DBRS Confirms Fulton Financial Corporation at A (low); Trend Stable

DBRS, Inc. (DBRS) has today confirmed the ratings of Fulton Financial Corporation (Fulton or the Company) and its rated subsidiaries, including Fulton’s Issuer & Senior Debt rating at A (low) and Short-Term Instruments rating at R-1 (low). The trend on all ratings is Stable. Additionally, DBRS has withdrawn the trust preferred ratings for Fulton Capital Trust I as this issuance has been redeemed. The rating actions follow a detailed review of the Company’s operating results, financial fundamentals, and future prospects.

Fulton’s ratings and Stable trend reflect the Company’s solid community banking franchise that extends into five Mid-Atlantic states, its sound asset quality, and healthy capital position. The ratings also take into consideration the Company’s pressured earnings and concentration in commercial real estate loans (CRE). While Fulton has generated revenue growth for three consecutive quarters, DBRS views maintaining an improving earnings trajectory and boosting the overall level of returns to be an ongoing challenge for Fulton, as well as the industry.

DBRS sees Fulton’s financial profile as continuing to return to its historical levels, providing support for its ratings, as the Company’s asset quality has improved and it continues to maintain solid levels of capital and liquidity. DBRS considers Fulton’s relatively high level of CRE and Construction loans, which averaged 45% of total loans for 2015, a concentration risk. Somewhat reducing this risk, is the highly granular exposure limits the Company has maintained for both borrowers and projects.

While an inability to boost earnings could place negative pressure on the Company’s ratings, DBRS will look for the Company to deliver on its projected 2016 outlook and show improvements in generating revenue and maintenance of a relatively stable net interest margin. Given DBRS’s view that Fulton is in the bottom quartile of its rating category, as well as the still outstanding regulatory agreements related to BSA/AML issues, DBRS currently does not see any positive rating pressure over the intermediate term.

Fulton’s capital position, while lower from previous periods due to capital management activity, as well as balance sheet growth, remains a strength for the Company. During 2015, the Company repurchased $50 million shares of stock and an additional $50 million repurchase was authorized. Still, at December 31, 2015, Fulton reported solid capital ratios including a tangible common equity to tangible assets ratio of 8.66%.

Fulton Financial Corporation, a bank holding company headquartered in Lancaster, Pennsylvania, had $17.9 billion in assets at December 31, 2015.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (December 2015). Other applicable methodologies include the DBRS Criteria: Support Assessments for Banks and Banking Organisations (December 2015) and DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2016). All DBRS methodologies and criteria can be found on DBRS website under Methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: John Mackerey
Rating Committee Chair: Michael Driscoll
Initial Rating Date: 19 January 2005
Most Recent Rating Update: 24 February 2015

For additional information on this rating, please refer to the linking document under Related Research.