Fitch Ratings has affirmed Fulton Financial Corp. (FULT) ratings at 'BBB+/F2'. The Rating and Outlook remains Stable. The affirmation reflects it solid earnings, asset quality and capital levels in line with its current rating.
The rating action follows a periodic review of the mid-tier regional banking group, which includes BOK Financial Corp. (BOKF), Cathay General Bancorp (CATY), East West Bancorp, Inc. (EWBC), First Horizon National Corp. (FHN), First National of Nebraska, Inc. (FNNI), First Republic Bank (FRC), Fulton Financial Corp (FULT), People's United Financial Inc. (PBCT), Synovus Financial Corp. (SNV), TCF Financial Corp. (TCB), Webster Financial Corp. (WBS), Wintrust Financial Corp (WTFC), and UMB Financial Corporation (UMB).
Company-specific rating rationales for the other banks are published separately.
KEY RATING DRIVERS - IDRs, VRs AND SENIOR DEBT
Asset quality trends continue to improve in line with its rated peers. Fitch expects nonperforming asset levels to be relatively flat year over year. Fulton's loan portfolio growth has been modest and commercial loan exposure is well diversified. Although FULT operates in the Pennsylvania market where the Marcellus Shale exists, FULT's footprint is further east of economies primarily driven by shale. As such, Fitch does not anticipate meaningful impact from declining energy prices in the near term.
FULT's operating performance is solid and ranks in the top half of the mid-tier peer group. Fitch believes ROA will continue to perform at cyclical lows during the low rate environment. However, Fitch has incorporated the expectation of earnings improvement once the interest rate environment improves.
FULT's liquidity profile remains solid. FULT's funding base is mostly composed of core deposits. FULT's loan-to-deposit ratio is 97%, which ranks among the top quartile of the mid-tier group. Fitch expects this ratio to be relatively flat in the near term as loan growth and deposit growth have been moderate.
Capital levels remain solid and in-line with the mid-tier regional bank peer. Fitch expects capital levels will relatively flat and modest capital fluctuations are not anticipated to impact to FULT's ratings.
RATING SENSITIVITIES - IDRs, VRs AND SENIOR DEBT
FULT is solidly situated at its current rating level. While near term ratings improvement is unlikely, FULT could garner positive ratings momentum should the company improve franchise strength as demonstrated by both funding costs and profitability consistently ranking amongst the top quartile of the mid-tier banks. However, negative ratings pressure could build should asset quality trends decline significantly or should capital management become more aggressively managed. Further, ratings could move lower over the long term if competitive pressures from larger banking institutions negatively impact FULT's ability to compete in its core markets.
RATING SENSITIVITIES - HOLDING COMPANY
Should FULT's holding company begin to exhibit signs of weakness, demonstrate trouble accessing the capital markets, or have inadequate cash flow coverage to meet near-term obligations, there is the potential that Fitch could notch the holding company's IDR and VR from the ratings of the operating companies. This is viewed as unlikely though for FULT given the strength of the holding company liquidity profile.
KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR
FULT has a Support Rating of '5' and Support Rating Floor of 'NF'. In Fitch's view, FULT is not systemically important and therefore, the probability of support is unlikely. IDRs and VRs do not incorporate any support.
RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR
FULT's Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need.
KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated debt and other hybrid capital issued by FULT and by various issuing vehicles are all notched down from FULT or its bank subsidiaries' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles.
RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The ratings of subordinated debt and other hybrid capital issued by FULT and its subsidiaries are primarily sensitive to any change in FULT's VR.
To the extent that one of FULT's subsidiary or affiliated companies is not considered to be a core business, Fitch could also notch the subsidiary's rating from FULT's IDR.
KEY RATING DRIVERS - LONG- AND SHORT-TERM DEPOSIT RATINGS
FULT's uninsured deposit ratings are rated one notch higher than the company's IDR and senior unsecured debt because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.
KEY RATING SENSITIVITIES - LONG- AND SHORT-TERM DEPOSIT RATINGS
The ratings of long- and short-term deposits issued by FULT and its subsidiaries are primarily sensitive to any change in FULT's long- and short-term IDRs.
Fulton Financial is a bank holding company that is headquartered in Lancaster, PA and has $17 billion in assets.
Fitch has affirmed the following ratings with a Stable Outlook:
Fulton Financial Corporation
--Long-term IDR at 'BBB+'; Outlook Stable;
--Short-term IDR at 'F2';
--Viability Rating at 'bbb+';
--Subordinated debt at 'BBB';
--Support affirmed at '5';
--Support Floor at 'NF'.
Fulton Bank, N.A.
--Long-term IDR at 'BBB+'; Outlook Stable;
--Long-term deposits at 'A-';
--Short-term IDR at 'F2';
--Short-term deposits at 'F2';
--Viability Rating at 'bbb+';
--Support '5';
--Support Floor at 'NF'.
The Columbia Bank
--Long-term IDR at 'BBB+'; Outlook Stable;
--Long-term deposits at 'A-';
--Short-term IDR at 'F2';
--Short-term deposits at 'F2';
--Viability Rating at 'bbb+';
--Support '5';
--Support Floor at 'NF'.
Lafayette Ambassador Bank
--Long-term IDR at 'BBB+'; Outlook Stable;
--Long-term deposits at 'A-';
--Short-term IDR at 'F2';
--Short-term deposits at 'F2';
--Viability Rating at 'bbb+';
--Support '5';
--Support Floor at 'NF'.
Fulton Bank of New Jersey
--Long-term IDR at 'BBB+'; Outlook Stable ;
--Long-term deposits at 'A-';
--Short-term IDR at 'F2';
--Short-term deposits at 'F2';
--Viability Rating at 'bbb+';
--Support '5';
--Support Floor at 'NF'.
Fulton Capital Trust I
--Preferred stock at 'BB'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. Banking Quarterly comment: 4Q14' (Jan. 28, 2015);
--'U.S. Banks: The Risks with Energy Slide' (Jan. 16, 2015);
--'U.S. Basel III and Dodd Frank Act Regulatory Guide' (Nov. 21, 2014);
--'2015 Outlook: U.S. Banks (Growth in a Challenging Rate Environment)' (Nov. 12, 2014);
--'U.S. Banks: Implications of an Interest Rate Shock Scenario' (Oct. 30, 2014)
--U.S. Banks: Liquidity and Deposit Funding (Aug. 08, 2013);
--U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) (June 18, 2013);
--U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? (July 11, 2013);
--'Index Trend Analysis - 4Q14 (Fitch Fundamentals Index Remains Neutral)' (January 2015);
--'Risk Radar Global 3Q14' (Sept. 15, 2014);
--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' (Jan. 31, 2014);
--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (March 27, 2014);
--'Rating Considerations for U.S. Bank Holdco & Opcos' (Update on Position Outlined in 1Q14) (Dec. 1, 2014).
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978960
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