Fulton hikes credit loss provision as economic outlook worsens

Fulton Financial Corp. raised its provision for credit losses by $3.5 million due to loan growth and a worsening economic outlook, even as the company's credit metrics remained relatively stable.

The company's $14.5 million provision for credit losses was up 31.8% from $11 million a quarter earlier.

Overall, Fulton's criticized and classified loans declined by $26 million, or 3%, in the fourth quarter of 2022 after a decline of $251 million, or 24%, in the third quarter, CFO Mark McCollom said during the company's fourth-quarter 2022 earnings call.

"Despite these positive trends, changes to our macroeconomic outlook and strong portfolio growth led to the increase in our provision for credit losses this quarter," McCollom said.

While the company's commercial real estate lending book is stable, Fulton is closely monitoring its $1.5 billion office loan portfolio, which includes $590 million in loans larger than $5 million, President, CEO and Chairman Curtis Myers said during the call.

"Specifically on the office portfolio, we continue to work hard to understand that portfolio. And just to confirm a couple of balances in that portfolio," Myers said.

Fulton took a $12 million write-down during the fourth quarter on a commercial office property in the Washington, D.C., metro area where a tenant terminated its lease and the value of the building fell from the value that Fulton initially underwrote, Myers said.

Following a review, the company decided to charge the allocation down, he said. The loan largely accounted for Fulton's $12 million in net charge-offs in the quarter.

"We're trying to understand what we think is the current value of that underlying property with that event, and decided to take the charge down versus just the allocation," Myers said.