Fitch Downgrades Fulton Financial Corp's Ratings; Outlook Stable.

NEW YORK -- Fitch Ratings downgraded Fulton Financial Corp's (FULT) long-term Issuer Default Rating (IDR) to 'A-' and affirmed the short-term IDR at 'F1'. FULT's rated subsidiaries were also affected by this action and are included at the end of this release. The Rating Outlook is Stable.

FULT's ratings are as follows:

--Long-term Issuer Default Rating (IDR) downgraded to 'A-' from 'A';

--Short-term Issuer Default Rating (IDR) affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Subordinated debt downgraded to 'BBB+' from 'A-';

--Support at '5';

--Support Floor at 'NF';

The Rating Outlook is Stable.

The ratings downgrade reflects FULT's difficulty over the last several quarters with a negative trajectory of asset quality and its adverse impact to earnings. The turn in the credit cycle and the overall difficult operating environment for financial institutions leads Fitch to believe that FULT's earnings will likely exhibit downward pressure. The affirmation of the short-term IDR reflects FULT's sustainable liquidity profile underpinned by comprehensive liquidity management, access to liquidity in non-regulated subsidiaries, and ability to draw on established lines of credit.

The impetus of the rating downgrade is continued pressure on earnings in tandem with the likelihood of further increases in nonperforming assets. The historical pristine asset quality has been challenged through 2007 largely by repurchase activity in Resource Bank, a subsidiary of FULT. This subsidiary had been originating 80/20 'piggy-back' loans through a national broker network. Further risk layering took place, primary adding a low documentation feature. Starting in first quarter 2007 (1Q07), investors requested Resource Bank repurchase loans due to early payment defaults (EPD). More recently, loans have been put back to FULT due to representation issues, primarily from misrepresentation by the borrower. For the nine-months ending Sept. 30, 2007, FULT has repurchased $40 million of loans, booking related charges totaling $24.9 million. Future charges may result if collateral values continue to deteriorate and FULT is not successful in quickly selling foreclosed properties.

While the NIM had been relatively stable throughout the first half of 2007, it experienced a decline in 3Q07. Responsible for the decline to the NIM is a reduction of non-interest bearing deposits and the use of non-deposit funding to grow earnings assets. Further affecting earnings generation is downward pressure to fee income. Historically, FULT derived fees from its wholesale loan operations of Resource Bank (now discontinued) and recognized moderate gains in its bank stock portfolio. Management can not depend on gains from the bank stock portfolio in the short-term due to negative stock performance in the bank sector. Offsetting the decline to fee income is continued streamlining of operational back-office processes and subsidiary consolidation. FULT announced that it intends to merge Resource Bank into Fulton Bank in 1Q08. Tangible capital has long been a rating factor, and while the ratio has improved since the 2005 Columbia acquisition, the reduced earnings level has slowed augmentation of capital.

The Stable Outlook reflects the relative strong asset quality and a solid capital position in the new rating category. While Resource Bank has been the catalyst to a modest deterioration to asset quality metrics, the higher level of nonperforming loans is manageable and falls in line with peers. Operating performance, while under pressure has also benefited from cost savings from streamlining operations and reducing the number of operating subsidiaries. The higher than normal efficiency ratio reflects expenses associated with the Resource Bank loan repurchases and related charges. Regulatory capital ratios are sound and fall in line with similarly rated peers.

The following related entities are affected by the rating action. The Rating Outlook is Stable.

Fulton Bank

--Long-term IDR downgraded to 'A-' from 'A';

--Long-term deposits downgraded to 'A' from 'A+';

--Short-term IDR affirmed at 'F1';

--Short-term deposits affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Columbia Bank (The)

--Long-term IDR downgraded to 'A-' from 'A';

--Long-term deposits downgraded to 'A' from 'A+';

--Short-term IDR affirmed at 'F1';

--Short-term deposits affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Lafayette Ambassador Bank

--Long-term IDR downgraded to 'A-' from 'A';

--Long-term deposits downgraded to 'A' from 'A+';

--Short-term IDR affirmed at 'F1';

--Short-term deposits affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Resource Bank

--Long-term IDR downgraded to 'A-' from 'A';

--Long-term deposits downgraded to 'A' from 'A+';

--Short-term IDR affirmed at 'F1';

--Short-term deposits affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

The Bank

--Long-term IDR downgraded to 'A-' from 'A';

--Long-term deposits downgraded to 'A' from 'A+';

--Short-term IDR affirmed at 'F1';

--Short-term deposits affirmed at 'F1';

--Individual rating downgraded to 'B' from 'A/B';

--Support affirmed at '5';

--Support floor affirmed at 'NF'.

Fulton Capital Trust I

--Preferred stock downgraded to 'BBB+' from 'A-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.