Even before investigators at the U.S. Department of Justice began delving into possible fair-lending violations at four of its subsidiary banks, Fulton Financial in Lancaster, Pa., had been eyeing ways to better serve low- and moderate-income consumers.
Two years ago, for example, it launched a homebuyer assistance program that provided down payment assistance as well as flexible credit terms for low- and middle-income borrowers. Over the past year, the number of people helped by the program more than doubled, said Fulton Chairman and CEO E. Philip Wenger.
In recent months the $18.7 billion-asset company has redoubled its outreach efforts, first by partnering with Operation Hope, a nonprofit group that promotes financial literacy, and then by naming veteran banker William "Smokey" Glover its director of fair and responsible banking, a newly created post. It has even branded the initiative, dubbing it Fulton Forward.
Wenger downplayed speculation that these latest efforts are an attempt by Fulton to soften the blow of a DOJ regulatory action when and if it comes.
"We're always seeking to do more to serve our communities," Wenger said in an interview earlier this month.
A Justice Department spokesman said that the agency does encourage banks to take pre-settlement steps to address perceived problem areas, and takes any cooperation into consideration during negotiations. But the spokesman added that attitude doesn't change the fact any resolution must address the violations and ensure remedies are put in place to prevent future issues from cropping up.
Fulton initially disclosed the Justice Department's probe in the second quarter of 2015. In its most recent 10-Q report, published Nov. 4, Fulton said that the Justice Department had widened its initial inquiry, which involved its flagship Fulton Bank initially, to include Fulton Bank of New Jersey, the Columbia Bank and Lafayette Ambassador Bank.
Fulton and the Justice Department declined to provide any more detail about the nature of the probe.
Fulton, though, seems intent on erasing any doubt it's serious about compliance.
Fulton Forward features a new program administered in collaboration with Operation Hope that offers first-time homebuyers grants of up to $2,500 for help with down payments and closing costs.
In addition, Operation Hope has agreed to staff selected Fulton branches with counselors to help customers with financial literacy training and credit rehabilitation.
"It's one thing to have a program or put together a plan you have a lot of passion about; it's another to be successful," Wenger said. "We want to be a model for helping communities that need assistance."
It's a message that Wenger no doubt hopes will resonate in Washington. Officials there have been willing to give banks credit for efforts like Fulton Forward — but they've also tacked on some stiff monetary penalties to their settlements.
In a Nov. 14 address before the Community Development and Fair Lending Colloquium in Washington, Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department's Civil Rights Division, noted Tupelo, Miss.-based BancorpSouth, another recent DOJ target, "took a number of steps to improve its fair-lending compliance" before it agreed to a consent order with the Department of Justice and the Consumer Financial Protection Bureau on June 29.
Indeed, in the months before the settlement, $14.6 billion-asset BancorpSouth followed a course that appears markedly similar to Fulton's. It implemented a program, Right@Home, to assist low- and moderate-income homebuyers, and it hired a senior executive to develop and promote affordable mortgage products in all its markets.
Ultimately, however, BancorpSouth was ordered to pay $5.78 million in penalties and payouts to homebuyers who the government said were overcharged or had their loan applications improperly denied. BancorpSouth also agreed to spend $4 million on loan subsidies in minority neighborhoods in Memphis.
BancorpSouth incurred a $13.8 million charge in the first quarter to reserve for "probable and estimable liability" connected to the DOJ investigation.
For its part, Fulton has taken no similar charges. Its third-quarter net income totaled $41.1 million, up 21% from the same period in 2015. Through Sept. 30, Fulton's profits have totaled $119 million.
All four of the Fulton subsidiaries on the DOJ's list have undergone multiple Community Reinvestment Act examinations in recent years, and all received either satisfactory or outstanding ratings. But BancorpSouth also received satisfactory ratings on its more recent CRA exams, in 2014 and in 2012.
Ironically, experts believe situations like the one involving Fulton may become less much less frequent with Donald Trump in the White House.
Andrew L. Sandler, chairman and executive partner at BuckleySandler in Washington, said federal enforcement agencies have been very aggressive in pursuing alleged fair-lending violations, often using the controversial disparate impact theory to support their cases. Sandler, however, said it is likely the incoming Trump administration "will take a more limited approach to the cases they bring."