Fulton Financial launches stock offering amid Republic First Bank acquisition

Shares of Fulton Financial saw a slight retreat on Monday following the announcement of a common stock offering aimed at supporting its acquisition of the deposits and assets of Republic First Bank. This acquisition comes in the wake of Republic First Bank's recent closure by regulators, marking the first US bank failure of 2024.

Regional banks like Fulton Financial have encountered challenges in retaining deposits as customers gravitate towards larger 'too-big-to-fail' institutions. Additionally, the impact of higher interest rates has led to diminished value in loan books due to increased unrealized losses.

Republic First Bank faced various issues including low liquidity, failure to file annual reports with the US SEC, and pressure from activist investors since 2021. With approximately $6 billion in total assets and $4 billion in deposits, Republic First Bank was closed on Friday by the Pennsylvania Department of Banking and Securities, with the Federal Deposit Insurance Corporation appointed as its receiver.

The FDIC estimated that the cost to the Deposit Insurance Fund related to Republic First Bank's failure would be $667 million. Concerns about potential contagion in the banking sector have arisen since the collapse of three prominent lenders in early 2023, triggering a broader sell-off in banking stocks and heightened regulatory scrutiny.

Earlier this year, Republic First Bank faced setbacks when an investor group, including George Norcross, Philip Norcross, and Gregory Braca, terminated a planned $35 million funding deal. Regulators had reportedly been exploring a sale of the bank prior to the termination of the capital infusion agreement.

Fulton Financial anticipates that the acquisition will significantly expand its presence in the Philadelphia market. The bank's management is set to host an investor conference to discuss the deal further.

Proceeds from the stock offering will be utilized for general corporate purposes, including supporting potential opportunities arising from the Republic First Bank acquisition. Analysts at Jefferies anticipate a smooth integration process and expect the acquisition to enhance Fulton Financial's liquidity, despite being the largest deal undertaken by Fulton post the global financial crisis.

Fulton Financial's stock initially traded 11 per cent higher in early premarket hours before moderating its gains. It was last up approximately 6 per cent in volatile trading, with a market capitalization of $2.53 billion as of the previous close. The KBW Regional Banking Index, reflecting investor sentiment towards the broader industry, has declined by 10.5 per cent year-to-date.

(With Reuters inputs)