Fulton shares surge after acquisition of Republic First Bank

Fulton Financials’ stock witnessed surge on Monday following its acquisition of the deposits and assets of Republic First Bank in a regulatory-approved deal, marking the first US bank failure of 2024.

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

In February, Republic Bank disclosed the termination of a planned $35 million funding by an investor group, signalling further distress for the troubled lender. Reports indicated that regulators had been exploring a potential sale of the bank prior to the capital infusion deal falling through.

The Philadelphia-based bank had undertaken measures such as job cuts and exiting its mortgage origination business in a bid to reduce costs. Following its delisting from the Nasdaq in August, the bank's shares now trade over the counter.

The acquisition comes amid challenges faced by regional banks in retaining deposits, exacerbated by higher interest rates impacting loan book valuations and commercial real estate values.

Fulton Financial anticipates that the deal will double its presence in the Philadelphia market. The bank has also launched an offering of its common stock, intending to utilize the proceeds for general corporate purposes and to support potential opportunities arising from the acquisition.

Market analysts anticipate a smooth integration process and improved liquidity for Fulton Financial post the acquisition, with the bank's stock witnessing a notable 10% increase in morning trading.

The FDIC estimated the cost to the Deposit Insurance Fund related to the failure of Republic Bank to be $667 million, highlighting the significance of the regulatory-engineered acquisition in stabilizing the banking sector.

(With Reuters inputs)