Shares of Fulton Financial (FULT) experienced a significant upsurge Monday following the bank's announcement of their acquisition of the assets and deposits of Republic First Bank in Philadelphia. The latter had been set upon by regulators last Friday, marking the initial bank failure case of 2024. Earlier in the year, the bank was reportedly unable to secure $35 million in required funding.
A deal was successfully negotiated between Fulton and the Federal Deposit Insurance Corporation (FDIC), referenced as the least expensive route for the Deposit Insurance Fund (DIF). The FDIC suggests that this failure may cost the DIF an approximate $667 million.
Republic Bank had previously experienced difficult times within a heightened interest rate milieu. The bank reported last year that increasing rates due to the Fed's rate hikings intended to mitigate inflation had significantly impacted their commercial real estate portfolio.
Nearly half of Republic Bank's loan book was accounted for by commercial real estate, a sector deeply impacted by the COVID-19 pandemic. Other challenges faced by the bank include conditions of low liquidity and conflicts with activist investors. Despite securing $35 million in funding earlier last year, courtesy of a group of investors including George Norcross, this plan was deconstructed by February.
The seizure and consequent sale of Republic Bank occurred just over a year post the 2023 bank failure incidents that shocked the banking industry, including the shutdown of Silicon Valley Bank and Signature Bank in March and the collapse of First Republic Bank in May.
The crisis imposed pressure on smaller regional banks to compete for deposits, driving many to secure refuge with larger banks such as JPMorgan Chase (JPM), which also acquired First Republic last year.
Jamie Dimon, CEO of JPMorgan, expressed in his recent annual shareholder letter that the gravest parts of the banking crisis seem to have passed. Yet, he warned that continuously high interest rates pose potential danger to regional banks nationwide.
Fulton has agreed to obtain all $6 billion of Republic's assets, along with its $5.3 billion liabilities in the form of $4 billion in deposits and other borrowings of $1.3 billion.
Upon the deal's completion, Fulton intends to offer 16.67 million shares of common stock priced at $15 per share to raise $250 million, specifically targeting general corporate needs, including costs related to the Republic acquisition. As a result, Fulton stocks finished 7.6% higher at $16.80 on Monday following this announcement.