Fulton Financial (NASDAQ:FULT) witnessed a surge in its stock value following the announcement of a common stock offering to facilitate its acquisition of the deposits and assets of Republic First Bank from regulators. This acquisition marked the first bank failure in the United States for the year 2024.
During premarket trading, Fulton’s stock soared approximately 12%, although it later moderated to around 6% amidst volatile market conditions. At the previous close, the company boasted a market capitalization of $2.53 billion. Meanwhile, the KBW Regional Banking Index, reflecting investor sentiment toward the broader industry, experienced a 10.5% decline since the beginning of the year.
Regional banks, including Fulton Financial, have faced challenges in retaining deposits as customers gravitate towards the perceived safety of larger institutions. Additionally, higher interest rates have led to decreased valuations of loan portfolios due to increased unrealized losses.
Republic First Bank encountered difficulties related to low liquidity and failure to file annual reports with the U.S. SEC. Moreover, it faced pressure from activist investors since 2021. The Pennsylvania Department of Banking and Securities closed the bank on Friday, with the Federal Deposit Insurance Corporation appointed as its receiver. The FDIC estimated the cost to the Deposit Insurance Fund at $667 million due to Republic Bank’s failure.
Investor concerns about potential contagion in the banking sector intensified following the collapse of three prominent lenders in early 2023. These events prompted a global sell-off in banking stocks and heightened regulatory scrutiny.
In February, Republic First disclosed the termination of a planned $35 million funding by an investor group, including veteran businessman George Norcross and high-profile attorney Philip Norcross. This termination occurred amidst discussions about a potential sale of the bank by regulators.
Fulton Financial anticipates that the acquisition will significantly expand its presence in the Philadelphia market. The company plans to utilize the proceeds from the stock offering for general corporate purposes and to capitalize on new opportunities arising from the Republic Bank deal.
Analysts at Jefferies expressed optimism about the integration process, foreseeing enhanced liquidity for Fulton Financial despite the scale of the acquisition, which is the largest since the global financial crisis.
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