What You Need To Know About the First US Bank Failure of 2024

Fulton Financial (FULT) shares surged Monday after the bank said it acquired the debt and deposits of Philadelphia-based Republic First Bank following the first bank failure of 2024. Republic First Bank was seized by regulators Friday after a deal for $35 million in funding reportedly fell apart earlier this year.

After a deal was reached with Fulton, the Federal Deposit Insurance Corporation (FDIC) said the Fulton deal was the least costly path for the Deposit Insurance Fund (DIF). It estimated the failure will cost the DIF about $667 million.

Why Republic First Bank Collapsed

Republic Bank had struggled amid an elevated interest rate environment, reporting last year that rising rates in the face of the Fed’s rate hikes to curb inflation hurt its commercial real estate portfolio.

Commercial real estate, a sector that has been under stress in the wake of the COVID-19 pandemic, accounted for nearly half of Republic Bank’s loan book.

The bank also faced challenges with low liquidity and battles with activist investors. Republic Bank managed to secure $35 million in funding from a group of investors led by George Norcross late last year, but that plan fell apart in February.

First Bank Failure of 2024 Near Anniversary of SVB, Signature, and First Republic Failures

The seizure and subsequent sale of Republic Bank comes a little more than a year after a series of bank failures that rocked the industry in 2023, as Silicon Valley Bank and Signature Bank shut down in March 2023. The collapse of First Republic Bank followed in May.

The crisis put a squeeze on smaller regional banks to compete for deposits as many consumers fled to the security of larger banks like JPMorgan Chase (JPM), which acquired First Republic last year and was one of several large banks that stepped in to provide financial assistance.

JPMorgan CEO Jamie Dimon said in his annual shareholder letter earlier this month that the worst of the banking crisis seemed to have passed, but warned persistently high interest rates could cause trouble for regional banks across the country.

What Happens Next

Fulton agreed to acquire all $6 billion of Republic’s assets, along with the bank’s $5.3 billion in liabilities in the form of $4 billion in deposits and “other borrowings and liabilities” of $1.3 billion.

Fulton and the FDIC said on Friday that Republic’s 32 branches would reopen as Fulton branches, effectively doubling Fulton’s retail banking footprint in the Philadelphia area.

Fulton Announces $250 Million Stock Offering

Fulton also announced plans Monday to offer 16.67 million shares of its common stock priced at $15 per share in order to raise $250 million.

The lender said it plans to use the funds for “general corporate purposes,” including costs associated with the Republic acquisition.

Fulton shares finished 7.6% higher at $16.80 Monday following the acquisition and stock offering news.