Fulton Financial rallies on plan to buy Republic First Bank - the first U.S. bank failure of 2024

By Steve Gelsi

Stock is upgraded to buy from neutral by Janney on expected boost from the purchase

Fulton Financial Corp.'s stock rallied Monday on plans by the bank to acquire Republic First Bank from the Federal Deposit Insurance Corp. in the year's first bank liquidation.

Fulton Financial (FULT) rose 9.4% after it said late Friday that its subsidiary Fulton Bank had acquired substantially all of the assets and deposits of Philadelphia-based Republic First.

Analysts were bullish on the deal, as Janney upgraded the stock to buy from neutral and said its fair value is about $19.50 a share.

"Given the potential for significant capital accretion and our view that downside risk is limited ... we are upgrading FULT," Janney analyst Feddie Strickland said in a research note.

Jefferies analyst Casey Haire said failed bank deals have been shareholder-friendly because they add to tangible book value and earnings per share.

For Fulton Bank, the deal will provide scale, double its market presence in Philadelphia and improve its liquidity profile, Haire said.

Separately, Fulton Financial said Monday it priced 16.67 million shares of its common stock at $15 per share for proceeds of $250 million.

Fulton said it plans to use the net proceeds "in connection with its business strategy" unveiled with its acquisition of Republic First, which ran 32 bank branches in Pennsylvania, New Jersey and New York under the name Republic Bank.

S&P Global Market Intelligence said Republic First ranks as the sixth largest bank failure by assets since 2010 with assets of $5.87 billion.

Joseph Lynyak, banking attorney at Dorsey & Whitney, said the failure of Republic First Bank won't be the last as regional banks struggle with higher-for-longer interest rates.

"The cause is twofold: higher cost deposits exceeding the yield on low-yield treasury securities and similar investments held by banks, and the deteriorating commercial real-estate market and commercial real-estate loans," Lynyak said.

The FDIC has indicated that banks have potentially significant unrealized losses in their investment portfolios - and many banks will ultimately need additional capital to address these unrecognized losses," he said.

Fulton Financial is expected to provide additional financial details of its business later on Monday.

Also read: First Citizens' stock touches all-time high on first-quarter earnings, while Valley National shares drop

-Steve Gelsi

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04-29-24 0957ET

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