Republic First Bank Closes, Assets Acquired by Fulton Bank

Republic First Bank, a regional lender operating in Pennsylvania, New Jersey and New York, was closed by state regulators on Friday night and its assets were given to the Federal Deposit Insurance Corp. (FDIC), according to an FDIC news release. The bank’s assets are now being taken over by Lancaster, Pennsylvania-based Fulton Bank effective immediately, with Fulton also assuming all deposits.

The move represents the latest crack – and the latest bandage job – in the beleaguered regional-banking industry. However, Republic First was relatively tiny compared to other banks that have failed or teetered on failure since the start of last year.

Higher interest rates in the industry have cut into the value of some banks’ bonds – including those at Republic First, and the Journal reported Friday – while the ailing market for commercial real estate, especially in the office sector, has hurt others, raising concerns that depositors might flee those financial institutions.

Republic First Bank's Closure and Acquisition

Republic First Bank, which did business as Republic Bank, had roughly $6 billion in assets and $4 billion in deposits as of Jan. 31, 2024. The bank’s 32 branches will reopen as branches of Fulton Bank as early as Saturday, and depositors can access their funds via checks or ATMs as early as Friday night, the FDIC said.

Customers with Republic Bank ATM debit cards or checks can still use them, and those with loans should continue to make payments as normal. Republic Bank depositors will become depositors of Fulton Bank, so customers do not need to change their banking relationship to retain their deposit insurance coverage.

The bank’s failure is expected to cost the deposit insurance fund $667 million, but the FDIC said Fulton Bank acquiring Republic First Bank was the cheapest resolution. Anyone with less than $250,000 in any FDIC-insured bank account is protected even if that person’s bank fails.

Reasons Behind Republic First Bank's Failure

Republic First Bank is the first FDIC-insured institution to fail in the U.S. in 2024. The last bank failure was Citizens Bank, based in Sac City, Iowa, in November 2023. Rising interest rates and falling commercial real estate values have heightened the financial risks for many regional and community banks.

The Pennsylvania Department of Banking and Securities seized Republic First on Friday, following a failed deal earlier this year to infuse the bank with new funds, amid a decline in deposits and a struggling mortgage lending business. Republic First’s financial auditor had previously told the bank it had “material weaknesses in internal control over financial reporting,” according to a regulatory filing.

Republic First’s seizure is the fourth by federal or state regulators since the start of 2023, following the collapses of Silicon Valley Bank, Signature Bank and First Republic Bank, which were substantially larger than Republic First.

Impact on the Banking Industry

Fulton, which holds around $27 billion in assets, said it had purchased assets worth approximately $6 billion in the transaction – including Republic First’s roughly $2 billion investment portfolio and around $2.9 billion in loans. The company said it assumed liabilities of around $5.3 billion, including deposits of some $4 billion and other borrowings and liabilities of roughly $1.3 billion.

The move will increase Fulton’s presence along the East Coast. Fulton Bank operates at more than 200 locations across Pennsylvania, New Jersey, Maryland, Delaware and Virginia. In a statement, Fulton Chief Executive Curt Myers said the deal would “double our presence across the region.”

Shares of Fulton (FULT) were up 10% after hours on Friday, while shares of Republic First (FRBK) closed at around a penny per share prior to the announcement.

Looking Ahead

The rescue of Republic First follows last year’s series of failures by much larger regional banks, including Silicon Valley Bank and Signature Bank. The struggling First Republic Bank was acquired by JPMorgan Chase & Co. (JPM) last year.

This year New York Community Bancorp. (NYCB) has encountered similar problems, with the lender struggling with its exposure to the ailing commercial real-estate market and maneuvering to stay afloat following a steep stock selloff.