Regulators seized the troubled Philadelphia bank Republic First Bancorp and sold it to fellow regional lender Fulton Financial, the fourth high-profile bank failure since last spring.
The bank was closed by the Pennsylvania state regulator on Friday and sold after an auction run by the Federal Deposit Insurance Corp., confirming an earlier report by The Wall Street Journal.
Republic First faced some of the same problems as the three regional banks that failed last year: paper losses on bonds that lost value as interest rates rose, and high proportions of uninsured deposits that can quickly flee.
In the first quarter, Lancaster, Penn.-based Fulton had about $28 billion in assets and around 200 locations throughout Pennsylvania, Delaware, Maryland, New Jersey and Virginia. A deal with the much smaller Republic First should allow it to scale up some without the increased regulatory scrutiny that comes when banks have more than $50 billion in assets.
Fulton said the deal would nearly double its size in the Philadelphia market, and all the Republic First branches would reopen as Fulton at their regularly scheduled hours.
Regulators had been prepared to seize Republic First late last year, people familiar with the matter said, before the bank announced it had reached a deal with investors to shore up its balance sheet. After that deal collapsed this March, the FDIC resumed efforts to seize and sell the bank.
Republic First operated branches in Pennsylvania, New Jersey and New York under the name Republic Bank. It had around $6 billion in total assets at the end of 2023.
People familiar with the matter said several banks had been exploring making offers. The most interested were expected to be midsize banks with established beachheads in or near Republic First’s network of branches that dot the Philadelphia suburbs and stretch across the Delaware River into western New Jersey. The lender’s relatively small footprint didn’t move the needle enough for larger regional banks, including PNC Financial Services Group and Citizens Financial, the people said.
This bank failure is distinct from the ones that set off a monthslong crisis in 2023.
Republic First is much smaller than Silicon Valley Bank, Signature Bank and the similarly named First Republic, which each had between roughly $100 billion and $200 billion in assets. Since there is a buyer, the government won’t be left with the decision over whether to backstop deposits over the FDIC limit of $250,000, as it did with SVB and Signature. The long, drawn-out failure also gave depositors more time to prepare, as compared with the rapid collapses of last year.
The FDIC said it expected the failure, even with the deal, to cost its insurance fund about $667 million. The nation’s biggest banks had taken billions of dollars in charges to rebuild the insurance fund for last year’s failures.
A relatively orderly deal should prevent the failure from sparking a wider crisis in confidence.
But regional banks are still on shaky ground. Two years of higher rates have forced them to pay more interest on deposits, which has increasingly eaten into profits. It will be harder for them to absorb the costs of potentially stricter regulatory requirements and technology updates, compared with megabanks like JPMorgan Chase. And some hold high concentrations of loans on offices and other commercial real estate that are under pressure.
A larger regional bank, New York Community Bancorp, fanned concerns about commercial real estate earlier this year after it revealed problems in its multifamily loan book. Those loans are concentrated in a niche area of the market: rent-stabilized buildings in New York that have dropped in value. NYCB got a rescue infusion from investors in March.
Republic First had for months struggled to stay afloat. Around half of its deposits were uninsured at the end of 2023, according to FDIC data.
Its total equity, or assets minus liabilities, was $96 million at the end of 2023, according to FDIC filings. That excluded $262 million of unrealized losses on bonds that it labeled “held to maturity,” which means the losses hadn’t counted on its balance sheet.
Its stock, which was delisted from Nasdaq in August, had been near zero. And it was in a proxy fight with an investor group led by George Norcross III, Philip Norcross and Gregory Braca.
In October, the Norcross group agreed to a deal to inject $35 million as the bank sought additional investors. Republic First disclosed in February that it dismissed its auditor, Crowe, which had flagged “material weaknesses” in bank controls at the end of 2022.
The investor group terminated the agreement last month because Republic First didn’t complete its 2022 annual securities filing with regulators or schedule a required shareholder meeting.
The stock on Friday traded at around 1 cent.
Write to Gina Heeb at gina.heeb@wsj.com, Lauren Thomas at lauren.thomas@wsj.com and Justin Baer at justin.baer@wsj.com
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==========================================================================U.S. regulators have seized Republic First Bancorp (FRBK.PK) and agreed to sell it to Fulton Bank, underscoring the challenges facing regional banks a year after the collapse of three peers.
Philadelphia-based Republic First, which had abandoned funding talks with a group of investors, was seized by the Pennsylvania Department of Banking and Securities.
The Federal Deposit Insurance Corp (FDIC), appointed as a receiver, said on Friday Fulton Bank, a unit of Fulton Financial Corp (FULT.O), will assume substantially all deposits and purchase all the assets of Republic Bank, which is the operating name for Republic First, to "protect depositors".
Republic Bank had about $6 billion in total assets and $4 billion in total deposits, as of Jan. 31, 2024. The FDIC estimated the cost of the failure to its fund will be $667 million.
Apart from deposits, Republic also had borrowings and other liabilities of approximately $1.3 billion, Fulton said in a statement.
Fulton said the deal almost doubles its presence in the Philadelphia market with combined company deposits of approximately $8.6 billion.
"With this transaction, we are excited to double our presence across the region," said Fulton Chairman and
CEO Curt Myers in a statement.
Republic Bank's 32 branches in New Jersey, Pennsylvania and New York will reopen as branches of Fulton Bank on Saturday or on Monday during business hours.
The decision marks the latest U.S. regional bank failure following the unexpected collapses of three lenders - Silicon Valley and Signature in March 2023 and First Republic in May.
Republic Bank had struck a deal with an investor group that included veteran businessman George Norcross and high-profile attorney Philip Norcross late last year, but the effort was terminated in February.
After that deal collapsed, the FDIC resumed efforts to seize and sell the bank, according to the Wall Street Journal, which first reported the news.
Republic Bank cut jobs and exited its mortgage origination business in early 2023 as it reeled under pressure from higher costs and inability to improve profitability
The bank's stock price has tumbled from just over $2 at the start of the year to about 1 cent on Friday, leaving it with a market capitalization below $2 million.
Its shares were delisted from the Nasdaq in August and now trade over the counter.
Piper Sandler & Co and BofA Securities acted as financial advisers to Fulton, while Sullivan & Cromwell LLP acted as legal adviser.
