How $1 billion vanished in Republic Bank collapse

The Monday after taking over the Philadelphia region’s failed Republic Bank, Fulton Bank, based in Lancaster County, turned its plans toward new customers and deciding which branches to keep open and which employees to retain.

Among losers in the financial collapse of Republic, seized Friday by state regulators, were shareholders, the Federal Deposit Insurance Corp., and up to half of the 430 employees.

The company was worth around $350 million, or $5 a share, as recently as May 2022, as factions led by Commerce Bank founder Vernon Hill, Wall Street investor Andrew Cohen, and South Jersey political leader George Norcross fought for control of the bank, founded in 1988.

Last fall, the Norcross group appeared to have won the power struggle, but in February, it canceled an agreement to invest in the bank, citing worse-than-expected financial data in Republic’s long-delayed reports to the Securities & Exchange Commission. Republic claimed it still had enough capital to stay in business without the Norcross money. But with no other investor in view, regulators pulled the plug on Friday, calling Republic “unsafe and unsound.”

“I’m wiped out of $75,000,” said Joe Accardi, a New Jersey therapist who invested in the bank. But that “pales in comparison to what Norcross, Cohen, and Hill” have lost, Accardi added.

The Norcross group — George; his brother Philip; George’s children; and banker Gregory Braca— together lost stock formerly worth $35 million as share values collapsed in advance of the takeover.

Republic is gone, but the Norcross Group is still pursuing litigation against Cohen and his allies, in hopes they “will be held accountable for the massive losses to shareholders,” Philip Norcross said in a statement.

The Federal Deposit Insurance Corp. (FDIC) estimates that the bank’s failure will cost $667 million to its bank deposit insurance fund, which is financed by the nation’s solvent banks.

Banks usually pay a premium to buy other banks’ assets, but this time, Fulton was able to buy troubled Republic’s assets at less than their face value, leaving the bank insurance fund to make up the difference, said FDIC spokesperson Brian Sullivan.

Fulton expects to cut Republic’s yearly spending on staff, buildings, and other expenses by at least 40% to $60 million — down from a current $100 million to $115 million a year, Fulton chief executive Curtis J. Meyers told investors in a conference call Monday.

Fulton has agreed to keep paying Republic’s workforce, which totaled 430 people as of Dec. 31, for 90 days. Fulton officials weren’t prepared to say how many people would keep their jobs or find positions at Fulton.

Republic operated around 30 branches in Philadelphia and its suburbs, and two in Manhattan. The buildings’ fate is also uncertain.

Fulton is continuing to operate the branches for now, but it hasn’t bought them from the FDIC. Some of the branches — particularly in Center City, Northeast Philadelphia, and in Delaware, Camden, and Burlington Counties — are close to existing Fulton branches. Meyers said his bank needs time to decide how many Republic branches it will keep.

Overall, Meyers called his bank’s takeover of Republic — adding $4.2 billion in customer deposits and $2.9 billion in loans without having to pay the usual premium banks pay when buying assets from other institutions — “a great opportunity,” nearly doubling Fulton’s presence in the Philadelphia area, which he called “our core metro market.”

Shareholders agreed, boosting Fulton’s share price above $17 in Monday morning trading for the first time in 2024.

Fulton announced that it is selling additional shares to raise $250 million, partly to support its expanding sales efforts in the Philadelphia area. Fulton hopes, for example, to get Republic customers to buy Fulton’s investment products since Republic wasn’t in that business. The deal boosts Fulton’s total deposits to $26 billion and loans to $24 billion.

Last year’s failure of Silicon Valley Bank and a handful of other large institutions that didn’t anticipate the sharp rise in interest rates sparked worries that a more general banking crisis threatened the U.S. economy.

Republic Bank was the first bank failure this year. But the Philadelphia bank’s collapse seems due to issues at the bank more than in the broader sector, said Gregory Nini, a finance professor at Drexel University who studies banks.

“They were having issues since before rates went up,” and no acquirer had been willing to buy the entire bank before the state takeover, he said. “This looks like just a Republic Bank thing.”