April 29 (Reuters) - Fulton Financial's ( FULT ) shares

pared gains on Monday after it launched a common stock offering

to support its acquisition of the deposits and assets of

Republic First from regulators, which marked the first U.S. bank

failure of 2024.

Regional banks have been struggling to retain deposits as

customers seek the safety of larger 'too-big-to-fail' rivals,

while higher interest rates have also diminished the value of

their loan books due to increased unrealized losses.

Republic Bank's troubles included low liquidity, not filing

annual reports detailing year-end financials with the U.S. SEC

and being targeted by multiple activist investors since 2021.

The beleaguered lender, which had about $6 billion and $4

billion in total assets and deposits, respectively, was closed

on Friday by the Pennsylvania Department of Banking and

Securities. The Federal Deposit Insurance Corporation was

appointed its receiver.

The FDIC estimated the cost to the Deposit Insurance Fund

related to the failure of Republic Bank would be $667 million.

Investors have been worried about a possible contagion in

the sector since three prominent lenders - Silicon Valley Bank,

First Republic and Signature Bank - collapsed in early 2023.

The failures reverberated across the global financial

system, triggered a broad sell-off in banking stocks and invited

tough regulatory scrutiny.

In February, Republic First disclosed that an investor group

consisting of veteran businessman George Norcross, high-profile

attorney Philip Norcross and former TD Bank executive

Gregory Braca had terminated its planned $35 million funding in

the troubled lender.

Regulators had reportedly been discussing a sale of the bank

before the capital infusion deal was signed.

The Philadelphia-based bank cut jobs last year to reduce

costs and exited its mortgage origination business. Its shares

were delisted from the Nasdaq in August and now trade over the

counter.

Fulton expects the deal will double its presence in the

Philadelphia market. The lender's management is scheduled to

hold an investor conference later in the day to discuss the

deal.

The bank said it intends to use the proceeds of the stock

offering for general corporate purposes, including supporting

"new opportunities" from the deal for Republic Bank.

Analysts at Jefferies said they expect the integration to be

smooth and boost the bank's liquidity, even though this is the

largest deal Fulton has undertaken post the global financial

crisis.

Fulton's stock had traded 11% higher in early premarket

hours, before paring gains. It was last up about 6% in volatile

trading. Through previous close, it had a market capitalization

of $2.53 billion.

The KBW Regional Banking Index, a gauge of investor

sentiment towards the broader industry, is down 10.5% so far

this year.