The first bank failure of 2024 happened when Republic First Bank, a financial institution based out of Philadelphia, was seized and closed by state and federal regulators last week.
The bank reportedly faced mounting financial difficulties due to a decrease in the number of deposits it received and its mortgage lending. The bank was seeking funds to continue its operation, but a deal that would have provided it with $35 million fell through earlier this year, according to multiple reports.
The bank had 32 branches located throughout Pennsylvania, New Jersey, and New York. It was considered high risk due to its inability to secure funding. The Pennsylvania Department of Banking and Securities cited “unsafe and unsound conditions to protect depositors” in its decision to shutter the bank. The Department of Banking and Securities immediately named the Federal Deposit Insurance Corporation “as receiver of the bank.”
The FDIC also issued a press release on the bank’s failure.
“Philadelphia-based Republic First Bank (doing business as Republic Bank) was closed today by the Pennsylvania Department of Banking and Securities, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver,” the FDIC announced. “To protect depositors, the FDIC entered into an agreement with Fulton Bank, National Association of Lancaster, Pennsylvania to assume substantially all of the deposits and purchase substantially all of the assets of Republic Bank.”
Republic First Bank was the fourth bank to be seized by regulators since 2023. Silicon Valley Bank, Signature Bank, and First Republic Bank all folded last year. All of those banks were considerably larger institutions than Republic First Bank, according to the FDIC. As of January, Republic First Bank only had about $6 billion in assets and approximately $4 billion in deposits. Comparatively, Silicon Valley Bank had total assets valued at $209 billion.
Analysts were divided on what this meant for the banking industry.
Feddie Strickland, an analyst from Janney Montgomery Scott, didn’t appear overly concerned about Republic First Bank’s closure in comments to the New York Times.
“I think small banks are in good shape,” Strickland said. “Some of the failures we saw last year were really banks with a certain specialization. I think there’s an importance of being diversified.”
Conversely, Joseph Lynyak, a banking attorney from Dorsey & Whitney, told Fox News that it was an ominous sign for the future.
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“This bank failure indicates that additional failures will occur and will range between smaller community banks and larger banks,” Lynyak said. “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.”
No risks reportedly existed to any customers who used Republic First Bank. The FDIC facilitated an arrangement with Fulton Bank to “assume substantially all of the deposits and purchase substantially all of the assets of Republic Bank.” The transition for customers from Republic First Bank to Fulton Bank should be relatively simple, according to statements from the FDIC.
