The Philadelphia-based Republic First Bank collapsed last week, the first US bank to fail this year, resurrecting memories of the three Silicon Valley banks that made headlines last spring when they collapsed.
The Pennsylvania Department of Banking and Securities seized Republic First Bank as it looked for a potential buyer after months of problems, including being delisted by Nasdaq. The Federal Deposit Insurance Corporation was appointed as receiver and entered into an agreement with Fulton Bank, based in Lancaster, Pennsylvania, to buy the struggling bank.
Republic First Bank, which operated under the name Republic Bank, had 32 branches across Pennsylvania, New York and New Jersey. They will all reopen under the name Fulton Bank.
This may not be the last failure we see this year, but your money is safe as long as you have an account insured by the FDIC or the National Credit Union Administration if it’s a credit union.
If you banked with Republic Bank, don’t panic. Your money is protected up to $250,000 since the bank was FDIC insured. But here’s what you need to know about the latest bank failure, how this bank failure differs from the ones we saw last year and what experts predict may happen next for other banks.
Why did Republic Bank fail?
Republic Bank was founded in 1988, servicing the Greater Philadelphia and Southern New Jersey markets as a mid-size bank. The bank expanded into New York City in 2019 and opened new lines, including an aggressive mortgage lending business.
Over the last two years, a new executive team came aboard amid infighting to return the bank’s focus to its core banking products and pull out of its riskier mortgage business, which had lost much of its value amid rising interest rates.
Republic Bank failed to file its fiscal year 2022 report with the Securities and Exchange Commission and subsequently was delisted by Nasdaq in August. Public stock exchanges like Nasdaq and the New York Stock Exchange can remove, or delist, a company for failing to follow its rules and requirements.
A deal with Norcross Braca Group to invest $35 million in the struggling bank fell through around the time Republic Bank was delisted. The bank blamed the delays to file on its former executive team’s “failure to maintain adequate internal controls,” according to a 2023 press release.
What should I do if I bank at Republic Bank?
If you don’t have an account with Republic Bank, you likely won’t be affected by its failure. And even if you do have an account, as long as you have less than $250,000 tied up with the bank, your deposits are safe.
Your money will be automatically moved to Fulton Bank, which bought out Republic Bank, and branches will reopen as early as Saturday.
You should always make sure your bank is FDIC or NCUA insured, including if you stash your money in one the best online bank accounts. If you do have more than $250,000 stashed at any one bank, we suggest you speak with a financial advisor about spreading your fund across multiple bank accounts.
How Republic Bank’s collapse differs from last year’s bank failures
Republic Bank, with $6 billion in assets and $4 billion in deposits, was a substantially smaller institution than the three regional banks that grabbed headlines after they failed last year.
When Silicon Valley Bank, Signature Bank and First Republic Bank (not to be confused with Republic First Bank) all collapsed in March 2023, they were among the biggest to fail in US history and stoked fears of a domino effect among other banking institutions. The three banks also catered to wealthy Silicon Valley customers who had a high number of uninsured deposits from customers with account balances above the $250,000 protected threshold.
But the economic situation was a little different in March 2023. Inflation was still at 5% yearly and the Fed was continuing its rate hike streak to tamp down on inflation, which some feared could send the US economy into a recession and lead to more bank failures. But the job market remained strong through several interest rate hikes, even as inflation remains stubbornly entrenched.
The most recent bank failure before Republic Bank’s collapse this year was Citizens Bank (not this Citizens), based in Sac City, Iowa, on Nov. 3, 2023. Deposits from that bank were transferred to Iowa Trust & Savings Bank.
The FDIC estimates that the cost to the Deposit Insurance Fund related to the failure of Republic Bank will be $667 million, the least costly resolution since the insurance fund was created by Congress in 1933 amid the Great Depression.
Will there be more bank failures in 2024?
Although it may be scary, we’re a long way from the Great Depression-era bank failures and even the Great Recession, when nearly 300 banks failed in 2009 and 2010. But banks are businesses, and like any other business, they can fail for a variety of reasons.
And as stubbornly high inflation forces more of us to draw on our savings to cover rising costs, dwindling account balances could potentially impact smaller banks, said Lanesha Mohip, a corporate accountant, founder of the Polished CEO and CNET expert review board member.
“We will see the merging of smaller and/or local banks as consumers feel the impact of less household income and increased pricing of goods and services,” she said.
Staying informed about the health of your bank is important, but there’s generally no reason to panic so long as you ensure your money is in an FDIC- or NCUA-insured account, Mohip advised. This way, even if your bank does fail, your money is safe.
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