A year ago First Republic Bank fell. This Friday, Republic First Bank had to be rescued. The two banks have nothing to do with each other, although the similarity in name caused some unwanted contagion between the two. Republic First Bank, which operated under the Republic Bank brand, was an entity with $6 billion in assets and $4 billion in deposits. A relatively small bank that is the protagonist of the first bank failure of the year, a role that at times seemed destined for New York Community Bank (NYCB), but that said entity has avoided.
As of January 31, 2024, Republic Bank had approximately $6 billion in total assets and $4 billion in total deposits. The bank, based in Philadelphia, has been taken over by the Pennsylvania Department of Banking and Securities, which has appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC has reached an agreement with Fulton Bank, of Lancaster, Pennsylvania, to assume substantially all of the deposits and purchase substantially all of the assets of Republic Bank.
The FDIC estimates that the cost to the deposit insurance fund related to the Republic Bank bankruptcy will be $667 million. Compared to other alternatives, it is the least expensive resolution, according to the agency.
All 32 Republic Bank branches in New Jersey, Pennsylvania and New York will now reopen as Fulton Bank branches this Saturday or Monday during normal business hours. This Friday and throughout the weekend, Republic Bank depositors will be able to access their money by writing checks or using ATMs or debit cards. Checks issued by Republic Bank will continue to be processed and loan customers should continue making payments as usual, the FDIC explained.
Republic Bank depositors will become Fulton Bank depositors, so customers will not have to change their banking relationship to maintain deposit insurance coverage. Republic Bank customers should continue to use their current branches until they receive notification from Fulton Bank that it has completed systems changes that will allow its branches to also process their accounts.
Republic Bank is the first failure of a US bank this year; the last was from Citizens Bank of Sac City, Iowa, on November 3, 2023.
The bank's intervention and its immediate delivery tries to avoid contagion to other entities in the sector. Republic Bank was a small and unsystematic entity, much less so than Silicon Valley Bank, Signature Bank or First Republic Bank, which failed in the banking storm a year ago.
Rising interest rates and falling commercial real estate values, especially office buildings facing rising vacancy rates following the pandemic, have exacerbated financial risks for many regional banks. and community. Outstanding loans secured by properties that have lost value make it difficult to refinance.
A report published last month by the International Monetary Fund (IMF) pointed out that the group of weak US banks represents an estimated total of 5.5 trillion dollars in assets, almost 23% of total banking assets. “Underlying concerns remain, with fears that the failure of one entity could precipitate a broader loss of confidence in the sector,” he says.
Last month, a group of investors that included Steven Mnuchin, who was Treasury secretary in the Trump era, agreed to pump more than $1 billion into bailing out NYCB. The entity has been hit by weakness in the commercial real estate sector and difficulties in integrating Signature Bank. The market is attentively awaiting the presentation of the first quarter results of said entity, whose shares have plummeted 71% so far this year.
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