First Bank Failure of 2024: Philadelphia-Based Republic First Bank Collapses
In a surprising turn of events, Philadelphia-based Republic First Bank has collapsed, marking the first bank failure of 2024. The Federal Deposit Insurance Corporation (FDIC) stepped in and arranged for fellow regional lender Fulton Financial to assume the deposits and assets of the failed bank. This move was made to protect people with savings at Republic Bank, ensuring that their money would continue to be covered by the FDIC’s deposit insurance guarantee.
Republic Bank’s 32 branches in New Jersey, Pennsylvania, and New York reopened as branches of Fulton Bank, allowing depositors to access their money without interruption. Customers could continue to write checks, use ATM or debit cards, and make loan payments as usual. Fulton Financial Corporation expressed excitement over the acquisition, stating that it would double their presence across the region and provide a comprehensive set of consumer, commercial, and wealth advisory products and services to even more customers.
With approximately $6 billion in assets and $4 billion in deposits as of January 31, 2024, Republic Bank’s failure had less impact compared to other high-profile bank failures in recent months. Last year, three banks – Silicon Valley, Signature, and First Republic – collapsed, shedding light on how lenders managed risks to assets and liquidity amid aggressive interest rate hikes by the Federal Reserve to combat inflation. These three failures amounted to a combined $440 billion in assets, making them the second, third, and fourth largest bank failures since the establishment of the FDIC.
The series of bank failures in 2023 led to emergency government measures to stabilize the banking sector and credit rating downgrades. Federal Reserve officials acknowledged that poor risk management and weaknesses in supervision played a role in these failures. The FDIC estimated that its total cost from bank failures in 2023 reached approximately $20.4 billion, which will be recovered through special assessments on larger banks.
The banking sector turmoil of the previous year resulted in a credit pullback as banks became more cautious in providing loans to consumers and businesses. While lending levels have stabilized, they remain below pre-crisis levels. However, the acquisition of Republic Bank by Fulton Financial signals optimism and a potential return to normalcy in the banking industry.
The collapse of Republic First Bank serves as a reminder of the importance of strong risk management and effective supervision in the banking sector. As regulators continue to monitor the industry and enact measures to mitigate future risks, customers can take comfort in the fact that their deposits are protected by the FDIC’s deposit insurance guarantee.
