Republic First Bank of Pennsylvania Becomes First 2024 Bank Failure

Philadelphia-based Republic First Bancorp with $6 billion in assets and $4 billion in deposits was seized by regulators on Friday.  Federal Deposit Insurance Corporation took a $667 million loss when they sold the bank to Pennsylvania regional Fulton Bank.

FDIC news release stated: “compared to other alternatives, Fulton Bank’s acquisition of Republic Bank is the least costly resolution for the Deposit Insurance Fund managed by the FDIC that was created by Congress in 1933 and to protect the deposits at the nation’s banks.  The FDIC added: “Republic Bank is the first U.S. bank failure this year; the last failure was Citizens Bank, Sac City, Iowa on November 3, 2023.”

On Halloween evening, October 31, 2023, an investor group led by New Jersey insurance executive George Norcross agreed to invest $35 million in Republic Bank.  The deal was very controversial because Republic First only had $301 million in Tier 1 Common Equity, and had suffered over $500 million of mark-to-market losses on a leverage $2.6 billion bond bet backed mostly by commercial real estate loans. 

Former FDIC Chair Sheila Bair appointed by President George W. Bush to a five-year term in 2006, warned earlier this month that, “hurdles facing these mid-sized banks, such as higher deposit costs and shaky office building loans, in the wake of the downfall of three banks, Silicon Valley Bank (SVB) and Signature Bank last March, followed by First Republic two months later.  Ms. Bair told CNBC that she continues to be worried about a handful of regional banks that could fail this year.

The FDIC announcement came as a shock to New York Community Bancorp (NYCB), that had been considered one of the banking industry “winners” after getting a big FDIC subsidy payment to acquire Signature Bank during last year’s crisis.  

But NYCB’s credit rating was slashed to junk status last month by Moody’s Investors Service that warned the bank faced “multifaceted” financial risks and governance challenges according to Bloomberg News.

NYCB announced last month that its CEO Thomas Cangemi had resigned.  The bank then closed $1 billion equity investment on March 6 that included naming former Comptroller of the Currency Joseph Otting as its new CEO.

According to credit analyst PYMNTS Intelligence, smaller community banks and credit unions have been aggressively increasing their issuance of low quality, but high interest consumer credit cards.  As a result, the percentage of consumers with a community bank or credit union card as their primary card leaped from 8.3% in 2020 to 13% at the end of 2023.  

PYMNTS survey found that almost a quarter of all consumer customers said they would switch their credit cards to smaller community banks and credit unions the next time they applied for a new card.

Chriss Street is the Editor of the Mountain Top Times

 

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