The United States has seen its first bank closure of 2024. The Federal Deposit Insurance Corporation (FDIC) announced that it has taken over Republic First Bank, headquartered in Pennsylvania, and is preparing to sell the bank’s deposits and a majority of its assets to Fulton Bank.
Background:
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In a statement today, the FDIC announced that it has taken over Republic First Bank, a regional bank in Pennsylvania that was ordered to close by the state regulator. This is the first bank closure in the United States in 2024.
The FDIC stated in its announcement that it has reached an agreement with Fulton Bank, which will “assume almost all of Republic First Bank’s deposits and acquire all of its assets” to protect depositors. As of the end of January, Republic First Bank had total assets of about $6 billion and total deposits of about $4 billion.
According to Reuters, Fulton Bank, which is acquiring Republic First Bank, stated in a statement that Republic First Bank also has approximately $1.3 billion in loans and other liabilities. The Chairman and CEO of Fulton Bank stated that “this transaction will double our business in the Philadelphia area”. It is understood that Fulton Bank’s total assets in the first quarter were about $28 billion.
Republic First Bank’s closure and acquisition by Fulton Bank
The disclosed asset size of Republic First Bank is in the range of billions of dollars, which means that the severity of the closure is much smaller than the series of regional bank closures that began with Silicon Valley Bank in March last year. Three of the five banks that closed last year, Silicon Valley Bank, Signature Bank, and First Republic, had asset sizes between $100 billion and $200 billion.
The FDIC stated that the 32 branches of Republic First Bank in New Jersey, Pennsylvania, and New York will reopen as branches of Fulton Bank during normal business hours on Saturday or Monday. Those who have deposits in Republic Bank will become depositors of Fulton Bank. The FDIC still expects that the closure of Republic First Bank will result in a loss of approximately $667 million for its deposit insurance fund.
Regarding the insider information about the closure of Republic First Bank, insiders told The Wall Street Journal that the regulatory agency was ready to take over the bank at the end of last year but the bank announced that it had reached an agreement with investors to support its balance sheet. However, after the deal fell apart in March this year, the FDIC resumed its actions to seize and sell the bank.
The stock price of Republic First Bank has dropped from over $2 at the beginning of the year to around $0.01 on Friday, and its market value is now less than $2 million. The bank’s stock was delisted from Nasdaq in August last year and can now only be traded over the counter.
Commercial real estate bad debts trigger bank closure crisis
It is also worth noting that due to the continuous increase in commercial real estate bad debts and the Federal Reserve’s continued maintenance of high interest rates, the crisis of bank closures in some areas has not been resolved.
In February of this year, Signature Bank in New York reported in its Q4 financial report that it increased its bad debt provisions from $62 million to $552 million to cope with the bad debt risks of commercial and office real estate loans. This once caused the bank’s stock price to plummet by 40%. The bank later raised over $1 billion from investors to survive.
Federal Reserve Chairman Powell also responded to the issue of increasing bad loans in commercial real estate earlier this month, predicting that this could lead to some bank closures but would not pose a risk to the entire system.
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