The United States has seen its first bank closure of 2024, according to an announcement by the Federal Deposit Insurance Corporation (FDIC). The FDIC has taken over Republic First Bank, headquartered in Pennsylvania, and is preparing to sell the bank’s deposits and the majority of its assets to Fulton Bank.
In its statement, the FDIC stated that it has reached an agreement with Fulton Bank to “assume almost all of Republic First Bank’s deposits and acquire all of its assets” in order to protect depositors. As of the end of January, Republic First Bank had total assets of approximately $6 billion and deposits of approximately $4 billion.
According to Reuters, Fulton Bank, which is acquiring Republic First Bank, stated in a release that besides deposits, Republic First Bank also has approximately $1.3 billion in loans and other debts. The Chairman and CEO of Fulton Bank stated that “this transaction will allow us to double our business in the Philadelphia region.” It is understood that Fulton Bank’s total assets in the first quarter were approximately $28 billion.
The closure of Republic First Bank, which is being acquired by Fulton Bank, is of a much smaller magnitude compared to the series of regional bank closures that began with Silicon Valley Bank in March last year. Among the five banks that closed last year, three of them, Silicon Valley Bank, Signature Bank, and First Republic, had assets ranging from $100 billion to $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 regular business hours on Saturday or Monday. Those who have deposits in Republic Bank will become depositors of Fulton Bank. The FDIC still expects the closure of Republic First Bank to result in a loss of approximately $667 million for its deposit insurance fund.
Regarding the insider details of the closure of Republic First Bank, sources have revealed to The Wall Street Journal that regulatory authorities were prepared 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 through in March, the FDIC resumed its actions to seize and sell the bank.
The stock price of Republic First Bank has fallen from over $2 at the beginning of the year to around 1 cent on Friday, with a market value now below $2 million. The bank’s stock was delisted from Nasdaq in August last year and can now only be traded over-the-counter.
The crisis of bank closures caused by bad commercial real estate loans is worth noting, as well as the Federal Reserve’s continued maintenance of high interest rates, which may still pose a risk of bank closures for some regional banks.
In February of this year, Signature Bank in New York reported in its Q4 financial report that it had increased its provision for bad loans from $62 million to $552 million to address the risk of bad loans in commercial and real estate loans, which caused the bank’s stock price to plummet by 40%. The bank later managed to survive by raising over $1 billion from investors.
Federal Reserve Chairman Powell also responded to the issue of increasing non-performing commercial real estate loans earlier this month, stating that it may lead to some bank closures but would not pose a risk to the entire system.
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