Regulators shut off Republic First Bank, located in Philadelphia, the first US bank to fail in the year

Republic First Bank, a regional institution with operations in Pennsylvania, New Jersey, and New York, has been closed by regulators. The Federal Deposit Insurance Corp. announced on Friday the seizure of the Philadelphia-based bank, also known as Republic Bank, with approximately $6 billion in assets and $4 billion in deposits as of January 31st.

Fulton Bank, headquartered in Lancaster, Pennsylvania, has agreed to absorb the majority of the failed bank’s deposits and acquire nearly all of its assets, according to the agency.

The 32 branches of Republic Bank will reopen under the Fulton Bank banner starting as soon as Saturday, with depositors able to access their funds via checks or ATMs as early as Friday night, as per the FDIC.

The collapse of Republic Bank is anticipated to incur a $667 million cost to the deposit insurance fund. It marks the first FDIC-insured institution to fail in the United States this year, with the previous instance being Citizens Bank, based in Sac City, Iowa, which occurred in November.

Under typical economic conditions, only four or five bank closures occur annually. However, the combination of rising interest rates and declining values in commercial real estate, particularly for office spaces grappling with increased vacancy rates post-pandemic, has escalated financial risks for numerous regional and community banks. The challenge of refinancing loans backed by devalued properties exacerbates these risks.

In a related development, last month, an investor consortium led by Steven Mnuchin, former U.S. Treasury secretary under the Trump administration, committed over $1 billion to rescue New York Community Bancorp. The bank has been adversely affected by weaknesses in commercial real estate and operational challenges stemming from its acquisition of a distressed bank.