Republic First Failure Reignites Fears of Banking Turmoil

Bank failures made headlines throughout 2023 and caused both individuals and businesses to question the safety of their deposits. The panic surrounding these collapses calmed throughout the latter half of the year as the failures grew smaller and less frequent. Unfortunately, the recent collapse of Republic First Bank brought the issue of banking turmoil into the new year and reignited worries for cash managers.

The FDIC responded quickly to the failure of Republic First Bank – as they have all prior bank failures – and ensured that deposits up to the applicable limit were safe. By analyzing the factors that led to the bank failure and the FDIC’s response, you can understand the steps you need to take to protect your company’s cash from future banking turmoil.

A Review of Recent Banking Turmoil

The failure of Republic First Bank is best understood within the larger context of the recent string of bank failures. These began in March 2023 with the failure of Silicon Valley Bank and continued throughout the year.

The bank failures last year shared two common characteristics – risky business practices and poor risk management. The troubled banks all had a high proportion of uninsured deposits – those above the FDIC limit – and did not prepare properly for the increased risk associated with this type of deposit. Additionally, the banks invested in risky securities which lost value with rising interest rates. Again, the banks that failed did not respond to this risk appropriately.

When interest rate hikes devalued the banks’ securities and uninsured depositors pulled their funds, five banks collapsed. Three of these banks were large enough to make headlines while the remaining two went largely unnoticed by mainstream media. A timeframe of the bank failures is below.

• March 10 – Silicon Valley Bank failed. The bank had approximately $119 billion in deposits and $167 billion in assets. The FDIC established a “bridge bank” and both deposits and assets were assumed by First-Citizens Bank & Trust company on March 26.
• March 12 – Signature Bank failed. The bank had approximately $87 billion in deposits and $110 billion in assets. Like the previous failure, the FDIC responded by establishing a “bridge bank” until both deposits and assets were assumed by Flagstar Bank on March 20.
• May 1 – First Republic Bank failed. The bank had approximately $104 billion in deposits and $229 billion in assets. The FDIC facilitated the assumption of both deposits and assets by JPMorgan Chase.
• July 28 – Heartland Tri-State Bank failed. The bank had approximately $130 million in deposits and $139 million in assets. The FDIC facilitated the assumption of both deposits and assets by Dream First Bank.
• November 3 – Citizens Bank, Sac City, IA failed. The bank had approximately $59 million in deposits and $66 million in assets. The FDIC facilitated the assumption of both deposits and assets by Iowa Trust & Savings Bank.

Republic First Bank Failure in 2024: What Happened?

Republic First Bank was headquartered in Philadelphia and had 32 branches across New Jersey, Pennsylvania, and New York. As of January 31^st, the bank had $4 billion in total deposits and $6 billion in assets.

The Wall Street Journal reported that the bank began struggling last year with the same issues that plagued other banks during that time. These included a large share of uninsured deposits, securities that lost value with rising interest rates, and poor management of related risks.

The bank reached a deal with a group of investors to shore up its balance sheet late last year. However, that deal fell through in March 2024 – leading to the collapse of the bank on April 26^th.

The FDIC’s Response to The Republic First Bank Failure

Like other recent bank failures, the FDIC quickly responded to the closure of Republic First Bank. Within a day of the failure, the FDIC entered into an agreement with Fulton Bank, National Association of Lancaster, Pennsylvania to assume substantially all deposits and assets of the bank.

All 32 branches of Republic First Bank were reopened as branches of Fulton Bank within one business day and depositors had access to their funds via check and debit card during the transition. Because of the FDIC’s swift action, the bank’s depositors were able to access their cash without significant delays.

What does the latest bank failure mean for the safety of business cash?

The failure of Republic First Bank was an unwelcome reminder that the issues plaguing banks recently are not wholly resolved. This should serve as motivation for businesses and individuals to ensure all their cash is protected from bank failure.

FDIC insurance is the strongest available protection for business cash, but it is limited to $250,000 per ownership category at each insured bank. If your company has more than this amount invested with any one financial institution, it is time to explore your options for accessing extended coverage.

ADM Helps Keep Your Business Cash Safe with Access to Extended FDIC Insurance

At the American Deposit Management Co. [ADM], our clients enjoy access to government deposit protection for all their cash. Our solutions spread cash across a nationwide network of financial institutions so that each account is under the $250,000 limit and all cash can be covered by government insurance.

We have curated a proprietary network of banks and credit unions that compete for deposits, allowing our customers to access nationally competitive returns in addition to extended safety. Best of all, we handle the various deposits and provide a single, consolidated monthly statement – making reconciliations a breeze. To learn more about our deposit management solutions, contact one of our friendly associates today.

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