Philadelphia-based Bank Shut Down By the FDIC

The Interwebs have exploded with news that the FDIC has seized the assets of Republic First Bank. And frankly Scarlett, I don’t care.

Republic First Bank operated as Republic Bank with about 35 branches in New York, New Jersey, and Pennsylvania. The regional bank had faced challenges over the past few years and finally succumbed to the pressure. On Friday, the FDIC announced that Fulton Bank will absorb the Republic’s assets and deposits with most branches being rebranded this weekend.

Republic’s Failure Sounds Bad

The online discussion focuses on the bank’s closure as if this were a repeat of the high-profile banks that fell in spring 2023. Let’s look at a couple of the lead sentences in articles from national publications:

Reading the articles you’d think this was a major issue that will affect the United States’ economy moving forward. My favorite is the New York Post’s usage of “latest” in the headline. It has been almost one year since a bank of this stature closed its doors, in a volatile market we’ve experienced.

Graph: Assets, Bank Failures This Century

graph of bank closure and assets
The graph shows the 35 bank failures and the associated total assets since 2001 according to the FDIC. (Source

Why Don’t You Care About This Bank Failing?

But let’s outline three reasons I am not concerned about this bank failing.

  1. Republic Bank has been on the verge of collapse. In a perfect world, there would be no hunger, no poverty, and no bank closures. However, this is not a perfect World. In this case, Republic Bank has been an imperfect bank for years and the fact it hung on this long should be seen as a positive. The bank got caught with its proverbial pant’s down when interest rates went up and they were making less off the mortgage interest than they were having to pay out to depositors. About the same time an investor initiated a proxy war that split the board of directors. Attempts to secure a line of financing to keep the bank operating were abandoned in 2023, which all but made the closure a formality.
  2. Republic Bank isn’t but a blip on the radar. According to the FDIC, Republic Bank had about $6,000,000,000 in assets. This sounds like a lot of money, but in the past decade, the average bank failure had $16,254,690,000 in assets. The average is skewed by Silicone Valley Bank’s ($209,000,000,000) and Signature Bank of New York’s ($110,400,000,000) failures in February 2023 and First Republic Banks’s ($239,000,000) failure in May 2023. The median bank to be shuttered is a regional bank with about $10,000,000,000 in assets. When you line them up, Republic Bank is just another small blip on the financial institutions’ radar.
  3. Banks can fail without hurting the economy. This is the one that frustrates me the most, the media is making every bank failure sound like it has the potential to bring down the economy. According to the FDIC summary of bank closures, there have been 35 failures in the past decade and the majority are small regional banks. While it is sad to know that the history of these institutions was lost, sometimes a failure can lead to a merged stronger bank.

Will Republic Bank’s Closure Affect Anything?

Of course, it will affect some things. There is always a reaction to something happening in the market. On the micro level, this will lead to job losses at Republic’s corporate headquarters and there will most likely be redundancy in some markets leading to some branch closures.

“With this transaction, we are excited to double our presence across the region,” said Fulton Chairman and CEO Curt Myers. “We look forward to welcoming Republic Bank’s team members and customers to Fulton and providing our comprehensive set of consumer, commercial and wealth advisory products and services to even more customers.”

Fulton Bank Press Release

However, on a macro level, this closure is not big enough to make more than a ripple in the financial pool.

So pardon me as I get back to watching the UFL this afternoon.