May 4, 2024 / VOLUME NO. 312

A Long, Slow Demise

As soon as rumors hit that Philadelphia-based Republic First Bank would be closed by its regulators — the first failure of 2024 — industry observers connected the $6 billion bank’s collapse last week to the Spring 2023 failures of Silicon Valley Bank, Signature Bank and the similarly-named First Republic Bank. 

“Republic First faced some of the same problems as the three regional banks that failed last year,” wrote The Wall Street Journal, “paper losses on bonds that lost value as interest rates rose, and high proportions of uninsured deposits that can quickly flee.” 

But SVB, Signature Bank and First Republic were all felled by a liquidity crisis despite profitable track records. Meanwhile, Republic First underperformed for years. 

“When I invested in Republic [in 2008], they were a broken bank, troubled. They needed capital, they needed [our] model, they needed people,” former CEO and director Vernon Hill told me last year for a story in Bank Director magazine. 

Dubbed the “greatest retail banker of our lifetime,” Hill founded and led Cherry Hill, New Jersey-based Commerce Bancorp, a wildly successful bank that offered customers longer hours, dog-friendly branches, free pens and coin-counting machines before announcing a sale to TD Bank Financial Group in 2007. He also invested in expensive branches in the best locations.

But a similar retail-focused reboot didn’t work at Republic, and Hill stepped down as CEO in 2021. High costs and years of underperformance — along with unrealized losses tied to government mortgage-backed securities and the delisting of the bank’s stock — meant the bank needed capital but couldn’t attract investors. 

The Federal Deposit Insurance Corp. started seeking bids last year in anticipation of the bank’s failure, according to Bloomberg. Ultimately, the Pennsylvania Department of Banking and Securities seized the assets of Republic First, which were transferred to $28 billion Fulton Financial Corp. It’s a gain for the Lancaster, Pennsylvania-based bank, which projected the deal will create a $33 billion institution with a stronger Philly footprint. 

Republic’s customers didn’t spend the weekend worrying about whether their deposits were safe. That’s a welcome contrast to the panic wrought by Silicon Valley Bank’s failure, which led to further deposit runs at so-called regional banks with high levels of uninsured deposits. 

Unlike the Spring 2023 failures, the long, slow demise of Republic First illustrates a process that worked. 

• Emily McCormick, vice president of editorial & research for Bank Director

A Reset on Interest Rates

Hopes that interest rate cuts would provide relief for what ails banks have been replaced by a realization that rates might be stuck for a while or even rise. 

“We didn’t think there were going to be six cuts [in 2024], but we thought there might be two or three. Now, the futures have a 20% chance that the next rate move will be up.”

– Tim Crane, Wintrust Financial Corp.

• John Engen, freelancer for Bank Director

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