Another family! Why is it difficult to alleviate the regional banking crisis due to the collapse of the First Bank of the Philadelphia Republic in the United States?

The stock price of New York Community Bank continues to decline.

The first bankrupt bank in the United States this year was announced last week.

The Federal Deposit Insurance Corporation (FDIC) recently announced the closure of Republic First Bank of Philadelphia and its sale to Fulton Bank. At this point, the First Bank of the Republic has also become the sixth financial institution to declare bankruptcy since last year’s regional banking crisis.

Self rescue failed and taken over

Due to the pressure of rising costs and inability to increase profits, the First Bank of the Republic began layoffs last year and withdrew from its mortgage lending business. The bank’s stock was delisted from NASDAQ in August and traded over OTC counters. At present, the stock price of the bank has dropped from slightly above $2 at the beginning of the year to 1 cent on Friday, with a market value below $2 million.

After falling into trouble, the First Bank of the Republic attempted to save itself. At the end of last year, the bank approached an agreement with an investment group led by Norcross Braca Group to raise $35 million. At the end of February this year, the agreement negotiations were announced to have broken down, and the investment group stated that Republican First Bank was unable to submit its 2022 annual report to the US Securities and Exchange Commission, nor could it arrange a shareholder meeting required to complete the extended trading deadline before February 29th.

This almost declared the ultimate bankruptcy fate, and Republican First Bank was subsequently taken over by the Pennsylvania Bank and Securities Department. The media quoted sources as saying that the Federal Deposit Insurance Corporation (FDIC) began negotiations with potential buyers last month.

('FDIC announces bankruptcy of the First Bank of the Republic (source: FDIC website)',)(‘FDIC announces bankruptcy of the First Bank of the Republic (source: FDIC website)’,)

The FDIC stated in its latest statement that Republican First Bank was the first bank in the United States to fail since Citizens Bank in Sak, Iowa in November 2023. After taking over, Fulton Bank, a subsidiary of Fulton Finance, will receive the majority of deposits and purchase all assets to protect the interests of depositors.

FDIC estimates that the bankruptcy incident has caused a loss of $667 million to its deposit insurance fund.

As of January 31, 2024, the total assets of the First Bank of the Republic were approximately 6 billion US dollars, and the total deposits were approximately 4 billion US dollars. This transaction has brought the deposit size of Fulton Bank to approximately $8.6 billion. Curt Myers, Chairman and CEO of Fulton Bank, said he is pleased to double its size in the Philadelphia market through transactions.

Is New York Community Bank in danger again?

Last March, the collapse of Silicon Valley Bank triggered a small-scale crisis. A few days later, a new round of bank runs caused the signing bank to collapse, and in May, First Republic Bank was taken over by JPMorgan Chase.

However, for banks in the US region, the pain seems to be not over yet. The soaring vacancy rate of office buildings after the epidemic has exacerbated the financial risks of many regions and community banks, and the outstanding loans supported by depreciated real estate have become a challenge for refinancing.

It is worth noting that since the start of the new financial reporting season, several regional banks that have released their financial reports have seen a significant decline in profits. The net interest income of small and medium-sized financial institutions is eroded by the rising cost of deposits, while high interest rates put pressure on loan demand. United States Bank of America stated that it has been working hard to cope with the rising financing costs as customers transfer cash from banks to higher yielding hedging alternatives such as money market funds to obtain better returns.

The Federal Reserve issued a warning in its semi annual financial stability report that banks with higher exposure to commercial real estate and consumer loans may suffer greater losses. In the financial status brown book released last week, commercial real estate leasing in the United States has continued to decline since February.

((“New York Community Bank’s Stock Price Weakens (Source: New York Stock Exchange)”,)

In February of this year, when New York Community Bank reported an unexpected loss in the fourth quarter of last year, it reignited market concerns about the industry’s commercial real estate exposure.

Recently, the stock price of New York Community Bank has fluctuated sharply again, plunging nearly 12% in a week and expanding to 70% this year. There are reports that customers are starting to withdraw their deposits again. In March of this year, the bank received $1 billion in equity investment “life-saving money” from investors, including Liberty Strategic Capital, a subsidiary of former Treasury Secretary Mnuchin.

Joseph Lynyak, a banking lawyer at Dorsey&Whitney law firm, said that the collapse of Republican First Bank will not be the last one. “There are two reasons: higher cost deposits exceed the yield of low yield treasury bond bonds and similar investments held by banks, and the deteriorating commercial real estate market and commercial real estate loans. On the other hand, there may be significant unrealized losses in banks’ investment portfolios, and many banks will eventually need additional capital to address these unrecognized losses,” he said.

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