Just a year after the Silicon Valley Bank collapse, Republic First Bancorp became the latest mid-sized bank to shut its doors.

On April 26, state regulators seized the Philadelphia-based bank holding $6 billion in assets and $4 billion worth of deposits.

Although Republic First’s failure will cost the Federal Deposit Insurance Corp (FDIC) $667 million, regulators dodged a bigger bullet.

As part of the deal, Fulton Bank agreed to take over the defunct bank and acquire all 32 Republic First branches across Pennsylvania, New York, and New Jersey.

“The FDIC determined that compared to other alternatives, Fulton Bank’s acquisition of Republic Bank is the least costly resolution for the [Deposit Insurance Fund],” the federal agency said.

Unlike other high-profile regional banking failures, Republic First’s impending collapse wasn't as unexpected.

Struggling to compete

Republic First’s struggles began to surface back in 2021.

Among other things, the bank reportedly failed to file annual financial reports with the Securities and Exchange Commission and became a target of activist investors.

Last year, the bank announced a round of job cuts and exited the mortgage business. Shortly after, the Nasdaq stock exchange delisted its share.

If that wasn’t bad enough, the bank confirmed in February that high-profile investors had canned a planned $35 million funding round.

Just four months prior, one of the three investors, George Norcross, said, “We will be able to move forward quickly when all requirements have been met and closing conditions have been satisfied.”

Unfortunately, the bank failed to meet the terms of the agreement, further delaying its $75 million to $100 million funding goal.

The deal fell through around the same time Republic First fired its auditor, Crowe—which had reported “material weaknesses” in the bank’s financial reporting.

The end result was a typical bank run with Republic First depositors fleeing to “too-big-to-fail” banks like JPMorgan, Bank of America, and Citi.

The fear of contagion

Regional banks had never been much of a taboo among depositors, but that perception changed after last year's regional bank crisis.

After all, it took just five days for three major regional banks—Silicon Valley Bank, Signature Bank, and First Republic—to go belly-up.

“Triggered by sizable deposit outflows, this event raised concerns about the soundness of the rest of the U.S. banking sector, in particular, other banks of similar or smaller size...” wrote IMF analysts in a post-mortem report one year after the crisis.

While regulators contained the crisis, they couldn’t prevent a deposit flight from other regional banks.

As The Wall Street Journal reported, small and midsize banks “lost hundreds of billions of dollars” to their larger peers and to money-market funds in the weeks following the crisis.

In total, $312 billion in deposits left the U.S. financial system in the month during the crisis, according to Fed data.

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