What lessons can be learned from the Republic First Bank failure?
Six risk management and oversight steps credit unions should take to ensure they don’t ever find themselves in the same position
I just about missed it, the news of a regional bank failure and subsequent takeover by another bank at the tail end of April. Yes, it really happened! (You can read a short timeline and summary of key details in this article from Forbes.) Republic First Bancorp, with assets of approximately $6 billion, is very small in comparison to the overall U.S. financial industry and especially when compared to the 2023 failures of much larger Silicon Valley Bank, Signature Bank and, confusingly, First Republic Bank. Those earlier failures contributed to customer fear and large deposit withdrawals, which led to a classic bank run.
Republic First had problems for a number of years, even before the other bank failures in 2023, due to some bad senior leadership decisions. Investors had been trying to force the sale of the bank since 2021 due to low profitability and growth following these questionable decisions. The CEO was forced out in 2022, but attempts to improve the bottom line failed. As a result of a run on deposits and negative outlook, the regulator forced the closure of Republic First, and the subsequent sale to Fulton Bank took place.
I don’t believe this failure is a harbinger of things to come in the financial services industry, but there are definite lessons that can be learned by credit unions and banks. So, what can be done?
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