Bank Closures 2024: Why Republic First closure is very different from First Republic

on April 30, 2024

Republic First Bank Closure FAQ

  1. What bank closed recently and how big was it? Republic First Bank of Philadelphia was seized by the FDIC, marking the first U.S. bank closure of 2024. Republic First was a relatively small consumer bank with $6 billion in assets and $4 billion in deposits.
  2. How does this closure differ from the major bank failures in 2023? Last year’s closures like Silicon Valley Bank and Signature Bank involved massive institutions with over $100 billion in assets that catered to the tech/crypto industries. Republic First’s troubles stemmed from its consumer mortgage portfolio.
  3. What were the issues that led to Republic First’s closure? Rising interest rates severely impacted Republic First’s mortgage business. The bank failed to find a buyer or secure promised investments after missing deadlines, ultimately leading to its seizure.
  4. Why was last year’s bank fallout so disruptive for startups? Banks like Silicon Valley Bank and Signature Bank were core to the startup/tech ecosystem, with SVB serving over 40% of U.S. venture-backed companies before its collapse.
  5. How can businesses insulate from bank vulnerabilities? Having a diversified capital strategy is crucial, such as leveraging R&D tax credits which allow businesses to claim up to $500,000 annually to offset payroll and operational costs related to innovation.

Republic First Bank of Philadelphia was seized by the Federal Deposit Insurance Corp (FDIC) last week, marking the United States’ first federally-managed bank closure of 2024—and giving many in the finance space a bout of deja vu. 

That’s because it was just over a year ago that bank closures were trending, with the similarly-named First Republic Bank being among a trio of lending institutions whose closures rocked the tech and startup space. 

But there are key differences between the situation folding out today compared to a year ago, when it seemed for many founders like the bedrock of the startup ecosystem was starting to erode.

While the silver linings of any bank closure may feel like a stretch, business leaders in the innovation space can largely rest assured that this latest closure won’t shock the system in the same way that last year’s closures left many CFOs and founders scrambling. 

While many of the same economic conditions that arguably tipped off the domino effect of closures persist today—stubborn inflation, high interest rates—Republic First’s closure is on a different scale altogether.

About: Bank Closures 2024: Why Republic First closure is very different from First Republic
Stakeholders across the tech ecosystem were frustrated when Silicon Valley Bank, Signature Bank and First Republic bank were seized during Spring 2023.

Small banks vs. Specialized banks

What made last year’s closures such a shock to the tech and startup community was the sheer size and scope of the institutions affected. First Republic Bank, for instance, had $232.9 billion in assets (and $104.5 billion in deposits) upon seizure, while specializing in a high-net-worth client base. 

In that same vein, Silicon Valley Bank (SVB) catered their services to the tech and startup community, holding roughly $209 billion in assets when it was seized back in March

Although SVBs services were specialized, they clearly weren’t a small bank in the traditional sense. In fact, more than 40 percent of U.S. venture-backed technology and healthcare companies were customers of SVB at the time of seizure.

It was a similar scenario when the FDIC took over Signature Bank just a few days after SVB fell. Akin to SVB’s cache among the startup community, Signature had been characterized as one of Wall Street’s most crypto-friendly lenders of the past decade before it was shuttered. 

In 2022, the Signature team had even tried to “cash out” of their crypto- and blockchain-dominant portfolio as they anticipated waning market attitudes toward the sector—which ultimately came to pass. By December 2022, the writing was arguably already on the wall for Signature, as the bank had total assets of roughly $110 billion and total deposits of about $83 billion.

Consumer banks now feeling the burn—but who will be next?

Fast forward to 2024, and the Republic First scenario paints a story of more personal, localized banking. For starters, Republic First was a primarily consumer bank, operating 32 branches across Pennsylvania, New York and New Jersey.

To that end, Republic First counted $6 billion in assets and $4 billion in deposits as of January, which is only a small slice of the 10-figure totals from SVB, Signature or First Republic. 

Further, much of the trouble for Republic First stems from their mortgage loan portfolio, which had “declined substantially in a rising rate environment,” according to a presentation the bank shared with investors last year. 

Despite early transparency around the state of the bank’s finances at the close of last year, however, the bank’s attempts to find a buyer before seizure failed as leaders missed key deadlines and plans to shore up assets ultimately failed. Not only was the bank de-listed from NASDAQ in August, but earlier promises of cash infusion from the Norcross-Braca Group failed to materialize as Republic First leaders missed key shareholder deadlines across 2023. 

All of that is to say that many of Republic First’s troubles aren’t breaking news to those who had been in business with the bank (although the closure is still frustrating and worrisome for direct customers). In that same vein, Republic First wasn’t in the direct business of funding tech companies or startups—in fact, their specialization in providing mortgages in the consumer lending market is what ultimately led to their seizure. 

But with headline-grabbing bank closures now occurring on a seemingly annual basis, it’s worth reminding finance leaders at companies of all sizes about the importance of a diversified capital strategy in the face of potential institutional failure. 

Innovation capital to extend operational runway

A powerful (and underutilized) source of non-dilutive funding are R&D tax credits, which CFOs can use to reinvest a share of the capital they’re already put into their product development. 

Each year in the US, businesses can claim up to $500,000 to offset payroll, income or any other tax liabilities related to R&D as part of the IRC Section 41 tax credit. That means up to $500,000 in liquid assets can actually stay in your business’ bank account each year if your team is able to secure a successful claim with the IRS.

By combining decades of combined human expertise in navigating tax code—while also being a team of founders in our own right—with a platform that synchronizes key financial, project workflow and payroll data into a single system of proof, Boast leaves no stone unturned in digging deeper to uncover all of your credit-worthy activities. 

This could be one of the most powerful bona-fides in your corner when pitching your solution to potential investors. 

To learn more about how Boast combines leading technology with years of expertise in the innovation ecosystem for the industry’s leading R&D tax credit solution, talk to an expert from our team today.

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