Republic First Bank Closure FAQ
- Which bank closed recently, and how large was it? Republic First Bank of Philadelphia was taken over 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.
- How is this closure different from the major bank failures in 2023? Last year’s closures, like Silicon Valley Bank and Signature Bank, involved much larger institutions with over $100 billion in assets that focused on the tech and crypto sectors. Republic First’s issues were tied to its consumer mortgage portfolio.
- What led to Republic First’s closure? Rising interest rates put significant pressure on Republic First’s mortgage business. The bank couldn’t find a buyer or secure promised investments after missing key deadlines, which ultimately led to its takeover.
- Why did last year’s bank failures hit startups so hard? Banks like Silicon Valley Bank and Signature Bank were central to the startup and tech ecosystem—SVB alone served over 40% of U.S. venture-backed companies before it collapsed.
- How can businesses protect themselves from bank risks? Having a diversified capital strategy is essential; for instance, R&D tax credits allow businesses to claim up to $500,000 per year to offset payroll and innovation-related operating costs.
Republic First Bank of Philadelphia was taken over by the Federal Deposit Insurance Corp (FDIC) last week, marking the first federally managed bank closure in the U.S. for 2024—and giving many in finance a sense of déjà vu.
That’s because just over a year ago, bank closures were making headlines, with the similarly named First Republic Bank among a trio of lenders whose collapse shook the tech and startup world.
But there are key differences between what’s happening now compared to a year ago, when many founders felt the foundation of the startup ecosystem was starting to crack.
While it’s hard to find a silver lining in any bank closure, leaders in the innovation sector can be reassured that this latest event won’t shock the system the way last year’s closures left CFOs and founders scrambling.
Many of the same economic pressures that triggered last year’s wave of closures—persistent inflation, high interest rates—are still present. But Republic First’s closure is on a much smaller scale.
Small banks vs. Specialized banks
What made last year’s closures so shocking for the tech and startup community was the sheer size and reach of the banks involved. First Republic Bank, for example, had $232.9 billion in assets (and $104.5 billion in deposits) when it was seized, and focused on high-net-worth clients.
Similarly, Silicon Valley Bank (SVB) tailored its services to the tech and startup sector, holding about $209 billion in assets when it was taken over in March.
Even though SVB’s services were specialized, it was far from a small bank. In fact, more than 40% of U.S. venture-backed tech and healthcare companies were SVB clients at the time.
It was a similar story when the FDIC took over Signature Bank just days after SVB’s collapse. Like SVB, Signature was known as one of Wall Street’s most crypto-friendly lenders over the past decade before it was shut down.
In 2022, Signature’s team even tried to exit their crypto- and blockchain-heavy portfolio as they anticipated a downturn in the sector—which ultimately happened. By December 2022, the warning signs were clear for Signature, which had about $110 billion in assets and $83 billion in deposits.
Consumer banks now feeling the pressure—but who’s next?
Fast forward to 2024, and the Republic First story is about more localized, personal banking. Republic First was mainly a consumer bank, operating 32 branches across Pennsylvania, New York, and New Jersey.
As of January, Republic First had $6 billion in assets and $4 billion in deposits—a fraction of the ten-figure totals at SVB, Signature, or First Republic.
Much of Republic First’s trouble came from its mortgage loan portfolio, which had “declined substantially in a rising rate environment,” according to a presentation the bank shared with investors last year.
Despite being upfront about its financial situation late last year, Republic First couldn’t find a buyer before the takeover. Leaders missed key deadlines, and plans to strengthen the bank’s finances fell through. Not only was the bank delisted from NASDAQ in August, but earlier promises of a cash infusion from the Norcross-Braca Group never materialized as Republic First’s leaders missed important shareholder deadlines throughout 2023.
In short, many of Republic First’s problems weren’t a surprise to those doing business with the bank (though the closure is still frustrating and concerning for direct customers). Republic First wasn’t focused on funding tech companies or startups—in fact, its specialization in consumer mortgages is what ultimately led to its seizure.
With high-profile bank closures now happening almost every year, it’s a good reminder for finance leaders at companies of all sizes: having a diversified capital strategy is crucial to weathering potential institutional failures.
Innovation capital to extend your runway
A powerful—but often overlooked—source of non-dilutive funding is R&D tax credits. CFOs can use these credits to reinvest a portion of the capital they’re already putting into product development.
Each year in the U.S., companies can claim up to $500,000 to offset payroll, income, or other tax liabilities tied to R&D as part of the IRC Section 41 tax credit. That means up to $500,000 in cash can stay in your company’s bank account each year if your team secures 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.
That could be one of your most powerful assets when pitching your solution to potential investors.
To learn how Boast combines cutting-edge technology with deep expertise in the innovation ecosystem to deliver the industry’s leading R&D tax credit solution, talk to one of our experts today.
