Will My Bank Fail?

[+ augustus]

On 4/26/2024 at 8:08 PM, BuffaloKyle said:

Philadelphia based Republic First Bank was shut down today by Pennsylvania state regulators. All customer accounts will become Fulton Bank accounts and all funds up to $250,000 are fully covered by the FDIC. All Republic First Bank branches will also become Fulton Bank branches immediately as well. This is the first bank failure since Nov. 2023.

And this bank failure (not a large one at $6 billion) will cost the FDIC $667 million.

[Frequentflier]

As long as depositors keep balances within FDIC limits they don't have to be concerned. There are even banking services now that automatically move excess balances to other FDIC institutions and back as needed - I have a couple of business clients that do that now post Silvergate (I believe that was the name). I use a couple of local / regional banks because the service is great and I prefer to give them business and avoid the Wells / Chase / B of A bankster run operations  Others are free of course to love those if they like.

[rvwnsd]

On 6/19/2023 at 8:17 AM, Charlie said:

I have had a small account for years with Union Bank of California, which has just been taken over by U.S. Bank. So far, everything in the changeover has gone smoothly for me.

I'm very, very happy to hear this. I retired/was laid off from them in 2021 (a month before they announced the sale to US Bank) and know several people who were involved in the migration, including the person who led it from the UBOC side. When I heard she was in charge, I knew it would go well. Very happy to hear my instincts were right.

PS: US Bank was the right acquisition partner and wanted to buy UBOC for more than 25 years. Patience paid off!

On 4/26/2024 at 5:08 PM, BuffaloKyle said:

Philadelphia based Republic First Bank was shut down today by Pennsylvania state regulators. All customer accounts will become Fulton Bank accounts and all funds up to $250,000 are fully covered by the FDIC. All Republic First Bank branches will also become Fulton Bank branches immediately as well. This is the first bank failure since Nov. 2023.

FDIC says Republic First Bank is closed by Pennsylvania regulators | CNN Business

WWW.CNN.COM

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The Federal Deposit Insurance Corporation on Friday said that Republic First Bank has been closed by Pennsylvania state regulators.

 

The problem with many of these start-up banks is their size outpaces their leadership's ability to manage the bank. I'm sure their leaders had previously run small banks that sold out to a larger bank. Problem is, the bank grew to be a relatively large bank and leadership didn't grow along with it.

On 4/27/2024 at 2:02 PM, marylander1940 said:

When it comes to banks in this era the bigger the better.  I keep it simple and I only have 2 accounts at Bank of America and Wells Fargo.

 

While I agree in principle, the only super-large banks I'd bank at are Chase, Bank of America (which is where I bank), US Bank, and maybe Truist. As a former banker (see above) who worked for two of the world's largest banks (Chase and MUFG, prior parent of Union Bank), I think the Wells Fargo of today needs to be sold branch-by-branch, loan-by-loan, and account-by-account to other institutions that don't have the deep-running rot that they have. I mean, even Charlie Scharf can't fix them. Essentially, Norwest was the surviving entity that took the Wells name and San Francisco HQ. The worst of Norwest's over-the-top sales culture infected Wells and here we are today.

PNC is simply incompetent, and I'd love to see US Bank buy them and ditch their leadership. I still haven't forgiven them for the BBVA fiasco. 

Back to the topic, I don't see a slew of bank failures on the horizon, as was the case in 2008 when three large banks (BofA, Citi, and WaMu) failed and several others (like National City) were acquired before they failed.  SVB and Signature were in over their heads and had a too-high risk tolerance. Some banks are risk-averse, they appeared to be averse to recognizing and managing risk. IMO, First Republic Bank's demise was an unfortunate consequence of SVB and Signature, the coverage they received, and the "pundits" who were gunning for them, Pac Western, and Western Alliance to fail. They got their wish. Well, part of it, anyway. Pac Western was acquired by Banc of California and Western Alliance seems to be flourishing. Pac Western got too big too fast and made a few ill-conceived acquisitions that d,id not work out. 

The moral of the story for customers is to spread deposits across multiple institutions and/or title the accounts such that your FDIC insurance is maximized. You can have five accounts totaling >$250K, but if you do something as simple as titling them as "Your Name P/O/D Name of Beneficiary 1", "Your Name P/O/D Name of Beneficiary 2" and so forth you have created multiple informal trusts, each of which has its own $250K in deposit insurance. For bankers, it is to know when growth is too much and when leaders should step aside. 

 

[KeepItReal]

7 hours ago, rvwnsd said:

 

The problem with many of these start-up banks is their size outpaces their leadership's ability to manage the bank. I'm sure their leaders had previously run small banks that sold out to a larger bank. Problem is, the bank grew to be a relatively large bank and leadership didn't grow along with it.

 

You may find this interesting: https://www.wsj.com/finance/banking/vernon-hill-republic-first-bank-failure-86f5b3b2

Some leaders have a track record of failure.

[rvwnsd]

On 5/9/2024 at 4:30 AM, KeepItReal said:

You may find this interesting: https://www.wsj.com/finance/banking/vernon-hill-republic-first-bank-failure-86f5b3b2

Some leaders have a track record of failure.

Thanks for posting this. Not sure how I missed it! Yeah, gross mismanagement is another thing that brings banks down. 

Funny story: In the early aughts Chase moved several street-level branches in NYC from the first to the second floor of buildings to save on rent. Commerce then leased the former Chase space. A friend wasn't paying attention and walked into what he thought was a Chase branch, when in fact it was a Commerce branch, and opened an account. He was not pleased when he realized what he had done. He wasn't the only one who did this. That nonsense ended when Bank One acquired Chase.

[+ augustus]

On 5/8/2024 at 11:52 PM, rvwnsd said:

Back to the topic, I don't see a slew of bank failures on the horizon, as was the case in 2008 when three large banks (BofA, Citi, and WaMu) failed

BofA and Citi didn't actually fail.  They received TARP money and actually paid it all back with interest.  All the big banks were forced to take TARP money whether they needed it or not, so there wouldn't be a run on the weaker ones like Citi that did receive TARP money.

Edited May 19 by augustus

[+ augustus]

I am predicting many bank failures over the next couple of years.  The US banking system has $2 trillion in unrecognized bond losses because of the rise in interest rates (and because interest rates were held too low for years).  

[rvwnsd]

10 hours ago, augustus said:

BofA and Citi didn't actually fail.  They received TARP money and actually paid it all back with interest.  All the big banks were forced to take TARP money whether they needed it or not, so there wouldn't be a run on the weaker ones like Citi that did receive TARP money.

Citi received a bailout that was later converted to an equity interest and loan guarantees. According to Citi's "Bank Find" profile, they "maintained operations with open bank assistance," which means they failed and were rescued by the federal government rather than being seized. 

Bank of America also received a bailout, but in early 2009. Like Citi, the FDIC lists them as having "maintained operations with open bank assistance." 

The difference between TARP and an outright bailout is twofold: 1) TARP was intended to help banks avoid becoming insolvent (Citi was already effectively insolvent) and 2) Healthy banks were strongly encouraged (i.e. forced) to take the money regardless of financial condition to avoid bank runs caused by a perception that specific banks were on the brink of failure. That's why healthy institutions like Chase took TARP money. 

Citi was the victim of mortgages going bad. BofA was the victim of good ol' fashioned dick-swinging. After Chase acquired Bear Stearns, the then-chair of BofA had to show Jamie Dimon that his dick was bigger and acquired Countrywide and Merrill Lynch. Sadly, that did not work out very well. 

Both institutions were treated the same as Continental Illinois was back in the 1980's after the Penn Square debacle. Fun fact: Bank of America eventually acquired Continental Bank. 

TARP funds were used to fund at least one bank merger that avoided a failure. National City was in deep trouble and PNC accepted TARP money which was used to acquire them. They were also used by healthy banks as a way of funding takeovers of banks that had failed.  

[+ augustus]

3 hours ago, rvwnsd said:

BofA was the victim of good ol' fashioned dick-swinging. After Chase acquired Bear Stearns, the then-chair of BofA had to show Jamie Dimon that his dick was bigger and acquired Countrywide and Merrill Lynch. Sadly, that did not work out very well. 

Ahhh yes, I forgot about that! Countrywide was a disaster.