Confusion around similar bank names led to a selloff at a Philadelphia community bank two weeks ago, prompting the CEO of Republic First Bank to set the record straight.
“As you may be aware, two financial institutions were closed by federal regulators over the weekend,” Thomas Geisel said in a letter to customers last month, referencing the collapse of Silicon Valley Bank and Signature Bank days prior. “Amid everything going on, Republic Bank would like to make very clear: we are Republic Bank, Inc. (FRBK-Red/Blue Logo); we are NOT First Republic Bank (FRC-Green Logo).”
First Republic Bank, based in San Francisco, faced an uncertain future following the collapse of SVB, which like SVB was highly startup-focused. First Republic’s woes led 11 of the country’s largest banks to infuse it with a $30 billion lifeline on March 16 to prevent contagion.
The following day, though, shares of Philadelphia’s Republic First fell as much as 28%, in what may be explained as a case of mistaken identity. The decrease marked Republic First’s worst single-day performance since 1994, Fortune noted.
Geisel didn’t just emphasize the name difference. Startup-focused banks and community banks like his, he said, are entirely different animals.
“Start-up focused banks realized massive growth over an extended period in a low-rate environment. They built-up a concentration in start-ups and early-stage technology companies. These types of companies usually don't have tangible assets to leverage and don't make money; they survive by continuously raising capital from venture firms off escalating valuations, and everything changes when their valuations drop. Including, utilizing cash on hand and deposits to survive,” he said. “This can create a liquidity crisis.”
“Republic Bank is very different; we DO NOT lend to start-ups and are not involved in Crypto. We lend primarily to established businesses,” he said. “We lend against collateral and cash flow, we lend to profitable companies that can service the debt, and we typically have personal guarantees. Our portfolio is not overly concentrated in any one specific class or industry.”
This isn’t the first time these banks have been at odds with each other due to their similar names.
Republic First was originally called First Republic following a merger between Republic Bank and First Executive in 1996. But because San Francisco-based First Republic had been established more than a decade earlier, the Philadelphia-based bank transposed its name. Its FRBK ticker, however, remained unchanged.
There are countless redundancies in bank nomenclature. For example, there’s a Citizens Bank of Lafayette in Tennessee, a Citizens Bank of Edmond in Oklahoma, and a Citizens Bank of Las Cruces in New Mexico, and none are part of the much larger Citizens Financial Group.
Corporate confusion goes beyond the bank sector. In crypto’s bull market in 2021, furniture retailer Ethan Allen’s ticker ETH was often confused with Ethereum, or ETH-USD. Ethan Allen changed its ticket to ETD that August.
Republic First has largely recovered since the confusion, with its share price climbing 26% over the past five days.