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First Republic Bank Run?

First Republic Bank Run?

Business

Worries about First Republic’s solvency reverberated through social media this weekend. Now that SVB‘s balance sheet issues and subsequent bank run caused a spotlight to shine on all of the unhealthy banks in America, First Republic finds itself in the regrettable position of being on the proverbial ‘bank hot seat’. Let’s also not forget about Silvergate’s demise earlier this week. This is the season of dying banks!

According to a Wall Street Journal article:

“In its an­nual re­port, First Re­pub­lic said the fair-mar­ket value of its “real es­tate se­cured mort­gages” was $117.5 bil­lion as of Dec. 31, or $19.3 bil­lion be­low their $136.8 bil­lion bal­ance-sheet value. The fair-value gap for that sin­gle as­set cat­e­gory was larger than First Re­pub­lic’s $17.4 bil­lion of to­tal eq­uity.”

Now we see actual bank runs occurring in Brentwood California. Lines around the block for worried customers hoping to access their accounts:

Displaying IMG_0340.jpg
pjb.eth on Twitter: “I’ve never seen a bank run in Brentwood Los Angeles in over 40 years — this is at first republic bank branch. People standing in rain https://t.co/k31PqqpyO3” / Twitter

Of course First Republic is doing their best to reassure customers. Releasing an 8-k on their financial health:

Microsoft Word – FRB Form 8-K_2023 03 10_v4.docx (firstrepublic.com)

The challenge, however, is that market hysteria can drown out rationality.

Moreover, First Republic actually offers insurance greater than $250k:

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Balances held in an ICS account are divided into FDIC insurable increments of less than $250K, and each increment is allocated to a different bank, enabled by the Promontory network of banks.

With the sweep, you can insure up to $160M!

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Can A Central Bank Run Out Of Money?

First Republic Bank is a private bank and wealth management company that was founded in San Francisco, California in 1985. The bank was established by Jim Herbert and others, who sought to create a new kind of banking experience that focused on personalized service and relationships with clients.

In its early years, First Republic Bank served primarily high net worth individuals and businesses in the San Francisco Bay Area.

Offering a range of services such as private banking, business banking, and real estate lending. The bank quickly gained a reputation for exceptional customer service and personalized attention. As a result, helping it grow rapidly in the years that followed.

During the 1990s and 2000s, First Republic Bank expanded beyond the Bay Area.

Opening branches in other major cities such as New York, Los Angeles, and Boston. The bank continued to focus on serving high net worth individuals and businesses, offering a range of services such as wealth management, investment management, trust and estate services, and mortgage lending.

In 2007, First Republic Bank was acquired by Merrill Lynch, which was itself later acquired by Bank of America. However, in 2010, a group of investors led by Jim Herbert and others acquired First Republic Bank back from Bank of America. Taking it private once again.

In conclusion, today, First Republic Bank continues to operate as a private bank and wealth management company, with a focus on serving high net worth individuals, businesses, and nonprofits. Laslty, the bank has expanded its offerings to include services such as student loan refinancing and personal lending.

Business

First Republic Bank Run?