- First Republic sought to reassure customers after its share price crashed following SVB's collapse.
- The bank said its average customer deposit amount was well below the maximum $250,000 insured limit.
First Republic Bank sought to reassure customers that their deposits were safe as regional lenders scramble to dampen contagion fears sparked by the collapse of Silicon Valley Bank.
SVB was $4 Friday and taken over by the Federal Deposit Insurance Corporation (FDIC) $4 following a failed $2.3 billion capital raise.
With $209 billion in assets and about $175 billion in deposits as of the end of last year, $4, and the second-biggest failure on record.
$4, leaving customers $4 if a new buyer cannot be found.
There are fears the problems that gripped SVB, a $4 which hurt its bond portfolio and increased outflows from business clients, could also affect other banks of a similar size. There are concerns that some customers of other regional banks such as First Republic could decide to withdraw their funds too.
First Republic scrambles to reassure investors
First Republic's share price plunged by a third last week as SVB imploded. Stock in Western Alliance, a comparably sized regional bank, also fell by a similar percentage.
$4 also fell but their shares stabilized Friday, while First Republic extended its owns losses.
$4 First Republic, which has more than 80 branches in seven states, held $176.4 billion in deposits at the end of 2022. Of that, $119.5 billion was uninsured. The 68% share is sizable, though much smaller than SVB's 89%.
$4, First Republic reassured customers of its liquidity position as its share price flagged.
It said the average size of deposits held by its customers was $200,000, less than the $250,000 limit insured by the FDIC, while its average business account held $500,000.
"First Republic's liquidity position remains very strong," the bank said. "Sources beyond a well-diversified deposit base include over $60 billion of available, unused borrowing capacity at the Federal Home Loan Bank and the Federal Reserve Bank."
Contagion fears linger
But investors remain far from convinced that First Republic has assuaged fears of contagion.
Like SVB, First Republic's latest filing showed a big discrepancy between the fair-market value and balance-sheet value of its assets. These are mostly tied up in mortgages, the rates of which have risen in the last year alongside the Fed's main interest rate.
Like SVB's bond holdings, First Republic's long-term mortgage assets are most likely worth less than their actual value.
Brian Levitt, global market strategist at Invesco, $4 that SVB and First Republic in particular had emerged as banks with balance sheets ill-prepared for higher interest rates and a potential recession.
"Investors, smelling blood, then turn their attention to the next bank exposed to interest rate risk and specific credit risk, and then the next," he said. "First Republic Bank, which has significant exposure to the coastal real estate markets appears to be next on the list."
In tweet Saturday, $4 regulators had 48 hours "to fix a soon-to-be-irreversible mistake" that could engulf the entire banking sector, echoing fears of contagion.
Regulators may step in to create a wider safety net to secure more of struggling banks' deposits, in an attempt to calm jittery customers.
$4 that the FDIC and the Federal Reserve were in discussions to set up a vehicle that would create a backstop to secure more deposits at banks that run into issues similar to SVB.
First Republic didn't immediately respond to Insider's request for comment made outside normal working hours.