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First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

ir.firstrepublic.com

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Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#51

Post by hackernewds »

gonehome wrote: post #24
Dr_Birdbrain wrote: post #9

Earlier quoted context omitted.

Matt Levine reports that the reason they had to buy those low-yield investments that plummeted is because it’s tech-sector customers had too much money in the boom times. Too much deposits means they need to buy a lot of something , and in the boom times that was low-yield stuff.

Sort of the other way to handle it would be to say “we can’t find risk-free yield for the volume of cash we just had deposited, so deposits now get 0.8% instead of 1.0%” Which is kinda fine? Means you might lose some business as others chase yield. But I feel like most startups don’t actually have that much cash in the bank so they shouldn’t really be chasing yield anyway. It didn’t take a genius to predict interest…

I'd rather have a bank do that, than go and invest in subprime packaged mortgage loans. Except SVB got punished for investing in long-term maturation US Treasury

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#52

Post by breck »

MrFoof wrote: post #6

In general, if anyone wants to go through all the recent 8-K filings, this is what SEC EDGAR is for. Here's a link that'll bring up all recent 8-K filings by date and time, descending: https://www.sec.gov/cgi-bin/browse-edgar?action=getcurrent&d... In general, I would expect a ton of 8-Ks on Monday the 13th for companies to release information on their exposure to SIVB, particularly if their exposure is minor or non-…

OMG. If anyone wants to fund it I could build a far better Tree language to replace this XML junk that they are using.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#53

Post by metacritic12 »

Counterpoint: This WSJ Article [1] and their latest 10Ks confirm that:

- Their actual assets market-to-market (sold on the fair market) is about $26 bln less than the amount they're carried at on their books. This is as of year end 2022, probably more today.

- This would wipe out all their equity, loans, and start hitting depositors.

- If there was a bank run, First Republic probably would not be able to meet all depositors.

- First Republic in some ways is in worse shape that SVB. SVB had all their assets in medium duration (10 year) treasuries. First Republic has a lot more 30 year mortgages they gave people at ultra low 2% interest rates. Today 30 year mortgages are 6%, which means if they tried to resell these loans they'd get more than 50% off.

- Personally, I know of at least a couple of HNWIs who pulled funds other than $250K today. Who can blame them -- what's the upside if you have more than $250K in? First Republic relies on wealthy deposits, and these are not insured.

[1] https://archive.is/QuOSD#selection-335.147-335.315

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#54

Post by sroussey »

gerad wrote: post #23
JshWright wrote: post #3

I’m not super well informed about this space, but my understanding was that SVB’s issue wasn’t that its depositors were from the tech sector, but rather that it had put a ton of capital into investments that are significantly less valuable (on the open market today) now than they were a year ago due to increasing interest rates. I’m curious how the tech sector matters here specifically?

The big concern is the contagion spreading. All banks are vulnerable to failure if deposits are taken out quickly, especially in this market where assets have taken a huge hit over the last 12 months. FRB wants people to believe the contagion is limited to tech and that they have limited exposure to it, so that folks don’t take deposits out en masse. If people start to think that it’s unstable, then they’ll take mone…

If people don’t get their access to their cash by Monday (or a week later at latest), then any rumor of liquidity issues at any bank will lead to a bank run. Once you know / experience it, bank runs feel like a legit thing to do.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#55

Post by hackernewds »

cbb330 wrote: post #12

Thank god, a single source of good news is better than none. Does anyone have an aggregate view of the LCR / NSFR metrics across U.S. banks? I'd love to see the risk trend here at a wider scale than single bank disclosures like this one. Why? Because I'm really nervous that SVB was in no unique situation -- after all VCs / Startups share a lot of low confidence and low cash traits in common with other investors.

Note they have only done this to contain fallout in their own stock. Banks usually reserve this information as competitive Intel.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#56

Post by reducesuffering »

Uhhh, are they next?

Their balance sheets says $17B assets more than liabilities, but $120B of those assets are in consumer loans and only $4B in cash... What kind of liquidity is that? $42B was just pulled from SVB. What are these banks doing?

https://www.cnbc.com/quotes/FRC?tab=financials

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#57

Post by ptero »

hackernewds wrote: post #47
TheHumanist wrote: post #41

Earlier quoted context omitted.

Your last line is key... The silent ones are who you should be concerned about, most likely.

That's a very prescient thought. But isn't there a fiduciary duty that is legally mandated to disclose in times like this?

IANAL, but I don't think fiduciary duty requires you to disclose SVB exposure. If anything, disclosing it might trigger another run on an otherwise easily survivable state.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#58

Post by fanzhang »

mdorazio wrote: post #48

I'd really like to know where people are withdrawing their money from these banks to . They're not taking suitcases of cash, so it must be flowing to some other financial institutions. Is it going to traditional big banks (BofA, Wells, Chase, etc.)?

Yes -- all the people I know withdrawing from small banks are going to Chase or Morgan Stanley. These largest banks have to mark-to-market their losses and have a lot of cash (short duration) assets, and are literally too big to fail.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#59

Post by cormacrelf »

khuey wrote: post #44
gonehome wrote: post #24

Earlier quoted context omitted.

Sort of the other way to handle it would be to say “we can’t find risk-free yield for the volume of cash we just had deposited, so deposits now get 0.8% instead of 1.0%” Which is kinda fine? Means you might lose some business as others chase yield. But I feel like most startups don’t actually have that much cash in the bank so they shouldn’t really be chasing yield anyway. It didn’t take a genius to predict interest…

Yeah I don't see why SVB couldn't have just rolled billions in short term T-bills instead.

Back in 2021 short term T-bills gave you less than 0.1% yield, hitting an all time low of 0.04% for some timeframes. The bonds they bought gave them 1.5% annual return. The banking regulations didn’t prevent them buying the ones they did. So yeah. That’s why.

Re: First Republic Bank files 8-K – Tech only 4% of total deposits; no sector >9%

#60

Post by sroussey »

nemo44x wrote: post #37
whatever1 wrote: post #18

Hopefully the panic will not spread. Multiple people were calling me to ask whether they should get their money out of their bank. But keep in mind that people also went through a pandemic, where panic was the go-to option.

> Multiple people were calling me to ask whether they should get their money out of their bank Should we? At minimum keep as close to $250k or less spread across however many banks as practical, right now.

I thinks lots of small companies with a sudden $4m influx of cash are not in a good position to open accounts at 16 banks.

Now that said, there are hot money managers that will do this for you.

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