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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%

#61

Post by csomar »

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…

> It didn’t take a genius to predict interest rates were going to rise. Locking cash away for 10yrs in very low % return vehicles seems stupid?

Everyone is a genius in hindsight. You could have made millions out of a few thousands if you were able to predict an interest rate regime change. But where are your millions?

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

#63

Post by sroussey »

remote_phone wrote: post #11

The main issue is no longer tech. It’s whether or not they have HTM assets that will bring them under if they have a run on the bank. A lot of the depositors are rich Silicon Valley residents and they may get spooked and pull their money. That’s the issue in this phase of the contagion.

No bank is safe from a bank run.

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

#64

Post by nemo44x »

NovemberWhiskey wrote: post #43
nemo44x wrote: post #29

Earlier quoted context omitted.

I think this was a weird thing where deposit demand was so much greater than loan demand. They had too much money and thought they were doing a safe thing. But failed to consider the time aspect and how rapid interest rate increases nuke them. Banks do provide a valuable service and having them reject deposits isn’t a solution.

I have literally no idea what the treasury people at SVB could have been thinking.

Probably about their bonus.

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

#65

Post by [deleted] »

JshWright wrote: post #16
dannyw wrote: post #4

Earlier quoted context omitted.

The investments were long term treasuries and mortgage backed securities, yielding about 1.6%? As rates have increased, long duration treasuries and MBSes are now worth 20-30% less.

Right, that bit all makes sense. What was less clear to me (though sibling comments have since clarified) is why the depositor sector matters.

[deleted]

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

#66

Post by metacritic12 »

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?

If First Republic could say they could meet all depositor demands, they would have. But instead this is the most they can say to stave off a run.

And to their credit, the fact that they're not tech heavy means the tech firms pulling from SVB aren't likely as scarred and pulling from First Republic. But First Republic has a ton of HNWIs too who are not insured.

This isn't Bank of America serving mom and pops, it's rich people who will pull and are uninsured by FDIC.

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

#67

Post by ptero »

sroussey wrote: post #54
gerad wrote: post #23

Earlier quoted context omitted.

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.

FDIC insures $250k per account, so most retail clients have no reason to bolt, which provides a lot of stability for traditional banks.

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

#68

Post by gonehome »

csomar wrote: post #61
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…

> It didn’t take a genius to predict interest rates were going to rise. Locking cash away for 10yrs in very low % return vehicles seems stupid? Everyone is a genius in hindsight. You could have made millions out of a few thousands if you were able to predict an interest rate regime change. But where are your millions?

I locked in a 30yr fixed mortgage at 2.49% right before the spike because it seemed obvious? Not sure if that counts, but that should be enough cred that I made a large bet on my prediction when it mattered.

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

#69

Post by ericd »

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.)?

idk how many companies are doing this right now, but recurring investment on 4 week T-bills are safe, can absorb arbitrary amounts of cash, and yield much more than the large banks. But it can take a bit to set up a TreasuryDirect account.

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

#70

Post by mtlmtlmtlmtl »

breck wrote: post #52
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.

Sure you can. I'm sure you'll do integrations with 9001 different legacy systems and the other endless bullshit that comes with software dev in the public sector. All by yourself. Let there be no doubt that you had it all planned out in your head already in the 10 seconds it took you to think up that comment. Because you're that good.
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