Risk register · entry
Q4 · Where models dieFirst Republic Bank
The same rate trap as SVB, triggered by contagion across 'similar' banks.
The world stops matching the model. Regime change and leverage turn a small error fatal.
Why this quadrant
The same rate trap as SVB, on a mortgage book rather than a bond book. What killed it was not its own numbers but its resemblance to a bank that had just failed. 102 billion dollars left in the first quarter, about 41 percent of deposits. No model of First Republic's loans could have carried that, because the driver was what depositors believed about a peer set.
The record
- Total assets at closure: $229.1 billion (as of April 13, 2023)certain
- Deposits assumed by JPMorgan: $103.9 billion (FDIC figure, as of April 13, 2023)certain
- Separately reported deal terms: ~$173 billion loans, ~$30 billion securities, ~$92 billion deposits acquired by JPMorganlikely
- JPMorgan payment to FDIC: $10.6 billionlikely
- Estimated cost to FDIC Deposit Insurance Fund: ~$13 billioncertain
- Deposit outflow Q1 2023: $102 billion withdrawn, ~41% of depositscertain
- March 10, 2023: $25 billion withdrawn in a single daylikely
- March 13, 2023: further $40 billion withdrawnlikely
- March 16, 2023: $30 billion emergency deposit injection from 11 banks, 120-day termcertain
- Uninsured deposit share at end of 2022: ~67%likely
- Unrealized losses on held-to-maturity securities and held-for-investment loans: 154% of total equity, end of 2022likely
- Bank closed by CA regulators / FDIC receivership: May 1, 2023certain
- 84 offices in 8 states at time of closurecertain
- Stock price fall: from early-March levels to under $4 (~95%+ decline) before delistinglikely
Sources
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