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 room
First Republic's core exposure, a long-duration, low-rate mortgage book funded by short-term deposits, started as a payoff that looked simple and priceable (rate risk on a known loan book) with thin tails, the classic Q4 "boring until the model breaks" setup; the March 2023 contagion run then exposed a fat, correlated tail the models never carried, because the real driver was depositor behavior across an entire peer set, not the bank's own fundamentals.
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- Deposit outflow Q1 2023: $102 billion withdrawn, ~41% of depositscertain
- March 10, 2023: $25 billion withdrawn in a single daylikely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
The book
This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.
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