In this episode, Scott shares 6 quick points on the First Republic Bank.
1. 68% of its deposits were uninsured, i.e. above the $250k FDIC guaranty.
2. It’s paper losses on its loans and investment portfolio are measured at nearly $9.5 billion to as much as $13.4 billion.
3. It has doubled down the last few years on pursuing high net worth clients. Those clients often borrow more and more importantly deposit more than $250k. The deposits above the $250k mark are uninsured and this means they are more likely to move their money quickly at signs of trouble.
4. It has pushed the concept of offering big loans at very competitive rates. This allowed the bank to grow the business for a period of time in a very profitable way. However, when their own borrowing costs rose, this put them in a much more difficult situation.
5. It’s government debt holdings show a current unrealized loss of nearly $5 billion up from $53 million a year ago.
6. The banks stock is down 90% YTD. See ‘How First Republic’s courtship of the wealth led to meltdown”. Reuters.
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