San Francisco-based First Republic Bank is touting its financial footing after announcing more borrowing capacity from the Federal Reserve and JPMorgan Chase, the country’s largest bank.
The bank, whose stock came under pressure Friday after the sudden failure of Silicon Valley Bank, said on Sunday evening it had gotten more borrowing capacity from the Fed and an “ability to access additional financing through JPMorgan Chase.”
The news “increases, diversifies, and further strengthens First Republic’s existing liquidity profile,” the $212.6 billion-asset bank said in a news release. In all, the bank said it has more than $70 billion in unused liquidity.
“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” said Jim Herbert, the bank’s founder and executive chairman, and Mike Roffler, its CEO and president.
The news is a “positive development” after investors’ concerns over the past few days, said Tim Coffey, an analyst at Janney Montgomery Scott. Another plus, he added, is that the bank remained open and wasn’t part of the Sunday evening regulatory announcements.
“It wasn’t closed tonight. I think that’s positive,” Coffey said.
The bank’s announcement came shortly after federal regulators announced new steps to increase confidence in the U.S. banking system.
On Friday, the tech-heavy bank SVB Financial failed after it experienced a run from depositors, many of whom were tech companies and venture capital firms whose deposits were far above the government’s $250,000 insurance limit. Regulators have taken over SVB Financial as well as Signature Bank, a crypto-friendly bank in New York that also ran into trouble. They said all depositors of the two banks will be protected.
First Republic had sent an update on Friday as its stock had come under pressure, emphasizing that tech-related depositors made up just 4% of its deposits and that it has a stable deposit base. The bank’s executives reiterated that message in their announcement Sunday.
“As we have done since 1985, we operate with an emphasis on safety and stability at all times, while maintaining a well-diversified deposit base,” the bank’s executives said. “First Republic continues to fund loans, process transactions and fully serve the needs of clients by delivering exceptional service.”
The Fed also announced it would create a new program that will give banks one-year loans for pledging high-quality securities, including U.S. Treasury securities and mortgage-backed securities.
First Republic noted it will be eligible to participate in the program, providing more liquidity in addition to the sources it announced.
Jon Arfstrom, an analyst at RBC Capital Markets, wrote in a research note that he appreciated the bank’s “proactive approach to addressing investor and key stakeholder questions around the company’s financial position.”
“We do not know the status of deposit flows at the company over the weekend, but this announcement does provide some relief in terms of the overall funding availability,” Arfstrom wrote.