First Republic says everything is fine. Why the stock market is worried.

First Republic Bank worked overtime Sunday to reassure customers about the safety of their business after the collapse of Silicon Valley Bank last week sparked fears of contagion in the banking sector.

Early Sunday evening, First Republic executives issued a statement highlighting the “continued strength” of its capital, liquidity and operations. But that wasn’t all.

Shortly after First Republic’s release, the Federal Reserve unveiled a new Bank Term Funding Program (BTFP) that would better allow banks to manage their liquidity. In addition to the BTFP, the Fed also said it is easing the terms of its discount window, which allows lenders to raise short-term loans to manage their liquidity needs.

Apparently the Fed’s terms were too good to pass up. Later on Sunday, First Republic (ticker: FRC ) said it “further improved and diversified its financial position” through additional liquidity from JPMorgan Chase ( JPM ) and the Fed. First Republic’s total available, unused cash is now more than $70 billion, the bank said. This is up from the $60 billion it disclosed earlier on Sunday. The bank added that this new amount does not include funding that it is eligible to receive under the BTFP.

“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” Chairman Jim Herbert and CEO Mike Roffler wrote late Sunday.

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By the end of 2022, First Republic had $176.4 billion in deposits, according to regulatory filings.

Shares of the San Francisco-based bank swooned last week amid the Silicon Valley Bank collapse, with First Republic’s stock cratering as much as 50% in Friday’s trading session before ending the day down 15%. Although the bank does not cater to the troubled startup and venture capital industries as much as Silicon Valley Bank did, investors have worried about its concentrated, well-secured deposit base that could appear to shift their savings to higher-yielding products. , thereby hollowing out a cheap source of financing for the bank.

Jon G. Arfstrom, director of research at RBC Capital Markets, called the announcement “positive news for First Republic,” especially in light of announcements Sunday by federal regulators to support uninsured depositors at Silicon Valley Bank and Signature Bank.

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“Broadly speaking, the regulatory and fiscal decisions to make whole depositors in recently failed banks and provide qualified institutions with access to secured lines of credit should provide confidence in the funding and liquidity conditions of the FRC and the industry,” Arfstrom wrote.

Over the weekend, analysts acknowledged the challenges facing First Republic but stressed that comparisons to Silicon Valley Bank were overblown.

“We believe FRC is no SIVB,” Erika Najarian, an analyst at UBS, wrote in a note Friday, maintaining her Buy rating on the stock.

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As of February 2022 — the most recent data — venture capital and private equity deposits made up 8% of First Republic’s business, while it was 52% of Silicon Valley Bank’s deposit base, Najarian wrote. Also, First Republic’s available-for-sale portfolio was 1.7% of earning assets at the bank, while it was 14% at Silicon Valley Bank.

Still, Najarian acknowledged that while First Republic is better positioned than Silicon Valley Bank, it is still likely to face pressure from a narrowing of net interest margin (NIM) in this rising interest rate climate.

“We emphasize that NIM pinches are not the same as business model/strategic/balance sheet management issues,” Najarian wrote.

While First Republic may not have an easy road ahead, Wall Street is hoping cool heads prevail.

Write to Carleton English at

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