Hello, and welcome back to The Breakdown.

If you keep up with banking and/or finance in the world, you probably saw that First Republic now became part of JPMorgan Chase, but you may be wondering exactly how that happened.

That is exactly what we’re going to be breaking down today is what happened, why it happened, and possibly what is to come.

Consider this a delayed part two where we broke down the terms of what happened with Silicon Valley Bank, which you can find here:

Breaking down: The broken down bank that was First Republic

Let’s just first start off with a quick, who is (was) First Republic bank?

First Republic was a commercial bank, and mainly a provider of wealth management services that was headquartered in San Francisco, California. It catered to high-net-worth individuals for the most part. So not a bank a lot of people were familiar with before this recent string of banking issues.

But, as we saw with Silicon Valley Bank, when the going gets tough, people obviously want to protect their money. Because a lot of what First Republic caters to is such high net worth individuals, that means one thing: unprotected money.

What do I mean by that? Well, let’s refer back to the part one of this post and look at how your money is protected:

“FDIC - FDIC (Federal Deposit Insurance Corporation) is a government "fund" one might say that guarantees you will always be able to get a certain amount of money of your deposits, even if that bank fails in some way. You most likely have FDIC Insurance from your bank up to $250k of your deposits. This means that however much you have deposited, you are guaranteed to get $250k of that if something happens to the bank. It doesn't mean you won't get all of it, it just means you're guaranteed that amount.”

The key part to note here is the last sentence, “it just means you’re guaranteed that amount” (referring to the $250k limit that the FDIC insurance covers). So, some of these depositors thought there was a possibility First Republic was not going to be able to honor the deposits they had with them, because being a high net worth individual, you have more than that $250k in that bank and exceed your insurance, and they proceeded to remove their deposits in fear.

And, that is how a bank goes under my friends. It loses deposits, which is how a bank makes money, so it loses its income too. And as of their last reporting at the quarters end, it was revealed they had lost $100 billion (yes, with a B) of their deposits. Yikes.

And that obviously began the spiral of the stock tanking 50%, people becoming more fearful, withdrawing their money, the bank trying to sell off assets, cut staff, but it was all too late. And over the last weekend, the regulators seized First Republic, and then immediately sold it off to JPMorgan Chase. The branches literally closed last Friday with the branding of First Republic, and opened Monday branded JPM.

First Republic had $92 billion in deposits and $203 billion in loans and other securities. This Is now the second biggest bank failure behind Washington Mutual back in 2008.

So all in all, First Republic fails, gets seized by regulators, and is sold to JPMorgan Chase, and that is how we get to where we are today.

The worst part? There is a chance this isn’t quite over, and we could be headed in a bad direction. Pacwest Bancorp has troubled the banking space a little more with it’s rumors of exploring a sale, which could be because it has unrealized losses on it’s assets. This may be the next domino to fall in the chain of banks. The fed hiked interested rates .25% today, and good ol’ Jerome Powell thinks the economy isn’t headed in a great direction.

And if Jerome doesn’t think the economy isn’t headed in a great direction, when he probably is more incentivized to make things seem better than they actual are, then it is definitely worth keeping an eye on.

And that's all for today, if you want to get more follow me on Twitter @Cam_LaChance, where I interact with people and share more thoughts similar to what I write about here.

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💯 Freaking sick dude🤷‍♂️ Meh, do better next time😑 Bruh, I might unsubscribe after reading that