First Republic, with Harvard branch, is rocked, while Cambridge’s banks reassure of stability
Financial industry turmoil touched Cambridge on Thursday as First Republic Bank said it was getting $30 billion in deposits from a coalition of other institutions – propping it up after the failures of Silicon Valley Bank on Friday and Signature Bank on Sunday caused nervous customers of midsize banks to take their money and leave.
Like those institutions, First Republic is based in California’s Bay Area or focused heavily on high-tech investments such as cryptocurrencies. First Republic, founded in 1985 and based in San Francisco, has a branch at 47 Brattle St., Harvard Square, that opened in 2017, filling a space left empty by the departure of an American Apparel shop. There are three branches in Boston, and one in Wellesley. Silicon Valley Bank had a Cambridge presence too, in Kendall Square, since buying Boston Private Financial Holdings in July 2021.
Cambridge-based banks reassured customers that the industry rumblings were not affecting them.
Cambridge Savings Bank president and chief executive Wayne Patenaude said that his institution was a community-based mutual bank for 189 years and, “as a mutual bank, we have a measured approach to growth, are not pressured by short-term gains and focus on a long view investing in our customers, our community and our business.”
“CSB is profitable, well-capitalized and our balance sheet is strong, with well-diversified loan, investment and deposit portfolios,” Patenaude said.
Gilda M. Nogueira, president and chief executive at East Cambridge Savings Bank, reminded customers that all deposits are insured in full through a combination of the Federal Deposit Insurance Corp. and the Depositors Insurance Fund. “Our customers can have additional peace of mind knowing that their entire balance is safe, secure and insured,” Nogueira said. “East Cambridge Savings Bank’s capital and liquidity positions are strong, secure and diversified and the bank continues to operate from a position of financial strength, safety and stability.”
At Cambridge Trust, president and chief executive Denis K. Sheahan sounded the same notes, reminding customers of its stability over 130 years in business and assuring that the “bank has a strong capital position, strong asset quality and is prepared to weather difficult financial environments.”
The trust is “a responsible financial institution,” Sheahan said.
Smaller banks see surge
It may be no coincidence that Cambridge Trust and Cambridge Savings Bank have been seeing an uptick in accounts being opened in the past few days, said Theodora Skeadas, executive director of the small-business organization Cambridge Local First.
“We’ve seen a huge number of customers shift their spending to local financial institutions. We encourage you to do the same – bank local!” Skeadas said late Thursday. “The recent collapse of Silicon Valley Bank and Signature Bank have underscored the importance of investing in well-capitalized, financially sound community banks.”
The organization has had a “bank local” focus since 2020, and April is its “Move Your Money” month, when there’s a push to remind residents that smaller banks invest more back into their communities. Safety has not been a theme of the campaigns, but current events may have outpaced PR: Skeadas said local bankers saw some Silicon Valley Bank customers preemptively moving their accounts before the collapse.
Lifeline of $30 billion
First Republic’s lifeline of $30 billion comes from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank – a move that Fed officials said showed the resilience of the U.S. banking industry.
That the money is uninsured does reflect confidence, financial experts told media, and First Republic was happy to pick up on the theme.
“This support from America’s largest banks reflects confidence in First Republic and its ability to continue to provide unwavering exceptional service to its clients and communities,” First Republic said Thursday.
As of Wednesday, the bank had a cash position of approximately $34 billion, First Republic said, meaning the injection of deposits nearly doubled the funds it has available.
First Republic shares were down 60 percent from a week ago, and The New York Times said a sale could be in the works.
“The widespread panic in markets came close to engulfing First Republic Bank,” the Times said, “a harrowing shot to a midsize lender that until a week ago appeared as financially stable as any of its peers.”
This post was updated March 17, 2023, with comments from Theodora Skeadas of Cambridge Local First.
There is no shortage of great local banks in Cambridge, such as the North Cambridge Co-operative Bank (https://www.asknccb.com/) which was chartered in 1912. It is a single branch bank located at 2360 Massachusetts Avenue and it is truly what banks used to be – local, personal and community minded.
On the other end of Cambridge is another, a larger East Cambridge Savings Bank (https://www.ecsb.com/). I was able to talk directly with the branch manager at now closed Porter Square branch when my wallet was stolen on my way to my sister’s apt in Paris from the airport. She made sure our account was secure and we had access to our funds using my wife’s ATM card. What a lifesaver she was!
These two banks have been loyal supporter of my Walk for Hunger since 2009 until the pandemic struck.