When Bay Area start-up founders walked into a First Republic branch, they used to count on a few notable niceties, like immediate service or, at a minimum, cushy chairs to wait in until their personal banker greeted them by name, and an open layout where glass dividers never separated lenders from clients during transactions, even simple withdrawals or deposits.
And, there were freshly baked cookies.
“It sounds so silly, but those cookies were one of the things about First Republic that made it feel like this is a place you wanted to bank,” Christie’s Sereno agent Nicholas French said. French used to refer his Silicon Valley residential clients to First Republic for their mortgages, and he banked there himself.
First Republic went under exactly two years ago in the second-largest bank failure in U.S. history. But though JPMorgan Chase purchased the majority of its assets for $10.6 billion, French and other agents catering to tech clients say there’s been a hole in the market for the former bank’s brand of white-glove, high-touch service, as well as its start-up and venture capital world experience.
Now, a slate of institutions is racing to endear themselves to these wealthy tech clients, who often bring their business and personal funds to the same bank. Satisfy founders’ demands for mortgage products with good discounts or that account for wealth being tied up in company equity, and you might get all of their investment business down the line.
Though no clear winner has yet emerged, it’s crucial for the region and its agents that the race continue. Techies make up a sizable portion of the buyer pool in the area’s residential market, where $300,000 salaries are the minimum for median-priced homes.
“There is a void banks recognize and there’s a lot of people double timing it to try to create something that’s going to have an atmosphere to replace First Republic because they know how valuable it was and it’s the kind of customers they want for their bank,” French said.
Fall of the Republic
In the spring of 2023, danger was in the air for tech-forward banks.
First, crypto-focused Silvergate Bank filed Chapter 11 bankruptcy after the collapse of FTX. Then, Silicon Valley Bank, which specialized in financing for start-ups, went under after VC funding began to dry up and the bank sold some of its bond portfolios at a major loss to have cash to cover an increase in withdrawals.
Within days of the bond sale disclosure, the bank shut down.
Signature Bank, another big crypto lender, closed a few days after that.
The closures put local agents in limbo. They wondered what would happen to First Republic, which held $62 billion worth of residential mortgages across California at the end of 2022, and feared the worst.
“First Republic is one of the main arteries for the tech world, and for the rich,” agent and City Real Estate founder David Cohen, whose San Francisco-based brokerage did its payroll through the bank, said at the time. “You cut that artery and you’re going to have bleeding.”
“We are able to talk in the same language that they use, and it makes that process a lot easier.”
In the bank’s final days, San Francisco and Marin Christie’s Sereno agent Arrian Binnings remembers scrolling through what was then Twitter and watching people post videos of lines out the door at the First Republic branches, “like it was 1929 or something.”
The bank’s push to serve the ultra-wealthy was part of its undoing. Many clients kept much more than the FDIC-insured $250,000 in deposits in their accounts. After seeing the earlier regional bank collapses, they panicked and withdrew funds. First Republic lost more than half of its deposits, or around $100 billion, in just a few days.
By April, the FDIC had taken over the bank’s assets, selling most to JPMorgan Chase. Borrowers breathed a sigh of relief, but agents had a new problem. Their wealthy clients, used to high-end service, didn’t like the blandness of a big bank, they said. JPMorgan Chase declined to comment.
“Once the dust settled and people knew that their money was actually going to be okay and it didn’t get lost, the next question became, okay, well how can I get that First Republic experience again?” Binnings said.
A lot of French’s clients who were formerly at First Republic “hated the JPMorgan Chase experience,” though he said other big banks like Bank of America or Wells Fargo, where “you’re standing in a cattle line” to get service weren’t appealing either.
In search of lost perks
Former First Republic clients aren’t just looking for a feeling — or a cookie. They also want their discounts back. First Republic used to offer mortgage interest rates that could be up to one point lower than the going rate, huge savings over the lifetime of the loan.
This was one of the carrots First Republic dangled to get high-net-worth individuals to bring all their business over.
“They would do any transactions you wanted, and offer you a discount to get the whole shebang instead of just one particular transaction,” Paul Zeger, founding partner of Polaris Pacific, which markets residential new development projects across the West Coast, said. “Ironically, JPMorgan Chase has not come to the conclusion that it’s worth having those VIP clients enough to discount the cost.”
Home buyers in the pre-IPO start-up world are having even more trouble finding a First Republic replacement, since traditional banks don’t always know how to value their equity.
“Those buyers with comp packages more weighted in future equity can struggle to qualify for loans their salaries could easily support,” Katharine Carroll, a Compass Silicon Valley agent, said.
Anything that makes it easier for those clients to get financing is a boon to local brokers, increasing both the buyer pool and the level of home that buyers can purchase.
In the absence of a ready replacement, buyers are getting creative, agents said. Some are selling their stock on the secondary market or borrowing against it and then putting down cash on a home, which helps in a competitive market with limited inventory.
It’s not impossible, Binnings said, but getting a loan requires more research and exploration and isn’t “as easy as it used to be when it was just, ‘Hey let’s do First Republic and call it a day.’”
“The fact that we’re still hearing about First Republic a couple of years later is evidence to me of how important they were in our local regional banking ecosystem,” he said.
Tools of the trade
In the last two years, other banks have tried to become the new go-to for high-end tech clients.
Agents mentioned OneTrust, Union Bank and Bank of San Francisco, but the names that came up most often were two similar-sounding but completely different entities: Citizens Private Bank, whose 200-year-old parent company bid on both Silicon Valley Bank and First Republic, but lost out both times; and First Citizens Bank, which bought Silicon Valley Bank.
Citizens Private Bank launched in October 2023 to “fill a void left in the market following the West Coast bank failures,” according to Susan deTray, head of Citizens Private Bank and the former head of credit administration at First Republic. The idea was to “close gaps in key industries like emerging and middle market private equity finance, including small businesses and underrepresented fund managers.”
Like deTray, many of the more than 250 private bankers and support staff at the private banking platform previously worked at First Republic, she said. Citizens Private Bank has grown to $8.7 billion in deposits and $3.7 billion in loans.
First Citizens retained much of the Silicon Valley Bank private banking team that had been working with entrepreneur and VC clients, allowing them to serve those same clients, according to Michele Lindzy, who was the head of mortgage lending for private bank clients at SVB and is now the senior director of private mortgage lending at First Citizens.
“We have a deep background in and full understanding of the financial intricacies involved with those types of clients, and that’s something our competitors typically don’t have,” she said.
Founders often have their personal finances tied up in the companies they start, which makes their home purchases more complex, but First Citizens applies its “special lens” when analyzing cash flow and asset holdings.
“We are able to talk in the same language that they use, and it makes that process a lot easier,” she said.
First Citizens offers the coveted “relationship pricing” for home loans that Lindzy said is typical in the wealth management industry.
But those relationships tend to be with the tech community directly — not their real estate brokers. That may be why agents are still missing First Republic, Lindzy said.
“We’re still here doing the same thing we’ve always been doing; I just think maybe the Realtors are paying a little more attention now when they see [our] name, rather than just going to the standby person they were working with before,” she said.
First Citizens wouldn’t give exact figures but said it continues to see high demand for mortgages from tech clients and that it has added to its private banking team serving the Bay Area market to keep up with the demand. While the bulk of its private banking business is in Silicon Valley and San Francisco, it is headquartered in North Carolina and also serves that area’s Research Triangle, as well as Boston’s innovation community, Lindzy said.
Newer and very local banks are also making their pitch to techies, such as Altos Bank in Los Altos, which just opened its doors in March, French said. These banks are starting off with general wealth management and investment loans before branching out into home loans. They are also pushing the white glove approach for which First Republic was known.
“You know that there’s a high demand for it if banks’ taglines might as well be, ‘We’re replacing First Republic. Come see us,’” he said.
Then they make the hard sell: “We’re even going to have the cookies.”