I Thought I Was Getting First Republic Stock at a Bargain. Instead, I Lost a Bunch of Money

It's pretty fair to say that 2023 has not been a great year for the banking industry. The failures of Silicon Valley Bank and Signature Bank sent shockwaves through the sector earlier in the year, causing many investors to unload their bank stock positions in their brokerage accounts. 

But I did something different. Back in mid-March, I decided to buy shares of First Republic Bank when the price started to fall due to the company's increasing financial woes. The way I saw it, if I could scoop those shares up at a bargain, it was worth doing so, because what was the likelihood of yet another bank failing?

But lo and behold, First Republic has joined the list of shuttered banks in 2023. And now I'm sitting on a big loss in my brokerage account. 

An impulsive move I now regret

Although I believe in researching stocks before buying them, purchasing shares of First Republic was something I did on a whim. I knew the bank was not in good shape when I bought those shares, and I knew the banking industry overall was iffy. But I figured I'd take a chance on First Republic given that its stock price had recently plunged so much, thinking things had to get better from there.

Well, that gamble didn't work out well for me. I wound up buying shares of First Republic at about $30 apiece. Now that the bank has failed, those shares are pretty much worth $0. 

See, what actually happened with First Republic is that the federal government seized its assets and sold them to JPMorgan Chase. JPMorgan will take in all of the assets, like savings accounts, that were being housed at First Republic. 

And because First Republic was FDIC-insured and JPMorgan is covering its deposits, consumers with savings at First Republic should be made whole. But JPMorgan will not be taking on First Republic's corporate debt or stock. So shareholders like myself are looking at losses. 

Lesson learned

Thankfully, when I bought shares of First Republic on a whim, I didn't go too heavy on them. So as of now, I'm only sitting on a $265 loss. 

It's a sum of money I'm hardly thrilled to say goodbye to. But it's also not a catastrophic amount. Plus, I intend to try to make the best of it by using that loss to my advantage from a tax perspective. 

I can use that loss to offset other capital gains I end up liable for in my brokerage account this year. And if I don't have capital gains to offset, I can use that loss to offset $265 of regular income. So either way, there's a silver lining.

Still, one thing I'm taking away from this experience is that when a stock's price utterly plunges overnight, there's a reason for it. And what might look like a buying opportunity is often anything but. 

In this case, I took a chance and it didn't work out, but the financial damage was minimal. I'll be sure to remind myself of this incident, though, the next time I'm tempted to scoop up what looks like a bargain stock.