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Wednesday, June 7, 2023

First Republic Bank’s Shares Plunge Toward Zero With FDIC Seizure Expected

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The Federal Deposit Insurance Corporation is set to seize control of First Republic Bank, according to multiple reports.

Shares of the ailing regional bank cratered on Friday following a CNBC report that it is likely to be seized by federal financial regulators, putting it in jeopardy of becoming the third bank to collapse since Silicon Valley and Signature Bank failed last month.

FDIC officials think First Republic is out of time to arrange a rescue involving other banks, leaving the agency no choice but to take the bank into receivership, Reuters reported.

First Republic’s stock price, which topped $200 as recently as 2021, plunged 43% on Friday and continued to sink in after-hours trading. The shares have fallen 97% this year.

Investors were spooked earlier this week by the San Francisco bank’s disclosure that depositors withdrew more than $100 billion during last month’s crisis, raising concerns about First Republic’s stability. The fund outflows were “unprecedented,” bank executives said on an earnings call Monday.

As with Silicon Valley, a significant share of First Republic’s deposits were uninsured, which makes it more prone to withdrawals from skittish customers.

The troubled bank, which had roughly $233 billion in assets under management as of March 31, said it now plans to sell off assets and restructure its balance sheet, as well as lay off as much as a quarter of its workforce, which totaled about 7,200 employees at the end of 2022.

The bank will also shrink its corporate office footprint, cut executives’ compensation by a “significant” amount and eliminate “nonessential” projects, executives said Monday.

In a rare move, 11 of the nation’s largest financial institutions gave First Republic $30 billion in deposits last month to prop up the troubled bank.

Silicon Valley Bank, at the time the 16th-largest U.S. bank with $210 billion in assets, was taken over by state regulators in March after concerns about potential losses spurred many depositors to withdraw their funds. New York’s Signature Bank failed only days later after a similar bank run.

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