Reports indicate that Federal regulators are preparing to take control of First Republic Bank, a San Francisco-based regional bank that appears to be on the brink of collapse. The Federal Deposit Insurance Corporation (FDIC) is expected to take the bank under receivership following a sharp decline in its share price, which fell 43% to close at $3.51 on Friday alone. First Republic’s stock is down approximately 98% from its 52-week high. The FDIC has reportedly started reaching out to potential buyers if it takes the bank under receivership, though there is still hope for an outcome that does not require the federal government seizing the bank.
First Republic Bank, which is largely supported by wealthy clients, has been struggling since similar institutions, including Silicon Valley Bank and Signature Bank, collapsed in mid-March, raising concerns about the stability of small- to mid-sized banks. The Biden Administration has reassured the public that there are no major red flags about the health of the financial sector, and there are no indications that the nation’s largest banks are in distress. However, concerns about First Republic's stability persisted and were exacerbated this week after the bank reported just $104.5 billion in deposits during the first quarter, down 41% from the same period last year and falling well short of analysts’ expectations of $136.7 billion in deposits.
The bank has said that it is “engaged in discussions with multiple parties about our strategic options while continuing to serve our clients” following reports of a potential seizure. The situation highlights the ongoing challenges facing regional banks, particularly those that rely heavily on wealthy clients. While the situation is concerning, it is important to note that the FDIC’s intervention is aimed at minimizing the impact on depositors and the wider financial system. The FDIC has not commented on the reports, and it remains to be seen how the situation will unfold.