First Republic Bank is reportedly exploring various options, including a potential sale, amid days of financial market volatility. The San Francisco-based bank is also weighing other alternatives, including shoring up liquidity, according to Bloomberg News. No decision has been reached, and the bank could still choose to remain independent. First Republic's shares were temporarily halted from trading on the New York Stock Exchange due to volatility.
The bank announced Sunday that it received additional liquidity from the Federal Reserve and JPMorgan Chase, increasing their unused liquidity to $70 billion. The stock nevertheless plummeted another 20% on Thursday to $20.65 per share, a fresh decade low.
The concerns at First Republic and other midsize regional banks began after the historic failure of Silicon Valley Bank — the 16th largest in the country — on Friday afternoon following a liquidity crunch. S&P Global Ratings and Fitch Ratings cut First Republic to junk earlier this week amid concern that clients pull holdings from the lender.
First Republic contacted customers over the weekend in an attempt to reassure them about its health. Silicon Valley Bank largely catered to tech companies, venture capital firms and high-net-worth individuals, and saw a huge boom in deposits during the pandemic. The Fed's aggressive interest-rate hike campaign and the value of their securities tumbling prompted a bank run.
The potential risk of a similar situation happening to other midsize banks is being taken seriously. While Silicon Valley Bank's situation may seem unique, numerous U.S. banks have increased their investments in held-to-maturity securities since the onset of the pandemic. It remains to be seen what will happen with First Republic Bank, and whether other banks will follow suit.