Could First Republic Bank be the next to collapse? What to know about the failing lender

First Republic Bank is on the brink of collapse this week after interventions to rescue the lender by larger institutions failed to quell investors’ nerves last month.

First Republic Bank’s stock price has lost over ninety percent of its value since early March. The bank has lost more than a third of its deposits in the last year.

In part, the dramatic decline relates to the reaction of investors to the collapse of Silicon Valley Bank. Wealthier investors at First Republic who held more than the FDIC-insured limit of $250,000 began to pull their money out of the bank over worries that it could fall victim to a similar investor-led bank run that sunk SVB.

Large institutions provide temporary relief

Leaders at First Republic reported “unprecedented deposit outflows” in March as some investors grew anxious after seeing what happened at SVB. Large financial institutions, including JPMorgan Chase, Wells Fargo, Bank of America, Citigroup, and seven other banks, assisted the First Republic by extending $34 billion in uninsured deposits to help stabilize the bank’s balance sheet. While those involved in the deal hoped that this injection of cash would stop the enormous rise in outflows, its effects were only temporary.

On 24 April, in an attempt to cast the position of the bank as strong, leaders at First Republic released a report on the bank’s balance sheets and the actions being taken to stabilize its financial situation. The $34 billion from major financial institutions was used to reduce the number of “short-term borrowings” on the bank’s balance sheet. Additionally, First Republic announced that it would be laying off between a fifth and a quarter of its workforce, reducing pay for executives, and consolidating corporate office space.

These actions, however, were not enough to quell investor concerns. On 26 April, the value of the stock continued to fall, with its price standing around $8.10, or nearly half of where it stood yesterday.

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