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First Republic Bank Will Be Seized by Regulators

Regulators are preparing to take control of First Republic Bank, according to a report from Reuters, potentially marking an astonishing downfall for a Bay Area institution whose affluent clientele and customer loyalty once made it the envy of the banking sector.

“We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients,” a First Republic spokesperson said in a statement.

Late Friday, the Wall Street Journal reported that big banks including JPMorgan Chase and PNC Financial Services Group were vying to buy First Republic Bank in a deal that would transpire after a government seizure of the troubled lender.

On Monday, First Republic told shareholders that it lost about $100 billion in deposits after Silicon Valley Bank’s collapse, as anxiety around uninsured deposits led wealthy clients and businesses to pull assets and park them in larger banks customers consider to be safer. The bank had been forced to borrow heavily to make up for the losses.

A coalition of banks deposited $30 billion into the bank on March 16, which helped to temporarily stabilize the bank but failed to instill much confidence among shareholders.

First Republic’s stock sunk to historic lows throughout March and April amid scrutiny of its losses and seemingly similar profile to Silicon Valley Bank, a regional bank catering to startups and venture capitalists with a high percentage of uninsured deposits. Its stock closed at $3.51 per share on Friday, down more than 95% since March 8, when news of Silicon Valley Bank’s troubles first emerged.

First Republic executives, government officials and financial institutions had urgently sought to cobble together a deal this week that might have involved selling off underwater assets, such as fixed-rate mortgages, to other institutions in the hopes of avoiding a shutdown. First Republic executives had also announced plans to lay off up to 25% of its staff, cut executive pay and trim real estate holdings.

Although First Republic was hoping for a white knight in the form of a buyer, the distressed assets on the bank’s books would have to be marked down as losses, making it a less attractive target.

Founded in 1985 by Jim Herbert, San Francisco-based First Republic was known for high-touch customer service that extended into banking, wealth management and loans to individuals and businesses. As the company floundered in recent weeks, customers took to social media to voice support for the bank.

First Republic was the Bay Area’s third-largest bank and the 14th-largest in the U.S. at the end of last year, with 44% of its deposits originating in the Bay Area. At the end of last year, it held $98.8 billion worth of loans in single-family homes, $21.6 billion in multifamily properties and another $14 billion in construction and development loans.

The company had 7,213 employees at the end of last year.

First Republic’s collapse would be the third banking failure since March. Silicon Valley Bank and New York-based Signature Bank failed within two days of each other in early March.

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