The Federal Deposit Insurance Corporation is preparing to place First Republic under receivership imminently, a person familiar with the matter said Friday, sending shares of the lender down more than 40% in extended trading.
The US banking regulator decided the troubled regional lender’s position has deteriorated and there is no more time to pursue a rescue through the private sector, the source told Reuters, requesting anonymity because the matter is confidential.
If the San Francisco-based lender falls into receivership, it would be the third US bank to collapse since March. First Republic said earlier this week its deposits had slumped by more than $100 billion in the first quarter.
First Republic and FDIC representatives did not immediately respond to requests for comment.
Shares of the bank closed down 43%, worsening a stock rout that has wiped out 75% of its value this week. The stock lost more than half of its value on Friday and touched a record low of $2.99.
At its lowest, the bank had a market capitalization of nearly $557 million, a far cry from its peak valuation of more than $40 billion in Nov. 2021.
Shares of some other regional banks also fell with PacWest Bancorp down 2% after the bell while Western Alliance was down 0.7%.
Reuters earlier reported a government-brokered rescue deal was in the works for First Republic. It was not immediately clear why that effort failed.
According to the report, the FDIC, the Treasury Department and the Federal Reserve were among the government bodies orchestrated meetings with financial companies about a lifeline for the bank.