Customers of First Republic Bank pulled more than $100 billion in deposits out of the bank during last month’s crisis, as fears swirled that it could be the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.
San Francisco-based First Republic said Monday that it was only after a group of large banks stepped in to save it by depositing $30 billion in uninsured deposits that the bank was able to staunch the bleeding.
The bank said it now plans to sell off assets and restructure its balance sheet, and said it also expects to lay off as much as a quarter of its workforce, which totaled about 7,200 employees at the end of 2022.
First Republic reported first-quarter results Monday that showed it had $173.5 billion in deposits in early March before Silicon Valley Bank failed on March 9. On April 21, it had deposits of $102.7 billion, including the $30 billion the big banks deposited. It said since late March, its deposits have been relatively stable.
“We continue to take steps to strengthen our business,” Jim Herbert, the bank’s executive chairman and Mike Roffler, the bank’s CEO, said in a joint statement.
Before the failure of Silicon Valley Bank, First Republic had a banking franchise that was the envy of most of the industry. Its clients, mostly the rich and powerful, rarely defaulted on their loans. The bank made much of its money making low-cost loans to the rich, which reportedly included Meta Platforms CEO Mark Zuckerberg.
Even through this crisis, the bank’s book of loans more than 90 days past due was zero.
But its franchise became a liability when bank customers and analysts started focusing on the fact that the vast majority of First Republic’s deposits, like Silicon Valley and Signature Bank, were uninsured — that is, above the $250,000 limit set by the FDIC — which means that if First Republic were to fail, its depositors may not get all their money back.
The bank’s profits fell 33% from a year earlier, according to its earnings, and revenues were down 13%.
[Written in collaboration with other media outlets with information from the following sources]
