First Republic Bank saw deposits drop $72 billion in the first three months of the year as the California lender sank into the regional banking crisis that led to the collapse of three of its peers.
Deposits fell to $104.5 billion as of March 31, down 41% from the end of 2022, even after the nation’s largest lenders blocked $30 billion of their own money at the San Francisco-based bank in an effort to shore up its finances. That compares with the $137 billion that analysts had predicted in a Bloomberg survey.
The company said it plans to reduce the size of its balance sheet and reduce its workforce by up to 25% as part of its efforts to stabilize the company and in response to “unprecedented deposit inflows”. In addition, the bank is “pursuing strategic choices to accelerate its progress while strengthening its capital position.”
The results are the first comprehensive update from First Republic since investors pulled out of the stock in the midst of the crisis that engulfed regional lenders nationwide last month.
The turmoil began with the collapse of SVB Financial Group’s Silicon Valley bank, which fell into government receivership after selling available-for-sale securities, spooking depositors in the venture capital community. The move highlighted banks with large piles of unrealized losses on their balance sheets that may have to take similar action if faced with excessive withdrawals.
In fact, First Republic finished last year with nearly $27 billion in loan writedowns and a host of unrealized losses on Treasury notes and other long-term securities on the company’s balance sheet. This was much more than the roughly $13 billion in tangible common stock it held at the time.
At the height of the crisis in March, 11 of the country’s largest banks joined forces to deposit $30 billion of their cash in the First Republic. The move was intended to boost confidence in the beleaguered lender.
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