Shares fell 21% on March 15 and another 26% overnight. They were trading early on March 16 under $22, with a market capitalization of just over $4 billion. The market cap entering March 15 was about $7 billion.
The bank also had the rating of its debt cut to “junk” status by the rating agency S&P.
First Republic, based in San Francisco, serves many of the same customers who took down Silicon Valley Bank last week in a massive run on deposits. It had the third-largest rate of “uninsured” deposits among the nation’s banks, behind SVB Financial Group’s (NASDAQ:SIVB) Silicon Valley Bank and Signature Bank (NASDAQ:SBNY), both of which have been closed by regulators.
Uninsured deposits are demand accounts worth over $250,000. While not technically insured by the Federal Deposit Insurance Corporation (FDIC), the government-backed entity promised to make them good as it closed SVB.
The stock’s fall comes just a few days after it got a $70 billion injection of liquidity from the Federal Reserve and JPMorgan Chase (NYSE:JPM). The bank can also tap a new Federal Reserve lending facility. It said it didn’t need the money when it got the cash injection.
First Republic was founded in 1985 and caters to “high net worth individuals,” which may be its undoing. Until last year it was still run by co-founder James Herbert, who helped repurchase the bank after Bank of America (NYSE:BAC) acquired it during the 2008 financial crisis.
Between them, SVB and First Republic dominated banking in the tech sector, the first serving start-up companies and venture capitalists, the second those who had made their fortunes. But tech fell hard in 2022, the victim of rising interest rates and falling stock prices. Both banks faced shrinking collateral from their borrowers and higher interest rates from the market.
FRC Stock: What Happens Next?
Fear is the order of the day for regional banks. Consolidation is the likely result. But common stockholders may be wiped out.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.