In 2022, things were going well for the executives at First Republic Bank, the bank had assets of over $200 billion or was the 18th largest bank in the US with 18 branches. In the GOBanking Rates Best Banking ratings it was considered a very good bank to deal with. Then a change happened, the San Franciso Bank SVB went bankrupt and people both institutions and individuals starting taking money from the regional banks to put in the largest banks of the country.

In an article by Manya Saini, David French and Saeed Azhar of Reuters, First Republic Bank reported it had $100 billion moved from its holdings to other banks or about half of its deposits. The bank was trading at over $142 a share in February, now it trades at $6 a share. What should the bank do?

First Republic said it was pursuing strategic options to help expedite progress on strengthening the bank. (the bank is studying all options open to it, said someone speaking on the condition of being anonymity).

Christopher Wolfe, head of North American banks at Fitch Ratings, told Reuters if someone were to acquire the bank, there is going to be big write downs that would have to be taken against some of the assets given the rate cycle. Mr. Wolfe was referring to the bank’s mortgage book and securities portfolio.

Analysts at Wells Fargo said the reported deposit outflows were much worse than Wall Street estimates and at a level that could prove very hard to come back from.

In March, the big banks put together a $30 billion rescue deal to ensure First Republic would continue to be a going concern and ease market concerns.

First Republic will be shrinking its balance sheet, slashing expenses, cutting office space and laying off a quarter of its employees. It will likely be merged with another bank in similar fashion as SVB was or was merged with a bigger bank – JPMorgan Chase.

Linking to dividend paying stocks, at the start of the year, there were many reports saying First Republic was a good stock to own at $140, then the banking world changed and its soft under belly was exposed and now the bank stock is $6. It is likely worth more than $6 but the fall came swiftly and seemingly out of the blue. After the fall of SVB, people asked are there any other banks which have mismatched assets and loans? First Republic was on the list and down it went. It would be normal if you were a shareholder to hold until the price went less than $100, then it was time to get out. People still liked the bank stock and bought it on the way down, but will it come back up? No one knows, but the likelihood is no, because of the fundamental reasons why it was considered on the list to be in trouble. Asking the worst case scenario is a good thing, for if you have considered the worst and something like it happens, you will have a better idea when to find alternatives.

There are more questions than answers, till the next time – to raising questions.