First Republic Bank Needs Another Rescue

April 27, 2023 Advisory

First Republic Bank (First Republic) is reported to be in serious financial distress despite last month’s unprecedented $30 billion rescue orchestrated by U.S. Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, J.P. Morgan CEO Jamie Dimon, and funded by 11 of the largest lenders in the U.S. in an attempt to save First Republic Bank from FDIC seizure. This was also the fate of Silicon Valley Bank and Signature Bank during the worst commercial banking crisis since 2008.

San Francisco-based First Republic was founded in 1985 and is now the 14th-largest commercial bank in the U.S., with multiple offices in 11 states and over 7,000 employees. However, the bank’s stock plunged dramatically after a worse-than-expected first quarter earnings report was released on Monday. The stock price dropped more than 25% on April 26, after plummeting to a record low following a 49% price drop on April 25, despite trading having been halted multiple times due to volatility. According to The Wall Street Journal, the bank was the worst performer yesterday in the S&P 500 and the most actively traded stock in the index.

First Republic suffered a more than $102 billion decrease in customer deposits in the quarter after the March banking debacle. The bank’s bonds are still trading at a steep discount to face value. Federal regulators are closely monitoring the bank but have not publicly announced any anticipated assistance.

The bank said it was seeking strategic alternatives. First Republic is reportedly considering a number of options to help stave off seizure. These options include an asset sale of up to $100 billion in which buyers could receive incentives such as warrants or preferred equity, the creation of a so-called “bad bank” in order to isolate problematic financial assets, and divesting $50 billion to $100 billion of long-dated securities and mortgages to help capitalize the bank and reduce the mismatch between the bank’s assets and liabilities, which resulted from the interest rates rise that forced the bank to pay depositors a higher rate than what it charged borrowers. This problem is more acute at First Republic than at other similar banks given that a large portion of its assets are mortgages that were made when interest rates were historically low.

First Republic is also reportedly trying to persuade some of the same lenders that provided it with the $30 billion deposit infusion in March to purchase its underwater bonds at above-market rates for a loss of a few billion dollars, which the bank is pitching will cost the lenders less than the consequences of another bank seizure. The bank also plans to reduce its balance sheets by cutting expenses including executive compensation, reducing its office footprint and laying off up to 25% of its employees in the second quarter. The bank is being advised by Lazard and J.P. Morgan Chase, and is said to be bringing in additional experts, including the Messina Group.

Please contact your regular AT lawyer or a member of our Distressed Bank Response Team if you have questions about the potential impact of these events on your business.


U.K. Quarterly Corporate Update, September 2022

First Prohibition Orders under U.K. NSI Act 2021 Target Acquisition of Technology In July 2022, the U.K. Government used its powers under the National Security and Investment Act 2021 (NSI Act) – which is, in...

Silicon Valley Bank’s Parent Files for Chapter 11 Bankruptcy: What You Need to Know

Distressed Bank Response Team

Planning for the Improbable: Tools to Protect Uninsured Bank Deposit Funds

Gregory Omer

A Cautionary Case on the Use of Model Disclosures by Financial Institutions

“A good template serves as a guide, not gospel. It must be adapted to fit the facts. That is what should have happened here.” – Hon. Stephanos Bibas The District Court for the District...

News Item

Armstrong Teasdale Recognised in Global Restructuring Review’s 2022 GRR 100

SVB Financial Group Anticipated to File for Bankruptcy Relief

Distressed Bank Response Team

JPMorgan Chase Bank Acquires Another Failed Bank 15 Years After 2008 Banking Crisis

Distressed Bank Response Team

Continued Economic Headwinds Force Mass Layoffs, Bring State and Federal WARN Laws into Focus

Distressed Bank Response Team

Staying Ahead of Silicon Valley Bank's Collapse

On Mar. 10, 2023, Silicon Valley Bank (SVB) closed after a run on the bank, causing the largest bank failure since the 2008 financial crisis and the second-largest in U.S. history. Nearly simultaneously, the...

Governments Extend a Safety Net for SVB Depositors while Signature Bank Shutters

On March 12, 2023, the U.S. Treasury Department (Treasury), Federal Reserve (Fed) and Federal Deposit Insurance Corporation (FDIC) released a “Joint Statement” confirming that depositors of Silicon Valley Bank (SVB) “will have access to all...

Contact Us
  • Worldwide
  • Boston, MA
  • Chicago, IL
  • Denver, CO
  • Dublin, Ireland
  • Edwardsville, IL
  • Jefferson City, MO
  • Kansas City, MO
  • Las Vegas, NV
  • London, England
  • Miami, FL
  • New York, NY
  • Orange County, CA
  • Philadelphia, PA
  • Princeton, NJ
  • Salt Lake City, UT
  • St. Louis, MO
  • Washington, D.C.
  • Wilmington, DE
abstract image of world map
Boston, MA
800 Boylston St.
30th Floor
Boston, MA 02199
Google Maps
Boston, Massachusetts
Chicago, IL
100 North Riverside Plaza
Suite 1500
Chicago, IL 60606-1520
Google Maps
Chicago, Illinois
Denver, CO
4643 S. Ulster St.
Suite 800
Denver, CO 80237
Google Maps
Denver, Colorado
Dublin, Ireland
Fitzwilliam Hall, Fitzwilliam Place
Dublin 2, Ireland
Google Maps
Edwardsville, IL
115 N. Second St.
Edwardsville, IL 62025
Google Maps
Edwardsville, Illinois
Jefferson City, MO
101 E. High St.
First Floor
Jefferson City, MO 65101
Google Maps
Jefferson City, Missouri
Kansas City, MO
2345 Grand Blvd.
Suite 1500
Kansas City, MO 64108
Google Maps
Kansas City, Missouri
Las Vegas, NV
7160 Rafael Rivera Way
Suite 320
Las Vegas, NV 89113
Google Maps
Las Vegas, Nevada
London, England
Royal College of Surgeons of England
38-43 Lincoln’s Inn Fields
London, WC2A 3PE
Google Maps
Miami, FL
355 Alhambra Circle
Suite 1250
Coral Gables, FL 33134
Google Maps
Photo of Miami, Florida
New York, NY
7 Times Square, 44th Floor
New York, NY 10036
Google Maps
New York City skyline
Orange County, CA
19800 MacArthur Boulevard
Suite 300
Irvine, CA 92612
Google Maps
Philadelphia, PA
2005 Market Street
29th Floor, One Commerce Square
Philadelphia, PA 19103
Google Maps
Philadelphia, Pennsylvania
Princeton, NJ
100 Overlook Center
Second Floor
Princeton, NJ 08540
Google Maps
Princeton, New Jersey
Salt Lake City, UT
222 South Main St.
Suite 1830
Salt Lake City, UT 84101
Google Maps
Salt Lake City, Utah
St. Louis, MO
7700 Forsyth Blvd.
Suite 1800
St. Louis, MO 63105
Google Maps
St. Louis, Missouri
Washington, D.C.
1050 Connecticut Avenue NW
Suite 500
Washington, DC 20036
Google Maps
Photo of Washington, D.C. with the Capitol in the foreground and Washington Monument in the background.
Wilmington, DE
1007 North Market Street
Wilmington, DE 19801
Google Maps
Wilmington, Delaware