Federal officials are preparing to place the ailing First Republic Bank in RECEIVERSHIP, sources say

First Republic Bank could be placed in receivership by federal authorities, Reuters reported Friday, sending the lender’s shares down more than 40% in extended trading.

If the San Francisco-based lender falls into receivership, it would be the third U.S. bank to fail since March.

First Republic said earlier this week that its deposits fell by more than $100 billion in the first quarter.

First Republic Bank had to be backed by other banks on March 16 amid stability concerns, but the move has not reassured markets.

The bank had tried to sell itself, but on Friday sources told Reuters the Federal Deposit Insurance Corporation (FDIC) has decided that the position of the troubled regional lender has deteriorated and there is no time left to seek bailout through the private sector. sector.

Shares of the bank closed 43 percent, worsening a stock rout that wiped 75 percent of its value this week.

The stock lost more than half of its value on Friday, reaching a record low of $2.99.

At its lowest point, the bank had a market cap of nearly $557 million, a far cry from its peak valuation of more than $40 billion in November 2021.

Shares of some other regional banks also fell 2 percent after the bell with PacWest Bancorp, while Western Alliance fell 0.7 percent.

Reuters previously reported that a government-brokered rescue deal was in the works for First Republic. It was not immediately clear why that attempt failed.

According to the report, the FDIC, the Treasury Department and the Federal Reserve were among government agencies that organized meetings with financial firms about a bank lifeline.

Last month, First Republic received $30 billion in deposits from 11 banks after it was seen to falter and risk bringing others down with it.

“This show of support from a group of major banks is very welcome and demonstrates the resilience of the banking system,” a group of US regulators led by Treasury Secretary Janet Yellen said in a statement released at the time.

The bank was considered vulnerable after the collapse of Silicon Valley Bank, with both SVB and First Republic having similar compositions in key areas.

When Silicon Valley Bank went into freefall on March 9, analysts believed First Republic would not be far behind.

Both banks courted a wealthy clientele.

Founded in 1983 in Santa Clara, California, SVB focused primarily on technology investors and wineries in the Bay Area, but also had a strong presence on the East Coast.

Launched in 1985 in San Francisco, First Republic lured wealthy people on both coasts.

First Republic clients included Mark Zuckerberg, who in 2011 was offered a 1.05 percent mortgage on a $5.95 million loan for his five-bedroom home in Palo Alto.

At that time, the average 30-year interest rate was 4.45 percent.

About three-quarters of the bank’s mortgage approvals are “jumbo” loans, or loans over $417,000, the WSJ reported.

And the average mortgage with First Republic is over $1.2 million.

Many customers are on a first name basis with their branch manager and cite personal attention as a reason for banking with the lender.

SVB’s clients included billionaire venture capitalist Peter Thiel.

At First Republic, customers with an average net worth of $3.3 million were enticed by lavish perks, including cocktail parties at its 69 branches, stretching from Manhattan to Palm Beach.

Photos and videos posted to social media in December show a glitzy, Willy Wonka-themed Christmas party, complete with dancers and an orchestra, at the luxurious Palace Hotel in San Francisco.

The bank’s clients also include cultural institutions, including the Lincoln Center and the San Francisco Ballet.

The bank, like Silicon Valley Bank, ran into trouble when interest rates started to rise.

Their wealthy clientele discovered that they suddenly had a wave of attractive offers for where to park their money and earn good returns, and they no longer had to remain loyal to First Republic.

First Republic was also deemed to be at risk due to its high level of uninsured deposits.

A bank where most customers have less than $250,000 in their accounts — the limit insured by the federal government — is considered nearly immune to a bank run because depositors know their money is safe.

The higher the percentage of customers with uninsured deposits, the more likely a bank is to see its customers panicking and trying to withdraw all of their money – which may not be possible given the nature of banking.

SVB had a dangerously high percentage of uninsured deposits – 94 percent of the total.

First Republic has a hefty 68 percent, according to S&P Global.

At most banks, about half of all deposits are uninsured.

After Americans came to terms with the drama of the SVB collapse, shares in First Republic fell 67 percent and panicked shoppers rushed to branches to drain their huge savings from their accounts.

Jamie Dimon, the CEO of JPMorgan Chase – the country’s largest bank – met with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen to discuss their concerns about First Republic.

According to Yahoo Finance, Dimon attended a Bank Policy Institute event the next day and spoke with other bank executives, including Citigroup CEO Jane Fraser, about a possible plan to support First Republic.

Then the deal was done: JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley were among the 11 banks involved in the bailout.