Stock in First Republic Bank plunges 62%

Another Bay Area bank was affected Monday by uncertainty in the financial markets following the failure of Silicon Valley Bank.

First Republic Bank shares sank nearly 62% on Monday and trading was briefly halted because of volatility. First Republic has branches in Menlo Park, Palo Alto, Los Altos and other Silicon Valley cities. Other regional banks whose stock plunged include Western Alliance Bancorp (down 47%) and PacWest Bancorp (down 20%).

The sell of follows a decision Sunday by regulators to seize Signature Bank in New York after it failed.

But a San Jose State University professor of finance and accounting does not see the failure of Silicon Valley Bank and Signature Bank as signs of a coming crisis.

“I don’t think it is a huge contagion issue,” said assistant professor Matthew Faulkner. “It’s more toward an isolated incident.”

Over the weekend and Monday, top federal officials including President Biden appeared to be getting ahead of the issue.

Biden sought to ease American’s fears by making all deposits held by Silicon Valley Bank customers available regardless of the amount of their deposits. That includes businesses who must pay their employees and their bills, officials said.

“Americans can have confidence that the banking system is safe,” Biden said Monday morning. “Your deposits will be there when you need them.”

Investors will not be protected, Biden said. They took a risk and “that’s how capitalism works,” he said.

Taxpayers will not be on the hook for the losses. Money to cover the losses will come from fees that banks pay into the deposit insurance fund, Biden said.

In California, state Treasurer Fiona Ma said Monday that her office has no exposure to Silicon Valley Bank and state and local government funds are safe.

Additionally, companies that did business with Silicon Valley Bank won’t have to pay any penalty if they must file their payroll taxes late, according to the California Employment Development Department, which collects payroll taxes.

Employers can request a waiver online at https://edd.ca.gov/en/payroll_taxes/e-Services_for_Business/ or in writing.

Silicon Valley Bank failed Friday after depositors and investors tried to withdraw $42 billion from the bank on Thursday. The bank had $175 billion in deposits at the end of last year. The withdrawals left the bank with a negative cash balance of nearly $1 billion Thursday.

Monday, First Republic Bank said it widened its financial position with liquidity from the U.S. Federal Reserve Bank and JP Morgan Chase and Co.

First Republic now has more than $70 billion to fund operations, the bank’s officials said. Additional liquidity is available through the Bank Term Funding Program, which the Federal Reserve announced Monday and ensures banks can meet the needs of their depositors.

“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” said Jim Herbert, founder and executive chairman, and Mike Roffler, president and CEO, of First Republic Bank. “First Republic continues to fund loans, process transactions and fully serve the needs of clients.”

U.S. Senate hopeful Rep. Barbara Lee, D-Oakland, blamed the failure of Silicon Valley Bank on the rollback of federal financial regulations by former President Trump.

“Federal oversight over large corporations and our economy is crucial and regulators must once again step in and ensure we do not repeat the mistakes made in 2008,” Lee said in a statement.

Silicon Valley Bank was the 16th largest bank in the United States as of March 10, Faulkner said.

Faulkner suggests depositors open another account, if they have one with more than $250,000 in it, to protect themselves.

Silicon Valley Bank was focused on serving startups, Faulkner said, which was probably part of the reason it failed. But Faulkner said the public only knows part of the story. — Bay City News