First Republic Bank saw deposits plummet US$72 billion in the first three months of the year as the California lender was engulfed in the regional-banking crisis that led to the collapse of three of its peers.

Deposits sank to US$104.5 billion as of March 31, down 41 per cent from the end of 2022, even after the country’s largest lenders parked US$30 billion of their own cash with the San Francisco-based bank in an effort to shore up its finances. That compares with the US$137 billion analysts in a Bloomberg survey had forecast. 

The company said it plans to reduce the size of its balance sheet and cut its workforce by as much as 25 per cent as part of its efforts to stabilize the company and in response to “the unprecedented deposit outflows.” Also, the bank “is pursuing strategic options to expedite its progress while reinforcing its capital position.”

The results are the first fulsome update from First Republic since investors pulled back from the stock in the midst of a crisis that engulfed regional lenders nationwide last month.

The turmoil started with the collapse of SVB Financial Group’s Silicon Valley Bank, which fell into government receivership after a sale of available-for-sale securities spooked depositors in the venture capital community. The move put a spotlight on banks sitting on large piles of unrealized losses on their balance sheets that might have to take similar action if faced with excessive withdrawals.

Indeed, First Republic ended last year with almost US$27 billion in markdowns on loans and a bevy of unrealized losses on Treasuries and other long-dated bonds on the company’s balance sheet. That was far greater than the roughly US$13 billion in tangible common equity it had at the time.

At the height of the crisis in March, 11 of the country’s largest banks banded together to deposit US$30 billion of their own cash into First Republic. The move was meant to shore up confidence in the beleaguered lender.