As First Republic Teeters, FDIC Asks JPMorgan, PNC And Others To Table Final Bids For Takeover By Sunday, Report Says

First Republic Bank's FRC fate appears to have been sealed, and rumors suggest the regional bank will be taken over by the government following which there will be potential suitors for its assets.

What Happened: First Republic stock went about a freefall on Friday, dropping 43.3% to $3.51 in regular trading and an incremental 33.62% during after hours, according to Benzinga Pro data.

The drop was precipitated by reports that the bank could be placed under Federal Deposit Insurance Corporation (FDIC) receivership, suggesting a government takeover of the bank.

JPMorgan Chase & Co., Inc. JPM and regional banking peer PNC Financial Services Group, Inc. PNC could be bidding for First Republic following the government seizure, a Wall Street Journal report said.

Bank of America BAC and Citizens Financial Group CFG were also named as potential bidders, according to outlets CNBC and Reuters. 

First Republic's seizure and sale could be announced as early as this weekend, the Wall Street Journal report added.

On Saturday, Bloomberg, reported that the FDIC asked JPM and PNC Financial to table final bids by Sunday. The federal banking regulator reportedly approached banks late Thursday to explore their interest in a potential buy, a proposed price and an estimated cost to the agency’s deposit insurance fund.

If JPMorgan were to take over First Republic, federal authorities may have to tweak rules as the big bank has already hit the upper ceiling for maximum nationwide deposits, it added.

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Why It's Important: The development could come as a setback even as the banking system is recovering from the recent collapses of Silicon Valley Bank and the Signature Bank. Both banks were taken over by the government, and SVB was later sold to First Citizens Bancshares, Inc. FCNCA.

The underlying issue behind the collapses was the asset maturity mismatch that left the banks, which invested in longer-dated treasuries, with huge book losses. When the issue came to light, it triggered bank runs, causing a flight of deposits away from the regional banks.

San Francisco-based First Republic came into the spotlight when it announced in mid-March measures to strengthen and diversify liquidity. Around that time, the Street started smelling some trouble surrounding the lender. Less than a week following the bank's announcement, 11 other banks led by JPMorgan pledged to collectively contribute $30 billion in uninsured deposits.Subsequently, First Republic announced the suspension of dividends on all the series of preferred shares.

The bank shared first-quarter results earlier this week, with the main metrics exceeding expectations. First Republic also said 70% of its deposits, aside from those received from the banking consortium led by JPMorgan, at the end of March were insured. However, there was a red flag in the earnings report: The company saw a 40.8% plunge in deposits to $104.5 billion.

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Updates to this story include the submission for final bids and the names of other potential bidders.