The collapse of three mid-sized banks last week reverberated across the U.S. financial system, focusing attention on smaller lenders that investors think could falter if nervous depositors decide to shift their money to larger firms.
These regional banks have struggled with market volatility all week and faced renewed pressure on Thursday.
Shares of First Republic Bank, whose credit rating was downgraded on Tuesday, fell more than 20 percent in premarket trading on fears it could suffer the same fate as the Silicon Valley bank. That set the San Francisco-based bank for its fifth double-digit-percentage decline in six trading days.
A steep decline in market value has raised the prospect of a takeover of the bank, and “any potential sale would be a difficult decision for existing shareholders,” analysts at Keefe, Bruyette & Woods wrote in a research note.
Other regional banks saw their shares decline in premarket trading Thursday: PacWest Bancorp and East West Bancorp both fell more than 10 percent. In contrast, major banks such as JPMorgan Chase and Bank of America were set to post smaller gains as markets opened.
The turmoil came as Silicon Valley Bank, a 40-year-old firm based in Santa Clara, Calif., collapsed on Friday. The bank failure was the second largest in US history and the largest since the financial crisis. 2008.
On Sunday, regulators shut down Signature Bank, a New York financial institution with a large real estate lending business, worried that a banking movement could spread and threaten the stability of the entire financial system.