What happened

Despite a more positive day for the market and the banking sector, shares of First Republic (FRCB) were trading down roughly 13.4% at 10:57 a.m. ET today after S&P Global once again downgraded the bank's credit.

So what

First Republic has struggled immensely since the collapse of SVB Financial and Signature Bank because, like these banks, it has a lot of uninsured deposits and billions of unrealized losses sitting in its bond portfolio. Those losses are not nearly as bad as what SVB has had, but they are worrisome nonetheless.

The bank has been experiencing deposit outflows and has not only had to tap the Federal Reserve and Federal Home Loan Bank for liquidity but has also had to receive a $30 billion deposit injection from 11 of the largest U.S. banks. Still, S&P Global believes these measures may not be enough.

"It may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing," S&P Global credit analyst Nicholas Wetzel said, adding that First Republic likely experienced "high liquidity stress with substantial deposit outflows over the past week." 

S&P has issued a "CreditWatch negative" rating for First Republic, suggesting the bank may see another downgrade if deposit balances don't begin to normalize. 

Now what

While First Republic may survive the intense deposit outflows it has likely experienced recently, I do unfortunately think the bank is going to continue to struggle with earnings. Before SVB collapsed, First Republic was already facing margin pressure because it has a large low-yielding mortgage portfolio and deposit costs were on the rise.

Now its deposit costs have likely surged, so I think it could be in for a real struggle from an earnings perspective. If the bank can find a buyer, that's probably a good option, although it has reportedly been exploring a private stock sale as well.

Either way, I'm avoiding this stock until things stabilize. There are plenty of better opportunities in the banking sector.