What happened

Shares of First Republic (FRCB) had dropped by more than 46% as of 11:41 a.m. ET today after media outlets reported that the embattled bank might be placed into receivership by the Federal Deposit Insurance Corporation (FDIC).

So what

Citing anonymous sources, CNBC's David Faber said First Republic will likely be placed into FDIC receivership, similar to what occurred with Silicon Valley Bank and Signature Bank. When a bank is placed into receivership, it usually happens after business hours on Friday so the FDIC has the weekend to get things in order.

The stock is down about 70% this week after the bank reported its first-quarter earnings results Monday, which showed that it lost more than $100 billion of deposits during the period.

Now, these reports are based on sources and likely rumors as well, so they are not definitive and there may still be a rescue of the bank. This would likely be preferable to regulators and the large banks, which are already looking at hefty charges later this year to replenish the FDIC's Deposit Insurance Fund. If First Republic officially fails, these charges could be exacerbated.

Now what

Unfortunately, I could see receivership being the only solution for First Republic right now. The bank has taken on expensive borrowings to replace the lost deposits so doing nothing will likely lead to huge margin compression and losses that will chip away at the bank's capital.

But it's also likely difficult to line up a buyer without some kind of special assistance because First Republic has a securities book and a mortgage book that are currently underwater. Any acquirer would have to eat those losses right now.

As I've written recently, I would avoid First Republic stock at all costs. I do not see a good outcome for shareholders and the situation is far too risky to take a chance.