First Republic Bank was seized by regulators and sold to JPMorgan Chase early Monday morning, making it the third major bank to fail since March.
The FDIC brokered the deal for Chase to take over First Republic following negotiations over the weekend and “a highly competitive bidding process,” according to a Monday statement.
JPMorgan Chase will take control of all First Republic deposits and assets, and all 84 branches of First Republic Bank will reopen as branches of JPMorgan Chase during Monday business hours, the FDIC said.
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Customers with accounts at First Republic would be able to access their deposits by the beginning of Monday business hours, the FDIC said. The agency also said deposits with the bank will continue to be insured.
As of April 13, First Republic Bank had about $229.1 billion in assets and $103.9 billion in deposits, the FDIC said.
First Republic Bank had struggled in the wake of the abrupt collapses of Silicon Valley Bank and Signature Bank, which were both taken over by the FDIC in March.
“I am pleased we were able to deal with First Republic’s failure without using the FDIC’s emergency powers. It is a grave and unfortunate event when the FDIC uses these emergency powers,” said FDIC Board of Directors member Jonathan McKernan in a statement, adding that “more work remains to be done” to strengthen the banking system and plan for failures.
JPMorgan Chase said in a statement that the move is supporting the U.S. financial system as consumer confidence in banking wavers.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman of CEO of JPMorgan Chase. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”
JPMorgan Chase and the FDIC together will cover the costs of losses on residential and commercial loans First Republic issued.
The FDIC said the sale of First Republic likely will cost $13 billion from the Deposit Insurance Fund, which is the FDIC fund for protecting deposits at failed banks. The DIF had $128 billion at the end of 2022, but the FDIC was already forced to spend nearly $22.5 billion to handle the collapses of Silicon Valley Bank and Signature Bank in March.
Why did First Republic collapse?
First Republic had been teetering for months after the collapses of SVB and Signature set off a banking crisis in March.
The San Francisco-based regional powerhouse did not appear to have the same mismanagement issues as SVB, nor did it share Signature Bank’s unique relationship with the volatile cryptocurrency sector.
But First Republic shared other major weaknesses with SVB, including steep losses on investment holding and holding the vast majority of its deposits above the FDIC’s insurance threshold.
First Republic received $30 billion in March from a group of major U.S. banks — including JPMorgan Chase — to help stave off a collapse and restore customer confidence in the bank.
Even so, First Republic’s woes deepened last week after a dire first-quarter earnings report showed the depth of its losses during the outbreak of the crisis. The dire financial numbers spurred a fresh round of panic over the health of the bank, spurring takeover discussions that stretched over the weekend.
Updated at 8:05 a.m.