Early on Monday, regulators seized the San Francisco-based First Republic Bank and agreed to sell its deposits and most of its assets to JPMorgan Chase, preventing further spiral in the banking industry.
Three of the four largest-ever U.S. bank failures have occurred in the past two months. First Republic Bank, which as of April 13 had $229.1 billion in total assets and $103.9 billion in total deposits, is the second largest bank to go under in U.S. history, behind only Washington Mutual, which went down in 2008. First Republic has been struggling since the failures of Silicon Valley Bank and New York-based Signature Bank in March.
Investors and depositors were growing increasingly worried the bank would not survive because of its high amount of uninsured deposits — that is, deposits over the FDIC-insured limit of $250,000. First Republic also had high exposure to low interest rate loans to wealthy clients, reportedly including Meta CEO Mark Zuckerberg.
“As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits,” explained the FDIC in a statement Monday.
“The resolution of First Republic Bank involved a highly competitive bidding process and resulted in a transaction consistent with the least-cost requirements of the Federal Deposit Insurance Act,” added the statement. “The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion.”
Both First Republic and Washington Mutual are now substantially owned by JP Morgan. Chairman and CEO Jamie Dimon was instrumental in earlier efforts to rescue First Republic.
“Our government invited us and others to step up, and we did,” explained Dimon in a statement. “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.”
“This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise,” Dimon added.