FDIC Sells Failed First Republic Bank to JPMorgan

After weeks of creeping to the edge of collapse, First Republic Bank is no more.

Regulators seized control of the struggling California lender over the weekend, with the Federal Deposit Insurance Corporation (FDIC) announcing Monday (May 1) it had sold the bank to J.P. Morgan Chase.

The sale of First Republic to the country’s largest bank came after several weeks of uncertainty surrounding its future. Its collapse marks the third bank failure to happen in the last eight weeks, and was the second largest in U.S. history.

The FDIC auctioned off the bank Sunday (April 30), with PNC and Citizens Bank among the other bidders, according to published reports. With the sale, J.P. Morgan agreed to assume all of First Republic’s deposits and “substantially all” of its assets, the FDIC said.

“Our government invited us and others to step up, and we did,” J.P. Morgan CEO Jamie Dimon said Monday.

As of April 13, First Republic Bank had roughly $229.1 billion in assets and $103.9 billion in total deposits, the agency said.

“As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of J.P. Morgan Chase Bank, National Association, today during normal business hours,” the FDIC said.

“All depositors of First Republic Bank will become depositors of J.P. Morgan Chase Bank, National Association, and will have full access to all of their deposits.”

When the banking crisis began in March with the failures of Silicon Valley Bank and Signature Bank, First Republic found itself downgraded by ratings agencies due to its large percentage of uninsured deposits, held by its wealthy customer base.

Many of those customers fled to larger banks during the crisis, taking more than $100 billion in deposits with them during the first quarter of this year.

News of this “unprecedented” level of withdrawals left the bank on even shakier ground, as its stock price — which had already declined 96% since last year — lost half its remaining value.

And although it received a $30 billion lifeline last month from 11 of the country’s banking giants — J.P. Morgan among them — it continued to struggle. By the time last week came to an end, First Republic was reportedly seeking a rescue by the FDIC or hoping to be purchased by one of those large banks.

The FDIC said the estimated cost of the takeover to its insurance fund will be $13 billion, compared to $2.5 billion for the failure of Signature Bank and $20 billion for the collapse of Silicon Valley Bank.