First Republic Bank, the third major bank to go under in less than two months, has been taken over by federal regulators and will be sold to JP Morgan. The California Department of Financial Protection and Innovation (DFPI) announced simultaneously Monday morning that the Federal Deposit Insurance Corporation (FDIC) had seized the bank and that JPMorgan Chase, the largest bank in America, would be purchasing substantially all of its assets.
First Republic Bank has eclipsed Silicon Valley Bank ($209.0 billion at the time of closure) to become the second largest bank failure in American history. The intervention comes days after First Republic reported losing about 40% of its deposits in the first quarter of this year. Despite a $30 billion infusion from 11 peer banks in mid-March, First Republic couldn't stop the bleeding: its stock fell more than 75% over the past 30 days.
The scale of the lender’s deposit losses were an outlier compared with other regional banks, and First Republic was also carrying many loans with fixed, long-term interest rates that have begun to lose value as the Federal Reserve has repeatedly hiked its benchmark rate. The FDIC estimates the cost of First Republic's receivership will be about $13 billion.
The California Department of Financial Protection and Innovation (DFPI) has taken possession of First Republic, resulting in the third failure of an American bank since March. JPMorgan Chase will assume all deposits, including uninsured deposits, and "substantially all assets"ofthebank.TheFederalDepositInsuranceCorporationwasappointedreceiveroftheBank.SincethesuddencollapseofSiliconValleyBankinMarchattentionhasfocusedonFirstRepublicastheweakestlinkintheU.S.bankingsystem.However,thismodelunraveledinthewakeoftheSVBcollapseasFirstRepublicclientswithdrewmorethan$100billionindeposits.SharesofFirstRepublicaredown97%sofaryearasofFriday'sclose.
First Republic Bank, a bank whose assets were battered by the rise in interest rates, was seized by regulators and sold to JPMorgan Chase. The move is aimed at curbing a two-month banking crisis that has rattled the financial system. 84 First Republic branches in eight states will reopen as JPMorgan branches on Monday.
"This acquisition represents another step forward for our firm," said Jamie Dimon, Chairman and CEO of JPMorgan Chase. "We are committed to providing exceptional service to First Republic customers while maintaining strong capital levels."
As part of the takeover process, all deposits and customer accounts have been transferred from First Republic Bank to JPMorgan Chase with no disruptions or changes for account holders. Customers can continue using their existing checks, debit cards, and online services without any interruptions.
"Customers should be assured that their deposits are safe and accessible," said FDIC Chairman Martin Gruenberg. "The transition to JPMorgan Chase should be seamless for customers."
Check back for updates on this developing story.