New York — Regulators seized troubled First Republic Bank and sold all of its deposits and most of its assets to JPMorgan Chase in a bid to avoid further banking turmoil in the United States.
San Francisco-based First Republic is the third midsize bank to fail in two months. It has struggled since the collapse of Silicon Valley Bank and Signature Bank, and investors and depositors have grown increasingly concerned that it may not survive due to its large amount of uninsured deposits and exposure to low-interest loans.
The Federal Deposit Insurance Corporation said early Monday that the 84 First Republic Bank branches in eight states will reopen Monday as branches of JPMorgan Chase.
Over the weekend, regulators worked to find a way forward before US stock markets open. Markets in many parts of the world were closed for the May 1 holiday on Monday. The two Asian markets that were open, in Tokyo and Sydney, rose.
As of April 13, First Republic had approximately $229 billion in total assets and $104 billion in total deposits, the FDIC said. At the end of last year, the Federal Reserve ranked it the 14th largest among US commercial banks.
Before the Silicon Valley bank failure, First Republic had a banking franchise that was the envy of most of the industry. Its clients – most of whom are rich and powerful – rarely default on their loans. The 72-branch bank made much of its money by offering low-cost loans to the wealthy, which reportedly included Meta Platforms CEO Mark Zuckerberg.
And with an influx of deposits from the wealthy, First Republic saw total assets more than double from $102 billion at the end of the first quarter of 2019, when its full-time workforce was 4,600.
But the vast majority of its deposits, like those at Silicon Valley and Signature Bank, were uninsured — well above the $250,000 limit set by the FDIC. This is what worries analysts and investors. If First Republic fails, depositors may not get all of their money back.
These concerns were crystallized in the bank’s recent quarterly results. The bank said depositors withdrew more than $100 billion from the bank during the April crisis. San Francisco-based First Republic said it was only able to stem the bleeding after a group of large banks stepped in to provide $30 billion in uninsured deposits.
Since the crisis, First Republic has been looking for a way to quickly change course. The bank planned to sell unprofitable assets, including the low-interest mortgages it made to wealthy clients. It also announced plans to lay off up to a quarter of its workforce, which totals about 7,200 employees, in late 2022.
Investors remained skeptical. Bank executives have not taken any questions from investors or analysts since the bank reported its results, sending First Republic stock lower.
It is difficult to restructure the balance sheet profitably when the company must sell assets quickly and have fewer bankers to find opportunities for the bank to invest in. And it took years for banks like Citigroup and Bank of America to return to profitability after the global financial crisis 15 years ago, and those banks had the advantage of government support to keep them going.
The Associated Press contributed to this report.
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