Banking Crisis: First Republic Collapses

The collapse of First Republic sparks new speculation about the health of US regional banks. Credit: Can Pac Swire, CC2, Flickr

First Republic Bank headquartered in San Francisco, California collapsed on Monday in the latest blow to the banking sector in the US.

The Federal Deposit Insurance Corporation (FDIC) confirmed in a statement that the bank which operates 84 offices in 8 states, primarily in New York, California, Massachusetts, and Florida collapsed.

It added that it has accepted a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank.

“In carrying out this transaction, JPMorgan Chase is supporting the US financial system through its significant strength and execution capabilities,” the bank said in a statement.

First Republic’s offices will also reopen as branches of JPMorgan Chase.

The FDIC took control of the embattled First Republic and then immediately announced a sale of many of its assets and deposits. It makes the lender the second-largest bank failure in the nation’s history.

The move represents the latest effort by federal regulators to prop up consumer confidence in the banking system, which has now suffered three major bank failures in the last six weeks.

Silicon Valley Bank and Signature Bank both were taken over by the FDIC last month following runs on those banks by their customers.

The collapse of those banks sparked weeks of speculation about the health of US regional banks, especially those with a largely uninsured deposit base.

First Republic is a mid-sized US bank

As of December 31, 2022, the company had $166 billion in outstanding loans receivable, including $102 billion in loans secured by residential real estate, $34 billion in loans secured by income-producing commercial real estate, $18 billion in business loans, and $10 billion in other loans.

Collateral securing loans were overwhelmingly in the metro areas of Boston, New York City, San Francisco, and Los Angeles.

In March, a group of America’s biggest banks stepped forward to pump $30bn into First Republic in a bid to stabilize the business, but the efforts proved futile.

Founded in 1985 with a single San Francisco branch, First Republic is a mid-sized US lender, similar to Silicon Valley Bank.

It is known for catering to wealthy clients in coastal states. It had assets of $233 billion as of the end of March. As of the end of last year, it was the nation’s 14th-largest bank, according to a ranking by the Federal Reserve.

It has branches in high-income communities such as Beverly Hills, Brentwood, Santa Monica and Napa Valley, California; in addition to San Francisco, Los Angeles and Silicon Valley. Outside of California, branches are in other high-income communities such as Palm Beach, Florida; Greenwich, Connecticut; Bellevue, Washington; and Jackson, Wyoming. It had about 7,200 employees as of the end of last year.