Another U.S. bank has failed.
California’s financial regulator took possession of First Republic Bank (FRC) and promptly sold it to JPMorgan Chase (JPM), the largest lender in the world by assets and market capitalization.
The seizure of First Republic by regulators marks the third failure of a U.S. bank since March. Regional lenders Silicon Valley Bank and Signature Bank also collapsed in the past two months.
JPMorgan Chase has acquired all of First Republic Bank’s deposits, including its uninsured deposits, according to a news release.
The California Department of Financial Protection and Innovation said it had taken possession of First Republic and appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver in the case.
The FDIC quickly accepted JPMorgan’s bid for First Republic’s assets. JPMorgan is the largest bank in both the U.S. and the world with about $3 trillion U.S. of assets under management.
First Republic had struggled to remain afloat in recent weeks. Another regional lender based in California, First Republic was a specialty bank that catered to rich Americans with low interest rate mortgages in exchange for leaving cash deposits with it.
But that model faltered in the wake of Silicon Valley Bank’s collapse, as First Republic clients withdrew more than $100 billion U.S. in deposits in recent weeks.
Shares of First Republic were down 97% as of April 28 and trading at $3.51 U.S., putting them in penny stock territory. A penny stock is defined as any security that trades for less than $5.
The deposit withdrawals forced First Republic to borrow heavily from the U.S. Federal Reserve to maintain its operations.
Executives at First Republic tried last week to persuade the biggest U.S. banks to help it, but the other lenders balked after they had already injected $30 billion U.S. of deposits into the troubled bank in March of this year.
JPMorgan Chase’s stock is up more than 2% on news that it is taking over First Republic. In the last 12 months, the bank’s share price has gained 15% to trade at $138.24 U.S.
