A San Francisco-based bank collapsed on Monday and was seized by the federal government and quickly sold to JPMorgan Chase following for billions of dollars in what was the second-largest bank failure in U.S. history.
First Republic Bank operated 84 locations in eight states but did not have the capital to hand to handle withdrawals during a bank run that commenced following the collapse of two other mid-size banks in March, the Associated Press reported.
The bank was founded in 1985 and, similarly to Silicon Valley Bank and New York-based Signature Bank, catered to mostly wealthy investors.
Both banks went insolvent in March after a bank run put SVB into turmoil — which led to panic for Signature’s customers.
The collapse of First Republic began after the Federal Deposit Insurance Corporation seized SVB and days later Signature when questions were raised about its ability to operate.
The bank invested deposits in low-interest loans but the value of its loans took a hit when the Federal Reserve began to hike interest rates in order to tackle inflation.
Once the other banks failed, panic among investors sent the institution reeling.
The FDIC announced on Monday that it had struck a deal with JPMorgan Chase that would allow it to immediately acquire all assets that belonged to First Republic.
The FDIC said in a news release, “To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.”
“Deposits will continue to be insured by the FDIC, and customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits,” the FDIC added.
The acquisition of First Republic followed what the FDIC called a “a highly competitive bidding process.”
The FDIC only insures deposits up to $250,000.
In the cases of SVB and Signature banks, deposits beyond that amount would have been traditionally covered.
JPMorgan Chase, which now owns First Republic’s investments and debts, vowed to protect investors — including their deposits — in its agreement to take over the failed institution.
JPMorgan Chase CEO Jamie Dimon said in a statement his company bid to purchase First Republic and its assets after it was asked to do so by the federal government.
“Our government invited us and others to step up, and we did,” Dimon said in a statement obtained by the AP.
First Republic’s assets were given an estimated value of $229 billion during an evaluation last month.
SVB was the second-largest bank in the country’s history to fail until Monday morning.
The only bank failure larger than that of First Republic on Monday came in 2008 during the financial crisis that saw Washington Mutual collapse.
This article appeared originally on The Western Journal.