- First Republic Bank tumbled 46% Monday after it became the second-largest bank failure in US history.
- The bank was seized by regulators and will be taken over by JPMorgan.
Shares of First Republic Bank dropped 46% in early trading Monday following news that the firm will be taken over by JPMorgan after being seized by regulators.
At 7:45 a.m. ET, the stock hovered at about $1.90. Before the collapse of Silicon Valley Bank in early March, it traded above $120 a share.
First Republic marks the second-largest bank failure in US history, with $230 billion in assets as of April 13. It's also the third regional bank to be taken over by federal regulators following SVB and Signature Bank.
In an announcement Monday, the FDIC said JPMorgan submitted a bid for all of First Republic's deposits — about $103.9 billion as of April 13 — and JPMorgan said it was assuming deposits of about $92 billion, suggesting that customers had withdrawn funds since that date.
The FDIC predicted that the cost to its Deposit Insurance Fund will be roughly $13 billion.
"Our government invited us and others to step up, and we did," Jamie Dimon, chief executive of JPMorgan, said in a statement Monday. "Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund."
As part of the deal, First Republic's 84 offices in eight states will reopen as JPMorgan branches on Monday. The latter will not, however, assume First Republic's corporate debt or preferred stock.
The seizure by regulators comes after First Republic took in $30 billion in March when a group of 11 banks led by JPMorgan, Bank of America, and Wells Fargo provided a lifeline in attempt to save it from meeting the same fate as Silicon Valley Bank and Signature Bank.
The cash influx had provided stability at the time, and First Republic said in a March regulatory filing its liquidity position remained "very strong."
Yet last week's first-quarter earnings report from First Republic, which catered to wealthy clients, revealed the depth of its financial troubles.
Deposits fell by $100 billion after SVB crashed, and the emergency liquidity it had drawn upon during the crisis created an unsustainable situation where it earned less on loans than it paid on liabilities.
Last week, the bank scrambled to put together a private-sector plan to stave off a takeover by the FDIC. It involved other banks purchasing bonds from First Republic at above-market rates, allowing the company to shrink its losses.