First Republic Bank, a San Francisco-based lender known for serving wealthy clients with jumbo mortgages and personalized service, was considered one of the safest regional banks in the US. Its loan portfolio was high-quality, and its clients were affluent.
But when SVB collapsed in March 2023, First Republic's depositor base — concentrated in wealthy individuals and businesses with deposits above the $250,000 FDIC insurance limit — panicked. Despite a $30 billion rescue deposit from major banks, First Republic lost over $100 billion in deposits in the first quarter of 2023.
On May 1, 2023, the FDIC seized First Republic and sold it to JPMorgan Chase for $10.6 billion. It was the second-largest bank failure in US history. The case illustrated how the perception of safety can be as fragile as the reality: First Republic's loans were safe, but its depositors were not insured, and in a panic, the quality of the loan book does not matter — the speed of the withdrawal does.
A $30B rescue deposit could not stop the flight; JPMorgan bought the bank for $10.6B after $100B left.
First Republic's depositors were concentrated in wealthy clients with uninsured deposits.
SVB's collapse triggered a panic among uninsured depositors at regional banks.
A $30B rescue deposit from major banks was insufficient to stop the outflow.
First Republic lost $100B+ in deposits; JPMorgan acquired it for $10.6B.
A bank's safety is measured by its depositors' confidence, not its loan book. First Republic's loans were safe, but its depositors were uninsured. Confidence is the asset.
JPMorgan acquired First Republic's operations. The case, alongside SVB and Credit Suisse, prompted a re-examination of deposit insurance limits and regional bank regulation.
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