First Republic becomes the third U.S. bank to fail this year

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JPMorgan Chase, the nation’s largest bank, just got bigger

First Republic Bank failed over the weekend and regulators sold its assets to JPMorgan Chase. It’s the third bank failure since March. Silicon Vally Bank and Signature Bank failed earlier.

To protect depositors, the Federal Deposit Insurance Corporation (FDIC) agreed to a purchase arrangement with Chase, the nation’s largest bank. In part of the deal, Chase will assume much of First Republic’s debt as well as its deposits.

First Republic’s 84 branches are concentrated in California and the West Coast. There are also branches in Florida and the Northeast. Some of the branches are expected to become Chase locations as the bank takes over.

For people with deposits in First Republic Bank it should be a fairly smooth process. FDIC insures deposits up to $250,000.

‘Deposits continue to be insured’

“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,” FDIC said in a statement. “Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Chase Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well.”

Industry experts say the reasons for the three bank failures this year differ. In Silicon Valley Bank’s case, much of depositors' money was invested in Treasury bonds that had lost value – on paper at least – when bond yields rose dramatically last year. A run on the bank, triggered by social media, led to huge withdrawals.

The bank had also made loans to many Silicon Valley startups that were not yet profitable and were being squeezed by higher interest rates.

First Republic, which had made a number of loans for expensive real estate, was faced with rising withdrawals by depositors. To make up for that, the bank borrowed heavily from the Federal Reserve in the first quarter.

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