The institution was under strong pressure since the close failures of two institutions with similar profiles in early March, Silicon Valley Bank and Signature.
Based on the amount of assets (229 billion dollars as of April 13), this is the second largest bank failure in the history of the United States (excluding investment banks such as Lehman Brothers) after that of Washington Mutual in September 2008.
According to the agreement, JPMorgan will recover all of the bank's deposits as well as "almost" all of its assets, according to the statement from the agency in charge of guaranteeing bank deposits (FDIC).
"Our government invited us and others to intervene, and we did," JPMorgan CEO Jamie Dimon said in a separate statement.
"Our financial strength, capabilities and business model allowed us to come up with an offer to execute the transaction in a way that minimized costs to the deposit insurance fund," he added.
The deal implies that First Republic's loans must be revalued downwards, and the FDIC has agreed to assume some of those losses: the agency estimates that the deal will cost it about $13 billion.
The bank's branches will be able to reopen on Monday according to the usual modalities.
The establishment had been in turmoil since the bankruptcies of SVB and Signature, seized by regulators after massive withdrawals from customers worried about their viability.
The authorities and other major banks came to the rescue of First Republic to prevent it from suffering the same fate, eleven financial institutions agreeing to pay a total of $ 30 billion.
But that wasn't enough to reassure investors and the stock continued to fall on Wall Street.
The bank has failed to find a satisfactory rescue plan and when it confirmed last Monday that many customers had withdrawn deposits in the first quarter, more than $ 100 billion in total, its stock, already in bad shape, took a nosedive.
First Republic was worth Friday at the close only $ 654 million on the stock market, while it was worth more than $ 20 billion at the beginning of the year and more than $ 40 billion at its peak in November 2021.
The authorities, who seemed reluctant to come to the rescue of a new bank, finally stepped up.
The FDIC and the Economy Department solicited several banks in the middle of last week to gauge their interest and, on Friday, allowed a handful of them to access more financial information about First Republic.
The bidding process was "highly competitive" and resulted in a transaction "in line with least-cost requirements," the FDIC said.
© 2023 AFP