Washington - JPMorgan took over First Republic Bank after it was seized by regulator, marking the third regional bank to be taken over by federal regulators.

The takeover is the second-largest bank failure in US history, with the FDIC estimating that the cost to its Deposit Insurance Fund will be about $13 billion. As part of the transaction, JPMorgan is assuming all of First Republic Bank's insured and uninsured deposits as well as most of its assets. First Republic Bank's 84 offices in eight states will reopen as branches of JPMorgan on Monday.

Efforts to stabilize the San Francisco bank started after California regulators shuttered neighboring Silicon Valley Bank on March 10 following large consumer withdraws. Two days later, New York state regulators did the same with Signature Bank. The same day JPMorgan partnered with the Federal Reserve to offer $70 billion in financing to First Republic, its long-time client.

First Republic's stock continued to plummet, however, resulting in a consortium of banks, led by JPMorgan, investing $30 billion in deposits into the bank on March 16. The cash influx helped stabilize the bank until this week when First Republic revealed the extent of its financial troubles during a first-quarter earnings report.

The bank said deposits fell 41% to $104.5 billion in the first three months of 2023 and that it was taking steps to shore up its balance sheet, including cutting jobs and executive pay.

According to CNBC, First Republic's bankers have asked big banks to buy its loans above cost, arguing that they will have to pay for the regional bank's collapse via an estimated $30 billion in fees levied by the FDIC to cover its uninsured deposits.

First Republic amassed a large book of loans during the pandemic that would be forced to take big haircuts if sold today to raise cash. The bank offered rich people interest-only mortgages where the borrower didn't have to pay back any principal for the first decade of the loan. In 2020 and 2021, according to Bloomberg's analysis, the bank extended nearly $20 billion of these no-interest loans just in San Francisco, Los Angeles, and New York.

First Republic's shares slumped on the news, sinking more than 40% to $2.10 in pre-market trading, while JPMorgan rose 2.5% to $141.70.