Why the First Republic Bank Failure?

First Republic Bank, a regional bank with assets over $200 billion, failed on May 1, 2023, becoming the second large regional bank to fail in just a few weeks, after Silicon Valley Bank. The bank grew rapidly through deposits from wealthy individuals and companies, which it used to make large loans, including jumbo mortgages. However, when Silicon Valley Bank and Signature Bank failed, many of these wealthy customers withdrew their deposits from First Republic Bank in droves, causing a massive $100 billion plunge in deposits in a matter of days. This caused the bank to fail, and the FDIC estimates a loss of $13 billion due to the failure. First Republic Bank's deposits dropped 41% to $104.5 billion in the first three months of 2023, and two-thirds of the bank's deposits were uninsured at the end of 2022. The bank's failure has been compared to the 2008 financial crisis, and regulators took over the bank and sold a substantial chunk of its assets to JPMorgan Chase, marking the third major bank failure in the US in less than three months.