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First Republic’s collapse is felt in Boston

The banking turmoil has been limited, but it’s having an effect on the economy, including locally

That makes three: First Republic Bank was taken over by federal regulators and sold to JPMorgan Chase in the wee hours of Monday morning, the third US regional bank failure since March.Victor J. Blue/Bloomberg

Is that the last of them?

That’s the big lingering question after First Republic Bank was taken over by federal regulators and sold to JPMorgan Chase in the wee hours of Monday morning.

It was the third US regional bank failure since March, when Silicon Valley Bank and Signature Bank collapsed.

Bankers and regulators alike are hoping that the worst of the recent banking turmoil is over.

“This is getting near the end of it, and, hopefully, this helps stabilize everything,” JPMorgan chief executive Jamie Dimon said on a call with journalists Monday. “The American banking system is extraordinarily sound.”

Bank stocks mostly rose on Monday morning, led by JPMorgan, which gained 3 percent.


Notable exceptions were Providence-based Citizens Financial Group and PNC Financial Services Group, which were among the banks that were asked by the Federal Deposit Insurance Corp. to submit a bid for First Republic, according to Bloomberg.

Both banks dropped more than 5 percent. Citizens’ shares are down 26 percent this year as investors worry about a decline in deposits and its loans to office landlords.

In a recent interview, Bruce Van Saun, Citizens’ CEO, said that outside of the office loans, “things look OK.” The bank’s level of nonperforming loans and charge-offs is “still very low,” Van Saun said.

Office real estate accounts for just $6 billion of its $175 billion in loans. After losing deposits in the first two months of the year, withdrawals stabilized in March, with average deposits during the first quarter dipping 2.6 percent.

“We can see the freight train coming but it happens slowly,” Van Saun said. “It’s a problem we can see coming” and prepare for, he said.

Still, even if First Republic marks the end of the recent spate of bank failures, the turmoil is having an effect on the economy, including locally.


Banks are tightening their credit standards and are expected to reduce lending, increasing the odds that the economy falls into a recession.

First Republic is the second-largest US bank to go under, following Washington Mutual in 2008, which JPMorgan also absorbed.

Its demise will be most keenly felt by its affluent customers — clustered in its home base of the Bay Area, as well as New York, Florida, and Massachusetts — who were drawn to the bank by its high-touch personal services such as low-interest mortgages.

Single-family real estate accounted for 60 percent of its loan book. However, about a fifth of its lending went to multifamily and commercial real estate, with another 12 percent lines of credit and business loans.

First Republic had $17.8 billion in Massachusetts deposits as of June 2022, according to the most recent data from Federal Deposit Insurance Corp., ranking it seventh in the state.

One First Republic customer, real estate investor Bruce Percelay, said he was in contact with his First Republic banker early Monday morning.

He told my colleague Shirley Leung that the bank held 75 percent of his commercial loans and he doubts JP Morgan can provide the same level of service.

“I would fully expect the cost of money will be higher, the process to borrow money will be more protracted, and the relationship will be more clinical than personal,” said Percelay, founder of Mount Vernon Co., a multifamily developer and manager of apartment rentals in Greater Boston.


Unlike the failure of Silicon Valley Bank, which specialized in funding tech startups, developers have many other options for financing. Still, Percelay sees the loss of First Republic as yet another headwind for the real estate industry, already reeling from high interest rates, soaring construction costs, a looming recession, and proposed Boston housing policies that could hamper growth.

“Pick your poison,” said Percelay. “This is just one more event that could negatively impact the real estate market.”

Larry Edelman can be reached at Follow him @GlobeNewsEd.