Is First Republic Bank, the first of the lot?

The collapse of First Republic Bank. Definitely not the “First” of its kind.
 
Following Silicon Valley Bank’s and Signature Bank’s failures in March, First Republic was seen as the system’s next dangerous bank. Due to their somewhat comparable clientele, dangers, and issues, Silicon Valley Bank and the First Republic began to be grouped together by investors and clients.
 
As of year-end 2022, First Republic Bank had slightly less than USD 120bn in uninsured deposits. Following the fall of Silicon Valley Bank, people were clearly uneasy about having exposure more than the insured amount at a local bank. In order to make up for the deposits that customers were withdrawing, several of the largest banks amassed USD 30bn of their own money and deposited it at First Republic Bank.
 
The First Republic and Silicon Valley Bank both had business models that weren’t ready for increasing interest rates. First Republic had issues with its loan portfolio since its business model of offering affordable mortgages to affluent consumers left it sitting on significant losses when interest rates increased, as opposed to Silicon Valley Bank, which had problems with its investments in long-term low-interest rate bonds. In terms of customer base, First Republic was more diverse than Silicon Valley Bank, and generally, the bank was facing a few years of low earnings due to the low rates they had locked in. However, the bank might have survived if it hadn’t had a run on its accounts.
 
In the end, JPMorgan bought USD 173bn in loans and about USD 30bn in securities from First Republic. They are not taking on the preferred stock or corporate debt of the insolvent banks. JPMorgan will give the FDIC USD 10.6bn in cash right away and an additional USD 50bn over five years. They will pay interest on that USD 50bn, albeit the interest rate has not been made public and is probably modest. This means that the FDIC will receive around USD 60.6bn to repay the Fed, along with an additional USD 15bn in cash and another USD 4bn in remaining First Republic assets, for a total of approximately USD 80bn. Given that First Republic owes the Fed about USD 93bn, the FDIC’s insurance fund will suffer a loss of about USD 13bn.
 
For the commercial loans and mortgages made by First Republic, the FDIC has agreed to cover 80% of the credit losses. A bank like JP Morgan would need to support a typical home loan with about 7% equity capital, according to their books. The loans become safer and require considerably less capital to get the same return when the FDIC agrees to a loss-sharing agreement. As a result, the return on equity on these mortgages will be significantly greater.
 
JP Morgan probably would have offered to pay less if the FDIC had not supplied these incentives to the agreement, and the FDIC would have declared greater damage to its insurance fund than the USD 13bn it had announced.
 
Has FDIC averted a collapse or is this just the tip of the iceberg?