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Late-Night Negotiating Frenzy Left First Republic in JPMorgan’s Control

Regulators had indicated that they planned to announce a winner by 8 p.m., before markets in Asia opened. PNC executives had spent much of the weekend at the bank’s Pittsburgh headquarters putting together its bid. Executives at Citizens, which is based in Providence, R.I., gathered in offices in Connecticut and Massachusetts.

But 8 p.m. rolled by with no word from the F.D.I.C. Several hours of silence followed.

For the three smaller banks, the deal would have been transformative, giving them a much bigger presence in wealthy places like the San Francisco Bay Area and New York City. PNC, which is the sixth-largest U.S. bank, would have bolstered its position to challenge the nation’s four large commercial lenders — JPMorgan, Bank of America, Citigroup and Wells Fargo.

Ultimately, JPMorgan not only offered more money than others and agreed to buy the vast majority of the bank, two people familiar with the process said. Regulators also were more inclined to accept the bank’s offer because JPMorgan was likely to have an easier time integrating First Republic’s branches into its business and managing the smaller bank’s loans and mortgages either by holding onto them or selling them, the two people said.

As the executives at the smaller banks waited for their phones to ring, the F.D.I.C. and its advisers continued to negotiate with Mr. Dimon and his team, who were seeking assurances that the government would safeguard JPMorgan against losses, according to one of the people.

At around 3 a.m., the F.D.I.C. announced that JPMorgan would acquire First Republic.

An F.D.I.C. spokesman declined to comment on other bidders. In its statement, the agency said, “The resolution of First Republic Bank involved a highly competitive bidding process and resulted in a transaction consistent with the least-cost requirements of the Federal Deposit Insurance Act.”

The announcement was widely praised in the financial industry. Robin Vince, the president and chief executive of Bank of New York Mellon, said in an interview that it felt “like a cloud has been lifted.”

Some financial analysts cautioned that the celebrations might be overdone.

Many banks still have hundreds of billions of dollars in unrealized losses on Treasury bonds and mortgage-backed securities purchased when interest rates were very low. Some of those bond investments are now worth much less because the Federal Reserve has sharply raised rates to bring down inflation.

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