JPMorgan Chase acquired San Francisco-based First Republic Bank this morning after the California Department of Financial Protection and Innovation seized the failed regional bank and appointed the FDIC as receiver.
JPMorgan Chase, which bid on the bank during a weekend auction, agreed to acquire $92 billion of deposits, $173 billion of loans and roughly $30 billion of securities.“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 FDIC stated.
The $229.1 billion First Republic Bank was the third U.S. bank to fail in less than two months and second-largest bank to collapse in U.S. history, trailing only the $307 million Washington Mutual in 2008. First Republic centered on serving affluent customers. Following the March failures of California-based Silicon Valley Bank and New York City-based Signature Bank, First Republic accessed $70 billion in unused liquidity through funding from the Federal Reserve, JPMorgan Chase and several other of the largest banks.
Late last month, First Republic revealed that customers withdrew $100 billion in the wake of the banks’ failures. The massive exodus of deposits forced the bank to heavily borrow from the Federal Reserve to maintain its business, which further pressured its margins due to a steep increase in funding costs.
The FDIC and JPMorgan Chase Bank are also entering into a loss-share transaction on single family, residential and commercial loans it purchased from the former First Republic Bank. The FDIC as receiver and JPMorgan Chase Bank will share in the losses and potential recoveries on the loans covered by the loss–share agreement. The loss–share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. In addition, JPMorgan Chase Bank will assume all Qualified Financial Contracts.
First Republic Bank’s 84 offices in eight states were expected to reopen as JPMorgan Chase branches today. “Our government invited us and others to step up, and we did,” said JPMorgan Chase CEO Jamie Dimon. “Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund.”