JPMorgan Chase completes a takeover deal of First Republic Bank, acquiring its assets and deposits worth more than $330 billion. The San Francisco-based First Republic Bank has been closed by the California Department of Financial Protection and Innovation, and its operations have been transferred to the Federal Deposit Insurance Corporation (FDIC).
With the goal of protecting depositors, the FDIC has partnered with JPMorgan Chase Bank, National Association based in Columbus, Ohio, to purchase and assume the majority of First Republic’s assets and deposits. As per the FDIC’s statement, the bank’s deposits will still be insured by the organization, which will cost its insurance fund roughly $13 billion. The purchase will consist of $103.9 billion in total deposits and $229.1 billion in assets.
Under the purchase and assumption agreement, JPMorgan Chase Bank, National Association made a bid to acquire all of First Republic Bank‘s deposits. As part of the agreement, all 84 offices of First Republic Bank in eight states will open today as branches of JPMorgan Chase Bank, National Association, with regular business hours. All depositors of First Republic will become customers of JPMorgan Chase Bank, National Association and will have complete access to their deposits.
The FDIC will continue to insure the deposits up to the applicable limits, so customers of First Republic will not need to switch banks to maintain their deposit insurance coverage. Customers are advised to continue using their current branch until they are notified by JPMorgan Chase Bank, National Association that other branches are ready to process their accounts.
The F.R Bank had a total of $229.1 billion in assets and $103.9 billion in deposits as of April 13, 2023. As part of the agreement, JPMorgan Chase Bank, National Association will not only assume all deposits but also purchase most of the bank’s assets.
The FDIC and JPMorgan Chase Bank, National Association have entered into a loss-share agreement covering single-family, residential, and commercial loans obtained from First Republic, the failed bank. Under this agreement, JPMorgan Chase Bank, National Association and the FDIC, as the receiver, will share the losses and potential recoveries on the loans included in the deal.
The aim of the loss-share transaction is to maximize the recoveries of the assets by keeping them in the private sector and minimizing any disruption to loan customers. Moreover, JPMorgan Chase Bank, National Association will take on all Qualified Financial Contracts.
The resolution of First Republic was carried out through a highly competitive bidding process, with the transaction aligning with the Federal Deposit Insurance Act’s least-cost requirements. The FDIC has projected the Deposit Insurance Fund’s cost to be approximately $13 billion, though the final cost will be determined when the FDIC ends the receivership.
JPMorgan Chase Bank, the National Association’s recent acquisition of First Republic is a strategic move to expand its branch network and customer base, with plans to invest in and strengthen its presence in California and other important markets.
The closure of First Republic marks the third American bank failure since March, following the sudden collapse of Silicon Valley Bank, which served the tech startup community, and the closure of Ponce de Leon Federal Bank in Florida.
First Republic, a specialty lender based in California, targeted wealthy coastal Americans by offering low-rate mortgages in exchange for keeping cash with the bank. However, after the collapse of SVB, First Republic experienced over $100 billion in deposit withdrawals, causing its business model to unravel. Institutions with a high proportion of uninsured deposits, such as SVB and First Republic, were vulnerable to bank runs as clients feared losing their savings.
With assets of around $3.5 trillion and operations in over 60 countries, JPMorgan Chase Bank, National Association provides a diverse range of financial services to millions of customers, including consumers, small businesses, corporations, governments, and institutions.