JPMorgan Chase acquires First Republic Bank after FDIC seizure
WASHINGTON, D.C., May 1, 2023 — First Republic Bank, San Francisco, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC is entering into a purchase and assumption agreement with JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all of the deposits and substantially all of the assets of First Republic Bank.
Earlier this year on March 12, Jim Herbert, Founder and Executive Chairman and Mike Roffler, CEO and President of First Republic Bank in a press release on the bank’s liquidity profile said, “First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks. As we have done since 1985, we operate with an emphasis on safety and stability at all times, while maintaining a well-diversified deposit base. First Republic continues to fund loans, process transactions and fully serve the needs of clients by delivering exceptional service.”
However, several weeks later on May 1, JPMorgan Chase announced it has acquired the substantial majority of assets and assumed the deposits and certain other liabilities of First Republic Bank from the FDIC. As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours. All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.
“Our government invited us and others to step up, and we did,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase. “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.”
Deposits will continue to be insured by the FDIC, and customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Chase Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well.
As of April 13, 2023, First Republic Bank had approximately $229.1 billion in total assets and $103.9 billion in total deposits. In addition to assuming all of the deposits, JPMorgan Chase Bank, National Association, agreed to purchase substantially all of First Republic Bank’s assets.
Key transaction elements following the FDIC’s competitive bidding process include:
- Acquisition of the substantial majority of First Republic Bank’s assets, including approximately $173 billion of loans and approximately $30 billion of securities
- Assumption of approximately $92 billion of deposits, including $30 billion of large bank deposits, which will be repaid post-close or eliminated in consolidation
- FDIC will provide loss share agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-rate term financing
- JPMorgan Chase is not assuming First Republic’s corporate debt or preferred stock
The acquired First Republic businesses will be overseen by JPMorgan Chase’s Consumer and Community Banking (CCB) Co-CEOs, Marianne Lake and Jennifer Piepszak.
“First Republic has built a strong reputation for serving clients with integrity and exceptional service,” said Lake and Piepszak. “We look forward to welcoming First Republic employees. As always, we are committed to treating employees with respect, care and transparency.”
The FDIC and JPMorgan Chase Bank, National Association, are also entering into a loss-share transaction on single family, residential and commercial loans it purchased of the former First Republic Bank. The FDIC as receiver and JPMorgan Chase Bank, National Association, 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. The transaction is also expected to minimize disruptions for loan customers. In addition, JPMorgan Chase Bank, National Association, will assume all Qualified Financial Contracts.
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.
As of March 31, 2023, JPMorgan Chase & Co. has $3.7 trillion in assets and $303 billion in stockholders’ equity. The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion. This is an estimate and the final cost will be determined when the FDIC terminates the receivership.
This is the third major U.S. bank within the last two months to collapse sparking speculation about the true state of the banking sector, especially those financial institutions with a large uninsured deposit base. Silicon Valley Bank collapsed on March 10, 2023, and Signature Bank failed two days and were both were taken over by the FDIC.
For the list of failed banks since October of 1, 2020, click here.
To protect depositors, we entered into an agreement with JP Morgan Chase Bank to purchase and assume all deposits and assets of First Republic Bank. Read more ➡️ https://t.co/8KCKgJ2ZWR. pic.twitter.com/FRrIZk5aBY
— FDIC (@FDICgov) May 1, 2023