JP Morgan Takes Over First Republic Bank After Its Collapse

by Jeff Shaw

SAN FRANCISCO — JP Morgan Chase (NYSE: JPM) has acquired the substantial majority of assets and assumed the deposits and certain other liabilities of First Republic Bank from the Federal Deposit Insurance Corp (FDIC). As part of the purchase, JPMorgan Chase is assuming all deposits — insured and uninsured. The move comes after First Republic, a regional lender, saw deposits fall by 40 percent during the first quarter, worse than Wall Street analysts feared.

According to CNBC, San Francisco-based First Republic focused on serving rich coastal Americans, enticing them with low-rate mortgages in exchange for leaving cash at the bank. But in the wake of Silicon Valley Bank’s collapse, First Republic clients withdrew more than $100 billion in deposits, the bank revealed in its earnings report made public on April 24.

“Our government invited us and others to step up, and we did,” said Jamie Dimon, chairman and CEO of New York City-based JPMorgan Chase, in a press release issued this morning. “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.”

Dimon added, “This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”

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.

First Republic branches were set to open this morning as normal. Clients will continue to receive uninterrupted service, including digital and mobile banking capabilities, according to JP Morgan.

— Matt Valley

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