Banking Mess: Regulators close First Republic Bank, JPMorgan buyer of $330B assets and deposits, FDIC on the hook for $13B

First Republic Bank, on the brink of collapse in the weeks after the Silicon Valley Bank crisis, has finally fallen over, but with a relatively quick resolution into its next chapter: today the FDIC announced that it was being closed by the the California Department of Financial Protection and Innovation, that the FDIC was appointed as receiver, and that the FDIC would be selling the assets to JPMorgan.

Its assets and deposits total just over $330 billion together.

Specifically, “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,” it said.

The FDIC also confirmed deposits will continue to be insured by the FDIC at an estimated cost of about $13 billion to its insurance fund.

The deal will cover assets of $229.1 billion and $103.9 billion in total deposits. JPMorgan is purchasing all assets and deposits, along with 84 offices in eight states, with all depositors of FRB now customers of JPMorgan Chase. The news comes after several days of speculation that the FRB would collapse, sending the stock into a death spiral . JPMorgan, along with PNC, were among the banks who submitted bids over the weekend. The FDIC called the process “highly competitive.”

The FDIC has had to face up to its own drama and criticism — some blame SVB’s collapse on U.S. regulators not acting quickly or decisively enough before it was too late — and so this was a relatively quick move on its part. It estimates that the cost to its Deposit Insurance Fund will be about $13 billion — the final cost will be determined when it ceases to be in receivership.

Alongside this deal 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,” it added, with 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.” It’s not clear what the value of that aspect of the deal.

https://techcrunch.com/2023/05/01/jpmorgan-chase-first-republic-bank/