JPMorgan Chase successfully bought First Republic Bank after the troubled financial institution was briefly taken over by the Federal Deposit Insurance Corporation (FDIC) over the weekend.
The FDIC who took control of the bank in order from the California Department of Financial Protection and Innovation (DFPI) received bids from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank.
The DFPI took action pursuant to California Financial Code section 592, subdivisions (b) and (c), specifically “conducting its business in an unsafe or unsound manner” and being in a “condition that … is unsafe or unsound” to transact banking business.
According to a statement from JPMorgan Chase, they have purchased a “substantial amount of their assets and certain liabilities,” of First Republic Bank.
“Our government invited us and others to step up, and we did. 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,” JPMorgan Chase CEO Jamie Dimon said in a statement.
First Republic stock crashed so much last week that the New York Stock Exchange halted trading several dozen times. The U.S. government had to take over the failed bank and saw it sold in what it referred to as a competitive bidding process.
According to JPMorgan, First Republic’s 84 branches which are located in eight states will open as JPMorgan Chase Bank branches on Monday and depositors have full access to their money.
Though First Republic is the third and largest U.S. bank to fail this year, federal regulators still say it is not a sign of wider problems in the banking industry.
“Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families,” a U.S. Treasury spokesperson said.
“The system is very, very sound,” Dimon also said in support.
According to the FDIC, the cost of the acquisition is about $13 billion and it includes the “assumption of approximately $92 billion of deposits” and the “acquisition of the substantial majority of First Republic Bank’s assets, including approximately $173 billion of loans and approximately $30 billion of securities.”
As of April 13, 2023, First Republic Bank, based in San Francisco, had total assets of approximately $229.1 billion and total deposits of approximately $103.9 billion. Its deposits are federally insured by the FDIC subject to applicable limits.
