First Republic Bank (FRB), which was on the verge of collapse in the weeks following the Silicon Valley Bank crisis, is finally over, but with a relatively quick resolution in the next chapter: The Federal Deposit Insurance Corporation (FDIC) announced today that it has been closed by management. California Financial Protection and Innovation, that FDIC is designated as the recipient, and that FDIC will sell the assets to JPMorgan.
Its total assets and deposits are just over $330 billion.
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 deposits and substantially all assets of First Republic Bank.”
The FDIC also confirmed that confirmed deposits will continue to be insured by the FDIC at an estimated cost of approximately $13 billion to its insurance fund. The deal will cover assets of $229.1 billion and total deposits of $103.9 billion. JPMorgan purchases all assets and deposits, along with 84 offices in eight states, with all FRB depositors now JPMorgan Chase clients.
This news comes after several days of speculation that FRB is going to crash, sending the stock into a death spiral. JPMorgan, along with PNC, was among the banks that submitted bids over the weekend. The FDIC called the process “highly competitive.”
The FDIC has had to confront its own drama and criticism — some blame the collapse of the SVB on US regulators who didn’t act quickly or decisively before it was too late — and so this was a relatively quick move on its part. While the estimated cost of the Deposit Insurance Fund is around $13 billion, the final figure will be determined when it ceases to be in receivership.
Along with the deal, the FDIC, JPMorgan Chase Bank, and the National Association are also “entering a loss share transaction on family, residential, and business loans it purchased from the former First Republic bank.” . The FDIC is the recipient, while JPMorgan Chase and the National Association will “share the losses and potential recoveries on loans covered by a loss-sharing agreement.” It is not clear what the value of this aspect of the deal is.