After being seized by the California Department of Financial Protection and Innovation, the assets of the troubled First Republic Bank will be taken over by JPMorgan.
After initial efforts to save First Republic Bank (FRB) failed, the American banking giant JPMorgan Chase is set to acquire its assets. On April 29, JPMorgan and several other banks made an offer to buy the assets of the troubled FRB.
On May 1, the California Department of Financial Protection and Innovation terminated FRB and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC then engaged into a purchase and assumption arrangement with JPMorgan.
JPMorgan will take over all of First Republic Bank’s assets, including uninsured deposits. The Federal Reserve Bank now has $229.1 billion in assets and $103.9 billion in deposits.
As part of the transaction, 84 First Republic Bank offices in eight states will reopen as JPMorgan Chase. All FRB depositors will become JPMorgan customers, with access to their total FDIC-insured deposits. Customers can continue to use the present branch’s banking services until they get a change notification from JPMorgan.
Aside from the asset transfer, the FDIC and JPMorgan also agreed on a loss-sharing agreement for residential and commercial loans acquired by the FRB. The FDIC, in its function as receiver, and JPMorgan will split the losses and any recovery on the loans covered by the loss-share agreement.
Trouble began to boil for FRB on April 26 when word of a government receivership broke. The bank’s stock dropped 20% in hours following the disclosure. The days following the news were even more tumultuous for the bank, which was eventually closed down by regulators.
FRB will follow Silicon Valley Bank and Signature Bank as the next U.S. bank to fail in 2023.