JPMorgan Buys First Republic, After Regulators Seize Beleaguered Bank

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First Republic Bank has been seized by the Federal Deposit Insurance Corp. (FDIC), which announced on May 1 that the beleaguered bank is being bought by JPMorgan Chase.

California financial regulators on May 1 ordered First Republic Bank closed, with the FDIC appointed as receiver.

“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,” the FDIC stated on May 1.

The purchase and assumption agreement will see the FDIC contribute an estimated $13 billion from its deposit insurance fund to sweeten the deal, which was hammered out late April 30 and early May 1 after several banks submitted last-minute bids.

The Epoch Times hasn’t been able to confirm other participants in the bidding, but the FDIC stated that JPMorgan’s offer—which includes the assumption of all customer deposits and substantially all of its assets—fits the bill.

“The resolution of First Republic Bank involved a highly competitive bidding process and resulted in a transaction consistent with the least-cost requirements of the Federal Deposit Insurance Act,” the FDIC stated.

This refers to the legal requirement for the FDIC to pick a form of “resolution”—or orderly liquidation of a failing bank—that results in the lowest possible cost to its deposit insurance fund and, indirectly, to customers of healthy banks that will eventually be encumbered by the cost of topping up the fund via a special assessment (or insurance premium) on banks.

The FDIC is also entering into a loss-share transaction with JPMorgan Chase on real estate loans purchased from First Republic, an arrangement meant to both minimize disruptions for loan customers and maximize recoveries.

“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,” the FDIC stated.

First Republic Bank had approximately $229.1 billion in total assets and $103.9 billion in total deposits as of April 13.

By Tom Ozimek

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