First Republic Bank was seized by state regulators and sold to JPMorgan Chase on Monday after months of struggles, adding to the uncertainty surrounding the financial market.
The takeover of the San Francisco-based bank was made by regulators in California after it was found to be "conducting its business in an unsafe or unsound manner" and "being in a 'condition that … is unsafe or unsound' to transact banking business," the California Department of Financial Protection and Innovation said.
The seizure and sale of the bank is likely to have major ramifications on the financial markets. Here are three takeaways from the overnight developments regarding First Republic Bank.
With First Republic's assets, JPMorgan Chase gets bigger
With the announcement that JPMorgan had acquired First Republic Bank's assets on Monday, the largest lender in the country got larger.
According to the most recent data from the fourth quarter of 2022, JPMorgan Chase had $3.2 trillion in total assets and $2.01 trillion in total domestic deposits. The Federal Deposit Insurance Corporation says First Republic Bank had $229.1 billion in total assets and $103.9 billion in total deposits as of April 13, 2023.
Regulators have expressed hesitancy in allowing JPMorgan Chase to get larger, with JPMorgan Chase likely needing a regulatory waiver to purchase First Republic Bank. With the purchase of First Republic Bank, JPMorgan Chase will operate the 84 offices in eight states and hold the deposits of all depositors formerly with First Republic.
FDIC will share in some losses and gains with JPMorgan Chase
As part of the deal JPMorgan Chase made to acquire First Republic Bank's assets, the lender and the FDIC will "share in the losses and potential recoveries on the loans covered by the loss–share agreement." The agency says the deal will allow recoveries to be maximized by leaving them in the private sector.
The FDIC also said it estimates it will cost the Deposit Insurance Fund roughly $13 billion. This cost comes months after the failures of Silicon Valley and Signature banks cost the Deposit Insurance Fund $20 billion and $2.5 billion, respectively.
The fund is filled by assessments on banks insured by the FDIC, meaning that the bill for the bank failures will be footed by depositors throughout the banking system.
Will this be the end of recent banking troubles?
Amid the turmoil of the failures of several regional banks, including Silicon Valley Bank and Signature Bank, First Republic Bank was widely seen as one of the regional banks in danger of failing.
The San Francisco-based bank had seen nearly 71% of its value evaporate in mid-March, but the crisis was thought to be avoided after a group of banks announced a $30 billion rescue of the bank to stabilize the markets.
The rescue included uninsured deposits ranging from $1 billion to $5 billion from 11 different banks but ultimately was unable to prevent the bank from succumbing to failure.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Chairman and CEO of JPMorgan Chase Jamie Dimon said on an analyst call on Monday that the banking system is "stable" and regarding the liquidity problems for the banking industry that "this part of the crisis is over," according to Bloomberg.
After the news of JPMorgan's takeover of First Republic Bank, the large lender's stock was up nearly 4% in morning trading.