First Republic Bank in San Francisco was closed early this morning by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. To protect depositors, the FDIC entered into a purchase and assumption agreement with JPMorgan Chase Bank to assume all deposits and a substantial majority of the assets of First Republic.
According to a press release from JPMC, it assumed $92 billion in deposits, including all uninsured deposits, and acquired $173 billion in loans and $30 billion of securities. To facilitate the transaction, the FDIC agreed to provide loss-share agreements covering First Republic’s single-family and commercial loan portfolios and fixed-rate term financing.
The FDIC said the resolution, which did not involve the invocation of the systemic risk exception, was the result of a competitive auction and resulted in a least-cost transaction. The agency’s preliminary estimate was a $13 billion loss to the Deposit Insurance Fund.
In a statement, ABA President and CEO Rob Nichols said that while the failure of any bank is regrettable, “today’s decision by federal and state regulators to close First Republic Bank and sell its deposits and assets through a competitive auction will bolster confidence in the nation’s banking system. This action highlights the depth of our industry and the orderly process in place to ensure that bank customers and the overall system are protected.”