First Republic Bank seized, JPMorgan to acquire assets

JPMorgan Chase & Co. agreed to acquire First Republic Bank in a government-led deal for the failed lender, putting to rest one of the biggest troubled banks remaining after turmoil engulfed the industry in March.

The transaction, announced in the early morning hours of Monday after First Republic was seized by regulators, makes the biggest US bank even larger while minimizing the damage to the Federal Deposit Insurance Corp.’s guarantee fund. JPMorgan agreed to the takeover after private rescue efforts failed to fill a hole on the troubled lender’s balance sheet and customers yanked their deposits. 

First Republic was the second-biggest bank failure in US history, and the fourth regional lender to collapse since early March.

“This is getting near the end of it, and hopefully this helps stabilize everything,” JPMorgan chief executive officer Jamie Dimon said on a call with journalists on Monday. Regional banks that reported first-quarter results in recent weeks “actually had some pretty good results”, the CEO said. “The American banking system is extraordinarily sound.”

Nevertheless, bank lending will probably suffer for a time in the wake of the bank failures, Dimon said. 

JPMorgan acquired about $173 billion of First Republic’s loans, $30 billion of securities and $92 billion in deposits. JPMorgan and the FDIC agreed to share the burden of losses, as well as any recoveries, on the firm’s single-family and commercial loans, the agency said early Monday in a statement.

New York-based JPMorgan was the only bidder that offered to take the entire bank off the the FDIC’s hands in the cleanest way, according to two people familiar with the decision. That was more appealing for the agency than the competing bids, which proposed breaking up First Republic or would have required complex financial arrangements to fund its $100 billion of mortgages, said the people, who asked for anonymity to describe the private talks.