First Republic seized by regulators, sold to JPMorgan
First Republic Bank was seized by federal regulators early Monday morning and sold to JPMorgan Chase in a move that officials hope marks the end of banking’s nearly two-month crisis.
First Republic, which lost $100 billion in deposits after the failure of Silicon Valley Bank, was taken over by the government and all its deposits and most assets transferred to JPMorgan, according to a statement from the Federal Deposit Insurance Corp. at 3:30 a.m. today.
On a conference call, JPMorgan Chief Executive Jamie Dimon said the panic that overwhelmed Silicon Valley Bank, Signature Bank and First Republic Bank is done.
“This part of the crisis is over,” Dimon said.
But banks still face difficulties with higher interest rates and rising loan losses.
“That’s a whole different issue,” he said.
Although Dimon had said he wouldn’t rescue a stricken rival again after doing so twice in 2008 with the government-brokered acquisitions of Bear Stearns and Washington Mutual, his bank emerged from the auction for First Republic with an attractive deal. The FDIC agreed to cover $13 billion in First Republic losses and provide JPMorgan with $50 billion in financing. The government will cover 80% of loan losses for residential and commercial real estate loans.
The First Republic brand will be retired, Dimon said.
The deal is expected to add $500 million in annual earnings, a relatively modest amount considering the bank generated $42 billion in profit last year. JPMorgan acquired 84 First Republic branches, $173 billion worth of loans, $92 billion in deposits, and $30 billion in securities. The bank will record a $2.6 billion gain on the transaction, offset by $2 billion in restructuring costs over this year and next.
“Our government invited us and others to step up, and we did,” Dimon said in a statement.