The drama surrounding First Republic Bank has ended. The bank was SEIZED by federal regulators this morning (05-01-2023) after it's stock lost 97% of its value in trading since last year. JP Morgan/CHASE has purchased the assets of the bank and all its branches will re-open as CHASE. Depositor money is safe up to $250,000.
Regulators took possession of First Republic>on Monday, resulting in the third failure of an American bank since March, after a last-ditch effort to persuade rival lenders to keep the ailing bank afloat failed.
JPMorgan Chase, already the largest U.S. bank by several measures, emerged as winner of the weekend auction for First Republic. It will get all of the ailing bank’s deposits and a “substantial majority of assets,” the New York-based bank said.
JPMorgan is getting about $92 billion in deposits in the deal, which includes the $30 billion that it and other large banks put into First Republic last month. The bank is taking on $173 billion in loans and $30 billion in securities as well.
The Federal Deposit Insurance Corporation agreed to share losses on mortgages and commercial loans that JPMorgan assumed in the transaction, and also provided it with a $50 billion credit line.
Since the sudden collapse of Silicon Valley Bank in March, attention has focused on First Republic as the weakest link in the U.S. banking system. Like SVB, which catered to the tech startup community, First Republic was also a California-based specialty lender of sorts. It focused on serving rich coastal Americans, enticing them with low-rate mortgages in exchange for leaving cash at the bank.
But that model unraveled in the wake of the SVB collapse, as First Republic clients withdrew more than $100 billion in deposits, the bank revealed in its earnings report April 24. Institutions with a high proportion of uninsured deposits like SVB and First Republic found themselves vulnerable because clients feared losing savings in a bank run.
Shares of First Republic had lost 97% as of Friday’s close.
