First Republic Bank in San Francisco, Calif., was closed by the California Department of Financial Protection and Innovation.
The Federal Deposit Insurance Corp., as receiver, entered into an agreement to sell all of the $229 billion-asset bank’s deposits to the $3.7 trillion-asset JPMorgan Chase Bank. The $30 billion of uninsured deposits that 11 banks placed at First Republic will be repaid post-close or eliminated in consolidation.
First Republic replaced Silicon Valley Bank as the nation’s second-biggest bank failure.
JPMorgan Chase will also buy “substantially all” of the failed bank’s assets, including 84 branches in eight states, $174 billion of loans and $30 billion of securities.
First Republic had $103.9 billion of deposits on April 13.
The FDIC and JPMorgan Chase entered into a loss-share arrangement for First Republic’s single-family, residential and commercial loans. The FDIC also agreed to provide $50 billion of five-year, fixed-rate term financing.
The FDIC estimated that the failure will cost to the Deposit Insurance Fund about $13 billion.
“Our government invited us and others to step up, and we did,” Jamie Dimon, JPMorgan Chase’s chairman and CEO, said in a press release.
“Our financial strength, capabilities and business model allowed us to develop a bid to execute the transaction in a way to minimize costs to the Deposit Insurance Fund,” he added. “This acquisition modestly benefits our company overall, it is accretive to shareholders, it helps further advance our wealth strategy, and it is complementary to our existing franchise.”
JPMorgan Chase said it will recognize an upfront, one-time gain of about $2.6 billion. It expects to incur about $2 billion of restructuring costs over the next 18 months.
The acquisition should be modestly accretive to earnings per share and generate more than $500 million of net income annually, excluding the one-time gain and restructuring expenses.
Marianne Lake and Jennifer Piepszak, co-CEOs of consumer and community banking, will oversee the First Republic businesses.