This morning, the California Department of Financial Protection and Innovation (DFPI) announced it had closed First Republic Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
The FDIC simultaneously announced that it had entered into a Purchase and Assumption Agreement (P&A Agreement) with JPMorgan Chase Bank, with all eighty-four First Republic Bank branches opening today as branches of JPMorgan Chase Bank.
As part of the P&A Agreement, JPMorgan Chase Bank assumed all of First Republic Bank’s approximately $92 billion of deposits and acquired substantially all of its assets, including approximately $173 billion of loans and approximately $30 billion of securities. It also assumed all Qualified Financial Contracts. It did not, however, assume First Republic Bank’s corporate debt or preferred stock.
The FDIC agreed to loss-share agreements on single family, residential, and commercial loans JPMorgan Chase Bank acquired; according to their investor presentation, the loss share agreements provide 80% loss coverage for five (for commercial loans) or seven (for single family mortgages) years. The FDIC will also provide $50 billion of five-year, fixed-rate term financing.
The FDIC announcement stated that the resolution of First Republic Bank involved a highly competitive bidding process and resulted in a transaction consistent with the least-cost requirements of the Federal Deposit Insurance Act. It estimated the cost to the Deposit Insurance Fund will be about $13 billion.
For additional information, please see:
Clients with questions should reach out to any of their regular contacts at Cleary Gottlieb or any of the partners or counsel listed on our website under Banking and Financial Institutions or Bankruptcy and Restructuring.
Additional Cleary Gottlieb content regarding SVB, Signature Bank and related developments can be found here.
Cleary Gottlieb is a trusted resource in the financial sector for clear and up-to-the-minute guidance on the evolving regulatory landscape. Our preeminent banking and bankruptcy and restructuring practices have been intimately involved advising the private sector and governments in times of crisis, including the 2008 financial crisis and in the federal government’s actions to stabilize the economy during the COVID pandemic. We have extensive experience advising banking institutions and their depositors, creditors, and investors through the FDIC resolution process.