The latest on JPMorgan Chase takeover of First Republic Bank

Stocks inched down Monday as investors digested JPMorgan Chase’s purchase of most of First Republic Bank’s assets.

Shares of JPMorgan Chase rose 2.1% after the bank acquired First Republic and said that the banking system is stable.

Regional bank shares slid. The SPDR S&P 500 Regional Bank exchange-traded fund, which tracks a range of mid-sized banks, fell 2.9%. Shares of PacWest Bancorp slipped 10.6%.

Shares of First Republic Bank remained halted from early Monday morning.

Meanwhile, the latest ISM manufacturing report revealed that manufacturing activity contracted for the sixth straight month in April.

The Federal Reserve begins its two-day monetary policy meeting Tuesday, which is expected to conclude with a quarter-point rate hike. Investors will be watching for clues on how the central bank will proceed with its inflation-fighting plan and whether the recent banking turmoil has altered Fed officials’ plans.

Also on deck are earnings reports from Advanced Micro Devices, Starbucks, Ford, Kraft Heinz and more later this week.

The Dow fell 47 points, or 0.1%.

The S&P 500 slipped 0.05%.

The Nasdaq Composite slid 0.1%.

As stocks settle after the trading day, levels might still change slightly.

The Federal Deposit Insurance Corporation’s fund used to back bank depositors’ money is estimated to have a balance of $92.7 billion after the collapse of First Republic Bank. That’s the lowest level since 2018.

The FDIC said Monday in a report that it is advocating for an increase in the deposit insurance limit for business payment accounts following the recent collapse of Silicon Valley Bank, Signature Bank and, on Monday, First Republic Bank. 

Currently, the FDIC insures up to $250,000 per depositor for each account ownership category. But the agency backed deposits exceeding that limit when SVB and Signature failed, in order to reduce the risk of further bank runs. It also provided temporary unlimited deposit insurance to non-interest bearing accounts in the wake of the Great Recession.

The agency’s proposal, outlined in a report it released Monday, did not specify what it thinks would be an appropriate increased level of deposit insurance for business payment accounts. 

The FDIC considered two other deposit insurance reforms: raising the insurance cap across all bank accounts, and extending unlimited deposit insurance to all accounts. It found that targeting business accounts for increased insurance was the best option since it has the largest “financial stability benefits relative to its costs.”

However, increasing deposit insurance poses a moral hazard since it could lead to banks taking on more risk with their depositors’ money without having to worry as much about a bank run. 

President Joe Biden speaks in the Rose Garden of the White House in Washington, DC, on May 1.

President Joe Biden said regulatory action taken on First Republican Bank Monday would “make sure that the banking system is safe and sound,” while calling on Congress to hold banks accountable and to raise the debt limit. 

Speaking at a small-business event in the Rose Garden Monday, the president began his remarks by saying he was “pleased to say that the regulators have taken action to facilitate the sale of First Republic Bank and ensure that all depositors are protected and the taxpayers are not on the hook.”  

“These actions are going to make sure that the banking system is safe and sound,” Biden said, “and that includes protecting small businesses across the country who need to make payroll for workers and their small businesses.” 

He added that “all depositors are being protected shareholders are losing their investments, and critically, taxpayers are not the ones that are on the hook.” 

Biden said that going forward, he was calling on Congress to “give regulators the tools, hold bank executives accountable,” and that he had called on regulators to “strengthen regulations and supervision of large and regional banks.” 

“We have to make sure that we’re not back in this position again,” Biden said, “and I think we’re well on our way to be able to make that assurance.” 

The issues in the banking sector came about because of “a small handful of banks that were poorly managed,” Citigroup CEO Jane Fraser told Bloomberg TV in an interview from the Milken Institute Global Conference in Los Angeles.

But, overall, “the US financial system is extremely strong,” she told Bloomberg.

Fraser noted the different roles that each size bank plays within the financial system, from global systemically important to smaller, community banks; but said that with around 4,500 banks, there will likely “be more consolidation in the banking sector.”

While Citigroup is anticipating a recession “at the back end of the year,” Fraser said the strength of the US consumer would mean the economy will recover pretty quickly.

However, she warned that if if the United States were to default on its debt obligations, the consequences would be “quite dire.” A debt ceiling crisis is “the last thing the world needs right now,” she said.

Sherrod Brown speaks during a Senate Banking, Housing and Urban Affairs Committee oversight hearing on Capitol Hill in Washington, DC, in 2022.

Sherrod Brown, chairman of the US Senate Committee on Banking, Housing, and Urban Affairs, said the collapse of First Republic underscores the need for stronger regulations on large banks.

“First Republic Bank’s risky behavior, unique business model, and management failures led to significant problems, and it’s clear we need stronger guardrails in place,” Brown said. “We must make large banks more resilient against failure so that we protect financial stability and ensure competition in the long run.” 

First Republic Bank was taken over by the Federal Deposit Insurance Corporation Monday, with most of its assets sold to JPMorgan Chase.

But for now, First Republic customers should keep banking at their regular branches.

“Customers of First Republic Bank should continue to use their existing branch until they receive notice from JPMorgan Bank, National Association, that it has completed systems changes to allow other JPMorgan Chase Bank, National Association, branches to process their accounts as well,” the FDIC said.

First Republic’s former customers will experience some changes as a result of the the takeover.

Since they effectively are becoming Chase customers, Chase will notify them if it plans to make any changes to their deposit rates on checking, savings and other accounts such as certificates of deposit.

Other terms of the accounts may also eventually change.

For instance, the FDIC said, “you may withdraw your funds from any transferred account without an early withdrawal penalty until you enter into a new deposit agreement with JP Morgan Chase Bank, N.A. as long as the deposits are not pledged as collateral for loans.”

People walk past a First Republic Bank in New York City on May 1.

Here’s where things stand for customers after First Republic Bank was taken over by the Federal Deposit Insurance Corporation Monday, with most of its assets sold to JPMorgan Chase.

Will I lose any money?

No. Chase is assuming all deposits of First Republic customers. What’s more, First Republic customers’ deposits will continue to be FDIC-insured.

FDIC insurance covers up to $250,000 per depositor for each account ownership category. That means some customers may be insured for more than $250,000: Each account type is covered separately, so if they had more than one type of deposit account, each one is insured. Also, if more than one person owns an account jointly, each owner is covered up to $250,000.

One quirk to note: If a First Republic customer already has Chase accounts, the transfer of their deposits to Chase will *not* count against their total balances at the bank initially.

Will I still have access to banking services?

First Republic customers will have many of the same banking conveniences that they had before the bank was taken over. 

“You may continue to use your checks and ATM/Debit card. Direct deposits like paychecks and Social Security benefits will continue as usual,” the FDIC said on its resource page for First Republic customers. 

What if I have a loan through First Republic?

The FDIC notes that anyone with a loan from the bank should continue making payments as usual. There will be no change in the terms of your loan.

How quickly can I access my money?

Immediately.

Silvergate. Silicon Valley Bank. Signature. Credit Suisse. And now, First Republic.

All of these banks have either failed or announced their liquidation in just the past two months, making investors and everyday customers uneasy.

But bankers and regulators agree: Despite the scary headlines, the system is, overall, sound.

“No crystal ball is perfect, but yes, I think the banking system is very stable,” said Jamie Dimon said on an investor call Monday, shortly after his bank, JPMorgan Chase, agreed to buy most of First Republic’s assets. “This part of the crisis is over.”

The reason it’s all happening now has to do with the Federal Reserve’s yearlong rate-hiking campaign to fight inflation. Interest rates are a blunt tool that often take months or years to show their effect, and it’s often hard to tell where the impact will be hardest.

In the case of banks, higher rates eroded the value of their investment portfolios and put a damper on the industries, such as tech, that they did business with.

In each bank’s case, a combination of factors — including management missteps and macroeconomic factors — collided to bring down the business.

No one knows what exactly comes next. But investors, consumers and the market at large are hoping Dimon is right about this chapter of the crisis coming to an end.

An exterior view of the First Republic Bank headquarters on March 13 in San Francisco.

First Republic Bank is poised to get kicked out of the broad-based S&P 500.

The bank’s market capitalization fell about $22 billion to $653.6 million after a mass outflow of deposits during the first quarter triggered a steep sell-off of its stock, and eventually First Republic Bank’s collapse and purchase of its assets by JPMorgan Chase.

The S&P 500 requires companies to have a total market cap of at least $12.7 billion.

Silicon Valley Bank, which collapsed last month, was replaced in the S&P 500 by medical device firm Insulet just days after the bank’s failure.

Signature Bank was replaced by soybean exporter Bunge Limited that same day.

Stocks were mixed Monday after JPMorgan Chase said early Monday morning that it is buying most of First Republic’s assets from the Federal Deposit Insurance Corporation.

JPMorgan Chase CEO Jamie Dimon reassured shareholders on a Monday call that the banking tumult has been contained, though he cautioned that the economy could still face headwinds ahead of it.

Shares of JPMorgan Chase rose 2.6% on Monday, as shares of regional banks also gained. Pacwest Bancorp ticked up 0.3% and PacWest Bancorp advanced about 0.4%.

First Republic’s stock trading was halted after the stock fell to about $2.30 a share. Shares of the embattled lender traded at around $121 a share at the beginning of this year.

Investors could get more clarity on the state of the economy, and how the recent banking tumult could complicate it, after the Federal Reserve announces its latest interest rate hike on Wednesday.

The central bank is expected to raise rates by a quarter point, and will likely field questions about the trajectory of its plan to fight inflation as well as about First Republic’s collapse.

Earnings season also continues this week, with companies including Starbucks, Apple, Advanced Micro Devices and Ford set to report.

The Dow rose 63 points, or 0.2%.

The S&P 500 slid 0.02%.

The Nasdaq Composite slipped 0.1%.

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing in 2022.

The banking sector remains stable despite the recent collapse of First Republic Bank, JPMorgan Chase CEO Jamie Dimon said Monday.

“No crystal ball is perfect, but yes, I think the banking system is very stable,” Dimon said on an investor call. “This part of the crisis is over.”

JPMorgan Chase has acquired “the substantial majority of assets” and assumed the deposits, insured and uninsured, of First Republic from the FDIC.

First Republic’s collapse is the second largest US bank to fail, and comes just over a month after the collapse of Silicon Valley Bank and Signature Bank set off concerns about the health of the financial sector.

But Dimon warned that while banking issues have been contained, the economy isn’t out of the woods.

“Down the road, rates going way up, real estate, recession — that’s a whole different issue. But for now, we should just take a deep breath,” Dimon said.

Treasury Secretary Janet Yellen speaks at Johns Hopkins University School of Advanced International Studies on April 20.

Treasury Secretary Janet Yellen and other US officials were in touch with regulators all week as First Republic neared collapse, a source familiar with the matter told CNN. 

Given the stakes in the banking crisis casting a shadow over the US economy, it stands to reason that Yellen and other Biden officials were involved in the First Republic situation. 

The source familiar with the matter argued to CNN that First Republic is an “outlier” in the regional bank sector, adding that first-quarter results show midsize and regional banks are “well-capitalized” and deposit flows have “stabilized.”

Still, the First Republic collapse shows the banking turmoil is not over. First Republic marks the third bank failure in the past seven weeks, following a period where no banks collapsed in either 2021 or 2022.

The JPMorgan deal to buy First Republic risks “creating political blow back” for the Biden administration by allowing America’s biggest bank to expand its size, according to Jaret Seiberg, analyst at TD Cowen Washington Research Group.  

“This is an extraordinary series of events,” Seiberg wrote in a note to clients on Monday, pointing out that top regulators have permitted “the country’s biggest bank to get even bigger.” 

Seiberg said this will likely be a “Democratic focus for months.”

People walk near a J.P.Morgan Chase & Co branch on April 14 in New York.

JPMorgan Chase is buying most assets of First Republic Bank after the nation’s second-largest bank failure ever, in a deal announced early Monday that protects the deposits of First Republic’s customers.

JPMorgan Chase said it had acquired “the substantial majority of assets” and assumed the deposits, insured and uninsured, of First Republic from the Federal Deposit Insurance Corporation, the independent government agency that insures deposits for bank customers.

“In carrying out this transaction, JPMorgan Chase is supporting the US financial system through its significant strength and execution capabilities,” the bank said in a statement.

The FDIC took control of the embattled First Republic and then immediately announced the sale. The failure will cost the FDIC about $13 billion. That money will be paid by the nation’s banks, which pay premiums to support the agency.

People pass the front of the New York Stock Exchange in New York on March 22.

US stocks were trading flat early Monday following the news that JPMorgan Chase had come to the rescue of First Republic, the second-largest bank to fail in US history.

Dow futures were trading up 0.01% at 7.23 a.m. ET, while S&P 500 futures ticked down 0.02%, and Nasdaq futures dipped 0.05%.

JPMorgan Chase said Monday that it had acquired “the substantial majority of assets” and assumed the deposits, insured and uninsured, of First Republic from the US Federal Deposit Insurance Corporation, the independent government agency that insures deposits for bank customers.

First Republic’s stock has plunged more than 97% since mid-March when two US regional lenders, Silicon Valley Bank and Signature Bank, collapsed, sending shockwaves through the global banking sector.

Regulators and investors have been nervously watching financial markets ever since for signs that more banks could follow suit.

A new joint effort by the government and the finance industry to prevent another teetering bank from triggering a wider crisis is underscoring US and international worries about the sector and producing another no-win political headache for the Biden administration.

The FDIC’s forced intervention in the sale of First Republic Bank is likely to fuel concerns about the overall health of the US banking sector. The run of banking crises has been partly caused by damage to banks – which had profited from years of low interest rates – from the Federal Reserve’s quick rate hikes to fight high inflation.

Challenges to the economy are already causing political reverberations for President Joe Biden, who launched his reelection bid last week arguing that he had engineered a strong exit from the Covid-19 storm for the economy, notwithstanding high inflation that caused significant pain for American families last year. Inflation has not yet fallen to low levels typical of recent decades, which has fueled an era of price stability.

The new concerns over the banking sector put the administration back in an unappealing position. During the previous round of banking disruption earlier this spring, administration officials strenuously denied that their interventions – designed to protect depositors rather than industry executives who made rash decisions – amounted to a bailout.

This position was a recognition of the political hangover left by massive government-funded rescues of the sector during the 2008 financial crisis, which helped nurture the Tea Party movement in the Republican Party and angered Americans amid a sudden escalation of unemployment.

But the charge that the administration is engaging in a 2008-style bailout for wealthy banking executives – even if it is not accurate – is an easy one for Biden’s political opponents to make, and is complicated for the White House and the Treasury Department to refute. At the same time, however, the likely political impact of a possible widespread banking crisis had First Republic simply been allowed to fail could have proven even more damaging to Americans generally and to the Biden administration, especially ahead of 2024.

People are reflected into a JPMorgan Chase & Co. window on April 14 in New York City.

JPMorgan Chase plans to pay the Federal Deposit Insurance Corporation $10.6 billion to acquire most of failed regional bank First Republic.

In a slide presentation detailing the deal, JPMorgan said it has agreed to acquire $173 billion of loans and $30 billion of securities from San Francisco-based First Republic.  

The FDIC has agreed to provide a $50 billion five-year fixed-rate term financing as part of the transaction, according to JPMorgan.  

Even though the First Republic seizure and takeover was not announced until early Monday, JPMorgan said the transaction has already closed and all regulatory approvals have been received. 

JPMorgan, the largest US bank, said it will not assume First Republic’s corporate debt or preferred stock.  

US officials are sweetening the deal for JPMorgan, in part by agreeing to limit the big bank’s downside. 

JPMorgan said the FDIC will provide loan share agreements on most acquired loans, including 80% loss coverage for seven years on single family residential mortgages. The FDIC has also agreed to 80% loss coverage for five years on commercial loans, including commercial real estate. 

For JPMorgan, the deal will increase its exposure to affluent Americans. First Republic catered to rich clients and has branches in Hollywood, Palm Beach and Greenwich, Connecticut.  

JPMorgan said the deal “increases penetration with US high net worth clients” and accelerates its wealth strategy.

Typically, in an FDIC takeover, the employees of the failed bank are kept on to help with the transition. Their salary and benefits are paid for by the FDIC during that time. “It is customary that we seek to retain these employees during the resolution process to ensure continued customer service and access to deposits,” a spokesperson said.

Since JPMorgan Chase has acquired First Republic, it will be the one deciding whether the banks’ employees stay on. 

A pedestrian walks by a First Republic bank on April 26 in San Francisco.

Deposits at First Republic will continue to be insured by the FDIC, and “customers do not need to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits,” the agency said in its statement Monday.

“As part of the transaction, First Republic Bank’s 84 offices in eight states will reopen as branches of JPMorgan Chase Bank, National Association, today during normal business hours,” it noted.

First Republic, which started operations in 1985 with a single San Francisco branch, is known for catering to wealthy clients in coastal states. It had assets of $229.1 billion as of April 13. As of the end of last year, it was the nation’s 14th-largest bank, according to a ranking by the Federal Reserve. JPMorgan Chase is the largest bank in the United States with total global assets of nearly $4 trillion as of March 31.

First Republic has branches in high-income communities such as Beverly Hills, Brentwood, Santa Monica and Napa Valley, California; in addition to San Francisco, Los Angeles and Silicon Valley. Outside of California, branches are in other high-income communities such as Palm Beach, Florida; Greenwich, Connecticut; Bellevue, Washington; and Jackson, Wyoming. It had about 7,200 employees as of the end of last year.

First Republic, which entered a death spiral six weeks ago and was seized by the Federal Deposit Insurance Corporation early Monday and taken over byJPMorgan Chase, is the third US lender to fail in two months — and the reason has a lot to do with its well-heeled client base.

The banking turmoil that started with Silicon Valley Bank in March set off a panic among depositors and investors, who fled regional bank stocks that had real and perceived similarities to SVB.

First Republic, only slightly larger than SVB and catering to a similarly wealthy coastal clientele, immediately had a target on its back.

Read more here.

The exterior of a First Republic bank office is seen on March 16 in San Francisco.

US Treasury officials are breathing a sigh of relief Monday after JPMorgan Chase agreed to buy most of First Republic Bank following the regional bank’s collapse.

“Treasury is encouraged that this institution was resolved with the least cost to the Deposit Insurance Fund, and in a manner that protected all depositors,” a Treasury spokesperson said in a statement to CNN.

Still, First Republic marks the second-largest bank failure in US history, topped only by the 2008 implosion of Washington Mutual. There have now been three major bank failures in the past seven weeks, an alarming development after no banks failed in either 2021 or 2022.

The Federal Deposit Insurance Corporation, the independent government agency that insures deposits for bank customers, estimates the First Republic collapse will cost its deposit insurance fund about $13 billion.

US officials stressed their confidence in the resilience of the banking industry.

“The banking system remains sound and resilient, and Americans should feel confident in the safety of their deposits and the ability of the banking system to fulfill its essential function of providing credit to businesses and families,” the Treasury spokesperson said.