JP Morgan to Acquire Deposits and Assets of First Republic Bank

Scott Peters
01 May, 2023
New York City

First Republic Bank dropped 34% to $2.30 after the Federal Deposit Insurance Corporation seized the ailing bank. 

JP Morgan agreed to acquire all deposits and a "substantial majority" of the seized bank after the U.S. government agency failed to convince rival banks to acquire the troubled lender. 

First Republic Bank’s 84 branches in eight states will reopen as branches of JPMorgan Chase Bank.  

First Republic marks the third bank failure of an American bank since March and the second-largest ever U.S. bank failure.  

Just months ago, eleven largest U.S. banks pledged $30 billion in deposits to shore up confidence in the San Francisco-based bank. 

However, the measure fell short and failed to stem deposit outflow over the next several weeks. The bank also had a high 68% of deposits that were uninsured, meaning they exceeded the threshold established by the FDIC. 

As of April 13, First Republic Bank had approximately $229.1 billion in total assets and $103.9 billion in total deposits.  

The acquisition includes approximately $173 billion of loans and $30 billion of securities and assumption of approximately $92 billion of deposits, including $30 billion of large bank deposits, which will be repaid post-close or eliminated in consolidation.  

FDIC will provide loss share agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion of five-year, fixed-rate term financing. 

The FDIC and JPMorgan Chase Bank also entered into a loss-share transaction on single family, residential and commercial loans it purchased of the former First Republic Bank and $50 billion of five-year fixed rate term financing. 

The FDIC as receiver and JPMorgan Chase Bank will share in the losses and potential recoveries on the loans covered by the loss–share agreement.

JP Morgan said it will recognize an upfront, one-time, after-tax gain of approximately $2.6 billion, which does not reflect the estimated restructuring cost of $2.0 billion of after-tax over the next 18 months.

The transaction is expected to be modestly EPS accretive and generate more than $500 million of incremental net income per year, not counting the cost and gains or losses linked to restructuring. 

JP Morgan Chase increased 4.4% to $144.30.