On Monday, it was announced that JPMorgan Chase Bank has acquired First Republic Bank from the Federal Deposit Insurance Corporation (FDIC), with the vast majority of its assets and assumed deposits and other liabilities.
As part of the purchase, JPMorgan Chase is assuming all deposits, insured and uninsured.
“Our government invited us and others to step forward, and we did,” said Jamie Dimon, chairman and chief executive of JPMorgan Chase. “Our financial strength, capabilities and business model allowed us to develop an offer to execute the transaction in a manner that minimized costs to the Deposit Insurance Fund.”
Dimon added that the acquisition is modestly beneficial to JPMorgan Chase overall, “is beneficial to shareholders, helps further advance our wealth strategy and is complementary to our existing franchise.”
Key elements of the transaction following the FDIC's competitive bidding process include the acquisition of the vast majority of First Republic Bank's assets, including approximately $173 billion in loans and approximately $30 billion in securities.
Also assuming approximately $92 billion in deposits, including $30 billion of large bank deposits, which will be repaid after closing or eliminated in consolidation.
The FDIC will provide loss-sharing agreements covering acquired single-family residential mortgage loans and commercial loans, as well as $50 billion in five-year, fixed-rate term financing.
It is worth noting that JPMorgan Chase will not assume First Republic's corporate debt or preferred stock.
While San Francisco-based First Republic Bank was closed Monday by the California Department of Financial Protection and Innovation, branches opened Monday, May 1, as usual, and customers continued to receive uninterrupted service, including digital and mobile banking capabilities. However, they now serve as just another JPMorgan Chase branch.
As a result of this transaction, JPMorgan Chase said in a statement that it expects to recognize a one-time upfront after-tax gain of approximately $2.6 billion, which does not reflect the approximately $2 billion of anticipated after-tax restructuring costs over the next 18 months.
The bank also expects the transaction to be modestly accretive to earnings per share and generate more than $500 million in incremental net income per year, not including approximately $2.6 billion in one-time after-tax gains or approximately $2 billion in after-tax restructuring costs expected over the course of 2023 and 2024.
The acquired First Republic businesses will be overseen by JPMorgan Chase's Community and Consumer Banking (CCB) co-CEOs Marianne Lake and Jennifer Piepszak.
“First Republic has built a strong reputation for serving customers with integrity and exceptional service,” Lake and Piepszak said. “We look forward to welcoming First Republic employees back. As always, we are committed to treating employees with respect, care and transparency.”
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