JPM - JPMorgan Chase pays $10.6B to FDIC for First Republic Bank acquisition

2023-05-01 07:31:36 ET

JPMorgan Chase ( NYSE: JPM ) will pay $10.6B to the Federal Deposit Insurance Corp. for its acquisition of First Republic Bank ( NYSE: FRC ), the Wall Street Bank said Monday in slides posted on its website. Earlier, regulators took possession of FRC and the Wall Street bank agreed to acquire the struggling San Francisco-based bank, marking the third seizure of a regional bank by a regulator since early March.

In addition, JPMorgan ( JPM ) will repay $25B of deposits from large U.S. banks and eliminate a $5B deposit from JPM on consolidation. All regulatory approvals were received and the acquisition of First Republic ( FRC ) has closed, JPM said.

The acquisition of First Republic ( FRC ) complements its J.P. Morgan and Chase franchises, accelerating growth in U.S. wealth strategy and adding locations in affluent markets, JPMorgan ( JPM ) said. First Republic's top markets are San Francisco (with 32 branches), New York (13), Los Angeles (10), and Boston (5).

As part of the deal, the FDIC will provide a new $50B five-year fixed-rate term financing to JPMorgan ( JPM ).

For JPMorgan ( JPM ), the deal results in more than $500M of net income accretion, adds to its tangible book value per share, and has an internal rate of return of more than 20%, it said .

Under the agreement, the FDIC will provide loss-sharing agreements to most acquired loans. For single-family residential mortgages, JPM will get 80% loss coverage for seven years. For commercial loans, including CRE, it will get 80% loss coverage for five years.

Transaction assumptions include fair value marks on acquired loans of ~$22B, with average loan mark of 87%.

JPMorgan ( JPM ) will hold a conference call to discuss the acquisition at 8:30 AM ET.

More on First Republic and the Bank Crisis:

• First Republic stock swoon deepens on report FDIC takeover imminent
• When Preferred Equity Goes to Zero, Part 2
• A Look at First Republic Bank's Death Spiral

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