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Business Combinations
 9 Months Ended
Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Business Combinations Business combinations
On May 1, 2023, JPMorgan Chase acquired certain assets and assumed certain liabilities of First Republic Bank (the "First Republic acquisition") from the Federal Deposit Insurance Corporation (“FDIC”), as receiver. The Firm believes that the First Republic acquisition is complementary to the Firm's existing franchises. The acquisition resulted in an estimated bargain purchase gain, which represents the excess of the estimated fair value of the net assets acquired above the purchase price.
The Firm has determined that this acquisition constitutes a business combination under U.S. GAAP. Accordingly, the initial recognition of the assets acquired and liabilities assumed were generally measured at their estimated fair values as of May 1, 2023. The determination of those fair values required management to make certain market-based assumptions about expected future cash flows, discount rates and other valuation inputs at the time of the acquisition. The Firm believes that the fair value estimates of the assets acquired and liabilities assumed provide a reasonable basis for determining the estimated bargain purchase gain.
The Firm and the FDIC have not yet completed the settlement process under which the purchase price, and the identification of the assets acquired and liabilities assumed, will be finalized. The finalization of this settlement process may impact the amount of the estimated bargain purchase gain. The purchase and assumption agreement entered into with the FDIC allows for final settlement to occur up to a year after the acquisition date.
In addition, the purchase price and the estimated bargain purchase gain could change pending management's finalization of its acquisition date fair value estimates for certain of the assets acquired and liabilities assumed (such as loans and commitments, intangible assets and leases), which may take place up to one year from the acquisition date, as permitted by U.S. GAAP.
The First Republic acquisition resulted in a preliminary estimated bargain purchase gain of $2.7 billion. The Firm continues to progress in the settlement process with the FDIC and refine its acquisition-date fair value estimates. As a result, during the three months ended September 30, 2023, adjustments were made to the fair value of the net assets acquired, increasing the estimated bargain purchase gain by $100 million to $2.8 billion for the nine months ended September 30, 2023.
In connection with the First Republic acquisition, the Firm and the FDIC entered into two shared-loss agreements with respect to certain loans and lending-related commitments (the "shared-loss assets"): the Commercial Shared-Loss Agreement ("CSLA") and the Single-Family Shared-Loss Agreement (“SFSLA”). The CSLA covers 80% of credit losses, on a pari passu basis, over 5 years with a subsequent 3-year recovery period for certain acquired commercial loans and other real estate exposure. The SFSLA covers 80% of credit losses, on a pari passu basis,
for 7 years for certain acquired loans secured by mortgages on real property or shares in cooperative property constituting a primary residence. The indemnification assets, which represent the fair value of the CSLA and SFSLA on the acquisition date, are reflected in the total assets acquired.
As part of the consideration paid, JPMorgan Chase issued a five-year, $50 billion secured note to the FDIC (the "Purchase Money Note"). The Purchase Money Note bears interest at a fixed rate of 3.4% and is secured by certain of the acquired loans. The Purchase Money Note is prepayable upon notice to the holder.
The Firm had placed a $5 billion deposit with First Republic Bank on March 16, 2023, as part of $30 billion of deposits provided by a consortium of large U.S. banks. The Firm's $5 billion deposit was effectively settled as part of the acquisition and the associated allowance for credit losses was released upon closing. The Firm subsequently repaid the remaining $25 billion of deposits to the consortium of banks, including accrued interest through the payment date on May 9, 2023.

The computation of the purchase price, the estimated fair values of the assets acquired and liabilities assumed as part of the First Republic acquisition and the related estimated bargain purchase gain are presented below, and reflect the adjustments made during the three months ended September 30, 2023 to the acquisition-date fair value of the net assets acquired.
Fair value purchase
price allocation as of
May 1, 2023
(in millions)
Purchase price consideration
Amounts paid/due to the FDIC, net of cash acquired(a)
$13,524 
Purchase Money Note (at fair value)48,848 
Settlement of First Republic deposit and other related party transactions(b)
5,447 
Contingent consideration - Shared-loss agreements15 
Purchase price consideration$67,834 
Assets
Securities$30,285 
Loans152,482 
Core deposit and customer relationship intangibles1,455 
Indemnification assets - Shared-loss agreements675 
Accounts receivable and other assets(c)
7,475 
Total assets acquired$192,372 
Liabilities
Deposits$87,572 
FHLB advances27,919 
Lending-related commitments2,589 
Accounts payable and other liabilities(c)
2,758 
Deferred tax liabilities888 
Total liabilities assumed$121,726 
Fair value of net assets acquired$70,646 
Estimated gain on acquisition, after income taxes$2,812 
(a)Includes $10.6 billion of cash paid to the FDIC at acquisition and $3.6 billion payable to the FDIC, less cash acquired of $680 million.
(b)Includes $447 million of securities financing transactions with First Republic Bank that were effectively settled on the acquisition date.
(c)Other assets include $1.2 billion in tax-oriented investments and $683 million of lease right-of-use assets. Other liabilities include the related tax-oriented investment liabilities of $669 million and lease liabilities of $748 million. Refer to Note 14 and Note 17 for additional information.
The issuance of the $50 billion Purchase Money Note, the effective settlement of the Firm's $5 billion deposit and $447 million of securities financing with First Republic Bank, and the $3.6 billion payable to the FDIC as part of the purchase price consideration are considered non-cash transactions.
The following describes the accounting policies and fair value methodologies generally used by the Firm for the following assets acquired and liabilities assumed: core deposit and customer relationship intangibles, shared-loss agreements and the related indemnification assets, Purchase Money Note, and FHLB advances.
Refer to JPMorgan Chase’s 2022 Form 10-K for a discussion of the Firm’s accounting policies and valuation methodologies for securities, loans, deposits, and lending-related commitments.
Core deposit and customer relationship intangibles
Core deposit and certain wealth management customer relationship intangibles were acquired as part of the First Republic acquisition. The core deposit intangible of $1.3 billion was valued by discounting estimated after-tax cost savings over the remaining useful life of the deposits using the favorable source of funds method. The after-tax cost savings were estimated based on the difference between the cost of maintaining the core deposit base relative to the cost of next best alternative funding sources available to market participants. The customer relationship intangibles of $180 million were valued by discounting estimated after-tax earnings over their remaining useful lives using the multi-period excess earnings method. Both intangible asset valuations utilized assumptions that the Firm believes a market participant would use to estimate fair values, such
as growth and attrition rates, projected fee income as well as related costs to service the relationships, and discount rates. The core deposit and customer relationship intangibles will be amortized over a projected period of future cash flows of approximately 7 years. As of September 30, 2023, the carrying values of the core deposit and customer relationship intangibles were $1.2 billion and $169 million, respectively, reflecting accumulated amortization of approximately $76 million and $11 million, respectively.
Indemnification assets - Shared-loss agreements
The indemnification assets represent forecasted recoveries from the FDIC associated with the shared-loss assets over the respective shared-loss recovery periods. The indemnification assets were recorded at fair value in other assets on the Consolidated balance sheets on the
acquisition date. The fair values of the indemnification assets were estimated based on the timing of the forecasted losses underlying the related allowance for credit losses. The subsequent quarterly remeasurement of the indemnification assets is based on changes in the amount and timing of forecasted losses in the allowance for credit losses associated with the shared-loss assets and is recorded in other income. Under certain circumstances, the Firm may be required to make a payment to the FDIC upon termination of the shared-loss agreements based on the level of actual losses and recoveries on the shared-loss assets. The estimated potential future payment is reflected as contingent consideration as part of the purchase price consideration.
Purchase Money Note and FHLB advances
The Purchase Money Note is recorded in long-term debt on the Consolidated balance sheets. The fair value of the Purchase Money Note was estimated based on a discounted cash flow methodology and incorporated estimated market discount rates.
The FHLB advances assumed in the acquisition are recorded in short-term borrowings and in long-term debt. The fair values of the FHLB advances were based on a discounted cash flow methodology and considered the observed FHLB advance issuance rates.
Loans
The following table presents the unpaid principal balance ("UPB") and estimated fair values of the loans acquired as of May 1, 2023, and reflects adjustments made during the three months ended September 30, 2023 to the acquisition-date fair value of the loans acquired.
May 1, 2023
(in millions)UPBFair value
Residential real estate$106,240 $92,053 
Auto and other3,093 2,032 
Total consumer109,333 94,085 
Secured by real estate37,117 33,602 
Commercial & industrial4,332 3,932 
Other22,599 20,863 
Total wholesale64,048 58,397 
Total loans $173,381 $152,482 
Unaudited pro forma condensed combined financial information
Included in the Firm's Consolidated statements of income are noninterest revenue, net interest income and net income contributed by First Republic of $761 million, $1.5 billion and $1.1 billion, respectively, for the three months ended September 30, 2023 and $3.9 billion, $2.4 billion and $3.5 billion, respectively, for the nine months ended September 30, 2023.
The following table presents certain unaudited pro forma financial information for the three and nine months ended September 30, 2023 and 2022 as if the First Republic acquisition had occurred on January 1, 2022, including recognition of the estimated bargain purchase gain of $2.8 billion and the provision for credit losses of $1.2 billion. Additional adjustments include the interest on the Purchase Money Note and the impact of amortizing and accreting certain estimated fair value adjustments related to intangible assets, loans and lending-related commitments.
The Firm expects to achieve operating cost savings and other business synergies resulting from the acquisition that are not reflected in the pro forma amounts. The pro forma information is not necessarily indicative of the historical results of operations had the acquisition occurred on January 1, 2022, nor is it indicative of the results of operations in future periods, particularly in light of recent changes in market and economic conditions.
Three months ended September 30,Nine months ended September 30,
(in millions)2023202220232022
Noninterest revenue$16,820 $15,655 $51,480 $51,857 
Net interest income22,726 18,648 66,808 49,618 
Net income12,902 10,354 39,500 29,533