Merrill Lynch to Acquire First Republic Bank for $1.8 billion

Merrill Lynch and First Republic Bank today announced that they have entered into a definitive agreement for Merrill Lynch to acquire all of the outstanding common shares of First Republic in exchange for cash and stock valued at a fixed price of $55.00 per First Republic share, subject to shareholder elections, for a total transaction value of $1.8 billion. The transaction is expected to be completed in the third quarter of 2007, pending necessary regulatory approvals and approval by First Republic shareholders.

First Republic, a private banking and wealth management firm focused on high net worth individuals and their businesses, will operate as a stand-alone brand within Merrill Lynch and will retain its name, its current management structure, its San Francisco headquarters and its client and community focus. First Republic will continue to operate its business separately as a new division of Merrill Lynch Bank & Trust Co., FSB. Jim Herbert and Katherine August-deWilde will continue their leadership roles, as Chairman and CEO and President and COO, respectively. Members of the current Board of Directors of First Republic will serve as the division’s Advisory Board and will continue to be chaired by the Bank’s current chairman, Roger Walther.

“We are very pleased that First Republic will join Merrill Lynch as a separately run business that will enable us to enhance the growth of our private client organization by leveraging First Republic’s very successful business model and strategy,” said Robert J. McCann, President of Merrill Lynch’s Global Private Client business. “First Republic will enable Merrill Lynch to accelerate its strategic objective of growing its high net worth business. Our goal is to provide First Republic with the resources and support to replicate the firm’s success in key markets across the country and to benefit from its deep banking expertise. We look forward to supporting First Republic’s further expansion with additional capital and a greater range of investment products, advice and services. While First Republic will operate as a separate division with its own brand identity and strategic goals, we expect our entire private client organization to benefit from its outstanding history, excellent credit and lending capabilities, and its experienced management team. First Republic’s strong culture of client focus and service sets the standard for excellence in the private banking industry and is consistent with Merrill Lynch’s mission and principles.”

First Republic, founded in 1985, is chartered in Nevada and headquartered in San Francisco. The firm provides highly personalized, relationship-based banking services, including private banking, private business banking, real estate lending, trust, brokerage and investment management, delivered through a team of financial professionals who are committed to extraordinary personalized service. First Republic has particular expertise in luxury home lending, and its offices are situated in markets with large concentrations of high net worth individuals.

First Republic is a high quality lender. On loans originated over the past 10 years, it has incurred less than one and a half basis points of cumulative net loan losses. Its high quality client service model has proven very successful. First Republic’s organic asset, deposit and net revenue growth rates have compounded at 18%, 20% and 22%, respectively, over the past 10 years. These growth rates testify to the success of its extraordinary client service culture.

“We are pleased with the value that this transaction will create for our shareholders. We are especially excited about all of the benefits that our partnership with Merrill Lynch will bring for our clients and the fact that First Republic will continue to operate as it has – with complete focus on delivering exceptional service to clients,” said Jim Herbert, the founding President, Chief Executive Officer and Director of First Republic. “With Merrill Lynch, we will be able to further grow First Republic and offer even more world-class wealth management products and services. For employees, our partnership with Merrill Lynch will provide more opportunities to serve their clients, offer additional professional growth opportunities and offer the chance to work with the best wealth management firm in the industry.”

First Republic has 43 offices located in key metropolitan markets across the United States: San Francisco, Silicon Valley, Los Angeles, Santa Barbara, Newport Beach, San Diego, Las Vegas, Portland, Seattle, Boston, Greenwich and New York City.

As of September 30, 2006, First Republic had assets of $10.7 billion, loans of $7.6 billion, deposits of $7.9 billion, and assets under management or administration of $16.4 billion. Net income available to common shareholders was $46.3 million for the nine months. Bank assets, assets under management and loans serviced totaled $31.8 billion at September 30, 2006.

First Republic shareholders will receive $55.00 per share at closing. Shareholders will have the ability to elect cash or stock, subject to proration, such that the aggregate consideration will be paid with 50% cash and 50% Merrill Lynch common stock. Merrill Lynch plans to repurchase in the open market the number of its shares equivalent to those it will issue in the transaction. The firm expects to realize synergies by eliminating certain of First Republic’s costs related to being a listed, publicly traded company.

Merrill Lynch also expects to realize benefits from the optimization of funding costs. First Republic and Merrill Lynch expect to enhance revenue and earnings growth by accelerating First Republic’s office expansion and by cross-offering products and services between the two organizations. Such enhancements will initially be partially offset by integration costs and retention expenses. Merrill Lynch expects the transaction to be modestly accretive to its earnings and EPS and neutral to its ROE by the end of 2008. First Republic’s financial results will be included in Merrill Lynch’s Global Private Client portion of its Global Wealth Management (GWM) segment.