First Republic Reports First Quarter 2023 Results

Rhea-AI Summary

First Republic Bank (NYSE: FRC) announced its financial results for Q1 2023, reporting revenues of $1.2 billion, a decline of 13.4% year-over-year. The bank's net interest income was $923 million, down 19.4%, while net income was $269 million, decreasing by 32.9%. Diluted earnings per share fell by 38.5% to $1.23. Despite these declines, book value per share increased by 10.4% to $76.97. The net interest margin stood at 1.77%, down from 2.45% in the previous quarter. Total deposits dropped 35.5% to $104.5 billion, primarily attributed to recent industry upheavals. The bank received a $30 billion lifeline from major U.S. banks, stabilizing deposit activity. First Republic aims to restructure its balance sheet, reduce dependence on short-term borrowings, and enhance financial stability.

Positive

• Book value per share increased by 10.4% to $76.97.
• Wealth management assets rose by 5.6% to $289.5 billion.
• Total loans grew by 22.6% year-over-year to $173.3 billion.

Negative

• Revenues decreased by 13.4% year-over-year to $1.2 billion.
• Net interest income fell by 19.4% to $923 million.
• Net income dropped by 32.9% to $269 million.
• Diluted earnings per share decreased by 38.5% to $1.23.
• Deposits declined by 35.5% to $104.5 billion.

SAN FRANCISCO--(BUSINESS WIRE)-- First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2023.

Jim Herbert, Founder and Executive Chairman, and Mike Roffler, CEO and President of First Republic said, “With the stabilization of our deposit base and the strength of our credit quality and capital position, we continue to take steps to strengthen our business. We remain fully committed to serving our communities, and we are grateful for the ongoing support of our clients and colleagues.”

Financial Results

• Year-over-year:
  • Revenues were $1.2 billion, down 13.4%.
  • Net interest income was $923 million, down 19.4%. ⁽¹⁾
  • Net income was $269 million, down 32.9%.
  • Diluted earnings per share of $1.23, down 38.5%.
  • Book value per share was $76.97, up 10.4%.
• Net interest margin was 1.77%, compared to 2.45% for the prior quarter. ⁽¹⁾
• Efficiency ratio was 70.4%, compared to 63.9% for the prior quarter.

Capital Position and Credit Quality

• Tier 1 leverage ratio was 8.25%.
• Common Equity Tier 1 ratio was 9.32%.
• Nonperforming assets were 0.06% of total assets.
• Net recoveries were $0.2 million.

Wealth Management

• Year-over-year:
  • Wealth management assets were $289.5 billion, up 5.6%.
  • Wealth management revenues were $223 million, up 0.7%.

Balance Sheet

• Year-over-year:
  • Loans totaled $173.3 billion, up 22.6%.
  • Deposits were $104.5 billion, down 35.5%. ⁽²⁾
  • Borrowings were $106.7 billion, up $101.2 billion.

__________
(1)		Following the recent industry developments, net interest income and net interest margin were, and continue to be, materially impacted due to the unprecedented loss of deposits resulting in higher funding costs.
(2)		Deposits were down 40.8% from December 31, 2022. Deposits at March 31, 2023 included $30 billion of time deposits received from the large U.S. banks.

Neal Holland, Chief Financial Officer of First Republic said, “With the closure of several banks in March, we experienced unprecedented deposit outflows. We moved swiftly and leveraged our high-quality loan and securities portfolios to secure additional liquidity. We are working to restructure our balance sheet and reduce our expenses and short-term borrowings.”

Selected Financial Data and Ratios		As of or for the Quarter Ended March 31, 2023				As of or for the Quarter Ended December 31, 2022				As of or for the Quarter Ended March 31, 2022
($ in millions, except per share amounts)
Financial Results
Revenues		$	1,209			$	1,437			$	1,396
Net interest income		$	923			$	1,174			$	1,145
Net income		$	269			$	386			$	401
Diluted earnings per share		$	1.23			$	1.88			$	2.00
Book value per share		$	76.97			$	75.38			$	69.70
Net interest margin			1.77	%			2.45	%			2.68	%
Efficiency ratio (1)			70.4	%			63.9	%			62.0	%
Capital Position and Credit Quality
Tier 1 leverage ratio			8.25	%			8.51	%			8.70	%
Common Equity Tier 1 ratio			9.32	%			9.17	%			9.48	%
Nonperforming assets to total assets			0.06	%			0.05	%			0.08	%
Net loan charge-offs (recoveries)		$	(0.2	)		$	0.9			$	(0.3	)
Wealth Management
Total wealth management assets		$	289,464			$	271,244			$	274,195
Total wealth management revenues		$	223			$	210			$	221
Balance Sheet
Total loans		$	173,311			$	166,868			$	141,313
Total deposits (2)		$	104,474			$	176,437			$	162,060
Short-term borrowings		$	80,365			$	6,700			$	—
Long-term borrowings		$	26,304			$	8,579			$	5,478
__________
(1) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(2) As of March 31, 2023, included $30 billion of time deposits received from the large U.S. banks.

Recent Industry Events

The recent industry events, beginning in March 2023, have impacted the Bank’s funding sources.

As of March 9, 2023, total deposits were $173.5 billion, down 1.7% from year-end 2022. On March 10, 2023, following the highly public closure of a large regional bank, First Republic began experiencing unprecedented deposit outflows.

On March 16, 2023, First Republic received uninsured deposits totaling $30 billion from a group of America’s largest banks. This support for First Republic allowed the Bank to reduce its short-term borrowings. At that time, daily deposit outflows had slowed considerably.

Deposit activity began to stabilize beginning the week of March 27, 2023, and has remained stable through Friday, April 21, 2023. Total deposits were $102.7 billion as of April 21, 2023, down only 1.7% from March 31, 2023, primarily reflecting seasonal client tax payments that occur each April.

In response to the unprecedented deposit outflows, the Bank enhanced its financial position through access to additional liquidity from the Federal Reserve Bank, the Federal Home Loan Bank and JP Morgan Chase & Co. Total borrowings peaked on March 15, 2023, at $138.1 billion. At that time, the Bank had $34.0 billion of cash on its balance sheet. Total borrowings totaled $104.0 billion, and cash and cash equivalents totaled $10.0 billion as of April 21, 2023. This includes $25.5 billion of long-term advances with the Federal Home Loan Bank, compared to $7.3 billion as of December 31, 2022.

As a result of the recent events, the Bank is taking actions to strengthen its business and restructure its balance sheet. These actions include efforts to increase insured deposits, reduce borrowings from the Federal Reserve Bank, and decrease loan balances to correspond with the reduced reliance on uninsured deposits. Through these actions, the Bank intends to reduce the size of its balance sheet, reduce its reliance on short-term borrowings, and address the challenges it continues to face. Refer to the Forward-Looking Statements below.

The Bank is also taking steps to reduce expenses, including significant reductions to executive officer compensation, condensing corporate office space, and reducing non-essential projects and activities. The Bank also expects to reduce its workforce by approximately 20-25% in the second quarter.

In addition to these actions, the Bank is pursuing strategic options to expedite its progress while reinforcing its capital position.

Suspension of Dividends on Common Stock and Noncumulative Preferred Stock

In response to recent events, as announced on March 16, 2023, the Bank’s Board of Directors determined to suspend its common stock dividend. In addition, on April 6, 2023, the Bank’s Board of Directors determined to suspend payment of the quarterly cash dividend on each series of the Bank’s outstanding noncumulative perpetual preferred stock.

Asset Quality

Nonperforming assets were 6 basis points of total assets at March 31, 2023.

The provision for credit losses for the quarter was $16 million. The Bank had net loan recoveries of $0.2 million for the quarter.

Book Value

Book value per common share at March 31, 2023 was $76.97, up 2.1% from the prior quarter.

Capital Position

The Bank’s Tier 1 leverage ratio was 8.25% at March 31, 2023, compared to 8.51% in the prior quarter. The Common Equity Tier 1 ratio was 9.32% at March 31, 2023, compared to 9.17% in the prior quarter.

In February 2023, the Bank sold 2,875,000 new shares of common stock in an underwritten public offering, which added $397 million to common equity.

Balance Sheet

Loans

Loans totaled $173.3 billion at March 31, 2023, up 3.9% compared to the prior quarter. The increase was primarily due to increases in single family and multifamily loans, as well as higher capital call lines of credit outstanding due to increased utilization in March.

Investments

Total investment securities at March 31, 2023 were $34.8 billion, a 9.8% increase compared to the prior quarter. High-quality liquid assets, including eligible cash and unencumbered investment securities, totaled $14.4 billion at March 31, 2023, and represented 6.6% of quarterly average total assets.

Deposits

Total deposits declined $72.0 billion during the quarter, to $104.5 billion at March 31, 2023 reflecting outflows toward the middle of March 2023. At March 31, 2023, excluding the $30 billion of deposits made by the large U.S. banks, total deposits consisted of 58.4% in checking deposits, 15.0% in other liquid deposits, and 26.6% in CDs. At March 31, 2023, excluding the $30 billion of deposits made by the large U.S. banks, our estimated uninsured deposits totaled $19.8 billion, or 27% of total deposits. Insured deposits declined moderately during the quarter and have remained stable from March 31 through April 21. Refer to the Deposits table for additional details regarding our deposits.

Funding

Other sources of funding at March 31, 2023 included secured short-term borrowings from the Federal Reserve, securities sold under agreements to repurchase, and short-term and long-term FHLB advances, which totaled $105.9 billion.

Our unused, available borrowing capacity at the Federal Reserve Bank discount window and FHLB at March 31, 2023 was $12.4 billion and $1.7 billion, respectively. This available borrowing capacity is supported by pledged loans and investment securities. In addition, at March 31, 2023, cash and cash equivalents totaled $13.2 billion.

As of April 21, 2023, the Bank had $45.1 billion of cash and cash equivalents and unused available borrowing capacity, representing more than two times our estimated uninsured deposits, excluding the $30 billion of deposits made by the large U.S. banks.

Wealth Management

Total wealth management assets were $289.5 billion at March 31, 2023, up 6.7% compared to the prior quarter and included investment management assets of $118.9 billion, brokerage assets and money market mutual funds of $149.7 billion, and trust and custody assets of $20.9 billion.

Wealth management fees, which consist of investment management, brokerage and investment, insurance, trust and foreign exchange fee income, totaled $223 million for the quarter, up 6.7% compared to the prior quarter. Such revenues represented 18.5% of the Bank’s total revenues.

Following the recent industry events and as of April 21, 2023, wealth management assets from teams that have departed First Republic were responsible for less than 20% of total wealth management assets as of March 31, 2023. As of April 21, 2023, First Republic has retained nearly 90% of its total wealth professionals and anticipates retaining a portion of the wealth management assets associated with departing teams.

Income Statement and Key Ratios

Revenue

Total revenues were $1.2 billion for the quarter, down 15.9% compared to the prior quarter. The decrease was due to a decrease in net interest income, partially offset by an increase in noninterest income. Following the recent industry developments, net interest income and net interest margin were, and continue to be, materially impacted due to the unprecedented loss of deposits resulting in higher funding costs.

Net Interest Income

Net interest income was $923 million for the quarter, down 21.4% compared to the prior quarter. The decrease in net interest income was primarily due to substantially higher funding costs, which was partially offset by CD withdrawal penalties that reduced interest expense on deposits by approximately $57 million.

Net Interest Margin

The net interest margin decreased to 1.77% for the quarter, from 2.45% in the prior quarter. The decrease was primarily due to higher short-term borrowings, which was partially offset by the impact of CD withdrawal penalties that increased the net interest margin by 11 basis points.

Noninterest Income

Noninterest income was $286 million for the quarter, up 8.7% compared to the prior quarter. The increase was primarily driven by higher investment management fees.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $852 million for the quarter, down 7.4% compared to the prior quarter. The decrease was primarily due to a reversal of previously recognized share-based compensation expense related to performance-based stock awards of $107 million. The decrease was partially offset by higher FDIC assessment expense of $27 million and goodwill impairment of $25 million. The impaired goodwill consisted of all of the Commercial Banking operating segment’s goodwill. The Commercial Banking operating segment is one of the Bank’s two reportable operating segments as identified in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2022.

The efficiency ratio was 70.4% for the quarter, compared to 63.9% for the prior quarter.

Income Taxes

The Bank’s effective tax rate for the first quarter of 2023 was 21.2%, compared to 20.9% for the prior quarter.

Conference Call Details

First Republic Bank’s first quarter 2023 earnings conference call is scheduled for April 24, 2023 at 1:30 p.m. PT / 4:30 p.m. ET.

To access the conference call by telephone, please dial (877) 400-0505 and provide confirmation code 3782547 approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (856) 344-9221 and provide the same confirmation code.

To access the conference call online, please visit the Investor Relations section of First Republic’s website at ir.firstrepublic.com/events-calendar approximately 15 minutes prior to the start time (to allow time to register, download and install any necessary audio software).

For those unable to join on April 24, 2023, a replay will be available following, accessible in the Investor Relations section of First Republic Bank’s website at ir.firstrepublic.com/events-calendar.

The Bank’s press releases are available after release in the Newsroom and Investor Relations section of First Republic Bank’s website at firstrepublic.com.

About First Republic Bank

Founded in 1985, First Republic specializes in delivering exceptional, relationship-based service. First Republic provides a complete line of banking products, including residential, commercial and personal loans, deposit services, as well as private wealth management, including investment, brokerage, insurance, trust and foreign exchange services. Services are offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach and San Diego, California; Portland, Oregon; Boston, Massachusetts; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; Jackson, Wyoming; and Bellevue, Washington. First Republic is a constituent of the S&P 500 Index and KBW Nasdaq Bank Index. For more information, visit firstrepublic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements about our expectations, beliefs, projections, future plans and strategies, objectives, assumptions or anticipated events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimates,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases.

Examples of forward-looking statements and general risks include, among others: statements regarding our expectations with regard to our business, financial and operating results; forecasts of future economic conditions generally and in our markets in particular, including expectations relating to interest rates and inflation, and their impact on our net interest margin; and our plans and actions to strengthen our business following recent industry developments, such as restructuring our balance sheet, reducing our expenses, repaying our borrowings, reducing reliance on uninsured deposits and increasing our insured deposit base, decreasing loan balances and pursuing other strategic options; and descriptions of assumptions underlying or relating to any of the foregoing. The forward-looking statements contained herein reflect our current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances, including in the near term, that may cause our actual results to differ materially from historical results and those expressed in any forward-looking statement.

There can be no certainty that the Bank will be able to take actions to strengthen our business within a time frame that is acceptable to the market or our regulators. There can be no certainty as to the future of the Bank if we are not able to do so.

Some factors that could cause actual results to differ materially from historical results or expected outcomes include, but are not limited to: demand for our products and services, including deposit attrition or further significant deposit outflows; our ability to retain our banking and wealth management clients, including those associated with departing wealth management teams; our ability to access adequate sources of funding and liquidity, in particular through the Federal Reserve, the Federal Home Loan Bank and other sources where our borrowings are far above historic levels or where we had not previously borrowed; our ability to satisfy our obligations when they become due; our ability to reduce our funding costs and improve our asset and liability mix; difficulties encountered by, or the soundness of, other financial institutions; adverse publicity about First Republic or the banking industry more generally, including as a result of bank failures and concerns about capital and liquidity; changes in our credit ratings and the impact on the cost of, and the ability to access, additional funding and capital, and our ability to conduct bank operations (such as offering our products and services and acting as a loan servicer); inflation and actions by central banks to manage inflation; interest rate risk (sensitivity to increases or decreases to interest rate fluctuations) and credit risk; our ability to retain key managers and employees, including those in our wealth management business; the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements, which may result in costs, fees, penalties, business restrictions, reputational harm or other adverse consequences; any changes to liquidity and regulatory capital requirements applicable to us; legislative and regulatory actions affecting us, the banking industry or the financial services industry more generally; litigation, investigations and other legal actions or proceedings, and associated costs and liabilities; future Federal Deposit Insurance Corporation (“FDIC”) special assessments or changes to regular assessments; and other matters discussed in the risk factors included in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the FDIC. In addition, state and federal banking regulators, including the California Department of Financial Protection and Innovation and the FDIC, have broad authority to oversee the Bank and to close the Bank and commence a conservatorship or receivership under various circumstances specified in state and federal banking laws.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements, whether written or oral, that may be made from time to time, set forth in this press release to reflect new information, future events or otherwise.

Non-GAAP Financial Measures

Our management uses and believes that investors benefit from using certain non-GAAP measures of our financial performance, which include return on average tangible common shareholders’ equity and net interest income on a fully taxable-equivalent basis. Management believes that return on average tangible common shareholders’ equity is a useful additional measure to evaluate our performance and capital position without the impact of goodwill and other intangible assets and preferred stock. In addition, to facilitate relevant comparisons of net interest income from taxable and tax-exempt interest-earning assets, when calculating yields and net interest margin, we adjust interest income on tax-exempt securities and tax-advantaged loans so such amounts are fully equivalent to interest income on taxable sources. We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information that is not otherwise required by GAAP or other applicable requirements. These non-GAAP financial measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with GAAP. A reconciliation of the non-GAAP calculation of the financial measure to the most comparable GAAP financial measure is presented in relevant tables in this document.

Explanatory Note

Some amounts presented within this document may not recalculate due to rounding.

CONSOLIDATED STATEMENTS OF INCOME
		Quarter Ended March 31,						Quarter Ended December 31,
(in millions, except per share amounts)			2023			2022			2022
Interest income:
Loans		$	1,565		$	1,002		$	1,438
Investments			252			180			231
Cash and cash equivalents			74			5			24
Other			6			2			6
Total interest income			1,897			1,189			1,699
Interest expense:
Deposits			555			20			428
Borrowings			419			24			97
Total interest expense			974			44			525
Net interest income			923			1,145			1,174
Provision for credit losses			16			10			30
Net interest income after provision for credit losses			907			1,135			1,144
Noninterest income:
Investment management fees			159			165			141
Brokerage and investment fees			29			22			29
Insurance fees			3			4			8
Trust fees			8			7			7
Foreign exchange fee income			24			23			25
Deposit fees			8			6			7
Loan and related fees			10			9			10
Income from investments in life insurance			38			14			34
Other income, net			7			1			2
Total noninterest income			286			251			263
Noninterest expense:
Salaries and employee benefits			453			560			551
Information systems			115			107			123
Occupancy			77			69			73
Professional fees			30			23			27
Advertising and marketing			17			13			23
FDIC assessments			46			15			19
Goodwill impairment			25			—			—
Other expenses			89			79			103
Total noninterest expense			852			866			919
Income before provision for income taxes			341			520			488
Provision for income taxes			72			119			102
Net income			269			401			386
Dividends on preferred stock			40			37			40
Net income available to common shareholders		$	229		$	364		$	346
Basic earnings per common share		$	1.24		$	2.03		$	1.89
Diluted earnings per common share		$	1.23		$	2.00		$	1.88
Weighted average shares—basic			185			180			183
Weighted average shares—diluted			186			182			184

CONSOLIDATED BALANCE SHEETS
		As of
($ in millions)		March 31, 2023				December 31, 2022				March 31, 2022
ASSETS
Cash and cash equivalents		$	13,159			$	4,283			$	7,756
Debt securities available-for-sale			3,409				3,347				3,446
Debt securities held-to-maturity, net			31,389				28,348				26,831
Equity securities (fair value)			24				24				25
Loans:
Single family			101,109				98,768				81,833
Home equity lines of credit			2,946				2,775				2,597
Single family construction			1,307				1,217				1,041
Multifamily			22,731				21,588				16,953
Commercial real estate			11,067				10,830				8,753
Multifamily/commercial construction			2,382				2,139				1,955
Capital call lines of credit			11,486				9,988				10,970
Tax-exempt			3,770				3,713				3,656
Other business			5,549				5,092				4,313
Stock secured			4,387				4,553				3,651
Other secured			3,458				3,191				2,623
Unsecured			3,119				3,014				2,968
Total loans			173,311				166,868				141,313
Allowance for credit losses			(802	)			(784	)			(701	)
Loans, net			172,509				166,084				140,612
Investments in life insurance			4,039				3,435				2,682
Tax credit investments			1,393				1,383				1,231
Premises, equipment and leasehold improvements, net			488				483				467
Goodwill and other intangible assets			193				218				221
Other assets			6,341				5,034				3,850
Total Assets		$	232,944			$	212,639			$	187,121
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking		$	20,297			$	62,579			$	72,424
Interest-bearing checking			23,162				41,178				41,589
Money market checking			6,028				25,805				21,846
Money market savings and passbooks			5,159				21,663				19,159
Certificates of deposit (1)			49,828				25,212				7,042
Total Deposits			104,474				176,437				162,060
Short-term borrowings			80,365				6,700				—
Long-term FHLB advances			25,525				7,300				3,700
Senior notes			—				500				999
Subordinated notes			779				779				779
Other liabilities			3,811				3,477				3,429
Total Liabilities			214,954				195,193				170,967
Shareholders’ Equity:
Preferred stock			3,633				3,633				3,633
Common stock			2				2				2
Additional paid-in capital			6,585				6,256				5,763
Retained earnings			8,065				7,886				6,893
Accumulated other comprehensive loss			(295	)			(331	)			(137	)
Total Shareholders’ Equity			17,990				17,446				16,154
Total Liabilities and Shareholders’ Equity		$	232,944			$	212,639			$	187,121
__________
(1) As of March 31, 2023, included $30 billion of time deposits received from the large U.S. banks.

		Quarter Ended March 31,																				Quarter Ended December 31,
		2023										2022										2022
Average Balances, Yields and Rates		Average Balance			Interest Income/ Expense (1)				Yield/ Rates (2)			Average Balance			Interest Income/ Expense (1)				Yield/ Rates (2)			Average Balance			Interest Income/ Expense (1)				Yield/ Rates (2)
($ in millions)
Assets:
Interest-bearing deposits with banks		$	6,372		$	74			4.70	%		$	11,342		$	5			0.18	%		$	2,704		$	24			3.49	%
Investment securities:
U.S. Government-sponsored agency securities			165			1			2.05	%			117			0			1.37	%			165			1			2.05	%
Agency residential and commercial MBS			12,448			86			2.77	%			9,142			39			1.70	%			10,535			66			2.49	%
Other residential and commercial MBS			18			0			4.20	%			24			0			2.04	%			18			0			3.77	%
Tax-exempt municipal securities			17,707			147			3.33	%			15,595			151			3.87	%			17,697			175			3.97	%
Taxable municipal securities			1,773			14			3.14	%			1,715			13			2.97	%			1,774			13			3.13	%
Other investment securities			1,442			11			2.88	%			1,416			10			2.85	%			1,440			10			2.88	%
Total investment securities			33,553			259			3.08	%			28,009			213			3.04	%			31,629			265			3.37	%
Loans:
Residential real estate			103,672			823			3.18	%			82,416			567			2.75	%			100,645			772			3.07	%
Multifamily			21,905			203			3.70	%			16,281			140			3.45	%			20,856			192			3.60	%
Commercial real estate			10,945			114			4.15	%			8,633			82			3.77	%			10,401			107			4.02	%
Multifamily/commercial construction			2,278			34			6.02	%			1,929			22			4.62	%			2,105			31			5.77	%
Business			18,649			271			5.82	%			18,971			152			3.21	%			17,771			240			5.29	%
Other			10,817			125			4.62	%			9,058			47			2.06	%			10,479			103			3.86	%
Total loans			168,266			1,570			3.73	%			137,288			1,010			2.94	%			162,257			1,445			3.53	%
FHLB stock			517			6			4.88	%			115			2			7.60	%			353			6			7.27	%
Total interest-earning assets			208,708			1,909			3.66	%			176,754			1,230			2.78	%			196,943			1,740			3.51	%
Noninterest-earning cash			522										449										478
Goodwill and other intangibles			218										221										219
Other assets			9,135										7,142										8,464
Total noninterest-earning assets			9,875										7,812										9,161
Total Assets		$	218,583									$	184,566									$	206,104
Liabilities and Shareholders’ Equity:
Deposits:
Interest-bearing checking		$	35,218			79			0.91	%		$	40,400			1			0.01	%		$	39,252			55			0.55	%
Money market checking			22,408			155			2.80	%			21,659			5			0.09	%			24,084			134			2.20	%
Money market savings and passbooks			17,954			107			2.43	%			17,925			7			0.15	%			20,423			100			1.95	%
CDs			29,541			214			2.93	%			7,217			7			0.40	%			20,546			139			2.69	%
Total interest-bearing deposits (3)			105,121			555			2.14	%			87,201			20			0.09	%			104,305			428			1.63	%
Borrowings:
Federal Reserve Discount Window			16,302			195			4.85	%			—			—			—	%			—			—			—	%
Short-term FHLB advances			8,722			103			4.80	%			—			—			—	%			6,131			54			3.51	%
Federal Reserve Bank Term Funding Program			2,318			26			4.57	%			—			—			—	%			—			—			—	%
Federal funds purchased			844			11			4.59	%			—			—			—	%			419			5			4.00	%
Securities sold under agreements to repurchase			94			1			5.23	%			—			—			—	%			—			—			—	%
Long-term FHLB advances			9,944			73			2.99	%			3,700			9			0.95	%			6,004			26			1.79	%
Senior notes			239			1			2.10	%			998			6			2.42	%			500			3			2.15	%
Subordinated notes			779			9			4.68	%			779			9			4.68	%			779			9			4.68	%
Total borrowings			39,242			419			4.33	%			5,477			24			1.75	%			13,833			97			2.79	%
Total interest-bearing liabilities (4)			144,363			974			2.73	%			92,678			44			0.19	%			118,138			525			1.76	%
Noninterest-bearing checking			52,051										72,251										67,067
Other noninterest-bearing liabilities			4,373										3,613										3,609
Total noninterest-bearing liabilities			56,424										75,864										70,676
Preferred shareholders’ equity			3,633										3,633										3,633
Common shareholders’ equity			14,163										12,391										13,657
Total Liabilities and Shareholders’ Equity		$	218,583									$	184,566									$	206,104
Net interest spread (5)									0.93	%									2.59	%									1.74	%
Net interest income (fully taxable-equivalent basis) and net interest margin (6)					$	935			1.77	%					$	1,186			2.68	%					$	1,215			2.45	%
Reconciliation of tax-equivalent net interest income to net interest income: (7)
Municipal securities tax-equivalent adjustment						(7	)									(34	)									(34	)
Business loans tax-equivalent adjustment						(5	)									(7	)									(7	)
Net interest income					$	923									$	1,145									$	1,174
Supplemental information:
Total deposits (interest-bearing and noninterest-bearing)		$	157,172		$	555			1.43	%		$	159,452		$	20			0.05	%		$	171,372		$	428			0.99	%
Total deposits (interest-bearing and noninterest-bearing) and borrowings		$	196,414		$	974			2.01	%		$	164,929		$	44			0.11	%		$	185,205		$	525			1.12	%

__________
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1)		Interest income on tax-exempt securities and loans has been adjusted to the fully taxable-equivalent basis using the statutory federal income tax rate in effect for each respective period presented.
(2)		Yields/rates are annualized.
(3)		Refer to supplemental information in this table for average balances, interest expense and rates for total deposits (interest-bearing and noninterest-bearing).
(4)		Refer to supplemental information in this table for average balances, interest expense and rates for total deposits (interest-bearing and noninterest-bearing) and borrowings.
(5)		Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(6)		Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets.
(7)		Fully taxable-equivalent net interest income is considered a non-GAAP financial measure, and is reconciled to GAAP net interest income in this table.

Selected Financial Data and Ratios		Quarter Ended March 31,								Quarter Ended December 31,
			2023				2022				2022
($ in millions, except per share amounts)
Selected Financial Data and Ratios:
Return on average assets (1), (2)			0.50	%			0.88	%			0.74	%
Return on average common shareholders’ equity (1)			6.55	%			11.91	%			10.05	%
Return on average tangible common shareholders’ equity (1), (3)			6.65	%			12.12	%			10.21	%
Average equity to average assets			8.14	%			8.68	%			8.39	%
Dividends per common share		$	0.27			$	0.22			$	0.27
Dividend payout ratio (4)			21.9	%			11.0	%			14.4	%
Efficiency ratio (5)			70.4	%			62.0	%			63.9	%
Selected Asset Quality Ratios:
Net loan charge-offs (recoveries)		$	(0.2	)		$	(0.3	)		$	0.9
Net loan charge-offs (recoveries) to average total loans (1)			(0.00	) %			(0.00	) %			0.00	%
Selected Ratios (period-end):
Book value per common share		$	76.97			$	69.70			$	75.38

__________
(1)		Ratios are annualized.
(2)		Return on average assets is the ratio of net income to average assets.
(3)		Refer to “Return on Average Common Shareholders’ Equity and Return on Average Tangible Common Shareholders’ Equity” table in this document for a reconciliation of this non-GAAP financial measure to the most comparable GAAP measure.
(4)		As announced on March 16, 2023, the Bank’s Board of Directors determined to suspend its common stock dividend. In addition, on April 6, 2023, the Bank’s Board of Directors determined to suspend payment of the quarterly cash dividend on each series of the Bank’s outstanding noncumulative perpetual preferred stock.
(5)		Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.

Effective Tax Rate		Quarter Ended March 31,						Quarter Ended December 31,
		2023			2022			2022
Effective tax rate, prior to excess tax benefits—stock awards and other adjustments		19.5	%		23.4	%		21.9	%
Excess tax benefits—stock awards		0.2			(0.5	)		(0.3	)
Research and development tax credit adjustments		—			—			(0.7	)
Goodwill impairment		1.5			—			—
Effective tax rate		21.2	%		22.9	%		20.9	%

Provision (Reversal of Provision) for Credit Losses		Quarter Ended March 31,							Quarter Ended December 31,
			2023				2022			2022
($ in millions)
Debt securities held-to-maturity		$	—			$	1		$	—
Loans			18				7			25
Unfunded loan commitments			(2	)			2			5
Total provision		$	16			$	10		$	30

Loan Originations		Quarter Ended March 31,						Quarter Ended December 31,
			2023			2022			2022
($ in millions)
Single family		$	3,716		$	8,376		$	5,894
Home equity lines of credit			468			689			499
Single family construction			158			267			387
Multifamily			1,300			1,709			1,581
Commercial real estate			386			566			879
Multifamily/commercial construction			597			384			445
Capital call lines of credit			2,349			3,020			2,477
Tax-exempt			39			90			195
Other business			637			538			1,090
Stock secured			815			1,136			976
Other secured			684			666			839
Unsecured			289			369			360
Total loans originated		$	11,438		$	17,810		$	15,622

		As of March 31, 2023
Commercial Real Estate Portfolio		Unpaid Principal Balance (1)			Percent of Total Loans			LTV (2)			Average Loan Commitment Size
($ in millions)
Mixed Use		$	2,603		1.5	%		45	%		$	4.4
Retail		$	2,602		1.5	%		48	%		$	3.0
Office		$	2,522		1.5	%		45	%		$	3.8
Warehouse/Industrial		$	1,563		0.9	%		45	%		$	2.9
Hotel		$	623		0.4	%		46	%		$	8.8
Healthcare		$	274		0.2	%		49	%		$	3.1
Restaurant		$	155		0.1	%		48	%		$	1.4
Other		$	729		0.4	%		43	%		$	3.3
__________
(1) Represents the unpaid principal balance, excluding unamortized net deferred fees and costs.
(2) Weighted average loan-to-value (LTV) at origination.

		As of
Asset Quality Information		March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
($ in millions)
Nonperforming assets:
Nonaccrual loans		$	131			$	109			$	120			$	137			$	140
Other real estate owned			—				—				—				—				—
Total nonperforming assets		$	131			$	109			$	120			$	137			$	140
Nonaccrual loans to total loans			0.08	%			0.07	%			0.08	%			0.09	%			0.10	%
Nonperforming assets to total assets			0.06	%			0.05	%			0.06	%			0.07	%			0.08	%
Accruing loans 90 days or more past due		$	—			$	—			$	—			$	—			$	—
Allowance for loan credit losses to:
Total loans			0.46	%			0.47	%			0.48	%			0.48	%			0.50	%
Nonaccrual loans			614.1	%			720.5	%			635.3	%			531.2	%			498.8	%

Deposits		As of
		March 31, 2023				December 31, 2022
($ in millions)
Total deposits		$	104,474			$	176,437
Estimated insured deposits		$	54,651			$	57,615
Estimated uninsured deposits		$	49,823			$	118,822
Estimated insured deposits as % of total deposits			52	%			33	%
Estimated uninsured deposits as % of total deposits			48	%			67	%
Excluding $30 billion of time deposits received from the large U.S. banks:
Total deposits (1)		$	74,413				n/a
Estimated insured deposits (1)		$	54,648				n/a
Estimated uninsured deposits (1)		$	19,765				n/a
Estimated insured deposits as % of total deposits (1)			73	%			n/a
Estimated uninsured deposits as % of total deposits (1)			27	%			n/a
Deposit types as % of total deposits, excluding $30 billion of time deposits received from the large U.S. banks:
Checking (1)			58.4	%			58.8	%
Other liquid deposits (1)			15.0	%			26.9	%
CDs (1)			26.6	%			14.3	%
__________
Note: Uninsured and insured amounts in the table above are based on deposit principal balances.
(1) As of March 31, 2023, excludes $30 billion of time deposits received from the large U.S. banks.

		As of
Short-Term Borrowings		March 31, 2023			December 31, 2022
($ in millions)
Federal Reserve Discount Window		$	63,500		$	—
Federal Reserve Bank Term Funding Program			13,844			—
FHLB advances			2,575			6,700
Securities sold under agreements to repurchase			446			—
Total short-term borrowings		$	80,365		$	6,700

		As of
Loan Servicing Portfolio		March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
($ in millions)
Loans serviced for investors		$	3,273		$	3,459		$	3,632		$	3,919		$	4,298

Return on Average Common Shareholders’ Equity and Return on Average Tangible Common Shareholders’ Equity (1), (2)
		Quarter Ended March 31,								Quarter Ended December 31,
			2023				2022				2022
($ in millions)
Average common shareholders’ equity (a)		$	14,163			$	12,391			$	13,657
Less: Average goodwill and other intangible assets			(218	)			(221	)			(219	)
Average tangible common shareholders’ equity (b)		$	13,945			$	12,170			$	13,438
Net income available to common shareholders (c)		$	229			$	364			$	346
Return on average common shareholders’ equity (c) / (a)			6.55	%			11.91	%			10.05	%
Return on average tangible common shareholders’ equity (c) / (b)			6.65	%			12.12	%			10.21	%

__________
(1)		Return on average tangible common shareholders’ equity is considered a non-GAAP financial measure, and is reconciled to GAAP return on average common shareholders’ equity in this table.
(2)		Ratios are annualized.

Regulatory Capital Ratios and Components (1), (2)		As of
		March 31, 2023 (3)				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
($ in millions)
Capital Ratios:
Tier 1 leverage ratio (Tier 1 capital to average assets)			8.25	%			8.51	%			8.59	%			8.59	%			8.70	%
Common Equity Tier 1 capital to risk-weighted assets			9.32	%			9.17	%			9.28	%			9.15	%			9.48	%
Tier 1 capital to risk-weighted assets			11.67	%			11.56	%			11.76	%			11.75	%			12.25	%
Total capital to risk-weighted assets			12.71	%			12.60	%			12.81	%			12.82	%			13.37	%
Regulatory Capital:
Common Equity Tier 1 capital		$	14,408			$	13,920			$	13,586			$	12,791			$	12,418
Tier 1 capital		$	18,041			$	17,553			$	17,219			$	16,424			$	16,051
Total capital		$	19,637			$	19,118			$	18,755			$	17,924			$	17,521
Assets:
Average assets		$	218,783			$	206,371			$	200,486			$	191,202			$	184,410
Risk-weighted assets		$	154,544			$	151,777			$	146,444			$	139,811			$	131,024

__________
(1)		As defined by regulatory capital rules.
(2)		Beginning in 2020, ratios and amounts reflect the Bank's election to delay the estimated impact of the Current Expected Credit Losses (“CECL”) allowance methodology on its regulatory capital, average assets and risk-weighted assets over a five-year transition period ending December 31, 2024.
(3)		Ratios and amounts as of March 31, 2023 are preliminary.

		As of
Wealth Management Assets		March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
($ in millions)
First Republic Investment Management		$	118,902		$	112,176		$	100,125		$	100,204		$	108,771
Brokerage and investment:
Brokerage			144,565			130,844			119,299			116,979			128,129
Money market mutual funds			5,121			8,100			10,891			10,510			18,543
Total brokerage and investment			149,686			138,944			130,190			127,489			146,672
Trust Company:
Trust			17,031			16,318			15,270			14,994			14,344
Custody			3,845			3,806			3,943			4,099			4,408
Total Trust Company			20,876			20,124			19,213			19,093			18,752
Total Wealth Management Assets		$	289,464		$	271,244		$	249,528		$	246,786		$	274,195

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230424005719/en/

Investor and Media Relations Contacts

Email: InvestorRelations@firstrepublic.com

MediaRelations@firstrepublic.com

Phone: (415) 392-1400

Source: First Republic Bank

FAQ

What were First Republic Bank's Q1 2023 financial results?

In Q1 2023, First Republic Bank reported revenues of $1.2 billion, net income of $269 million, and diluted earnings per share of $1.23.

How much did First Republic Bank's deposits decline in Q1 2023?

Deposits at First Republic Bank declined by 35.5% year-over-year to $104.5 billion.

What actions is First Republic Bank taking to address financial challenges?

First Republic Bank is restructuring its balance sheet, reducing short-term borrowings, and enhancing financial stability following significant deposit outflows.

What is First Republic Bank's net interest margin for Q1 2023?

First Republic Bank's net interest margin for Q1 2023 was 1.77%, down from 2.45% in the previous quarter.

How did First Republic Bank's book value per share change in Q1 2023?

The book value per share for First Republic Bank increased by 10.4% to $76.97 in Q1 2023.