First Republic Bank (NYSE: FRC) reported Q1 EPS of $1.23, $0.26 better than the analyst estimate of $0.97. Revenue for the quarter came in at $1.2 billion versus the consensus estimate of $1.22 billion.

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.

For earnings history and earnings-related data on First Republic Bank (FRC) click here.