First Republic Stock Falls After Earnings Show a 41% Drop in Deposits

Before the bank reported results, its shares soared 12% during Monday’s regular session to close at $16, but they were changing hands at $12.60, down 21% in after-hours trading. As of Monday’s close, the stock was down 87% so far this year, largely because of the crisis that hit regional banks in March.

First Republic said it had deposits of $104.5 billion at the end of the first quarter, a figure that included $30 billion of deposits received from large U.S. banks last month as a lifeline for First Republic, according to a company press release.

The San Francisco-based bank had $176.4 billion in total deposits at the end of the fourth quarter, which at the time made it the 12th largest bank in the U.S., according to the company’s annual report.

But a rough first quarter took its toll on First Republic. The bank ended the quarter with net income of $269 million, down 33% year over year. Revenue was $1.2 billion, down 13.4%. Deposit outflows were “unprecedented,” Neal Holland, chief financial officer of First Republic, said. “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.”

First Republic says the lifeline it received from large U.S. banks has helped it weather the storm. When deposit outflows exceed cash on hand, First Republic can access other liquidity sources such as Federal Home Loan Bank loans. But it’s a costly solution. The bank said secured short-term borrowings from the Federal Reserve, securities sold under agreements to repurchase, and short-term and long-term FHLB advances totaled $106 billion. First Republic said it has access to more liquidity, including cash and cash equivalents totaling $13.2 billion.

Total borrowings peaked on March 15 at $138.1 billion, according to the bank. Deposit outflows have slowed, according to the bank. Total deposits were $102.7 billion as of April 21, down 1.7% from the end of the first quarter.

Speaking during the company’s earnings call, CEO Mike Roffler said the bank’s deposit base has stabilized and First Republic will focus on rebuilding it. “Going forward, uninsured deposits will remain a much smaller portion of total deposits than in the past,” he said.

The earnings call lasted approximately 12 minutes, and the bank did not take questions from analysts.

It’s not just the bank’s deposit base that has been under pressure. The wealth management unit has seen advisors head for the exits since the regional banking crisis exploded in March. In recent weeks, First Republic has seen a dozen teams or solo advisors decamp for other companies.

The exodus continued on Monday, when an advisor team that oversaw $13 billion in assets left to join Cresset Asset Management, a private wealth management firm based in Chicago.

The full effects of the advisor departures did not show up in Monday’s earnings report. Wealth management assets were $289.5 billion at the end of the first quarter, up 5.6% year over year, according to First Republic. Roffler said on the earnings call that departing advisor teams represented less than 20% of total assets, and that First Republic anticipates retaining a portion of the money departing advisors managed.

“We have retained nearly 90% of wealth management professionals,” Roffler said.

This is breaking news. Read a preview of First Republic Bank’s earnings below and check back for more analysis soon. 

First Republic Bank

had a tumultuous first quarter. On Monday, the company reports earnings and the pressing question for investors is: How bad was the damage?

“It’s probably the most important earnings report in the history of the bank,” says Morningstar analyst Eric Compton.

Investors will be…