First Republic Bank

History

Foundation and first IPO

First Republic was founded in February 1985 by Jim Herbert, previously the founder and CEO of San Francisco Bancorp, which he sold to Atlantic Financial. First Republic began operations on July 1, 1985, as a California-chartered industrial loan company. It became a public company via an initial public offering on the Nasdaq in August 1986, selling stock at $10 a share. In 1993, First Republic acquired Silver State Thrift, a savings and loan association in Nevada.

In 1996, First Republic sought to shift to a banking charter to expand its offerings. It lobbied the Nevada Legislature to pass a law allowing conversion of a Nevada thrift into a Nevada state bank. The law passed in July 1997, shortly after First Republic completed a reverse merger of the larger California-chartered thrift into the Nevada-chartered Silver State Thrift subsidiary. After the passage of the law, the Nevada thrift became a state-chartered bank, First Republic Savings Bank.

Acquisitions

In 1998, First Republic acquired Trainer Worthman & Co., and in December 2001, it acquired Starbuck, Tisdale & Associates for $13 million in cash and stock. In January 2000, First Republic acquired an 18% interest in Froley, Revy Investment Company Inc., and in 2002, it purchased the investment firm for $17 million in cash and stock.

In 2004, it acquired the Private Client Asset Management division of Bay Isle Financial from Janus Capital Group.

In 2006, the bank acquired Bank of Walnut Creek.

Acquisition, sale, and second IPO

In September 2007, First Republic was acquired by Merrill Lynch for $1.8 billion in cash and stock.

In July 2010, Bank of America, which acquired Merrill Lynch and thereby acquired First Republic, sold First Republic Bank to a group of private investors including Colony Capital, General Atlantic, and chairman James Herbert and former COO Katherine August DeWilde, for approximately $1 billion. Thomas J. Barrack, Jr., the head of Colony, had been a board member prior to the Merrill Lynch deal and General Atlantic had been an early investor in the firm putting up about $5 million in 1987. An additional $800 million was provided by the investment consortium to meet new capital requirements established by U.S. regulators.

In December 2010, the bank once again became a public company via an initial public offering, raising $280.5 million.

Later acquisitions

In November 2012, First Republic acquired Luminous Capital, a wealth management firm with $5.5 billion in assets, for $125 million. The 2015 acquisition was followed by in 2015, First Republic acquired Constellation Wealth Partners for $115 million.

In December 2016, led by then chief investment officer Hafize Gaye Erkan, the bank acquired Gradifi, a then 2-year-old startup that works with companies to help employees pay off student loan debt that counted PricewaterhouseCoopers, Natixis Global Asset Management, and Penguin Random House as customers. In March 2018, the bank invested in CommonBond, a student loan financier, and in May of the same years, the company leased more office space at Rockefeller Center in New York City. 50 client advisors, who were part of First Republic's Luminous acquisition, with $17 billion of assets under management, left the company in 2019.

Collapse

During the March 2023 United States bank failures, Fitch Ratings and S&P Global Ratings downgraded First Republic's credit rating, citing "a high proportion of uninsured deposits" from wealthy customers who are more likely to move their money elsewhere and a loan-to-deposit ratio of 111%, meaning that it had lent out more money than it had in deposits from customers. To alleviate concerns of a possible bank run and support any withdrawals of deposits, on March 16, 2023, eleven American banks including JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, and Truist Financial deposited $30 billion with First Republic. Despite the deposits, shares of the company declined.

On March 19, S&P downgraded the bank's credit rating further into junk by three grades saying that it "may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing." On that day, the bank's capital shortfall was $13.5 billion, which The Wall Street Journal compared to the liquidity crisis of the Silicon Valley Bank (SVB) being a factor in its collapse. In its first quarterly earnings release since the crisis, the bank noted that its customers withdrew $104.5 billion in deposits during the turmoil, but noted that outflows had stabilized in April. The significance of those outflows was explained by the number of high-net-worth clients at the bank, whose assets exceeding $250,000 would not have been protected by the Federal Deposit Insurance Corporation (FDIC). First Republic noted it was "weighing strategic options" and aiming to reduce the size of its balance sheet.

On April 28, the bank announced plans to begin selling its bonds and securities at a loss to raise equity and also begin laying off people. Multiple advisor teams began to leave the bank as well. On that day, it was announced that the FDIC was considering seizing the bank, causing its stock price to plunge another 43% to $3.50. After the price fell another 42% in after-hours trading, the FDIC confirmed its imminent takeover of the bank. The next day, the FDIC approached various banks, including JPMorgan Chase, PNC and Bank of America, saying they had until April 30 to place bids for First Republic Bank. On May 1, the FDIC announced that First Republic had been closed by the California Department of Financial Protection and Innovation and its assets seized by the FDIC. JPMorgan Chase eventually won the auction, paying the FDIC $10.6 billion for nearly all of First Republic's assets.

Financials

Note: The financial data for the total revenue, net income, assets, and dividends per common share is sourced from the company's annual reports, earnings releases, and SEC Form 10-Ks from 2009 to 2022. Total revenue: Average Stock Price: Dividends per common share:

References

References

1. (1 May 2023). "JPMorgan Chase to buy most First Republic assets after bank fails". [[CNN]].
2. "First Republic Bank 2022 Form 10-K Annual Report". First Republic.
3. (1 May 2023). "First Republic Bank Is Seized by Regulators and Sold to JPMorgan Chase". [[The New York Times]].
4. (1 May 2023). "JPMorgan Chase Bank, National Association, Columbus, Ohio Assumes All the Deposits of First Republic Bank, San Francisco, California".
5. (December 30, 1993). "First Republic acquires Silver State thrift.".
6. "Nevada Bank Charter – Revisiting the Law". First Republic Bank.
7. (February 1, 2002). "First Republic buys LA firm for $17M". [[American City Business Journals]].
8. (June 30, 2004). "Janus to Sell Private Client Asset Management Division of Bay". [[Business Wire]].
9. (October 16, 2006). "First Republic Bank completes acquisition of Bank of Walnut Creek". [[American City Business Journals]].
10. (September 21, 2007). "Merrill Lynch and First Republic Bank Successfully Close Merger; Final Results of Election Regarding Merger Consideration Announced". [[Business Wire]].
11. McLaughlin, Tim. (January 29, 2007). "Merrill to buy First Republic for $1.8 bln". [[Reuters]].
12. Kouwe, Zachery. (October 22, 2009). "Bank of America Sells Republic Bank to Private Equity Firms". [[The New York Times]].
13. Kouwe, Zachery. (October 21, 2009). "Bank of America Sells First Republic Bank". [[The New York Times]].
14. [http://www.altassets.com/private-equity-news/article/nz18876.html General Atlantic, Colony Capital close First Republic Bank deal, July 21, 2010] {{webarchive. link. (August 12, 2011)
15. Baldwin, Clare. (December 9, 2010). "First Republic shares rise in IPO debut". [[Reuters]].
16. (November 2, 2012). "First Republic to Acquire Luminous Capital". [[PR Newswire]].
17. (June 17, 2015). "First Republic To Acquire Constellation Wealth Advisors". [[PR Newswire]].
18. (4 July 2018). "40 Under 40 - Hafize Gaye Erkan".
19. Obrien, Kelly J.. (December 12, 2016). "First Republic Bank scoops up Boston student debt startup in the Boston Business Journal". [[American City Business Journals]].
20. Kellard, Joseph. (December 12, 2016). "First Republic Buys Student-Debt Startup Gradifi in American Banker". [[American Banker]].
21. Stoller, Kristin. (March 21, 2018). "Student Lender CommonBond Raises $50M to Invest in Technology, Blockchain".
22. (May 29, 2018). "First Republic Bank Renews and Expands to 280K SF in Rock Center".
23. Marsh, Ann. (June 6, 2019). "$17B gone: The biggest-ever advisory team exit and the bank that lost it". [[American Banker]].
24. Gura, David. (March 16, 2023). "First Republic becomes the latest bank to be rescued, this time by its rivals". [[NPR]].
25. (March 16, 2023). "First Republic secures $30 billion rescue from large banks".
26. (March 10, 2023). "First Republic Hit by Silicon Valley Bank Failure". [[The Wall Street Journal]].
27. Rushe, Dominic. (March 16, 2023). "US banks launch $30bn rescue of First Republic to stem spiraling crisis". [[The Guardian]].
28. (March 17, 2023). "First Republic's $30 Billion Rescue Fails to Soothe Investor Fear". Bloomberg.
29. (March 19, 2023). "S&P cuts First Republic deeper into junk, says $30 billion infusion may not solve problems".
30. Ackerman, David Benoit and Andrew. (March 19, 2023). "First Republic Bank Looms Large for U.S. Regulators After Credit Suisse Sale". Wall Street Journal.
31. (April 24, 2023). "First Republic Lost $100 Billion in Deposits in Banking Panic".
32. (April 24, 2023). "First Republic Shares Plunge as Deposit Drop Renews Concern". Bloomberg.
33. (28 April 2023). "First Republic Will Be Seized by Regulators, Report Says". [[The San Francisco Standard]].
34. (28 April 2023). "Pre-Farewell to First Republic". [[The American Prospect]].
35. (April 28, 2023). "First Republic most likely headed for FDIC receivership, sources say; shares drop 40%".
36. (April 28, 2023). "Pressure on First Republic Mounts as Advisors Jump Ship".
37. (April 28, 2023). "First Republic's Troubles Reignite Fears of a Banking Crisis". [[The New York Times]].
38. "First Republic Bank Stock Quote (U.S.: NYSE)".
39. (April 28, 2023). "First Republic Bank to be taken over by FDIC: Report".
40. (April 28, 2023). "U.S. regulator set to take over First Republic".
41. (29 April 2023). "FDIC approaches big banks about buying First Republic".
42. (1 May 2023). "Regulators seize First Republic Bank, sell assets to JPMorgan".
43. (March 1, 2011). "FORM 10-K - FIRST REPUBLIC BANK (2009, 2010)".
44. (March 20, 2012). "FORM 10-K - FIRST REPUBLIC BANK (2011)".
45. (January 16, 2013). "FIRST REPUBLIC BANK REPORTS RECORD ANNUAL AND QUARTERLY EARNINGS - Press Release (2011, 2012)".
46. (February 26, 2016). "FORM 10-K - FIRST REPUBLIC BANK (2013, 2014, 2015)".
47. (January 13, 2017). "FIRST REPUBLIC REPORTS STRONG QUARTERLY AND ANNUAL RESULTS - Press Release (2016)".
48. (January 16, 2018). "FIRST REPUBLIC REPORTS STRONG 2017 RESULTS - Press Release (2017)".
49. (January 15, 2019). "FIRST REPUBLIC REPORTS STRONG 2018 RESULTS - Press Release (2018)".
50. (January 14, 2020). "FIRST REPUBLIC REPORTS STRONG 2019 RESULTS - Press Release (2019)".
51. (January 14, 2021). "FIRST REPUBLIC REPORTS 2020 RESULTS - Press Release (2020)".
52. (January 14, 2022). "FIRST REPUBLIC REPORTS 2021 RESULTS - Press Release (2021)".
53. (March 1, 2011). "FORM 10-K - FIRST REPUBLIC BANK (2009, 2010)".
54. (February 26, 2016). "FORM 10-K - FIRST REPUBLIC BANK (2011-2015)".
55. "2021 First Republic Bank Annual Report (2016-2021)".
56. "First Republic Bank - Stock Price History {{!}} FRC".
57. (February 28, 2018). "FORM 10-K - FIRST REPUBLIC BANK (2013-2017)".
58. (February 26, 2021). "FORM 10-K - FIRST REPUBLIC BANK (2018-2020)".
59. (February 28, 2022). "FORM 10-K - FIRST REPUBLIC BANK (2018-2020)".