Apr 29, 2023 - Economy

How FRB got here

black and white photo of an alarm in front of various rectangles and cutouts of money

Illustration: Tiffany Herring/Axios

First Republic Bank is uniquely and consistently praised by its customers — mainly wealthy individuals and businesses — but the San Francisco-based bank’s nearly 40 years of existence has been a bumpy ride.

Why it matters: The latest loop in the roller coaster that started nearly two months ago with the collapse of Silicon Valley Bank could soon end with a government takeover or sale.

Flashback: Founded in 1985 by Jim Herbert, who’d previously founded and sold another San Francisco bank, First Republic was initially a California-chartered industrial loan company.

  • It went public on the Nasdaq in 1986, raising $8.4 million. Since the '90s, it's made some acquisitions, including a Nevada-based thrift in 1993.
  • After it successfully lobbied the state to allow the conversion of thrifts into state-chartered banks, it reversed merged with its own subsidiary to become a full-fledged bank and expand its offerings.
  • In 1997, it adopted its signature tagline: “It’s a Privilege to Serve You.”

Later: It was sold to Merrill Lynch in 2007 for $1.8 billion in cash and stock.

  • Following the latter’s acquisition by Bank of America, it was sold to a group of private investors, including General Atlantic and Colony Capital in July 2010; in December of that year it went public for a second time, raising $280.5 million.

The big picture: First Republic’s recent troubles are largely owed to its similarities to SVB: Both are Bay Area-based regional institutions favored by the tech industry.

  • 57% of FRB's business loan portfolio last year went to venture capital and private equity firms; its push into business banking naturally followed its clients into the sectors employing them.
  • Nonprofits and schools, the second-largest category, only make up 22%.

By the numbers: At the end of 2022, First Republic was the 14-largest commercial bank in the country with $212.6 billion in assets — ahead of then-16th spot holder SVB.

  • Last year, First Republic brought in $5.9 billion in revenue, with $1.7 billion in profits.
  • Its wealth management division raked in $877 million in revenue for the year.

Between the lines: In 2019, the bank was rattled when almost 50 bankers from its acquisition of Luminous Capital left the company, taking $17 billion in assets under management with them.

  • The five wealth management advisers who led the exodus went on to form their own smaller shops again (instead of joining large rivals).
  • "If it were classed as a breakaway, which typically refers to brokers who bust out of their wirehouse firms, it would be the largest in history," wrote American Banker of the move.

Yes, but: The bank proved to be more resilient than it seemed. Its wealth management business, which the Luminous acquisition was intended to bolster, continued to grow, according to American Banker.

  • Its wealth management assets grew from $41 billion in 2013 (the year after the acquisition) to $140 billion by March 2019.

The bottom line: Markets are fickle things, and life — like a stock price that plunges by over 90% in a year — comes at you fast.

  • Barring a miracle, First Republic's eventful 40-year history appears headed toward an ending that's at least as dramatic as SVB's.
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