First Republic to Cut Staff After 40% Plunge in Deposits

Troubled regional lender First Republic Bank (FRC) announced that it will cut about a quarter of its staff to reduce expenses after deposits plunged by 40% in the first quarter of the year.

The San Francisco-based lender released its first-quarter earnings after the market close, reporting earnings per share of $1.24, which beat analysts’ expectations of about 85 cents. The bank fell short of forecasts for its deposits, which came in at $104.5 billion, much lower than the expected $136 billion, despite a $30 billion bailout by large American banks. Net income dropped almost 33% to $269 million.

In addition to cutting between 20% and 25% of its staff, management also said that reductions to executive compensation, office space, and non-essential projects would also help reduce expenses. Chief Financial Officer Neal Holland confirmed that in response to “unprecedented” outflows, the company leveraged its “high-quality loan and securities portfolios to secure additional liquidity.” This brought the company’s Tier 1 leverage ratio from 8.52% to 8.25% at the end of March. Non-performing assets were 6 basis points of the bank’s total assets.

The bank was caught up in the contagion from the collapse of Silicon Valley Bank. First Republic sought to reassure investors that it had access to “more than $70 billion” in unused liquidity from the Federal Reserve and JP Morgan Chase & Co. which followed by the rescue orchestrated by other banks. First Republic was also said to be considering its strategic options in March after S&P Global and Fitch Ratings cut their bond ratings for the firm to junk status.

Shares in the bank plunged 22% in after-hours trading after posting a 12% rally on Monday ahead of the earnings report. The stock is set to open on Tuesday with the price down more than 86% year-to-date.