According to The Motley Fool, how the bank makes its money is pretty simple. It still accepts deposits, originates loans and does financial management. However, instead of building out its branch network, it opens branches in strategic locations to target affluent customers.
In fact, the bank only has 71 offices, but it has more than $46 billion in total assets.
First Republic's primary product is mortgages, according to The Motley Fool. Since the bank’s average customers are high-net worth individuals who often own businesses, these mortgages tend to have much lower risk.
The average loan-to-value (LTV) ratio of new single-family loans originated in the third quarter of 2014 was 60%. For many banks, that number exceeds 80%. Mortgages generated a total interest income of $378 million in the third quarter of 2014, which represented 81% of its total income, according to the bank's latest FDIC quarterly filing.
Since the financial crisis, First Republic Bank has dominated its competitors and has continually beaten the S&P 500 Indices by a solid 11%. So, what’s its secret sauce to success?