First Republic Bank's (FRCB) first-quarter earnings results came in worse than expected. While the headline numbers beat analyst estimates for the quarter, which had been significantly revised downward, deposits came in worse than anticipated and there still don't seem to be a lot of viable options for the bank moving forward. But there was one silver lining in the report, which may be positive for the banking sector in general.

Looking at borrowings

First Republic's deposits came in worse than feared in the first quarter. Investors had known that the bank saw significant outflows during Q1, as First Republic got caught up in the chaos of the banking crisis, depositors pulled their funds, and investors sold the stock intensely. Still, the extent of the damage -- or whether or not First Republic had been able to regain some of those deposits -- was largely unknown.

People in a meeting looking at data on a tablet.

Image source: Getty Images.

In Q1, First Republic saw its total deposits decline by roughly $72 billion. But when you consider the fact that 11 of the top U.S. banks had injected $30 billion of deposits into the bank in an effort to help shore up liquidity, that number is actually more like $102 billion. Most of the deposits lost were core deposits, which means the bank had to replace these with higher-cost funding and borrowings.

At the end of March, First Republic had total short-term borrowings over $80 billion, and $63.5 billion of those were from the Federal Reserve's discount window. Nearly $14 billion were from the Fed's new Bank Term Funding Program (BTFP).

Data from the Fed showed that total Fed discount window borrowing was roughly $88 billion, meaning that First Republic constituted most of those borrowings. Total BTFP borrowings at the time were about $64.4 billion, so First Republic made up a healthy portion of these borrowings as well. Looking at Fed data for the week ending April 19, Fed discount window borrowing had shrunk to about $70 billion, while BTFP borrowing had risen to about $74 billion.

In its earnings report, First Republic said that deposits have stabilized but were still down slightly. So it's possible the bank still has all or most of the borrowings on its balance sheet, meaning the bank's borrowings may make up almost all of what is being lent through the Fed's discount window. However, since BTFP borrowing has increased, more banks using borrowings may have switched from the discount window to BTFP.

A good sign for the broader banking system

As Bob Elliott, the chief investment officer at Unlimited Funds, said on CNBC recently, this is not necessarily a good sign for First Republic. But it could be a plus for the banking system, because it suggests that fewer banks are using Fed borrowings than initially believed by the market.

Although more banks still need to report, bank earnings season so far has largely shown stabilization among banks and deposits. It also further supports the narrative that the banks that collapsed in March had very different business models.

Don't get me wrong -- banks are still going to face pressure on the funding side, as deposits continue to flow out of the banking system and as banks have to pay up for deposits. But this is now more of an earnings story and less about systemic risk.