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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

Commission File Number: 000-33461



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FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(Exact name of registrant as
specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 91-1971389                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                      |  |           
|----------------------------------------------------- |  | ----------
|111 Pine Street, 2nd Floor, San Francisco, California |  | 94111     
|(Address of principal executive offices)              |  | (Zip Code)

Registrants telephone number, including area code: (415) 392-1400



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Securities registered pursuant to Section 12(b) of the Act:

8.875% Noncumulative
Perpetual Series B Preferred Stock

7.25% Noncumulative Perpetual Series D Preferred Stock

Securities registered pursuant to Section 12(g) of the Act:

None



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated
filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



The number of shares outstanding of the registrants common stock, par value $0.01 per share, as of May 4, 2007 was 29,352,873 shares.



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##### Table of Contents

FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

TABLE OF CONTENTS



|         |  |                                                                                                 |  |   
|-------- |  | ----------------------------------------------------------------------------------------------- |  | --
|         |  | PART I  FINANCIAL INFORMATION                                                                  |  |   
|         |  |                                                                                                
|Item 1.  |  | Financial Statements (Unaudited):                                                               |  |   
|         |  |                                                                                                
|         |  | Balance Sheet at March 31, 2007 and December 31, 2006                                           |  | 3 
|         |  |                                                                                                
|         |  | Statement of Income for the Three Months Ended March 31, 2007 and 2006                          |  | 4 
|         |  |                                                                                                
|         |  | Statement of Changes in Stockholders Equity for the Three Months Ended March 31, 2007 and 2006 |  | 5 
|         |  |                                                                                                
|         |  | Statement of Cash Flows for the Three Months Ended March 31, 2007 and 2006                      |  | 6 
|         |  |                                                                                                
|         |  | Notes to Financial Statements                                                                   |  | 7 
|         |  |                                                                                                
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations           |  | 11
|         |  |                                                                                                
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                      |  | 15
|         |  |                                                                                                
|Item 4.  |  | Controls and Procedures                                                                         |  | 16
|         |  |                                                                                                
|         |  | PART II  OTHER INFORMATION                                                                     |  |   
|         |  |                                                                                                
|Item 1.  |  | Legal Proceedings                                                                               |  | 17
|         |  |                                                                                                
|Item 1A. |  | Risk Factors                                                                                    |  | 17
|         |  |                                                                                                
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                     |  | 17
|         |  |                                                                                                
|Item 3.  |  | Defaults Upon Senior Securities                                                                 |  | 17
|         |  |                                                                                                
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                             |  | 17
|         |  |                                                                                                
|Item 5.  |  | Other Information                                                                               |  | 17
|         |  |                                                                                                
|Item 6.  |  | Exhibits                                                                                        |  | 17
|         |  |                                                                                                
|         |  | SIGNATURES                                                                                      |  |   



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PART 1FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

The following interim
financial statements as of and for the three months ended March 31, 2007 are unaudited. However, the financial statements reflect all adjustments (which included only normal recurring adjustments) that are, in the opinion of management,
necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.

FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(A Majority Owned Subsidiary of First Republic Bank)

BALANCE SHEET

(Unaudited)



|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                      |  | March 31, 2007 |             |   | December 31,2006 |  
|ASSETS                                                                                                                                                                                |  |                |             |   |                  |   |             |  
|Cash and short-term investments on deposit with First Republic Bank                                                                                                                   |  | $              | 14,539,000  |   |                  | $ | 12,813,000  |  
|                                                                                                                                                                                      |  |               
|Single family mortgage loans                                                                                                                                                          |  |                | 290,239,000 |   |                  |   | 288,725,000 |  
|Multifamily mortgage loans                                                                                                                                                            |  |                | 34,127,000  |   |                  |   | 34,491,000  |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Total mortgage loans                                                                                                                                                                  |  |                | 324,366,000 |   |                  |   | 323,216,000 |  
|                                                                                                                                                                                      |  |               
|Less: Allowance for loan losses                                                                                                                                                       |  |                | (481,000    | ) |                  |   | (481,000    | )
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Mortgage loans, net                                                                                                                                                                   |  |                | 323,885,000 |   |                  |   | 322,735,000 |  
|                                                                                                                                                                                      |  |               
|Accrued interest receivable                                                                                                                                                           |  |                | 1,693,000   |   |                  |   | 1,683,000   |  
|Prepaid expenses                                                                                                                                                                      |  |                | 25,000      |   |                  |   | 2,000       |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Total Assets                                                                                                                                                                          |  | $              | 340,142,000 |   |                  | $ | 337,233,000 |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                  |  |                |             |   |                  |   |             |  
|Liabilities:                                                                                                                                                                          |  |                |             |   |                  |   |             |  
|Dividends payable on preferred stock                                                                                                                                                  |  | $              | 1,544,000   |   |                  | $ |            |  
|Payable to First Republic Bank (Note 3)                                                                                                                                               |  |                | 25,000      |   |                  |   | 25,000      |  
|Other payables                                                                                                                                                                        |  |                | 97,000      |   |                  |   | 86,000      |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Total liabilities                                                                                                                                                                     |  |                | 1,666,000   |   |                  |   | 111,000     |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Stockholders equity (Notes 4 and 5):                                                                                                                                                 |  |                |             |   |                  |   |             |  
|Preferred stock, $0.01 par value per share; 10,000,000 shares authorized:                                                                                                             |  |                |             |   |                  |   |             |  
|10.50% perpetual, exchangeable, noncumulative Series A preferred stock; $1,000 liquidation value per share; 55,000 shares authorized, issued
and outstanding                          |  |                | 55,000,000  |   |                  |   | 55,000,000  |  
|8.875% perpetual, exchangeable, noncumulative Series B preferred stock; $25 liquidation value per share; 1,840,000 shares authorized,
1,680,000 shares issued and outstanding         |  |                | 42,000,000  |   |                  |   | 42,000,000  |  
|5.70% perpetual, convertible, exchangeable, noncumulative Series C preferred stock; $1,000 liquidation value per share; 10,000 shares
authorized, 7,000 shares issued and outstanding |  |                | 7,000,000   |   |                  |   | 7,000,000   |  
|7.25% perpetual, exchangeable, noncumulative Series D preferred stock; $ 25 liquidation value per share; 2,400,000 shares authorized, issued
and outstanding                          |  |                | 60,000,000  |   |                  |   | 60,000,000  |  
|Common stock, $0.01 par value; 50,000,000 shares authorized, 29,352,873 shares issued and outstanding at March 31, 2007 and
December 31, 2006                                         |  |                | 294,000     |   |                  |   | 294,000     |  
|Additional paid-in capital                                                                                                                                                            |  |                | 173,028,000 |   |                  |   | 173,028,000 |  
|Retained earnings (dividends in excess of retained earnings)                                                                                                                          |  |                | 1,154,000   |   |                  |   | (200,000    | )
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Total stockholders equity                                                                                                                                                            |  |                | 338,476,000 |   |                  |   | 337,122,000 |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  
|Total Liabilities and Stockholders Equity                                                                                                                                            |  | $              | 340,142,000 |   |                  | $ | 337,233,000 |  
|                                                                                                                                                                                      |  |                |             |   |                  |   |             |  

See accompanying notes to financial statements.



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FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(A Majority Owned Subsidiary of First Republic Bank)

STATEMENT OF INCOME

(Unaudited)



|                                                                       |  |                             |           |      |   |          
|---------------------------------------------------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                                                                       |  | Three Months EndedMarch 31,
|                                                                       |  | 2007                        |           | 2006
|Interest income:                                                       |  |                             |           |      |   |          
|Interest on loans                                                      |  | $                           | 4,864,000 |      | $ | 4,350,000
|Interest on short-term investments on deposit with First Republic Bank |  |                             | 124,000   |      |   | 51,000   
|                                                                       |  |                             |           |      |   |          
|Total interest income                                                  |  |                             | 4,988,000 |      |   | 4,401,000
|                                                                       |  |                             |           |      |   |          
|Operating expense:                                                     |  |                             |           |      |   |          
|Advisory fees payable to First Republic Bank (Note 3)                  |  |                             | 25,000    |      |   | 25,000   
|General and administrative                                             |  |                             | 46,000    |      |   | 44,000   
|                                                                       |  |                             |           |      |   |          
|Total operating expense                                                |  |                             | 71,000    |      |   | 69,000   
|                                                                       |  |                             |           |      |   |          
|Net income                                                             |  |                             | 4,917,000 |      |   | 4,332,000
|                                                                       |  |                            
|Dividends on preferred stock (Note 6)                                  |  |                             | 3,563,000 |      |   | 3,563,000
|                                                                       |  |                             |           |      |   |          
|Net income available to common stockholders                            |  | $                           | 1,354,000 |      | $ | 769,000  
|                                                                       |  |                             |           |      |   |          

See accompanying notes to financial statements.



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FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(A Majority Owned Subsidiary of First Republic Bank)

STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY

(Unaudited)



|                                  |  |                 |             |             |   |                           |  |                                                          |             |  |       |            |   |  |   |             |  
|--------------------------------- |  | --------------- | ----------- | ----------- | - | ------------------------- |  | -------------------------------------------------------- | ----------- |  | ----- | ---------- | - |  | - | ----------- | -
|                                  |  | Preferred Stock |             | CommonStock |   | AdditionalPaid-in Capital |  | Retained Earnings(Dividends inExcessof RetainedEarnings) |             |  | Total |           
|Balance as of January 1, 2006     |  | $               | 164,000,000 |             | $ | 294,000                   |  | $                                                        | 168,824,000 |  | $     | (200,000   | ) |  | $ | 332,918,000 |  
|Net income                        |  |                 |            |             |   |                          |  |                                                          |            |  |       | 4,332,000  |   |  |   | 4,332,000   |  
|Dividends paid on preferred stock |  |                 |            |             |   |                          |  |                                                          |            |  |       | (3,563,000 | ) |  |   | (3,563,000  | )
|                                  |  |                 |             |             |   |                           |  |                                                          |             |  |       |            |   |  |   |             |  
|Balance as of March 31, 2006      |  | $               | 164,000,000 |             | $ | 294,000                   |  | $                                                        | 168,824,000 |  | $     | 569,000    |   |  | $ | 333,687,000 |  
|                                  |  |                 |             |             |   |                           |  |                                                          |             |  |       |            |   |  |   |             |  
|Balance as of January 1, 2007     |  | $               | 164,000,000 |             | $ | 294,000                   |  | $                                                        | 173,028,000 |  | $     | (200,000   | ) |  | $ | 337,122,000 |  
|Net income                        |  |                 |            |             |   |                          |  |                                                          |            |  |       | 4,917,000  |   |  |   | 4,917,000   |  
|Dividends paid on preferred stock |  |                 |            |             |   |                          |  |                                                          |            |  |       | (3,563,000 | ) |  |   | (3,563,000  | )
|                                  |  |                 |             |             |   |                           |  |                                                          |             |  |       |            |   |  |   |             |  
|Balance as of March 31, 2007      |  | $               | 164,000,000 |             | $ | 294,000                   |  | $                                                        | 173,028,000 |  | $     | 1,154,000  |   |  | $ | 338,476,000 |  
|                                  |  |                 |             |             |   |                           |  |                                                          |             |  |       |            |   |  |   |             |  

See accompanying notes to financial statements.



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FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(A Majority Owned Subsidiary of First Republic Bank)

STATEMENT OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                              |             |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                  |  | Three Months Ended March 31, |            
|                                                                                  |  | 2007                         |             |   | 2006 |  
|Operating activities:                                                             |  |                              |             |   |      |   |             |  
|Net income                                                                        |  | $                            | 4,917,000   |   |      | $ | 4,332,000   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |             |   |      |   |             |  
|Amortization of premium on loans                                                  |  |                              | 46,000      |   |      |   | 60,000      |  
|Increase in accrued interest receivable                                           |  |                              | (10,000     | ) |      |   | (94,000     | )
|Increase in prepaid expenses                                                      |  |                              | (23,000     | ) |      |   | (19,000     | )
|Increase in other payables                                                        |  |                              | 11,000      |   |      |   | 17,000      |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                              | 4,941,000   |   |      |   | 4,296,000   |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Investing activities:                                                             |  |                              |             |   |      |   |             |  
|Loans acquired from First Republic Bank                                           |  |                              | (22,693,000 | ) |      |   | (28,200,000 | )
|Principal payments on loans                                                       |  |                              | 21,497,000  |   |      |   | 12,762,000  |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash used for investing activities                                            |  |                              | (1,196,000  | ) |      |   | (15,438,000 | )
|                                                                                  |  |                              |             |   |      |   |             |  
|Financing activities:                                                             |  |                              |             |   |      |   |             |  
|Dividends paid on preferred stock                                                 |  |                              | (2,019,000  | ) |      |   | (2,019,000  | )
|                                                                                  |  |                              |             |   |      |   |             |  
|Net cash used for financing activities                                            |  |                              | (2,019,000  | ) |      |   | (2,019,000  | )
|                                                                                  |  |                              |             |   |      |   |             |  
|Increase (decrease) in cash and cash equivalents                                  |  |                              | 1,726,000   |   |      |   | (13,161,000 | )
|Cash and cash equivalents at beginning of year                                    |  |                              | 12,813,000  |   |      |   | 17,250,000  |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Cash and cash equivalents at end of period                                        |  | $                            | 14,539,000  |   |      | $ | 4,089,000   |  
|                                                                                  |  |                              |             |   |      |   |             |  
|Supplemental disclosure of cash flow information:                                 |  |                              |             |   |      |   |             |  
|Preferred stock dividends payable                                                 |  | $                            | 1,544,000   |   |      | $ | 1,544,000   |  

See accompanying notes to financial statements.



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FIRST REPUBLIC PREFERRED CAPITAL CORPORATION

(A Majority Owned Subsidiary of First Republic Bank)

NOTES TO FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

First Republic Preferred Capital Corporation (the Company) is a
Nevada corporation formed by First Republic Bank (the Bank) in April 1999 for the purpose of raising capital for the Bank. The Companys principal business is acquiring, holding, financing and managing assets secured by real estate
mortgages and other obligations secured by real property, as well as certain other qualifying real estate investment trust (REIT) assets (collectively, the Mortgage Assets). The Mortgage Assets presently held by the Company
are loans secured by single family and multifamily real estate properties (Mortgage Loans) that were acquired from the Bank. The Company expects that all, or substantially all, of its Mortgage Assets will continue to be Mortgage Loans
acquired from the Bank. The Company has elected to be taxed as a REIT and intends to make distributions to its stockholders such that the Company is relieved of substantially all income taxes relating to ordinary income under applicable tax
regulations. Accordingly, no provision for income taxes is included in the accompanying financial statements.

At March 31, 2007, the
Company has issued 29,352,873 shares of common stock, par value $0.01 per share. The Bank owns all of the common stock, except for 80 shares held by one of the Banks former employees. Earnings per share data is not presented, as the
Companys common stock is not publicly traded.

These interim financial statements are intended to be read in conjunction with the
Companys 2006 Annual Report on Form 10-K, Financial Statements and Notes thereto. Interim results should not be considered indicative of results to be expected for the full year.

The results of operations of the Company and the Bank are subject to various risks, including business, economic, legal and regulatory conditions and
factors. Additional information is included in Item 1A, Risk Factors, in the Companys Annual Report on Form 10-K for the year ended December 31, 2006 and in filings made subsequent to the filing of the 2006 Form 10-K.

Recent Development

On
January 29, 2007, the Bank announced that it had entered into a definitive agreement with Merrill Lynch & Co. Inc. (Merrill Lynch) pursuant to which Merrill Lynch agreed to acquire all of the Banks outstanding shares
of common stock in exchange for cash or stock valued at $55.00 per share, for a total consideration of approximately $1.8 billion. The transaction is expected to close during the third quarter of 2007, pending necessary regulatory approvals and
approval by the Banks stockholders. At the present time, Merrill Lynch and the Bank expect that the Company will become a subsidiary of Merrill Lynch Bank & Trust, FSB and that there will be no changes in the Companys Board of
Directors, material agreements or outstanding issues of preferred stock as a result of this proposed transaction.

Note 2. Summary of Significant
Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses
and disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Material estimates that are particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses.

Mortgage Loans

Mortgage Loans are carried at the principal amount outstanding, net of purchase discounts and premiums. Discounts or premiums on Mortgage Loans are accreted or amortized as yield adjustments over the contractual lives
of the loans using methods that approximate the interest method. The unaccreted discount or unamortized premium on a loan sold or paid in full is recognized in income at the time of sale or payoff.



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The Company has purchased Mortgage Loans from the Bank at the Banks carrying amount, which
generally has approximated the fair value of the loans purchased. If a significant difference were to exist between the Banks carrying amount and the fair value of loans at the date of purchase, the Company would record the difference as a
capital contribution by the Bank or a capital distribution to the Bank.

The Company recognizes interest income, net of servicing fees paid
to the Bank, in the month earned. The Company places a loan on nonaccrual status, and interest income is not recorded on the loan, when the loan becomes more than 90 days delinquent, except for a single family loan that is well secured and in the
process of collection, or at such earlier times as management determines that the ultimate collection of all contractually due principal or interest is unlikely. When a loan is placed on nonaccrual status, interest income may be recorded when cash
is received if the Companys recorded investment in such loan is deemed collectible. When, in managements judgment, the borrowers ability to make periodic interest and principal payments resumes, the loan is returned to accrual
status. The Company classifies a loan as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Allowance for Loan Losses

The Company maintains an
allowance for loan losses that can be reasonably anticipated based upon specific conditions at the time. The Company considers a number of factors, including the Companys and the Banks past loss experience, the Banks underwriting
policies, the amount of past due and nonperforming loans, legal requirements, recommendations or requirements of regulatory authorities, current economic conditions and other factors. If the Company were to determine that an additional provision is
required, the Company would provide for loan losses by charging current income.

Other Real Estate Owned

Real estate acquired through foreclosure is recorded at the lower of cost or fair value, less estimated costs to sell such real estate. The Company
records costs related to holding real estate as expenses when incurred. The Company has not owned any real estate since inception.

Statement of Cash
Flows

For the purpose of reporting cash flows, cash and cash equivalents include cash on hand and short-term investments on deposit
with the Bank. As a REIT making sufficient dividend distributions, the Company paid no income taxes for the three months ended March 31, 2007 or March 31, 2006.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which provides a definition of fair value, establishes a fair value hierarchy, emphasizes that fair value is a market-based
rather than entity-specific concept and expands quantitative and qualitative disclosures. SFAS No. 157 applies when other accounting pronouncements require fair value measurements and does not require any new fair value measurements. SFAS
No. 157 is effective for fiscal years and interim periods beginning after November 15, 2007. SFAS No. 157 should be applied prospectively as of the beginning of the fiscal year it becomes effective, with limited retrospective
application for certain financial instruments. Management is currently evaluating the impact of SFAS No. 157 on the Companys financial condition and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  including an
amendment to FASB Statement No. 115. SFAS No. 159 allows the Company to elect to measure certain financial assets and liabilities at fair value upon initial recognition or upon occurrence of an event that results in a new
basis of accounting. The fair value election, if made, shall be applied on an instrument by



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instrument basis and is irrevocable. Upon adoption of SFAS No. 159, a cumulative effect adjustment to the opening balance of retained earnings would be
made to record existing assets or liabilities at fair value. At each subsequent reporting date, changes in the fair value of those assets and liabilities would be recognized in earnings. SFAS No. 159 does not affect existing guidance for
fair value measurement and does not eliminate existing disclosure requirements relating to fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of SFAS
No. 159 on the Companys financial condition and results of operations.

Note 3. Related Party Transactions

The Companys related party transactions include the acquisition of Mortgage Loans from the Bank, loan servicing fees paid to the Bank and advisory
fees paid to the Bank. The following table presents the Companys related party transactions for the three months ended March 31, 2007 and 2006:



|                                       |  |                              |            |      |   |           
|-------------------------------------- |  | ---------------------------- | ---------- | ---- | - | ----------
|                                       |  | Three Months Ended March 31,
|                                       |  | 2007                         |            | 2006
|Mortgage Loans acquired from the Bank: |  |                              |            |      |   |           
|Principal                              |  | $                            | 22,666,000 |      | $ | 28,070,000
|Premium                                |  |                              | 27,000     |      |   | 130,000   
|                                       |  |                              |            |      |   |           
|Total Mortgage Loans acquired          |  | $                            | 22,693,000 |      | $ | 28,200,000
|                                       |  |                             
|Loan servicing fee expense             |  | $                            | 203,000    |      | $ | 195,000   
|Advisory fee expense                   |  | $                            | 25,000     |      | $ | 25,000    

Since inception, the Company has acquired all Mortgage Loans from the Bank at a price equal to the
Banks carrying value of the loans, which approximated the fair value of Mortgage Loans.

The Bank retains loan servicing fees on the
Companys Mortgage Loans under a loan purchase and servicing agreement pursuant to which the Bank performs, among other things, servicing of loans held by the Company in accordance with normal industry practice. In its capacity as servicer, the
Bank receives Mortgage Loan payments on behalf of the Company and holds the payments in custodial accounts at the Bank. The loan purchase and servicing agreement is renewable on an annual basis. Pursuant to the agreement, the Bank charges an annual
servicing fee of 0.25% of the gross average outstanding principal balances of Mortgage Loans that the Bank services. The Company records these loan servicing fees as a reduction of interest income.

The Company pays advisory fees to the Bank under an advisory agreement pursuant to which the Bank administers the day-to-day operations of the Company.
The Bank is responsible for: (i) monitoring the credit quality of the Mortgage Assets held by the Company; (ii) advising the Company with respect to the reinvestment of income from, and principal payments on, the Mortgage Assets, and with
respect to the acquisition, management, financing and disposition of the Mortgage Assets; (iii) monitoring the Companys compliance with the requirements necessary to qualify as a REIT and (iv) performing financial reporting and
internal control duties required for all public companies. The advisory agreement is renewable on an annual basis. The advisory fees were $100,000 per annum for 2007 and 2006, payable in equal quarterly installments. At March 31, 2007 and at
December 31, 2006, the Company had advisory fees payable to the Bank of $25,000.

At March 31, 2007 and at December 31,
2006, the Bank owned 25,410 shares of the Companys Series A preferred stock, with a liquidation preference value of $25.4 million. For the first three months of 2007 and for all of 2006, the Bank did not purchase any shares of the
Companys Series A preferred stock.

Note 4. Preferred Stock

At March 31, 2007, the Company was authorized to issue 10,000,000 shares of preferred stock, of which 4,142,000 shares were outstanding. The Company has issued and outstanding shares for each of the following
series of preferred stock, par value $0.01 per share at March 31, 2007 and December 31, 2006:



|                                                                         |  |   |            
|------------------------------------------------------------------------ |  | - | -----------
|Series A  55,000 shares authorized, issued and outstanding              |  | $ | 55,000,000 
|Series B  1,840,000 shares authorized, 1,680,000 issued and outstanding |  |   | 42,000,000 
|Series C  10,000 shares authorized, 7,000 issued and outstanding        |  |   | 7,000,000  
|Series D  2,400,000 shares authorized, issued and outstanding           |  |   | 60,000,000 
|                                                                         |  |   |            
|Total preferred stock                                                    |  | $ | 164,000,000
|                                                                         |  |   |            



9



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##### Table of Contents

In June 1999, the Company issued 55,000 Series A Preferred Shares. The Companys proceeds from this
issuance were $55 million; the Bank paid all expenses of the offering, including underwriting commissions and discounts. The Series A Preferred Shares are not redeemable prior to June 1, 2009. Holders of the Series A Preferred Shares are
entitled to receive, if authorized and declared by the Board of Directors of the Company, noncumulative dividends at a rate of 10.5% per annum, or $105 per annum per share. Dividends on the Series A Preferred Shares, if authorized and declared,
are payable semiannually in arrears on June 30 and December 30 of each year.

In June 2001, the Company issued 7,000 Series C
Preferred Shares. The Companys proceeds from this issuance were $7 million; the Bank paid all expenses of the offering, including underwriting commissions and discounts. The Series C Preferred Shares are redeemable on or after June 16,
2007; the Company currently expects that the Series C Preferred Shares will be redeemed prior to June 30, 2007. The Series C Preferred Shares are convertible into common stock of the Bank at a price of $20.38 per share. The single holder of the
Series C Preferred Shares is entitled to receive, if authorized and declared by the Board of Directors of the Company, noncumulative dividends at a rate of 5.7% per annum, or $57 per annum per share. Dividends on the Series C Preferred Shares,
if authorized and declared, are payable semiannually in arrears on June 30 and December 30 of each year.

In January 2002, the
Company issued 1,680,000 Series B Preferred Shares. The Companys proceeds from this issuance were $42 million; the Bank paid all expenses of the offering, including underwriting commissions and discounts. The Series B Preferred Shares are
redeemable on or after December 30, 2006. Holders of the Series B Preferred Shares are entitled to receive, if authorized and declared by the Board of Directors of the Company, noncumulative dividends at a rate of 8.875% per annum, or
$2.21875 per annum per share. Dividends on the Series B Preferred Shares, if authorized and declared, are payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year.

In June 2003, the Company issued 2,400,000 Series D Preferred Shares. The Companys proceeds from this issuance were $60 million; the Bank paid all
expenses of the offering, including underwriting commissions and discounts. The Series D Preferred Shares are not redeemable prior to June 27, 2008. Holders of the Series D Preferred Shares are entitled to receive, if authorized and declared by
the Board of Directors of the Company, noncumulative dividends at a rate of 7.25% per annum, or $1.8125 per annum per share. Dividends on the Series D Preferred Shares, if authorized and declared, are payable quarterly in arrears on
March 30, June 30, September 30, and December 30 of each year.

Upon the occurrence of an adverse change in
relevant tax laws, the Company will have the right to redeem its preferred shares, in whole (but not in part). The liquidation preference for each of the Series A Preferred Shares and the Series C Preferred Shares is $1,000 per share plus the
semiannual dividend thereon accrued through the date of redemption for the dividend period in which the redemption occurs. The liquidation preference for each of the Series B Preferred Shares and the Series D Preferred Shares is $25 per share plus
the quarterly dividend thereon accrued through the date of redemption for the dividend period in which the redemption occurs.

The
Companys preferred shares will be exchanged into preferred shares of the Bank upon the occurrence of certain events. The exchange rate for each of the Series A Preferred Shares and the Series C Preferred Shares is 1:1. The exchange rate for
each of the Series B Preferred Shares and Series D Preferred Shares is 1:1/40. Except under certain limited circumstances, the holders of the Companys preferred shares have no voting rights.

Note 5. Common Stock

At March 31, 2007, the
Company was authorized to issue 50,000,000 shares of common stock with a par value of $0.01 per share, of which 29,352,873 shares were outstanding. The Company issued no common stock in the first three months of 2007 or in all of 2006. In January
2005, the Company tendered an offer to repurchase the 9,840



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##### Table of Contents

shares that were issued to 123 current and former employees of the Bank. As of March 31, 2007, 122 individuals had accepted the offer of $2.50 per
share, or $200 for each owner. As of March 31, 2007, a total of 80 shares were held by one of the Banks former employees.

Holders of common stock are entitled to receive dividends if and when authorized and declared by the Board of Directors out of funds legally available therefore after all preferred dividends have been paid for the full year.

Note 6. Dividends on Preferred Stock and Common Stock

The following table presents the dividends on preferred stock for the three months ended March 31, 2007 and 2006. The dividends on the Series B and Series D Preferred Shares were paid during the quarter. The Company accrued the
dividends on the Series A and Series C Preferred Shares and expects to pay these dividends on June 30, 2007.



|                          |  |                             |           |      |   |          
|------------------------- |  | --------------------------- | --------- | ---- | - | ---------
|                          |  | Three Months EndedMarch 31,
|                          |  | 2007                        |           | 2006
|Series A Preferred Shares |  | $                           | 1,444,000 |      | $ | 1,444,000
|Series B Preferred Shares |  |                             | 932,000   |      |   | 932,000  
|Series C Preferred Shares |  |                             | 100,000   |      |   | 100,000  
|Series D Preferred Shares |  |                             | 1,087,000 |      |   | 1,087,000
|                          |  |                             |           |      |   |          
|Total                     |  | $                           | 3,563,000 |      | $ | 3,563,000
|                          |  |                             |           |      |   |          

Dividends on the Companys preferred shares are payable if, when and as authorized by the
Companys Board of Directors. If the Board of Directors does not authorize a dividend on any series of preferred shares for any respective dividend period, holders of each series of preferred shares will not be entitled to be paid that dividend
later or to recover any unpaid dividend whether or not funds are, or subsequently become, available. The Board of Directors, in its business judgment, may determine that it would be in the best interest of the Company to pay less than the full
amount of the stated dividend on each series of preferred shares for any dividend period. However, to remain qualified as a REIT, the Company must distribute annually at least 90% of its REIT taxable income (excluding deductions for any
dividends paid and any net capital gains) to stockholders, and, generally, the Company cannot pay dividends on common stock for periods in which less than full dividends are paid on each series of preferred shares.

The Company expects to pay the holders of common stock an amount of dividends that when aggregated with the dividends paid to holders of the preferred
shares is not less than 90% of the Companys REIT taxable income (excluding deductions for any dividends paid and any net capital gains) in order to remain qualified as a REIT. The Company did not declare dividends on its common
stock during the three months ended March 31, 2007 or 2006.

Note 7. Concentration of Credit Risk

At March 31, 2007, approximately 80% of Mortgage Loans were secured by real estate properties located primarily in California. Future economic,
political or other developments in California could adversely affect the value of the Mortgage Loans. See Financial ConditionSignificant Concentration of Credit Risk under Managements Discussion and Analysis of
Financial Condition and Results of Operations.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Introduction

This discussion summarizes the significant factors affecting the financial condition of
the Company as of March 31, 2007 and results of operations for the three months ended March 31, 2007. This discussion is provided to increase the understanding of, and should be read in conjunction with, the unaudited interim financial
statements, accompanying notes and tables included in this quarterly report.



11



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##### Table of Contents

Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended
(the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements reflect managements current views and assumptions and are subject to known and unknown risks, uncertainties and other
factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are
not limited to, statements regarding the following:



| |  |  | business strategy;
| | - |  | ------------------



| |  |  | estimates regarding capital requirements and the need for additional financing; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | plans, objectives, expectations and intentions contained in this report that are not historical facts.
| | - |  | ------------------------------------------------------------------------------------------------------

Forward-looking statements often include words such as may, will, would, should, could,
expect, anticipate, believe, estimate, plan, project, predict, intend, potential, continue, or similar expressions. Statements
that contain these words should be read carefully because they discuss future expectations, contain projections of future results of operation or financial condition or state other forward-looking information. With respect to the proposed
transaction with Merrill Lynch described elsewhere in this report, forward-looking statements may include, for example, statements about managements expectations. There may be events in the future, however, that cannot be accurately predicted
or controlled and that may cause actual results to differ materially from the expectations described in the forward-looking statements. The reader is cautioned that all forward-looking statements involve risks and uncertainties, and actual results
may differ materially from those discussed as a result of various factors, including, but not limited to, competitive pressure in the mortgage lending industry; changes in the interest rate environment that reduce margins; general economic
conditions, either nationally or regionally, that are less favorable than expected, resulting in, among other things, a deterioration in credit quality and an increase in the provision for loan losses; changes in the regulatory environment; changes
in business conditions, particularly in San Francisco and Los Angeles counties and the New York area and in the home mortgage lending industry; and changes in the securities markets. Other risks, uncertainties and factors are discussed elsewhere in
this report, in other First Republic Preferred Capital Corporation filings with the Securities and Exchange Commission (SEC) (including in Item 1A, Risk Factors, in the Companys 2006 Annual Report on Form 10-K) and
in materials incorporated therein by reference.

Throughout this document, the Company, we, our or
us refers to First Republic Preferred Capital Corporation and the Bank refers to First Republic Bank.

Critical Accounting
Policies and Estimates

The Companys discussion and analysis of its financial condition and results of operation are based upon
its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and the disclosures for contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to allowance for loan losses, credit risks,
estimated loan lives, interest rate risk, contingencies and litigation. The Company bases its estimates on historical experience and other assumptions it believes are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of its assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company considers accounting for allowance for loan losses to be a critical accounting policy because it is a complex process involving difficult and
subjective judgments, assumptions and estimates. The allowance for loan losses is an estimate that can change under different assumptions and conditions. The Company estimates credit losses resulting from the inability of borrowers to make required
payments. If the financial condition of borrowers were to deteriorate, resulting in an impairment of their ability to make payments, or the value of collateral securing



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##### Table of Contents

Mortgage Loans were to decline, an increase in the allowance may be required. A significant decline in the credit quality of the Companys loan
portfolio could have a material adverse affect on the Companys financial condition and results of operations.

Results of Operations

Overview

Net income was $4,917,000
for the first quarter of 2007, compared with $4,332,000 for the first quarter of 2006. The increase was primarily due to an increase in interest income resulting from higher interest rates and operating expenses remain relatively stable. The ratio
of earnings to fixed charges for the first quarter was 1.38x in 2007 and 1.22x in 2006. Dividend payments were 100% of fixed charges.

Total Interest
Income

Total interest income increased in the first quarter of 2007 compared with the same period in 2006 primarily due to higher loan
and investment yields. The following table presents the average balances and yields on the Companys interest-earning assets for the periods indicated:



|                              |  |                              |         |                |      |       |  |      |                |  |                |         |       |   |       |  |      |  
|----------------------------- |  | ---------------------------- | ------- | -------------- | ---- | ----- |  | ---- | -------------- |  | -------------- | ------- | ----- | - | ----- |  | ---- | -
|                              |  | Three Months Ended March 31, |        
|                              |  | 2007                         |         |                | 2006 |      
|($ in thousands)              |  | AverageBalance               |         | InterestIncome |      | Yield |  |      | AverageBalance |  | InterestIncome |         | Yield |  
|Loans                         |  | $                            | 325,778 |                | $    | 4,864 |  | 5.97 | %              |  | $              | 327,064 |       | $ | 4,350 |  | 5.32 | %
|Short-term investments        |  |                              | 12,188  |                |      | 124   |  | 4.08 |                |  |                | 6,602   |       |   | 51    |  | 3.10 |  
|                              |  |                              |         |                |      |       |  |      |                |  |                |         |       |   |       |  |      |  
|Total interest-earning assets |  | $                            | 337,966 |                | $    | 4,988 |  | 5.90 | %              |  | $              | 333,666 |       | $ | 4,401 |  | 5.28 | %
|                              |  |                              |         |                |      |       |  |      |                |  |                |         |       |   |       |  |      |  

Interest income on Mortgage Loans increased $514,000, or 12%, in the first quarter of 2007
compared with the same period in 2006, and the average yield increased 65 basis points. Loan yields began to increase in the second half of 2004 as the Federal Reserve Bank began to raise the federal funds rate from 1.00% in June 2004 to 5.25% in
March 2007. The weighted average coupon rate on Mortgage Loans was 6.09% at March 31, 2007, and 6.10% at December 31, 2006, an increase from 5.50% at March 31, 2006. In addition to interest rate increases, the yield on Mortgage Loans
increased due to a change in the portfolio mix from intermediate fixed and fixed rate loans to adjustable rate mortgage loans (ARMs), which bear interest rates indexed to rates that rose over the period. See Quantitative and
Qualitative Disclosures about Market Risks.

Interest income on Mortgage Loans is reduced for loan servicing fees that the Bank
retains. The Bank charges an annual servicing fee of 25 basis points on the gross average outstanding principal balance of Mortgage Loans serviced. Loan servicing fees were $203,000 for the first quarter of 2007 and $195,000 for the same period in
2006.

Interest income on short-term investments increased in the first quarter of 2007, compared with the same period in 2006, due to
higher interest rates and an increase in the average investment balance. The average yield on short-term investments increased to 4.08% in the first quarter of 2007, compared with 3.10% for the first quarter of 2006.

Operating Expense

Advisory fees payable to the Bank
are for services that the Bank renders on the Companys behalf pursuant to an advisory agreement. Advisory fees were $100,000 per annum for 2007 and 2006, or $25,000 per quarter.

General and administrative expenses were $46,000 for the first quarter of 2007 and $44,000 for the first quarter of 2006. These expenses consisted
primarily of audit fees, exchange listing fees and other stockholder costs.

Financial Condition

Short-term Investments on Deposit with the Bank

At
March 31, 2007 and December 31, 2006, short-term investments consisted entirely of a money market account held at the Bank.



13



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##### Table of Contents

Mortgage Loans

The loan portfolio at March 31, 2007 and December 31, 2006 consisted of both single family and multifamily mortgage loans acquired from the Bank. The Company anticipates that in the future it will continue
to acquire all of its loans from the Bank.

The Company has purchased from the Bank single family loans with a period of interest only
payments. Underwriting standards for all such loans have required a high level of borrower net worth, substantial post-loan liquidity, excellent FICO scores and significant down payments. At March 31, 2007, approximately $187.0 million of
loans, or 65% of the Companys single family loan portfolio, allowed interest only payments for varying periods. These interest only loans had an average LTV ratio at March 31, 2007 of approximately 54%, based on appraised value at the
time of origination. None of the Companys interest only home loans had an LTV ratio at origination of more than 80%.

Nonaccrual Loans and
Allowance for Loan Losses

A loan is placed on nonaccrual status when any installment of principal or interest is over 90 days past due,
except for any single family loan that is well secured and in the process of collection or when the Company determines that the ultimate collection of all contractually due principal or interest is unlikely. The Company classifies a loan as impaired
when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan purchase and servicing agreement.

At March 31, 2007 and December 31, 2006, there were no nonaccrual loans, impaired loans, loans that were troubled debt restructurings or
accruing loans that were contractually past due more than 90 days. The following table presents information with respect to the Companys allowance for loan losses:



|                                                  |  |                                     |             |   |                                    |   |             |   |  |   |             |  
|------------------------------------------------- |  | ----------------------------------- | ----------- | - | ---------------------------------- | - | ----------- | - |  | - | ----------- | -
|                                                  |  | For the Three Months EndedMarch 31, |             |   | For the
YearEndedDecember 31, 2006 |  
|                                                  |  | 2007                                |             |   | 2006                               |   |            
|Allowance for loan losses:                        |  |                                     |             |   |                                    |   |             |   |  |   |             |  
|Balance, beginning of period                      |  | $                                   | 481,000     |   |                                    | $ | 481,000     |   |  | $ | 481,000     |  
|Provision charged to expense                      |  |                                     |            |   |                                    |   |            |   |  |   |            |  
|Chargeoffs                                        |  |                                     |            |   |                                    |   |            |   |  |   |            |  
|Recoveries                                        |  |                                     |            |   |                                    |   |            |   |  |   |            |  
|                                                  |  |                                     |             |   |                                    |   |             |   |  |   |             |  
|Balance, end of period                            |  | $                                   | 481,000     |   |                                    | $ | 481,000     |   |  | $ | 481,000     |  
|                                                  |  |                                     |             |   |                                    |   |             |   |  |   |             |  
|Average Mortgage Loans for the period             |  | $                                   | 325,778,000 |   |                                    | $ | 327,064,000 |   |  | $ | 328,835,000 |  
|Total Mortgage Loans at end of period             |  | $                                   | 324,366,000 |   |                                    | $ | 330,157,000 |   |  | $ | 323,216,000 |  
|Ratio of allowance for loan losses to total loans |  |                                     | 0.15        | % |                                    |   | 0.15        | % |  |   | 0.15        | %

Significant Concentration of Credit Risk

Concentration of credit risk generally arises with respect to the loan portfolio when a number of borrowers engage in similar business activities or
activities in the same geographical region. Concentration of credit risk indicates the relative sensitivity of the Companys performance to both positive and negative developments affecting a particular industry. The balance sheet exposure to
geographic concentrations directly affects the credit risk of the Companys Mortgage Loans. The following table presents an analysis of Mortgage Loans at March 31, 2007 by major geographic location:



|                    |          |              |         |         |              |   |        |            |  |        |          |   |       |                 |        |   |        |   |        |           |  |   |        |   |  |   |       |   |  |   |         |   |  |     |  
|------------------- | -------- | ------------ | ------- | ------- | ------------ | - | ------ | ---------- |  | ------ | -------- | - | ----- | --------------- | ------ | - | ------ | - | ------ | --------- |  | - | ------ | - |  | - | ----- | - |  | - | ------- | - |  | --- | -
|($ in thousands)    |          | SanFrancisco |         |         | New York/New |   |        | LosAngeles |  |        | SanDiego |   |       | OtherCalifornia |        |   | Other  |   |        | LasVegas, |  |   | Total  |  
|                    | Bay Area |              |         | England |              |   | County |            |  | County |          |   | Areas |                 |        |   | Nevada |   |        | Amount    |  |   | %      |  
|Single family       |          | $            | 167,199 |         |              | $ | 34,235 |            |  | $      | 27,175   |   |       | $               | 9,956  |   |        | $ | 22,250 |           |  | $ | 26,280 |   |  | $ | 3,144 |   |  | $ | 290,239 |   |  | 89  | %
|Multifamily         |          |              | 26,497  |         |              |   | 858    |            |  |        | 3,462    |   |       |                 | 648    |   |        |   | 2,662  |           |  |   |       |   |  |   |      |   |  |   | 34,127  |   |  | 11  |  
|                    |          |              |         |         |              |   |        |            |  |        |          |   |       |                 |        |   |        |   |        |           |  |   |        |   |  |   |       |   |  |   |         |   |  |     |  
|Total               |          | $            | 193,696 |         |              | $ | 35,093 |            |  | $      | 30,637   |   |       | $               | 10,604 |   |        | $ | 24,912 |           |  | $ | 26,280 |   |  | $ | 3,144 |   |  | $ | 324,366 |   |  | 100 | %
|                    |          |              |         |         |              |   |        |            |  |        |          |   |       |                 |        |   |        |   |        |           |  |   |        |   |  |   |       |   |  |   |         |   |  |     |  
|Percent by location |          |              | 60      | %       |              |   | 11     | %          |  |        | 9        | % |       |                 | 3      | % |        |   | 8      | %         |  |   | 8      | % |  |   | 1     | % |  |   | 100     | % |  |     |  



14



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##### Table of Contents

At March 31, 2007, approximately 80% of Mortgage Loans were secured by properties located in
California. The weighted average loan to value ratio on Mortgage Loans was approximately 53%, based upon the appraised values of the properties at the time the loans were originated.

Liquidity and Capital Resources

The Companys principal liquidity needs are to pay dividends
and to fund the acquisition of additional Mortgage Assets as borrowers repay Mortgage Loans. The Company intends to fund the acquisition of additional Mortgage Loans with the proceeds from principal repayments on Mortgage Loans. Proceeds from
interest payments will be reinvested until used for the payment of operating expenses and dividends. The Company does not anticipate that it will have any other material capital expenditures. The cash generated from interest and principal payments
on Mortgage Assets is expected to provide sufficient funds for operating requirements and dividend payments in accordance with the requirements to be taxed as a REIT for the foreseeable future.



|I
tem 3. | Quantitative and Qualitative Disclosures About Market Risk.
|-------- | -----------------------------------------------------------

Interest Rate Risk Management

The Company services fixed-rate dividend obligations to preferred stockholders and operating
expenses by the collection of interest income from Mortgage Loans. To meet dividend payments, the Company maintains an average interest-earning asset balance of approximately two times the liquidation preference of its outstanding preferred shares.
The Companys earnings to fixed charges ratio was 1.38x for the first quarter of 2007, compared with 1.22x for the first quarter of 2006 and 1.30x for the year 2006.

Since mid-2004, interest rates have moved up from 40-year historical lows. The yield on total interest-earning assets rose to 5.90% for the first quarter of 2007, compared with 5.28% for the first quarter of 2006. The
increase in the yield was due to rising interest rates and a change in the portfolio mix to higher-yielding loans. The portfolio mix at March 31, 2007 changed over the past year as the level of ARMs increased and the level of intermediate fixed
rate loans and fixed rate loans decreased. ARMs grew to 76% of Mortgage Loans at March 31, 2007 from 64% at March 31, 2006, and the weighted average coupon rate for ARMs increased more rapidly over the past year than the weighted average
coupon rate for intermediate fixed or fixed rate loans, largely due to the inverted yield curve. The weighted average coupon rate at March 31, 2007 for ARMs increased 70 basis points from a year ago, compared with a 10 basis point increase in
the weighted average coupon rate for intermediate fixed rate loans and a 2 basis point increase for fixed loans. The weighted average remaining maturity of Mortgage Loans was 23.1 years at March 31, 2007 and 23.6 years at March 31, 2006.

For ARMs, the timing of changes in the average yield depends on the underlying interest rate index, the timing of changes in the index and
the frequency of adjustments to the loan rate. The weighted average coupon rate for ARMs was 6.27% at March 31, 2007, up 70 basis points from 5.57% at March 31, 2006 due to the rise in short-term rates. The increase in the yield on ARM
loans was mitigated by a significant volume of ARM loans indexed to COFI. COFI is a lagging index that tends to respond more slowly to changes in the general interest rate environment than a market rate index. At March 31, 2007, ARM loans
indexed to COFI were 78% of total ARMs and 59% of Mortgage Loans, compared with 82% of total ARMs and 52% of Mortgage Loans at March 31, 2006.

For intermediate fixed and fixed rate loans, the balance outstanding at March 31, 2007 was $75.7 million, or 24% of total Mortgage Loans, down from $120.0 million at March 31, 2006, or 36% of total Mortgage Loans. The weighted
average coupon rate for intermediate fixed rate loans was 5.32% at March 31, 2007 and 5.22% at March 31, 2006. The weighted average coupon rate for fixed rate loans was 5.68% at March 31, 2007 and 5.66% at March 31, 2006. A portion of
the repayments of intermediate fixed and fixed rate loans were reinvested in ARMs.



15



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##### Table of Contents

The following table presents an analysis of Mortgage Loans at March 31, 2007 by interest rate type:



|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|--------------------------- |  | ------- | ------- | ----------------- | ---- | - | ---------------------- | -- | --------------- | --- | -
|($ in thousands)            |  | Balance |         | NetCoupon (1) (2) |      |   | Monthsto NextReset (1) |    | % of TotalLoans |    
|ARM loans:                  |  |         |         |                   |      |   |                        |    |                 |     |  
|COFI                        |  | $       | 192,777 |                   | 6.36 | % |                        | 1  |                 | 59  | %
|CMT                         |  |         | 35,052  |                   | 6.23 |   |                        | 8  |                 | 11  |  
|LIBOR                       |  |         | 20,796  |                   | 5.49 |   |                        | 8  |                 | 6   |  
|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|Total ARMs                  |  |         | 248,625 |                   | 6.27 |   |                        | 3  |                 | 76  |  
|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|Intermediate fixed:         |  |         |         |                   |      |   |                        |    |                 |     |  
|12 months to 36 months      |  |         | 15,284  |                   | 5.24 |   |                        | 23 |                 | 5   |  
|37 months to 60 months      |  |         | 12,681  |                   | 5.42 |   |                        | 40 |                 | 4   |  
|Greater than 60 months      |  |         | 6,799   |                   | 5.32 |   |                        | 78 |                 | 2   |  
|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|Total intermediate fixed    |  |         | 34,764  |                   | 5.32 |   |                        | 40 |                 | 11  |  
|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|Total adjustable rate loans |  |         | 283,389 |                   | 6.15 |   |                        | 7  |                 | 87  |  
|Fixed rate loans            |  |         | 40,977  |                   | 5.68 |   |                        |    |                 | 13  |  
|                            |  |         |         |                   |      |   |                        |    |                 |     |  
|Total loans                 |  | $       | 324,366 |                   | 6.09 | % |                        |    |                 | 100 | %
|                            |  |         |         |                   |      |   |                        |    |                 |     |  

---

|(1) | Weighted average coupon rate.
|--- | -----------------------------

|(2) | Net of servicing fees retained by the Bank.
|--- | -------------------------------------------

The following table presents maturities or interest rate adjustments based upon the contractual maturities or adjustment dates as of March 31, 2007:



|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|----------------------------------- |  | --------------- | ------- | - | -------------- | - | ------- | ------------ |  | - | ------------ | - |  | -------- | ------- | - | ----------------- | - | ------- | ----- |  | - | -------- | - |  | - | -------
|($ in thousands)                    |  | 6 Monthsor Less |         |   | >6 to 12Months |   |         | >1 to 3Years |  |   | >3 to 5Years |   |  | >5 Years |         |   | Not RateSensitive |   |         | Total
|Cash and investments                |  | $               | 14,539  |   |                | $ |        |              |  | $ |             |   |  | $        |        |   |                   | $ |        |       |  | $ |         |   |  | $ | 14,539 
|Loans, net                          |  |                 | 221,691 |   |                |   | 44,397  |              |  |   | 33,190       |   |  |          | 17,037  |   |                   |   | 7,570   |       |  |   |         |   |  |   | 323,885
|Other assets                        |  |                 |        |   |                |   |        |              |  |   |             |   |  |          |        |   |                   |   |        |       |  |   | 1,718    |   |  |   | 1,718  
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Total assets                        |  | $               | 236,230 |   |                | $ | 44,397  |              |  | $ | 33,190       |   |  | $        | 17,037  |   |                   | $ | 7,570   |       |  | $ | 1,718    |   |  | $ | 340,142
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Other liabilities                   |  | $               |        |   |                | $ |        |              |  | $ |             |   |  | $        |        |   |                   | $ |        |       |  | $ | 1,666    |   |  | $ | 1,666  
|Stockholders equity                |  |                 |        |   |                |   |        |              |  |   |             |   |  |          |        |   |                   |   |        |       |  |   | 338,476  |   |  |   | 338,476
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Total liabilities and equity        |  | $               |        |   |                | $ |        |              |  | $ |             |   |  | $        |        |   |                   | $ |        |       |  | $ | 340,142  |   |  | $ | 340,142
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Repricing gap  positive (negative) |  | $               | 236,230 |   |                | $ | 44,397  |              |  | $ | 33,190       |   |  | $        | 17,037  |   |                   | $ | 7,570   |       |  | $ | (338,424 | ) |  |   |        
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Cumulative repricing gap:           |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Dollar amount                       |  | $               | 236,230 |   |                | $ | 280,627 |              |  | $ | 313,817      |   |  | $        | 330,854 |   |                   | $ | 338,424 |       |  |   |          |   |  |   |        
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        
|Percent of total assets             |  |                 | 69.5    | % |                |   | 82.5    | %            |  |   | 92.3         | % |  |          | 97.3    | % |                   |   | 99.5    | %     |  |   |          |   |  |   |        
|                                    |  |                 |         |   |                |   |         |              |  |   |              |   |  |          |         |   |                   |   |         |       |  |   |          |   |  |   |        

The Company has not engaged in business activities related to foreign currency
transactions or commodity-based instruments and has not made any investments in equity securities subject to price fluctuations.



|Item 
4. | Controls and Procedures.
|-------- | ------------------------

Evaluation of Disclosure Controls and
Procedures

As required by SEC rules, the Company carried out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act as of the end of the period covered by this report. The Companys management, including the Companys chief
executive officer and chief financial officer, supervised and participated in the evaluation. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Companys disclosure controls and



16



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procedures, as of March 31, 2007, were effective for providing reasonable assurance that information required to be disclosed by the Company in such
reports was accumulated and communicated to the Companys management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no significant changes in the Companys internal control over financial reporting during the quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

The Company is not currently
involved in nor, to its knowledge, currently threatened with any material legal proceedings.



|Item 1A. | Risk Factors.
|-------- | -------------

There are risks, many beyond the
Companys control, which could cause the Companys results to differ significantly from managements expectations. Some of these factors are described in the Companys Annual Report on Form 10-K for the year ended
December 31, 2006. Any factor described in the Companys 2006 Form 10-K or in this report could, by itself or together with one or more other factors, adversely affect the Companys business, results of operations and/or
financial condition. There are factors not described in the Companys 2006 Form 10-K or in this report that could cause results to differ from the Companys expectations.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

Not applicable.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

None.



|Item 5. | Other Information.
|------- | ------------------

None.



|Item 6. | Exhibits.
|------- | ---------



|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|12   |  | Statement of computation of ratios of earnings to fixed charges.                                                       
|     | 
|31.1 |  | Certification pursuant to 15 U.S.C. 7m(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       
|     | 
|31.2 |  | Certification pursuant to 15 U.S.C. 7m(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



17



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST REPUBLIC PREFERRED CAPITAL CORPORATION



|                   |  |  |  |     |  |                                                                                               |  | 
|------------------ |  |  |  | --- |  | --------------------------------------------------------------------------------------------- |  | 
|Date: May 11, 2007 |  |  |  | By: |  | /s/ JAMES J. BAUMBERGER                                                                       |  | 
|                   |  |  |  |     |  | James J. Baumberger                                                                           |  | 
|                   |  |  |  |     |  | President and Director (Principal Executive
Officer)                                          |  | 
|                   |  |  |  |     |  |                                                                                               |  | 
|Date: May 11, 2007 |  |  |  | By: |  | /s/ WILLIS H. NEWTON, JR.                                                                     |  | 
|                   |  |  |  |     |  | Willis H. Newton, Jr.                                                                         |  | 
|                   |  |  |  |     |  | Vice President, Chief Financial Officer,
Treasurer and Director (Principal Financial Officer) |  | 



18



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INDEX TO EXHIBITS



|              |  |                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Exhibit Title                                                                                                          
|12            |  | Statement of computation of ratios of earnings to fixed charges.                                                       
|              | 
|31.1          |  | Certification pursuant to 15 U.S.C. 7m(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       
|              | 
|31.2          |  | Certification pursuant to 15 U.S.C. 7m(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.       
|              | 
|32.1          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|              | 
|32.2          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.