First Republic Reports Record Quarterly And Annual Results

Core Annual Revenues Up 15.2%

Wealth Management Revenues Up 20.5% for the Year

14 Jan, 2016, 08:00 ET from First Republic Bank

SAN FRANCISCO, Jan. 14, 2016 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter and year ended December 31, 2015.

"First Republic reported record revenue and net income for both the quarter and the year," said CEO Jim Herbert.  "Our asset quality and capital continue to be very strong."

Full Year Highlights

Financial Results

  • Core revenues were up 15.2%. (1)
  • Net income was $522.1 million.
  • Diluted earnings per share ("EPS") of $3.18.
  • Core net income was $498.8 million, up 13.4%. (1)
  • Core diluted EPS of $3.02, up 10.2%. (1)
  • Loan originations totaled a record $19.7 billion for the year, up 16.0% over last year.
  • Loans sold totaled $2.4 billion.
  • Core net interest margin was 3.09%, compared to 3.14% for the prior year. (1)
  • Core efficiency ratio was 60.5%. (1)

Continued Financial and Credit Strength

  • Tier 1 leverage ratio was 9.21%.
  • Common Equity Tier 1 ratio was 10.76%.
  • Tangible book value per share was $30.16, up 13.6% from a year ago.
  • Nonperforming assets were low at 12 basis points of total assets.
  • Credit quality remains very strong, with net charge-offs of only $1.7 million for the year, less than 1 basis point.

Franchise Development

  • Loans outstanding, excluding loans held for sale, totaled $44.1 billion, up 16.4% from a year ago.
  • Deposits were $47.9 billion, up 29.0% from a year ago.
  • Checking balances represented 63.2% of total deposits.
  • Wealth management assets were $72.3 billion, up 35.4% from a year ago.
  • Wealth management revenues were $231.7 million, up 20.5% from a year ago. (2)

Quarterly Highlights

  • Compared to last year's fourth quarter:
    • Core revenues were $484.9 million, up 20.8%. (1)
    • Core net income was $136.0 million, up 25.1%. (1)
    • Core diluted EPS of $0.82, up 22.4%. (1)
  • Net income was $140.0 million.
  • Diluted EPS of $0.84
  • Loan originations totaled $4.7 billion.
  • Loans sold totaled $367.6 million.
  • Core net interest margin was 3.02%, compared to 3.09% for the prior quarter. (1)
  • Core efficiency ratio was 61.4%. (1)
  • Wealth management assets were $72.3 billion, up 22.9% from the prior quarter.

"Wealth management had a terrific quarter and year," said Vice Chair Katherine August-deWilde.  "For the year, wealth management revenues were up over 20% and now represent 13% of core revenues.  During the quarter, in addition to closing Constellation Wealth Advisors, we were pleased to welcome several wealth management teams to First Republic."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the fourth quarter of $0.15 per share of common stock, which is payable on February 11, 2016 to shareholders of record as of January 28, 2016. 

Strong Asset Quality

Credit quality remains very strong.  Nonperforming assets were 12 basis points of total assets at December 31, 2015. 

The Bank had net charge-offs for the quarter of $1.4 million, while adding $12.0 million to its allowance for loan losses due to continued loan growth.  Net charge-offs for the year were $1.7 million, less than 1 basis point of average loans.  A total of $55.4 million was added to the Bank's allowance for loan losses during the year.

Continued Capital Strength

During the fourth quarter, the Bank issued 3.5 million shares of common stock, which added approximately $226 million to common equity.

The Bank's Tier 1 leverage ratio was 9.21% and Common Equity Tier 1 ratio was 10.76% at December 31, 2015.

Tangible Book Value Growth

Tangible book value per common share was $30.16 at December 31, 2015, up 13.6% from a year ago.  Since repurchasing the Bank five and a half years ago, tangible book value per common share has grown 16% per year.   

Continued Franchise Development

Loan Originations

Loan originations totaled $4.7 billion for the quarter, compared to $4.3 billion for the fourth quarter a year ago.  For 2015, loan originations totaled $19.7 billion, compared to $17.0 billion for the prior year, up 16.0%.

Loans outstanding, excluding loans held for sale, totaled $44.1 billion at December 31, 2015, up 16.4% compared to a year ago.

Deposit Growth

Total deposits increased to $47.9 billion, up 8.0% for the quarter and up 29.0% compared to a year ago.  At December 31, 2015, checking accounts totaled 63.2% of deposits.  The Bank is almost entirely deposit-funded, with deposits representing 90% of total liabilities at December 31, 2015.

The average rate paid on all deposits was 0.14% for both the fourth quarter and the prior quarter.

Investments

Total investments at December 31, 2015 were $10.5 billion, up 28.1% for the quarter and 57.4% compared to a year ago. 

High-quality liquid assets, from a regulatory perspective, totaled $5.8 billion at December 31, 2015, up 22.6% from $4.7 billion at September 30, 2015.  Such assets were up 80.4% for the year.

Mortgage Banking Activity

During the fourth quarter, the Bank sold $367.6 million of loans and recorded a gain on sale of $1.5 million, compared to loan sales of $991.3 million and a gain on sale of $4.1 million during the fourth quarter of last year.

For the year ended December 31, 2015, the Bank sold $2.4 billion of loans, compared to $4.4 billion for the prior year.  Gain on sale of loans for the year ended December 31, 2015 was $9.7 million, compared to $35.5 million for the prior year.

Loans serviced for investors at year-end totaled $10.5 billion, up 9.8% from a year ago.  Net loan servicing fees for the year were $13.0 million, up 34.4% from $9.7 million for the prior year.

Continued Expansion of Wealth Management

Wealth management revenues totaled $67.1 million for the quarter, up 26.4% compared to last year's fourth quarter.  For the year ended December 31, 2015, wealth management revenues were $231.7 million, an increase of 20.5% compared to the prior year.

Total wealth management assets were $72.3 billion at December 31, 2015, up 22.9% for the quarter and up 35.4% compared to a year ago.  The increase in wealth management assets includes assets under management from the Constellation acquisition on October 1, 2015. 

In addition, the growth in wealth management assets was due to net new assets from both existing and new clients.  Wealth management assets include investment management assets of $35.2 billion, brokerage assets and money market mutual funds of $30.2 billion, and trust and custody assets of $6.8 billion.

Income Statement and Key Ratios

Highlights

Strong Core Revenue Growth

Total revenues were $494.9 million for the quarter and $1.8 billion for 2015.

Core revenues were $484.9 million for the fourth quarter and $1.8 billion for 2015, up 20.8% compared to last year's fourth quarter and up 15.2% compared to 2014. (1)   

Continued Core Net Interest Income Growth

Net interest income was $404.7 million for the quarter and $1.5 billion for 2015.   

Core net interest income was $394.7 million for the fourth quarter, a 21.3% increase from the fourth quarter of last year.  Core net interest income was $1.5 billion for all of 2015, a 16.2% increase from the prior year, resulting primarily from growth in average earning assets. (1)

Core Net Interest Margin

The Bank's net interest margin was 3.10% for the fourth quarter and 3.21% for 2015. 

For 2015, the core net interest margin was 3.09%, compared to 3.14% for the prior year.  For the fourth quarter, the core net interest margin was 3.02%, compared to 3.09% for the prior quarter.  The decrease from the prior quarter was entirely the result of higher average cash balances due to strong deposit activity during the fourth quarter. (1)

Noninterest Income

Noninterest income was $90.2 million for the quarter, an 18.9% increase compared to the fourth quarter a year ago.  Noninterest income was $325.1 million for 2015, up 2.1% compared to the prior year. 

Core noninterest income was $90.2 million for the quarter, up 18.9% compared to the fourth quarter a year ago, which was primarily from increased wealth management revenues.  Core noninterest income was $325.1 million for 2015, up 10.9% compared to the prior year. (1)

Core Efficiency Ratio

For 2015, noninterest expense was $1.1 billion, up 18.7% from the prior year.  Noninterest expense for the fourth quarter was $300.9 million, a 23.3% increase from the fourth quarter of last year. 

The Bank's GAAP efficiency ratio was 60.8% for the quarter.  For all of 2015, the GAAP efficiency ratio was 59.5%.   

The Bank's core efficiency ratio was 61.4% for the quarter, compared to 59.4% for the prior quarter and 59.9% for the fourth quarter a year ago.  The increase from the prior quarter was substantially driven by investments in the wealth management business. (1)

For all of 2015, the core efficiency ratio was 60.5%, compared to 58.5% for 2014. (1)

Income Tax Rate

The Bank's effective tax rate for 2015 was 24.4%, compared to 27.3% for 2014.  The decrease in the effective tax rate results from the steady increase in tax credit investments, tax-exempt securities, tax-advantaged loans and bank-owned life insurance.  The effective tax rate for the fourth quarter was 23.0%, compared to 24.3% for the prior quarter.  The decrease during the fourth quarter was due to an increase in tax benefits from tax credit investments.

 

_________

(1)  "Core" measures are non-GAAP financial measures that exclude the positive impact of purchase accounting.  In addition, core measures also exclude other positive, but one-time, impacts from the special FHLB dividend in the second quarter of 2015, and the gain from repositioning of investment portfolio in the third quarter of 2014.  See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures." (2)  Wealth management revenues include investment advisory, brokerage and investment, trust, and foreign exchange fee income.

Conference Call Details

First Republic Bank's fourth quarter and full year 2015 earnings conference call is scheduled for January 14, 2016 at 7:00 a.m. PT / 10:00 a.m. ET.  To listen to the live call by telephone, please dial (855) 224-3902 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #15929141.  International callers should dial (734) 823-3244 and enter the same conference ID number.  The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of First Republic's website at www.firstrepublic.com.  To listen to the live webcast, please visit the site at least 10 minutes prior to the start of the call to register, download and install any necessary audio software.  A replay of the call will also be available for 90 days on the website.  For those unable to participate in the live presentation, a replay will be available beginning January 14, 2016, at 10:00 a.m. PT / 1:00 p.m. ET, through January 21, 2016, at 8:59 p.m. PT / 11:59 p.m. ET.  To access the replay, dial (855) 859-2056 (U.S.) and use conference ID #15929141.  International callers should dial (404) 537-3406 and enter the same conference ID number.  The Bank's press releases are available after release on the Bank's website at www.firstrepublic.com.

About First Republic Bank

Founded in 1985, First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services.  First Republic specializes in delivering exceptional, relationship-based service, with a solid commitment to responsiveness and action.  Services are offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Palm Beach, Greenwich and New York City.  First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans.  For more information, visit www.firstrepublic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Statements in this press release that are not historical facts are hereby identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended.  Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimates," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases and include statements about economic performance in our markets, growth in our loan originations and wealth management assets, our progress in preparing for, and our compliance with, any enhanced regulatory requirements, and our projected tax rate.  Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.  Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: our ability to deal with significant competition for banking and wealth management customers; our projections for certain financial items, expectations concerning the bank and wealth management industries; earthquakes and other natural disasters in our markets; interest rate or credit risk; our plans or objectives for future operations, products or services; our ability to maintain and follow high underwriting standards; economic conditions generally and in our markets; our geographic concentration; our opportunities for growth; our future provisions for loan losses; our regulatory compliance and future regulatory requirements, including any requirements that have become applicable to us as a bank with a four-quarter average of total consolidated assets of at least $50 billion; any increased compliance costs; the phase-in of the Basel III Capital Rules; and new accounting standards.  For a discussion of these and other risks and uncertainties, see First Republic's FDIC filings, including, but not limited to, the risk factors in First Republic's Annual Report on Form 10-K.  These filings are available in the Investor Relations section of our website.  All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

 

CONSOLIDATED STATEMENT OF INCOME

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

(in thousands, except per share amounts)

2015

2014

2015

2015

2014

Interest income:

Loans

$

357,446

$

322,177

$

348,367

$

1,361,654

$

1,271,562

Investments

81,030

55,652

75,970

296,146

207,736

Cash and cash equivalents

2,730

1,170

1,691

6,292

3,711

Total interest income

441,206

378,999

426,028

1,664,092

1,483,009

Interest expense:

Deposits

16,638

14,470

15,903

61,072

60,454

Borrowings

19,869

23,674

21,244

86,357

91,795

Total interest expense

36,507

38,144

37,147

147,429

152,249

Net interest income

404,699

340,855

388,881

1,516,663

1,330,760

Provision for loan losses

12,045

14,076

14,502

55,439

56,486

Net interest income after provision for loan losses

392,654

326,779

374,379

1,461,224

1,274,274

Noninterest income:

Investment advisory fees

49,814

39,892

44,211

178,738

147,840

Brokerage and investment fees

7,654

4,341

3,899

19,659

14,404

Trust fees

3,259

2,600

2,600

10,745

10,483

Foreign exchange fee income

6,413

6,265

5,933

22,517

19,552

Deposit fees

4,914

4,634

4,898

19,311

18,468

Gain on sale of loans

1,480

4,107

2,957

9,725

35,515

Loan servicing fees, net

3,752

3,174

3,135

13,040

9,701

Loan and related fees

3,161

2,465

3,083

12,393

8,658

Income from investments in life insurance

9,289

8,389

8,555

35,474

29,558

Gain (loss) on investment securities, net

(515)

(567)

(76)

821

21,837

Other income

930

534

552

2,630

2,339

Total noninterest income

90,151

75,834

79,747

325,053

318,355

Noninterest expense:

Salaries and employee benefits

168,424

129,980

149,463

596,593

490,341

Occupancy

27,220

26,082

26,531

106,856

98,466

Information systems

33,416

26,360

31,564

119,114

95,387

Professional fees

16,487

17,042

16,974

73,022

53,429

FDIC assessments

9,500

8,300

8,700

35,250

31,294

Advertising and marketing

7,617

5,484

6,167

25,562

25,703

Amortization of intangibles

6,933

5,368

4,731

21,760

22,744

Other expenses

31,327

25,534

31,767

117,452

105,382

Total noninterest expense

300,924

244,150

275,897

1,095,609

922,746

Income before provision for income taxes

181,881

158,463

178,229

690,668

669,883

Provision for income taxes

41,835

43,004

43,387

168,523

182,877

Net income

140,046

115,459

134,842

522,145

487,006

Dividends on preferred stock

15,314

13,889

15,314

58,928

55,556

Net income available to common shareholders

$

124,732

$

101,570

$

119,528

$

463,217

$

431,450

Basic earnings per common share

$

0.87

$

0.74

$

0.84

$

3.27

$

3.16

Diluted earnings per common share

$

0.84

$

0.72

$

0.82

$

3.18

$

3.07

Dividends per common share

$

0.15

$

0.14

$

0.15

$

0.59

$

0.54

Weighted average shares—basic

144,006

137,794

142,152

141,689

136,420

Weighted average shares—diluted

147,814

141,753

145,890

145,510

140,497

 

 

CONSOLIDATED BALANCE SHEET

As of

($ in thousands)

December 31,  2015

September 30,  2015

December 31,  2014

ASSETS

Cash and cash equivalents

$

1,131,110

$

1,795,780

$

817,150

Securities purchased under agreements to resell

100

100

100

Investment securities available-for-sale

2,910,801

1,584,142

1,393,357

Investment securities held-to-maturity

7,540,678

6,572,289

5,244,707

Loans:

Single family (1-4 units)

23,092,346

22,273,533

20,494,402

Home equity lines of credit

2,370,188

2,316,120

2,211,621

Multifamily (5+ units)

5,371,484

5,211,200

4,689,692

Commercial real estate

4,462,834

4,353,000

3,824,835

Single family construction

436,774

465,549

428,358

Multifamily/commercial construction

693,364

645,230

453,732

Commercial business

6,232,378

5,836,330

4,873,580

Other secured

541,637

546,407

436,918

Stock secured

521,005

421,084

285,240

Unsecured loans and lines of credit

423,795

361,351

231,552

Total unpaid principal balance

44,145,805

42,429,804

37,929,930

Net unaccreted discount

(108,499)

(118,567)

(152,764)

Net deferred fees and costs

46,263

40,308

31,203

Allowance for loan losses

(261,058)

(250,408)

(207,342)

Loans, net

43,822,511

42,101,137

37,601,027

Loans held for sale

48,681

250,494

271,448

Investments in life insurance

1,168,596

1,059,237

1,014,734

Tax credit investments

1,006,836

890,430

828,640

Prepaid expenses and other assets

817,410

702,125

747,763

Premises, equipment and leasehold improvements, net

172,008

161,634

165,703

Goodwill and other intangible assets

309,016

201,723

216,550

Mortgage servicing rights

53,538

53,588

49,023

Other real estate owned

2,541

Total Assets

$

58,981,285

$

55,375,220

$

48,350,202

LIABILITIES AND EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking

$

18,252,007

$

17,546,255

$

12,542,881

Interest-bearing checking

12,027,363

9,472,995

8,809,590

Money market checking

5,756,821

5,892,419

5,216,253

Money market savings and passbooks

7,270,396

7,167,514

6,795,189

Certificates of deposit

4,586,878

4,263,761

3,767,016

Total Deposits

47,893,465

44,342,944

37,130,929

Securities sold under agreements to repurchase

100,000

100,000

Long-term FHLB advances

4,000,000

4,350,000

5,275,000

Senior notes

397,159

396,964

396,384

Debt related to variable interest entities

29,643

30,716

36,039

Other liabilities

855,335

770,422

733,383

Total Liabilities

53,275,602

49,991,046

43,571,735

Shareholders' Equity:

Preferred stock

989,525

989,525

889,525

Common stock

1,461

1,425

1,383

Additional paid-in capital

2,770,265

2,533,713

2,313,592

Retained earnings

1,949,652

1,846,604

1,570,871

Accumulated other comprehensive income (loss)

(5,220)

12,907

3,096

Total Shareholders' Equity

5,705,683

5,384,174

4,778,467

Total Liabilities and Shareholders' Equity

$

58,981,285

$

55,375,220

$

48,350,202

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Operating Information and Yields/Rates

2015

2014

2015

2015

2014

($ in thousands)

Operating Information

Net income to average assets (3)

0.93

%

0.94

%

0.96

%

0.96

%

1.06

%

Net income available to common shareholders to average common equity (3)

10.74

%

10.37

%

10.84

%

10.72

%

11.72

%

Dividend payout ratio

17.8

%

19.5

%

18.3

%

18.5

%

17.6

%

Efficiency ratio (4)

60.8

%

58.6

%

58.9

%

59.5

%

56.0

%

Core efficiency ratio (non-GAAP) (1), (4)

61.4

%

59.9

%

59.4

%

60.5

%

58.5

%

Net loan charge-offs (recoveries)

$

1,395

$

1,783

$

(38)

$

1,723

$

2,149

Net loan charge-offs to average total loans (3)

0.01

%

0.02

%

0.00

%

0.00

%

0.01

%

Yields/Rates (3)

Cash and cash equivalents

0.28

%

0.25

%

0.25

%

0.26

%

0.25

%

Investment securities (5), (6), (7)

4.48

%

4.81

%

4.96

%

4.80

%

5.06

%

Loans (5), (8)

3.39

%

3.48

%

3.36

%

3.42

%

3.59

%

Total interest-earning assets

3.36

%

3.54

%

3.45

%

3.49

%

3.67

%

Checking

0.01

%

0.01

%

0.00

%

0.00

%

0.01

%

Money market checking and savings

0.07

%

0.08

%

0.07

%

0.07

%

0.13

%

CDs (8)

1.24

%

1.21

%

1.27

%

1.24

%

1.13

%

Total deposits

0.14

%

0.15

%

0.14

%

0.14

%

0.17

%

Long-term FHLB advances

1.55

%

1.58

%

1.55

%

1.57

%

1.56

%

Senior notes (9)

2.59

%

2.59

%

2.59

%

2.59

%

2.57

%

Other borrowings

1.39

%

1.67

%

1.35

%

0.92

%

1.70

%

Total borrowings

1.63

%

1.65

%

1.63

%

1.62

%

1.60

%

Total interest-bearing liabilities

0.27

%

0.35

%

0.30

%

0.31

%

0.37

%

Net interest spread

3.09

%

3.19

%

3.15

%

3.18

%

3.30

%

Net interest margin

3.10

%

3.21

%

3.17

%

3.21

%

3.32

%

Core net interest margin (non-GAAP) (1)

3.02

%

3.06

%

3.09

%

3.09

%

3.14

%

(3)

For periods less than a year, ratios are annualized.

(4)

Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.

(5)

Yield is calculated on a tax-equivalent basis.

(6)

Includes FHLB stock and securities purchased under agreements to resell.

(7)

Yield on investment securities for the year ended December 31, 2015 includes a $9.1 million one-time special FHLB dividend received in the second quarter of 2015, which resulted in an 11 basis point positive impact to the investment yield for this period.

(8)

Yield/rate includes accretion/amortization of purchase accounting discounts/premiums.

(9)

Rate includes amortization of issuance discounts and costs.

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Mortgage Loan Sales

2015

2014

2015

2015

2014

($ in thousands)

Loans sold:

Agency

$

73,244

$

29,319

$

71,923

$

273,128

$

135,681

Non-agency

294,359

961,965

527,814

2,156,132

4,273,851

Total loans sold

$

367,603

$

991,284

$

599,737

$

2,429,260

$

4,409,532

Gain on sale of loans:

Amount

$

1,480

$

4,107

$

2,957

$

9,725

$

35,515

Gain as a percentage of loans sold (10)

0.40

%

0.41

%

0.49

%

0.40

%

0.81

%

(10)

For the year ended December 31, 2014, gain on sale of loans includes discounts established in purchase accounting, which increase gain on sale of loans.  Excluding the impact of purchase accounting, the gain as a percentage of loans sold for 2014 would be 0.77%.

 

As of

Loan Servicing Portfolio

December 31,  2015

September 30,  2015

June 30,  2015

March 31,  2015

December 31,  2014

($ in millions)

Loans serviced for investors

$

10,531

$

10,550

$

10,305

$

9,840

$

9,590

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Loan Originations

2015

2014

2015

2015

2014

($ in thousands)

Single family (1-4 units)

$

1,635,350

$

1,885,418

$

1,863,396

$

7,633,653

$

7,932,174

Home equity lines of credit

398,267

339,001

452,048

1,575,262

1,458,448

Multifamily (5+ units)

302,435

339,505

371,266

1,461,123

1,443,357

Commercial real estate

292,369

272,211

321,578

1,344,072

998,700

Construction

305,085

210,312

434,155

1,291,902

894,786

Commercial business

1,343,953

1,044,474

1,127,386

5,138,716

3,445,664

Other loans

432,012

197,654

295,589

1,227,234

779,072

Total loans originated

$

4,709,471

$

4,288,575

$

4,865,418

$

19,671,962

$

16,952,201

 

 

As of December 31, 2015

Composition of Loan Portfolio

Loans acquired on July 1, 2010

Loans originated since July 1, 2010

Total Loans

($ in thousands)

Single family (1-4 units)

$

2,358,231

$

20,734,115

$

23,092,346

Home equity lines of credit

443,075

1,927,113

2,370,188

Multifamily (5+ units)

269,758

5,101,726

5,371,484

Commercial real estate

412,213

4,050,621

4,462,834

Single family construction

4,012

432,762

436,774

Multifamily/commercial construction

1,226

692,138

693,364

Commercial business

299,834

5,932,544

6,232,378

Other secured

12,979

528,658

541,637

Stock secured

4,286

516,719

521,005

Unsecured loans and lines of credit

28,707

395,088

423,795

Total unpaid principal balance

3,834,321

40,311,484

44,145,805

Net unaccreted discount

(108,235)

(264)

(108,499)

Net deferred fees and costs

(3,765)

50,028

46,263

Allowance for loan losses

(6,115)

(254,943)

(261,058)

Loans, net

$

3,716,206

$

40,106,305

$

43,822,511

 

 

As of

Asset Quality Information

December 31,  2015

September 30,  2015

June 30,  2015

March 31,  2015

December 31,  2014

($ in thousands)

Nonperforming assets:

Nonaccrual loans

$

73,545

$

51,987

$

55,872

$

49,830

$

45,962

Other real estate owned

2,541

  Total nonperforming assets

$

73,545

$

54,528

$

55,872

$

49,830

$

45,962

Nonperforming assets to total assets

0.12

%

0.10

%

0.11

%

0.10

%

0.10

%

Accruing loans 90 days or more past due

$

4,199

$

698

$

2,118

$

202

$

4,380

Restructured accruing loans

$

14,043

$

14,539

$

15,624

$

14,855

$

16,252

 

 

As of

Book Value Ratios

December 31,  2015

September 30,  2015

June 30,  2015

March 31,  2015

December 31,  2014

(in thousands, except per share amounts)

Number of shares of common stock outstanding

146,110

142,477

142,389

142,105

138,269

Book value per common share

$

32.28

$

30.84

$

30.03

$

29.45

$

28.13

Tangible book value per common share

$

30.16

$

29.43

$

28.58

$

27.97

$

26.56

 

 

As of

2015

2014

December 31, (11)

September 30,

June 30,

March 31,

December 31,

Capital Ratios

Actual (12)

Fully

Phased-in (13)

Actual (12)

Actual (12)

Tier 1 leverage ratio

9.21

%

9.09

%

9.38

%

9.86

%

9.90

%

9.43

%

Common Equity Tier 1 ratio (14)

10.76

%

10.56

%

10.71

%

10.87

%

11.25

%

n/a

Tier 1 common equity ratio (14)

n/a

n/a

n/a

n/a

n/a

10.90

%

Tier 1 risk-based capital ratio

13.12

%

12.93

%

13.21

%

13.47

%

13.73

%

13.55

%

Total risk-based capital ratio

13.78

%

13.58

%

13.87

%

14.13

%

14.37

%

14.20

%

(11)

Ratios as of December 31, 2015 are preliminary.

(12)

Ratios for 2015 periods reflect the adoption of the Basel III Capital Rules in effect beginning January 1, 2015.  Ratios as of December 31, 2014 represent the previous capital rules under Basel I.

(13)

Certain adjustments required under the Basel III Capital Rules will be phased in through the end of 2018.  The ratios shown in this column are calculated assuming a fully phased-in basis of all such adjustments as if they were effective as of December 31, 2015.

(14)

Beginning in 2015, the Common Equity Tier 1 ratio is a new ratio requirement under the Basel III Capital Rules and represents common equity, less goodwill and intangible assets net of any associated deferred tax liabilities, divided by risk-weighted assets (subject to phase-in adjustments as indicated in footnote 13 above).  As of December 31, 2014, the Tier 1 common equity ratio represents common equity, less goodwill and intangible assets, divided by risk-weighted assets.

 

As of

Wealth Management Assets

December 31,  2015

September 30,  2015

June 30,  2015

March 31,  2015

December 31,  2014

($ in millions)

First Republic Investment Management

$

35,230

$

28,969

$

28,998

$

28,530

$

27,453

Brokerage and investment:

Brokerage

26,059

19,746

19,852

18,973

17,653

Money market mutual funds

4,155

3,012

1,732

2,100

2,025

Total brokerage and investment

30,214

22,758

21,584

21,073

19,678

Trust Company:

Trust

3,375

3,618

3,370

3,149

3,057

Custody

3,474

3,477

3,613

3,617

3,189

Total Trust Company

6,849

7,095

6,983

6,766

6,246

  Total Wealth Management Assets

$

72,293

$

58,822

$

57,565

$

56,369

$

53,377

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Average Balance Sheet

2015

2014

2015

2015

2014

($ in thousands)

Assets:

Cash and cash equivalents

$

3,921,839

$

1,845,498

$

2,682,142

$

2,425,747

$

1,468,877

Investment securities (15)

9,581,952

6,304,984

8,190,959

8,155,136

5,697,744

Loans (16)

43,042,968

37,573,433

42,143,922

40,889,434

36,271,956

Total interest-earning assets

56,546,759

45,723,915

53,017,023

51,470,317

43,438,577

Noninterest-earning cash

287,695

263,915

257,826

263,627

239,345

Goodwill and other intangibles

312,665

219,140

204,021

235,044

227,516

Other assets

2,694,402

2,350,513

2,467,187

2,504,807

2,127,302

Total noninterest-earning assets

3,294,762

2,833,568

2,929,034

3,003,478

2,594,163

Total Assets

$

59,841,521

$

48,557,483

$

55,946,057

$

54,473,795

$

46,032,740

Liabilities and Equity:

Checking

$

30,189,409

$

20,694,274

$

27,208,451

$

25,993,413

$

18,572,545

Money market checking and savings

13,607,852

12,661,395

13,226,282

12,905,039

12,737,635

CDs (16)

4,485,104

3,772,544

4,162,188

4,086,327

3,687,912

Total deposits

48,282,365

37,128,213

44,596,921

42,984,779

34,998,092

Long-term FHLB advances

4,302,174

5,275,000

4,657,337

4,772,192

5,474,726

Senior notes

397,064

396,291

396,869

396,774

214,966

Other borrowings

130,211

37,617

131,168

152,356

40,073

Total borrowings

4,829,449

5,708,908

5,185,374

5,321,322

5,729,765

Total interest-bearing liabilities

53,111,814

42,837,121

49,782,295

48,306,101

40,727,857

Noninterest-bearing liabilities

1,133,650

943,984

797,627

899,116

733,347

Preferred equity

989,525

889,525

989,525

949,525

889,525

Common equity

4,606,532

3,886,853

4,376,610

4,319,053

3,682,011

Total Liabilities and Equity

$

59,841,521

$

48,557,483

$

55,946,057

$

54,473,795

$

46,032,740

(15)

Includes FHLB stock and securities purchased under agreements to resell.

(16)

Average balances are presented net of purchase accounting discounts or premiums.

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Purchase Accounting Accretion and Amortization (17)

2015

2014

2015

2015

2014

($ in thousands)

Accretion/amortization to net interest income:

Loans

$

9,974

$

14,086

$

9,663

$

43,467

$

65,647

Deposits

1,313

1,006

6,352

Total

$

9,974

$

15,399

$

9,663

$

44,473

$

71,999

Noninterest income:

Discounts recognized in gain on sale of loans

$

$

$

$

$

1,679

Amortization to noninterest expense:

Intangible assets

$

3,007

$

3,649

$

3,170

$

12,993

$

15,552

(17)

Related to the Bank's re-establishment as an independent institution.

 

Use of Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry.  However, due to the application of purchase accounting from the Bank's re-establishment as an independent institution, management uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate our performance, including net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and the efficiency ratio. 

Our net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and efficiency ratio were significantly impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting from the Bank's re-establishment as an independent institution.  The accretion and amortization affect our net income, earnings per share and certain operating ratios as we accrete loan discounts to interest income; recognize discounts established in purchase accounting on the sale of loans, which increase gain on sale of loans; amortize premiums on CDs to interest expense; and amortize intangible assets to noninterest expense.

The Bank's non-GAAP measures also exclude the positive impact of certain nonrecurring items.  In the second quarter of 2015, the Bank received a one-time special dividend of $9.1 million from the FHLB, which is excluded from non-GAAP net income, earnings per share, net interest income, net interest margin and efficiency ratio.  In addition, in the third quarter of 2014, as a result of the restructuring of its investment securities portfolio, the Bank had a gain on sale of investments of $23.6 million, which is excluded from non-GAAP net income, earnings per share, noninterest income, revenue and efficiency ratio.

We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance.  Our management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing our operating results and related trends.  However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.  In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure:

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Non-GAAP Earnings

2015

2014

2015

2015

2014

(in thousands, except per share amounts)

Net income

$

140,046

$

115,459

$

134,842

$

522,145

$

487,006

Accretion/amortization added to net interest income

(9,974)

(15,399)

(9,663)

(44,473)

(71,999)

One-time special FHLB dividend

(9,134)

Discounts recognized in gain on sale of loans

(1,679)

One-time gain on sale of investments

(23,580)

Amortization of intangible assets

3,007

3,649

3,170

12,993

15,552

Add back tax impact of the above items

2,961

4,994

2,759

17,261

34,726

Core net income (non-GAAP)

136,040

108,703

131,108

498,792

440,026

Dividends on preferred stock

(15,314)

(13,889)

(15,314)

(58,928)

(55,556)

Core net income available to common shareholders (non-GAAP)

$

120,726

$

94,814

$

115,794

$

439,864

$

384,470

GAAP earnings per common share—diluted

$

0.84

$

0.72

$

0.82

$

3.18

$

3.07

Impact of purchase accounting, net of tax

(0.02)

(0.05)

(0.03)

(0.12)

(0.23)

Impact of one-time special FHLB dividend, net of tax

(0.04)

Impact of one-time gain on sale of investments, net of tax

(0.10)

Core earnings per common share—diluted (non-GAAP)

$

0.82

$

0.67

$

0.79

$

3.02

$

2.74

Weighted average diluted common shares outstanding

147,814

141,753

145,890

145,510

140,497

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Yield on Average Loans

2015

2014

2015

2015

2014

($ in thousands)

Interest income on loans

$

357,446

$

322,177

$

348,367

$

1,361,654

$

1,271,562

Add: Tax-equivalent adjustment on loans

10,571

8,520

10,045

38,657

29,859

Interest income on loans (tax-equivalent basis)

368,017

330,697

358,412

1,400,311

1,301,421

Less: Accretion

(9,974)

(14,086)

(9,663)

(43,467)

(65,647)

Core interest income on loans (tax-equivalent basis) (non-GAAP)

$

358,043

$

316,611

$

348,749

$

1,356,844

$

1,235,774

Average loans

$

43,042,968

$

37,573,433

$

42,143,922

$

40,889,434

$

36,271,956

Add: Average unaccreted loan discounts

114,338

161,556

125,315

131,111

187,097

Average loans (non-GAAP)

$

43,157,306

$

37,734,989

$

42,269,237

$

41,020,545

$

36,459,053

Yield on average loans—reported (5)

3.39

%

3.48

%

3.36

%

3.42

%

3.59

%

Contractual yield on average loans (non-GAAP) (5)

3.28

%

3.32

%

3.26

%

3.31

%

3.39

%

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Cost of Average Deposits

2015

2014

2015

2015

2014

($ in thousands)

Interest expense on deposits

$

16,638

$

14,470

$

15,903

$

61,072

$

60,454

Add: Amortization of CD premiums

1,313

1,006

6,352

Core interest expense on deposits (non-GAAP)

$

16,638

$

15,783

$

15,903

$

62,078

$

66,806

Average deposits

$

48,282,365

$

37,128,213

$

44,596,921

$

42,984,779

$

34,998,092

Less: Average unamortized CD premiums

(1,607)

(159)

(3,876)

Average deposits (non-GAAP)

$

48,282,365

$

37,126,606

$

44,596,921

$

42,984,620

$

34,994,216

Cost of average deposits—reported

0.14

%

0.15

%

0.14

%

0.14

%

0.17

%

Contractual cost of average deposits (non-GAAP)

0.14

%

0.17

%

0.14

%

0.14

%

0.19

%

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Net Interest Margin

2015

2014

2015

2015

2014

($ in thousands)

Net interest income

$

404,699

$

340,855

$

388,881

$

1,516,663

$

1,330,760

Add: Tax-equivalent adjustment

36,927

28,766

35,619

134,352

109,323

Net interest income (tax-equivalent basis)

441,626

369,621

424,500

1,651,015

1,440,083

Less: Accretion/amortization

(9,974)

(15,399)

(9,663)

(44,473)

(71,999)

Less: One-time special FHLB dividend

(9,134)

Core net interest income (tax-equivalent basis) (non-GAAP)

$

431,652

$

354,222

$

414,837

$

1,597,408

$

1,368,084

Average interest-earning assets

$

56,546,759

$

45,723,915

$

53,017,023

$

51,470,317

$

43,438,577

Add: Average unaccreted loan discounts

114,338

161,556

125,315

131,111

187,097

Average interest-earning assets (non-GAAP)

$

56,661,097

$

45,885,471

$

53,142,338

$

51,601,428

$

43,625,674

Net interest margin—reported

3.10

%

3.21

%

3.17

%

3.21

%

3.32

%

Core net interest margin (non-GAAP)

3.02

%

3.06

%

3.09

%

3.09

%

3.14

%

 

 

Quarter Ended  December 31,

Quarter Ended  September 30,

Year Ended  December 31,

Efficiency Ratio

2015

2014

2015

2015

2014

($ in thousands)

Net interest income

$

404,699

$

340,855

$

388,881

$

1,516,663

$

1,330,760

Less: Accretion/amortization

(9,974)

(15,399)

(9,663)

(44,473)

(71,999)

Less: One-time special FHLB dividend

(9,134)

Core net interest income (non-GAAP)

$

394,725

$

325,456

$

379,218

$

1,463,056

$

1,258,761

Noninterest income

$

90,151

$

75,834

$

79,747

$

325,053

$

318,355

Less: Discounts recognized in gain on sale of loans

(1,679)

Less: One-time gain on sale of investments

(23,580)

Core noninterest income (non-GAAP)

$

90,151

$

75,834

$

79,747

$

325,053

$

293,096

Total revenue

$

494,850

$

416,689

$

468,628

$

1,841,716

$

1,649,115

Total core revenue (non-GAAP)

$

484,876

$

401,290

$

458,965

$

1,788,109

$

1,551,857

Noninterest expense

$

300,924

$

244,150

$

275,897

$

1,095,609

$

922,746

Less: Intangible amortization

(3,007)

(3,649)

(3,170)

(12,993)

(15,552)

Core noninterest expense (non-GAAP)

$

297,917

$

240,501

$

272,727

$

1,082,616

$

907,194

Efficiency ratio

60.8

%

58.6

%

58.9

%

59.5

%

56.0

%

Core efficiency ratio (non-GAAP)

61.4

%

59.9

%

59.4

%

60.5

%

58.5

%

 

Logo- http://photos.prnewswire.com/prnh/20130906/MM75721LOGO

 

SOURCE First Republic Bank



RELATED LINKS

http://www.firstrepublic.com