First Republic Reports Record Annual Earnings

Core EPS up 24% and Wealth Management Assets up 33% for the Year

Jan 16, 2014, 07:00 ET from First Republic Bank

SAN FRANCISCO, Jan. 16, 2014 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the fourth quarter and the year ended December 31, 2013.

(Logo: http://photos.prnewswire.com/prnh/20130906/MM75721LOGO)

"First Republic had a strong quarter and a terrific year," said Jim Herbert, Chairman and Chief Executive Officer.  "Core diluted EPS increased 24% in 2013.  We're quite pleased with the growth in our banking and wealth management businesses.  Asset quality remains excellent and total equity grew 22%."

2013 Full Year Highlights (1)

Strong Financial Results

  • Net income was $462.1 million, an increase of 15.2%. 
  • Diluted earnings per share ("EPS") were $3.10, up 12.7%. 
  • Core net income rose to $401.4 million, up 31.3%. (2)
  • Core diluted EPS were $2.65, up 23.8%. (2)

Continued Franchise Growth

  • Loan originations were a record $17.8 billion, up 15.4% from a year ago.
  • Loans outstanding totaled $34.3 billion, up 20.2% from a year ago.
  • Deposits were $32.1 billion, up 18.4% from a year ago.
  • Total equity was $4.2 billion, up 22.4% from a year ago.
  • Wealth management assets reached $41.6 billion, up 32.9% from a year ago.

Operating Results

  • Core net interest margin was 3.26% in 2013 and 3.53% in 2012. (2)
  • Nonperforming assets were 14 basis points of total assets at year-end.

Quarterly Financial Highlights

  • Loan originations were $4.1 billion for the quarter.
  • Net income was $115.3 million
  • Diluted EPS were $0.75.
  • Core net income was $103.3 million, up 16.3% from last year's fourth quarter. (2)
  • Core diluted EPS were $0.66, up 8.2% from last year's fourth quarter. (2)
  • Loans outstanding of $34.3 billion, up 4.8% for the quarter.
  • Deposits of $32.1 billion, up 2.5% for the quarter.
  • Wealth management assets were $41.6 billion, up 8.7% from the prior quarter.
  • Core net interest margin was 3.06%, compared to 3.15% for the prior quarter.  The margin decline was predominately due to higher average cash balances compared to the prior quarter. (2)

"Wealth management and business banking both had another very good quarter and continue to be important drivers of success," said Katherine August-deWilde, President and Chief Operating Officer.  "We are actively adding new clients, and all of our markets are performing very well."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the fourth quarter of $0.12 per share of common stock, which is payable on February 14, 2014 to shareholders of record as of January 31, 2014. 

Asset Quality

The Bank's credit quality remains very strong.  Nonperforming assets were 14 basis points of total assets. 

Net charge-offs for the year totaled only 5 basis points of average loans.

In the fourth quarter, the Bank recorded a provision for loan losses of $7.8 million.  This provision is related primarily to the continued growth in new loans.  The allowance related to loans originated since our independence totaled $144.5 million, or 0.52% of such loans outstanding. 

Capital Strength

Total equity increased 22.4% from a year ago.  At year-end, the Bank's Tier 1 leverage ratio was 9.19%. 

During the quarter, the Bank issued $200 million of 7.00% Noncumulative Perpetual Preferred Stock, which qualifies as Tier 1 capital. 

Book Value

Book value per common share was $24.63 at December 31, 2013, up 11.4% from a year ago. 

Franchise Development

Composition of Loan Originations

Loan originations totaled $4.1 billion for the quarter.  Nearly half of such originations were attributable to business loans, multifamily and commercial real estate loans and other non-single family lending.  Single family and home equity lines of credit originations were $2.2 billion; 58% of the home loans were for purchases.

Total Assets

Total assets were $42.1 billion, up 2.8% for the quarter.  Loans were $34.3 billion, up 4.8% for the quarter.

Excellent Deposit Growth

Total deposits increased to $32.1 billion, up 2.5% compared to the prior quarter and up 18.4% compared to a year ago.  At December 31, 2013, 96% of deposits were core deposits. (3)

The average contractual rate paid on all deposits declined to 0.25% for the quarter, compared to 0.28% for the prior quarter. 

Continued Expansion of Wealth Management

Total wealth management assets were $41.6 billion, up $3.3 billion, or 8.7% from the prior quarter and up $10.3 billion, or 32.9% for the year.  Such growth in wealth management assets for the year was driven significantly by net new assets obtained from new and existing clients.  Wealth management assets include investment management assets of $21.8 billion, brokerage assets and money market mutual funds of $13.9 billion, and trust and custody assets of $5.9 billion

Wealth management fees earned for the quarter totaled $37.1 million, up 9.7% compared to the prior quarter.  The increased fees reflect the growth in assets under management.

Limited Mortgage Banking Activity

Mortgage banking volume and profitability were down compared to the fourth quarter of last year and the first two quarters of 2013.  The Bank sold $215.8 million of primarily longer-term, fixed rate home loans during the quarter and recorded modest gains of $306,000, or 0.14% of loans sold. 

Loans serviced for investors totaled $6.0 billion, up 31.0% from a year ago primarily due to the increased level of loan sales in the first half of 2013.  The carrying value of mortgage servicing rights was $29.8 million, or 50 basis points of such loans serviced. 

Income Statement and Key Ratios

Revenue Growth

Total revenues were $371.0 million for the quarter, a 2.5% increase from the prior quarter. Total revenues for 2013 were $1.5 billion, up 9.4% from 2012.

Core revenues were $345.9 million for the quarter, a 4.4% increase from the prior quarter. Core revenues for 2013 were $1.3 billion, up 16.4% from 2012. (2)

Net Interest Income Growth

Net interest income was $314.8 million for the quarter, a 2.1% increase from the prior quarter.  Net interest income for 2013 was $1.2 billion, up 4.4% from 2012.   

Core net interest income was $289.7 million for the quarter, a 4.4% increase from the prior quarter.  Core net interest income for 2013 was $1.1 billion, up 11.5% from 2012. (2)

Net Interest Margin

The Bank's net interest margin was 3.32% for the quarter, compared to 3.50% for the prior quarter.  For 2013, the net interest margin was 3.62%. 

The core net interest margin was 3.06% for the quarter, compared to 3.15% for the prior quarter.  For 2013, the core net interest margin was 3.26%, compared to 3.53% for 2012. (2)

High average cash balances contributed significantly to the decline in core net interest margin.  Increased liquidity in the fourth quarter, in the form of $2.6 billion of average cash, resulted in approximately 7 basis points of the 9 basis point decline in core net interest margin quarter-over-quarter. (2)

Noninterest Income

Noninterest income for the quarter was $56.2 million, up $2.6 million, or a 4.8% increase compared to the prior quarter.  For 2013, noninterest income was $244.4 million

The increase in noninterest income from the prior quarter is primarily due to increases in wealth management fees.

Noninterest Expense and Efficiency Ratio (1)

Effective as of the fourth quarter of 2013, the Bank adopted an amended FASB standard related to accounting for low income housing tax credit investments.  This change results in lower noninterest expense, a better efficiency ratio, increased income tax expense and an increased effective tax rate.  Under this new standard, the amortization expense related to these investments is now included in the provision for income taxes and is no longer included in operating expenses.  We are reporting this way herein and going forward, consistent with the new FASB standard.

Noninterest expense for the quarter was $200.9 million, a 4.8% increase over the prior quarter.  For 2013, noninterest expense was $768.0 million, up 13.4% from 2012. 

The efficiency ratio was 54.2% for the quarter, compared to 53.0% for the prior quarter.  For 2013 and 2012, the efficiency ratio was 52.3% and 50.5%, respectively. 

The core efficiency ratio was 56.9% for the quarter, compared to 56.5% for the prior quarter.  For 2013, the core efficiency ratio was 55.8% versus 56.8% for 2012. (2)

Income Tax Rate (1)

The Bank's effective tax rate for 2013 was 30.4%, compared to 33.0% for 2012.  These effective tax rates reflect the adoption of the amended FASB standard, which does not alter the amount of income taxes actually paid by the Bank.  The decrease in the effective tax rate in 2013 was the result of the steady increase in tax-exempt securities, bank-owned life insurance, tax credit investments and tax-advantaged loans.

(1) On January 15, 2014, the FASB issued an amended accounting standard for low income housing tax credit investments. In accordance with this standard, the Bank has adjusted its financial statements for all prior periods. The adoption of this standard reduced noninterest expense and increased provision for income taxes. See "Noninterest Expense and Efficiency Ratio" and "Income Tax Rate" for further discussion of this change and supplemental schedule "Impact of Low Income Housing Tax Credit Investments Accounting Adjustments" for the impact of the change in accounting to noninterest expense, provision for income taxes, core efficiency ratio, and, to a minor extent, net income, diluted EPS and core diluted EPS. (2) See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures." (3) Core deposits exclude CDs greater than $250,000.

Conference Call Details

First Republic Bank's fourth quarter 2013 earnings conference call is scheduled for January 16, 2014 at 11:00 a.m. PT / 2:00 p.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 #29111696.  International callers should dial (734) 823-3244.  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 15 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 16, 2014, at 12:00 p.m. PT / 3:00 p.m. ET, through January 24, 2014, 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 #29111696.  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

First Republic Bank (NYSE: FRC) is a full-service bank specializing in private banking and private business banking.  The Bank's wealth management affiliates offer trust, investment consulting and advisory services.  Founded in 1985, First Republic specializes in exceptional, relationship-based service offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Greenwich, Palm Beach 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.  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, 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 from those discussed in the forward-looking statements include, but are not limited to: our ability to compete for banking and wealth management customers; earthquakes and other natural disasters in our markets; changes in interest rates; our ability to maintain high underwriting standards; economic conditions in our markets; conditions in financial markets and economic conditions generally; regulatory restrictions on our operations and current or future legislative or regulatory changes affecting the banking and investment management industries.  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 and Quarterly Reports on Form 10-Q.  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

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

(in thousands, except per share amounts)

2013

2012

2013

2013

2012

Interest income:

Loans

$

307,876

$

294,763

$

303,747

$

1,193,931

$

1,160,522

Investments

43,965

33,278

41,212

159,086

124,040

Cash and cash equivalents

1,637

546

1,091

3,001

2,644

Total interest income

353,478

328,587

346,050

1,356,018

1,287,206

Interest expense:

Deposits

18,049

11,732

18,504

60,817

56,981

Borrowings

20,605

14,521

19,336

71,026

57,205

Total interest expense

38,654

26,253

37,840

131,843

114,186

Net interest income

314,824

302,334

308,210

1,224,175

1,173,020

Provision for loan losses

7,815

17,204

10,023

36,969

63,436

Net interest income after provision for loan losses

307,009

285,130

298,187

1,187,206

1,109,584

Noninterest income:

Investment advisory fees

30,731

16,305

28,766

112,121

59,054

Brokerage and investment fees

3,912

2,904

2,518

11,892

10,682

Trust fees

2,478

2,381

2,552

9,588

8,715

Foreign exchange fee income

3,248

3,147

2,938

13,912

11,504

Deposit fees

4,545

3,746

4,458

18,258

13,994

Gain on sale of loans

306

17,721

1,215

36,290

38,831

Loan servicing fees, net

2,152

217

3,443

7,230

(5,307)

Loan and related fees

1,741

1,829

1,753

7,515

6,291

Income from investments in life insurance

6,756

6,212

5,813

24,365

22,186

Other income

331

1,149

176

3,179

2,784

Total noninterest income

56,200

55,611

53,632

244,350

168,734

Noninterest expense:

Salaries and employee benefits

103,301

88,412

98,880

402,222

339,656

Occupancy

23,306

21,834

22,822

91,120

83,648

Information systems

22,132

19,745

20,496

79,955

72,508

FDIC and other deposit assessments

7,500

6,684

6,849

27,976

24,386

Advertising and marketing

6,994

6,061

5,820

25,459

25,120

Professional fees

7,316

4,854

6,355

22,488

19,848

Amortization of intangibles

6,218

4,927

6,430

26,147

20,472

Other expenses

24,162

24,873

24,023

92,630

91,333

Total noninterest expense

200,929

177,390

191,675

767,997

676,971

Income before provision for income taxes

162,280

163,351

160,144

663,559

601,347

Provision for income taxes

46,981

53,762

48,396

201,489

198,645

Net income before noncontrolling interests

115,299

109,589

111,748

462,070

402,702

Less: Net income from noncontrolling interests

1,538

First Republic Bank net income

115,299

109,589

111,748

462,070

401,164

Dividends on preferred stock

12,800

6,534

10,389

40,671

18,743

Redemption of preferred stock

13,200

Net income available to common shareholders

$

102,499

$

103,055

$

101,359

$

421,399

$

369,221

Basic earnings per common share

$

0.78

$

0.79

$

0.77

$

3.21

$

2.84

Diluted earnings per common share

$

0.75

$

0.76

$

0.74

$

3.10

$

2.75

Dividends per common share

$

0.12

$

0.20

$

0.12

$

0.36

$

0.30

Weighted average shares - basic

131,905

130,614

131,436

131,326

130,051

Weighted average shares - diluted

136,522

134,731

136,133

135,949

134,189

 

CONSOLIDATED BALANCE SHEET

As of

($ in thousands)

December 31, 2013

September 30, 2013

December 31, 2012

ASSETS

Cash and cash equivalents

$

807,885

$

1,934,727

$

602,264

Securities purchased under agreements to resell

100

19,373

30,901

Investment securities available-for-sale

1,571,206

1,221,802

960,433

Investment securities held-to-maturity

3,252,534

2,966,120

2,545,189

Loans:

Single family (1-4 units)

19,869,491

18,880,349

16,672,924

Home equity lines of credit

1,961,476

1,959,032

1,887,604

Multifamily (5+ units)

4,022,457

3,915,097

3,006,946

Commercial real estate

3,430,881

3,318,749

2,909,201

Single family construction

290,314

275,485

234,213

Multifamily/commercial construction

278,456

274,543

171,268

Commercial business

3,582,054

3,202,098

2,600,151

Other secured

397,878

422,651

391,833

Unsecured loans and lines of credit

202,197

271,393

279,515

Stock secured

163,650

120,195

145,460

Total unpaid principal balance

34,198,854

32,639,592

28,299,115

Net unaccreted discount

(220,147)

(242,525)

(332,404)

Net deferred fees and costs

21,841

17,192

20,048

Allowance for loan losses

(153,005)

(145,912)

(129,889)

    Loans, net

33,847,543

32,268,347

27,856,870

Loans held for sale

58,759

60,054

204,631

Investments in life insurance

766,291

759,240

701,672

Tax credit investments

688,870

624,836

480,686

Prepaid expenses and other assets

680,756

655,067

581,162

Premises, equipment and leasehold improvements, net

166,544

162,839

142,201

Goodwill

106,549

106,549

106,549

Other intangible assets

132,745

138,963

158,892

Mortgage servicing rights

29,781

29,870

17,786

Other real estate owned

3,200

3,353

Total Assets

$

42,112,763

$

40,951,140

$

34,389,236

LIABILITIES AND EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking accounts

$

8,859,276

$

8,554,095

$

8,544,472

Interest-bearing checking accounts

7,325,235

6,440,239

5,408,325

Money Market (MM) checking accounts

4,966,626

5,111,552

4,104,791

MM savings and passbooks

7,025,686

7,151,758

6,064,629

Certificates of deposit

3,905,893

4,032,725

2,966,030

Total Deposits

32,082,716

31,290,369

27,088,247

Short-term borrowings

75,000

Long-term debt

5,150,000

5,150,000

3,150,000

Debt related to variable interest entity

43,132

46,999

56,450

Other liabilities

676,868

584,655

619,436

Total Liabilities

37,952,716

37,072,023

30,989,133

Shareholders' Equity:

Preferred stock

889,525

689,525

499,525

Common stock

1,328

1,322

1,313

Additional paid-in capital

2,042,027

2,043,498

2,027,578

Retained earnings

1,213,896

1,127,397

840,311

Accumulated other comprehensive income

13,271

17,375

31,376

Total Shareholders' Equity

4,160,047

3,879,117

3,400,103

Total Liabilities and Shareholders' Equity

$

42,112,763

$

40,951,140

$

34,389,236

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

2013

2012

2013

2013

2012

Operating Information

Net income to average assets (4)

1.07

%

1.30

%

1.12

%

1.20

%

1.28

%

Net income available to common shareholders to average common equity (4)

12.51

%

14.18

%

12.69

%

13.50

%

13.48

%

Dividend payout ratio

16.0

%

26.1

%

16.1

%

11.6

%

10.9

%

Efficiency ratio (1), (5)

54.2

%

49.6

%

53.0

%

52.3

%

50.5

%

Efficiency ratio (non-GAAP) (1), (5), (6)

56.9

%

54.4

%

56.5

%

55.8

%

56.8

%

Yields/Rates (4)

Cash and cash equivalents

0.25

%

0.25

%

0.26

%

0.25

%

0.26

%

Investment securities (7), (8)

5.27

%

5.46

%

5.30

%

5.18

%

5.53

%

Loans (7), (9)

3.75

%

4.34

%

3.90

%

3.96

%

4.66

%

Total interest-earning assets

3.70

%

4.35

%

3.90

%

3.98

%

4.61

%

Checking

0.02

%

0.01

%

0.02

%

0.01

%

0.01

%

Money market checking and savings

0.22

%

0.12

%

0.26

%

0.20

%

0.20

%

CDs (9)

1.01

%

1.08

%

1.04

%

1.04

%

1.07

%

Total deposits

0.22

%

0.18

%

0.24

%

0.21

%

0.23

%

Short-term borrowings

0.00

%

0.29

%

0.00

%

0.19

%

0.25

%

Long-term FHLB advances

1.57

%

1.80

%

1.57

%

1.63

%

1.82

%

Other long-term debt (9)

1.84

%

1.85

%

1.79

%

1.79

%

2.47

%

Total borrowings

1.57

%

1.79

%

1.57

%

1.51

%

1.84

%

Total interest-bearing liabilities

0.40

%

0.35

%

0.43

%

0.39

%

0.41

%

Net interest spread

3.30

%

4.00

%

3.47

%

3.59

%

4.20

%

Net interest margin

3.32

%

4.02

%

3.50

%

3.62

%

4.22

%

Net interest margin (non-GAAP) (6)

3.06

%

3.46

%

3.15

%

3.26

%

3.53

%

(4)

For the periods less than a year, ratios are annualized.

(5)  

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

(6)  

For a reconciliation of these ratios to the equivalent GAAP ratios, see "Use of Non-GAAP Financial Measures."

(7)  

Yield is calculated on a tax-equivalent basis.

(8) 

Includes FHLB stock and securities purchased under agreements to resell

(9)  

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

The following table presents loans sold and gain on sale of loans for the periods indicated:

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Mortgage Loan Sales

Loans sold:

Agency

$

53,296

$

242,073

$

48,509

$

467,049

$

922,475

Non-agency

162,480

429,241

235,658

2,196,439

1,510,905

Total loans sold

$

215,776

$

671,314

$

284,167

$

2,663,488

$

2,433,380

Gain on sale of loans:

Amount

$

306

$

17,721

$

1,215

$

36,290

$

38,831

Gain as a percentage of loans sold

0.14

%

2.64

%

0.43

%

1.36

%

1.60

%

The following table presents loan originations, by product type, for the periods indicated:

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Single family (1-4 units)

$

1,862,710

$

2,260,035

$

2,269,410

$

9,039,956

$

8,603,111

Home equity lines of credit

308,318

322,440

350,452

1,271,646

1,112,655

Multifamily

216,388

413,367

576,604

1,695,073

1,185,727

Commercial real estate

247,825

334,913

366,820

1,156,273

1,044,507

Construction

196,085

117,814

297,878

868,070

496,472

Commercial business

994,361

661,888

871,356

3,042,350

2,190,685

Other loans

230,182

191,535

197,839

768,912

829,784

Total loans originated

$

4,055,869

$

4,301,992

$

4,930,359

$

17,842,280

$

15,462,941

The following table separates our loan portfolio as of December 31, 2013 between loans acquired on July 1, 2010 and loans originated since July 1, 2010:

Composition of Loan Portfolio

($ in thousands)

Loans acquired on July 1, 2010

Loans originated since July 1, 2010

Total loans at December 31, 2013

Single family (1-4 units)

$

3,778,646

$

16,090,845

$

19,869,491

Home equity lines of credit

770,695

1,190,781

1,961,476

Multifamily (5+ units)

474,178

3,548,279

4,022,457

Commercial real estate

857,430

2,573,451

3,430,881

Single family construction

7,159

283,155

290,314

Multifamily/commercial construction

1,151

277,305

278,456

Commercial business

361,339

3,220,715

3,582,054

Other secured

37,734

360,144

397,878

Unsecured loans and lines of credit

41,741

160,456

202,197

Stock secured

4,371

159,279

163,650

Total unpaid principal balance

6,334,444

27,864,410

34,198,854

Net unaccreted discount

(219,650)

(497)

(220,147)

Net deferred fees and costs

(6,644)

28,485

21,841

Allowance for loan losses

(8,551)

(144,454)

(153,005)

Loans, net

$

6,099,599

$

27,747,944

$

33,847,543

 

As of

(in thousands, except per share amounts)

December 31, 2013

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

Book Value

Number of shares of common stock outstanding

132,768

132,179

131,822

131,481

131,273

Book value per common share

$

24.63

$

24.13

$

23.50

$

22.97

$

22.10

Tangible book value per common share

$

22.83

$

22.27

$

21.59

$

21.00

$

20.07

Capital Ratios

Tier 1 leverage ratio

9.19

%

9.18

%

9.83

%

9.36

%

9.33

%

Tier 1 common equity ratio (10)

10.30

%

10.57

%

10.87

%

11.44

%

11.14

%

Tier 1 risk-based capital ratio

13.34

%

13.06

%

13.52

%

13.53

%

13.28

%

Total risk-based capital ratio

13.89

%

13.62

%

14.12

%

14.13

%

13.87

%

(10)

Tier 1 common equity ratio represents common equity less goodwill and intangible assets divided by risk-weighted assets.

 

As of

($ in millions)

December 31, 2013

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

Assets Under Management

First Republic Investment Management

$

21,812

$

20,093

$

19,045

$

18,573

$

17,000

Brokerage and Investment:

Brokerage

12,933

11,905

10,784

10,357

8,810

Money Market Mutual Funds

941

870

929

870

852

Total Brokerage and Investment

13,874

12,775

11,713

11,227

9,662

Trust Company:

Trust

3,013

2,857

2,822

2,326

2,157

Custody

2,879

2,510

2,766

2,520

2,471

Total Trust Company

5,892

5,367

5,588

4,846

4,628

Total Wealth Management Assets

41,578

38,235

36,346

34,646

31,290

Loans serviced for investors

6,000

5,957

6,036

5,433

4,581

Total fee-based assets

$

47,578

$

44,192

$

42,382

$

40,079

$

35,871

 

Asset Quality Information

As of

($ in thousands)

December 31, 2013

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

Nonperforming assets:

Nonaccrual loans

$

54,492

$

51,847

$

62,824

$

49,873

$

49,153

Other real estate owned

3,200

3,353

Total nonperforming assets

$

57,692

$

55,200

$

62,824

$

49,873

$

49,153

Nonperforming assets to total assets

0.14

%

0.13

%

0.17

%

0.14

%

0.14

%

Accruing loans 90 days or more past due

$

$

$

$

5,959

$

Restructured accruing loans

$

19,984

$

19,950

$

18,766

$

18,223

$

12,398

 

Three Months  Ended December 31,

Three Months

Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Net loan charge-offs to allowance for loan losses

$

722

$

315

$

12,418

$

13,853

$

1,660

Net loan charge-offs to average total loans (4)

0.01

%

0.01

%

0.16

%

0.05

%

0.01

%

 

Average Balance Sheet

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Assets:

Cash and cash equivalents

$

2,590,814

$

880,708

$

1,691,248

$

1,199,650

$

1,022,996

Investment securities (11)

4,696,478

3,513,251

4,350,133

4,322,772

3,243,171

Loans (12)

33,161,682

27,232,372

31,371,115

30,643,493

25,106,210

Total interest-earning assets

40,448,974

31,626,331

37,412,496

36,165,915

29,372,377

Noninterest-earning cash

230,262

232,787

247,206

240,043

205,978

Goodwill and other intangibles

242,297

148,834

248,641

251,942

151,396

Other assets

1,863,580

1,587,601

1,776,161

1,720,385

1,499,592

Total noninterest-earning assets

2,336,139

1,969,222

2,272,008

2,212,370

1,856,966

Total Assets

$

42,785,113

$

33,595,553

$

39,684,504

$

38,378,285

$

31,229,343

Liabilities and Equity:

Checking

$

16,011,898

$

13,351,861

$

14,629,935

$

14,420,567

$

11,515,255

Money market checking and savings

12,814,579

10,095,930

11,884,853

11,443,203

9,691,658

CDs (12)

3,995,699

3,090,586

3,861,458

3,447,556

3,398,532

Total deposits

32,822,176

26,538,377

30,376,246

29,311,326

24,605,445

Short-term borrowings

12

10,804

2,391

402,176

3,262

Long-term FHLB advances

5,150,000

3,150,000

4,822,826

4,253,562

2,992,760

Other long term-debt (12)

45,874

59,257

49,233

50,709

105,535

Total borrowings

5,195,886

3,220,061

4,874,450

4,706,447

3,101,557

Total interest-bearing liabilities

38,018,062

29,758,438

35,250,696

34,017,773

27,707,002

Noninterest-bearing liabilities

685,217

533,589

575,420

571,576

464,605

Preferred equity

830,829

413,112

689,525

666,552

290,675

Common equity

3,251,005

2,890,414

3,168,863

3,122,384

2,738,937

Noncontrolling interests

28,124

Total Liabilities and Equity

$

42,785,113

$

33,595,553

$

39,684,504

$

38,378,285

$

31,229,343

(11)

Includes FHLB stock and securities purchased under agreements to resell.

(12)

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

Purchase Accounting Accretion and Amortization

The following table presents the impact of purchase accounting from the Bank's re-establishment as an independent institution for the periods indicated:

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Accretion/amortization to net interest income:

Loans

$

22,356

$

36,746

$

28,008

$

111,682

$

162,018

Deposits

2,802

4,342

2,619

11,897

22,239

Borrowings

1,942

Total

$

25,158

$

41,088

$

30,627

$

123,579

$

186,199

Noninterest income:

Loan commitments

$

$

$

$

$

255

Amortization to noninterest expense:

Intangible assets

$

4,289

$

4,927

$

4,447

$

18,113

$

20,472

 

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, net interest margin and the efficiency ratio. 

Our net income, earnings per share, 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; accrete discounts on loan commitments to noninterest income; amortize premiums on liabilities such as CDs and subordinated notes to interest expense; and amortize intangible assets to noninterest expense.  In addition, earnings per share for the twelve months ended December 31, 2012 were impacted following the redemption of the First Republic Preferred Capital Corporation ("FRPCC") Series D preferred stock in the second quarter of 2012 due to the $13.2 million difference between the liquidation preference and the carrying value established in purchase accounting. 

In December 2012, First Republic purchased substantially all of the assets of Luminous.  The amortization of intangible assets from this transaction is not an adjustment in the calculation of the Bank's non-GAAP measures in 2013.

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 and when planning and forecasting future periods.  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 for the periods indicated:

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

(in thousands, except per share amounts)

2013

2012

2013

2013

2012

Non-GAAP earnings

Net income

$

115,299

$

109,589

$

111,748

$

462,070

$

401,164

Accretion/amortization added to net interest income

(25,158)

(41,088)

(30,627)

(123,579)

(186,199)

Accretion added to noninterest income

(255)

Amortization of intangible assets

4,289

4,927

4,447

18,113

20,472

Add back tax impact of the above items

8,869

15,368

11,127

44,823

70,542

Non-GAAP net income

103,299

88,796

96,695

401,427

305,724

Dividends on preferred stock

(12,800)

(6,534)

(10,389)

(40,671)

(18,743)

Redemption of FRPCC preferred stock

(13,200)

Impact of FRPCC preferred stock redemption

13,200

Non-GAAP net income available to common shareholders

$

90,499

$

82,262

$

86,306

$

360,756

$

286,981

GAAP earnings per common share – diluted

$

0.75

$

0.76

$

0.74

$

3.10

$

2.75

Impact of purchase accounting, net of tax

(0.09)

(0.15)

(0.11)

(0.45)

(0.71)

Impact of FRPCC preferred stock redemption

0.10

Non-GAAP earnings per common share – diluted

$

0.66

$

0.61

$

0.63

$

2.65

$

2.14

Weighted average diluted common shares outstanding

136,522

134,731

136,133

135,949

134,189

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Average yield on loans

Interest income on loans

$

307,876

$

294,763

$

303,747

$

1,193,931

$

1,160,522

Add: Tax-equivalent adjustment on loans

6,013

3,448

5,459

19,816

10,825

Interest income on loans (tax-equivalent basis)

313,889

298,211

309,206

1,213,747

1,171,347

Less: Accretion

(22,356)

(36,746)

(28,008)

(111,682)

(162,018)

Non-GAAP interest income on loans (tax-equivalent basis)

$

291,533

$

261,465

$

281,198

$

1,102,065

$

1,009,329

Average loans

$

33,161,682

$

27,232,372

$

31,371,115

$

30,643,493

$

25,106,210

Add: Average unaccreted loan discounts

234,580

358,084

261,121

277,231

418,583

Average loans (non-GAAP)

$

33,396,262

$

27,590,456

$

31,632,236

$

30,920,724

$

25,524,793

Average yield on loans – reported

3.75

%

4.34

%

3.90

%

3.96

%

4.66

%

Average contractual yield on loans (non-GAAP)

3.46

%

3.76

%

3.52

%

3.56

%

3.95

%

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Average cost of deposits

Interest expense on deposits

$

18,049

$

11,732

$

18,504

$

60,817

$

56,981

Add: Amortization of CD premiums

2,802

4,342

2,619

11,897

22,239

Non-GAAP interest expense on deposits

$

20,851

$

16,074

$

21,123

$

72,714

$

79,220

Average deposits

$

32,822,176

$

26,538,377

$

30,376,246

$

29,311,326

$

24,605,445

Less: Average unamortized CD premiums

(8,863)

(21,278)

(11,400)

(12,958)

(28,888)

Average deposits (non-GAAP)

$

32,813,313

$

26,517,099

$

30,364,846

$

29,298,368

$

24,576,557

Average cost of deposits – reported

0.22

%

0.18

%

0.24

%

0.21

%

0.23

%

Average contractual cost of deposits (non-GAAP)

0.25

%

0.24

%

0.28

%

0.25

%

0.32

%

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Net interest margin

Net interest income

$

314,824

$

302,334

$

308,210

$

1,224,175

$

1,173,020

Add: Tax-equivalent adjustment

23,919

18,121

21,955

84,830

66,114

Net interest income (tax-equivalent basis)

338,743

320,455

330,165

1,309,005

1,239,134

Less: Accretion/amortization

(25,158)

(41,088)

(30,627)

(123,579)

(186,199)

Non-GAAP net interest income (tax-equivalent basis)

$

313,585

$

279,367

$

299,538

$

1,185,426

$

1,052,935

Average interest-earning assets

$

40,448,974

$

31,626,331

$

37,412,496

$

36,165,915

$

29,372,377

Add: Average unaccreted loan discounts

234,580

358,084

261,121

277,231

418,583

Average interest-earning assets (non-GAAP)

$

40,683,554

$

31,984,415

$

37,673,617

$

36,443,146

$

29,790,960

Net interest margin – reported

3.32

%

4.02

%

3.50

%

3.62

%

4.22

%

Net interest margin (non-GAAP)

3.06

%

3.46

%

3.15

%

3.26

%

3.53

%

 

Three Months  Ended December 31,

Three Months  Ended September 30,

Twelve Months  Ended December 31,

($ in thousands)

2013

2012

2013

2013

2012

Efficiency ratio (1)

Net interest income

$

314,824

$

302,334

$

308,210

$

1,224,175

$

1,173,020

Less: Accretion/amortization

(25,158)

(41,088)

(30,627)

(123,579)

(186,199)

Net interest income (non-GAAP)

$

289,666

$

261,246

$

277,583

$

1,100,596

$

986,821

Noninterest income

$

56,200

$

55,611

$

53,632

$

244,350

$

168,734

Less: Accretion of discounts on loan commitments

(255)

Noninterest income (non-GAAP)

$

56,200

$

55,611

$

53,632

$

244,350

$

168,479

Total revenue

$

371,024

$

357,945

$

361,842

$

1,468,525

$

1,341,754

Total revenue (non-GAAP)

$

345,866

$

316,857

$

331,215

$

1,344,946

$

1,155,300

Noninterest expense

$

200,929

$

177,390

$

191,675

$

767,997

$

676,971

Less:  Intangible amortization

(4,289)

(4,927)

(4,447)

(18,113)

(20,472)

Noninterest expense (non-GAAP)

$

196,640

$

172,463

$

187,228

$

749,884

$

656,499

Efficiency ratio

54.2

%

49.6

%

53.0

%

52.3

%

50.5

%

Efficiency ratio (non-GAAP)

56.9

%

54.4

%

56.5

%

55.8

%

56.8

%

 

Supplemental Schedule

The following table presents the impact of the Bank's adoption of an amended accounting standard related to low income housing tax credit investments issued by the FASB on January 15, 2014 and its retroactive application for the periods indicated:

Impact of Low Income Housing Tax Credit Investments Accounting Adjustments

Three Months Ended

Three Months Ended

Three Months Ended

Three Months Ended

Six Months Ended

Twelve Months Ended

($ in thousands, except per share amounts)

Sept. 30, 2010

Dec. 31, 2010

Mar. 31, 2011

Jun. 30, 2011

Sept. 30, 2011

Dec. 31, 2011

Mar. 31, 2012

Jun. 30, 2012

Sept. 30, 2012

Dec. 31, 2012

Mar. 31, 2013

Jun. 30, 2013

Sept. 30, 2013

Dec. 31, 2010

Dec. 31, 2011

Dec. 31, 2012

Noninterest expense

As previously reported

$       136,203

$       143,033

$      134,989

$      138,829

$        144,789

$      158,001

$      164,755

$      171,555

$      178,390

$      183,144

$      197,434

$      200,139

$        203,647

$      279,236

$       576,608

$        697,844

As reported under new guidance

$       136,061

$       140,767

$      133,385

$      137,355

$        141,627

$      154,321

$      159,505

$      167,034

$      173,042

$      177,390

$      186,534

$      188,859

$        191,675

$      276,828

$       566,688

$        676,971

Provision for income taxes

As previously reported

$        46,972

$         49,535

$       52,895

$        46,142

$         49,986

$        49,016

$        41,635

$       42,274

$       45,069

$        47,486

$        44,097

$        38,831

$         36,189

$        96,507

$       198,039

$       176,464

As reported under new guidance

$        47,193

$         51,155

$       54,497

$        47,395

$         52,152

$        51,615

$        46,495

$       47,442

$       50,946

$        53,762

$        54,752

$        51,360

$         48,396

$        98,348

$       205,659

$       198,645

Net income

As previously reported

$        66,395

$        75,967

$       88,772

$       84,832

$        87,793

$       90,691

$        91,758

$       97,907

$      102,696

$      110,111

$      122,308

$       113,719

$        111,983

$       142,362

$       352,088

$       402,472

As reported under new guidance

$        66,316

$        76,613

$       88,774

$       85,053

$        88,789

$       91,772

$        92,148

$       97,260

$      102,167

$      109,589

$      122,553

$       112,470

$        111,748

$       142,929

$       354,388

$       401,164

Diluted EPS

As previously reported

$            0.53

$            0.60

$            0.67

$            0.64

$            0.66

$           0.68

$            0.67

$            0.60

$            0.72

$            0.77

$            0.85

$            0.77

$             0.75

$             1.12

$             2.65

$             2.76

As reported under new guidance

$            0.53

$            0.60

$            0.67

$            0.64

$            0.67

$           0.69

$            0.67

$            0.60

$            0.72

$            0.76

$            0.85

$            0.76

$             0.74

$             1.13

$             2.67

$             2.75

Diluted EPS (non-GAAP)

As previously reported

$            0.35

$            0.35

$             0.41

$             0.41

$            0.42

$           0.44

$            0.49

$            0.50

$            0.54

$            0.61

$            0.72

$            0.64

$             0.64

$             0.71

$             1.68

$             2.15

As reported under new guidance

$            0.35

$            0.36

$             0.41

$             0.41

$            0.42

$           0.45

$            0.49

$            0.49

$            0.54

$            0.61

$            0.72

$            0.64

$             0.63

$             0.71

$             1.70

$             2.14

Efficiency ratio (non-GAAP)

As previously reported

59.0 %

59.4 %

58.7 %

59.1 %

58.8 %

59.9 %

59.6 %

60.5 %

58.6 %

56.2 %

57.3 %

58.9 %

60.1 %

59.2 %

59.2 %

58.6 %

As reported under new guidance

58.9 %

58.3 %

57.9 %

58.5 %

57.5 %

58.5 %

57.6 %

58.8 %

56.8 %

54.4 %

54.1 %

55.5 %

56.5 %

58.6 %

58.1 %

56.8 %

 

SOURCE First Republic Bank



RELATED LINKS

http://www.firstrepublic.com