First Republic Reports Strong Second Quarter 2016 Results

Revenues Year-Over-Year Increased 17.5%

News provided by

Jul 14, 2016, 08:00 ET

SAN FRANCISCO, July 14, 2016 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended June 30, 2016.

"We are quite pleased with the strength and consistency of second quarter results," said Jim Herbert, Chairman and CEO. "Earnings, credit quality and capital levels remain very strong."

Quarterly Highlights ⁽¹⁾

Financial Results

Compared to last year's second quarter:
- Revenues were $535.1 million, up 17.5%.
- Net income was $165.0 million, up 25.6%.
Diluted earnings per share ("EPS") of $0.97.
(Includes $0.08 per share positive impact from the adoption of new accounting guidance for share-based compensation.) ⁽¹⁾
Loan originations totaled $6.5 billion, our strongest quarter ever.
Loans sold totaled $920.8 million.
Net interest margin was 3.21%, compared to 3.20% for the prior quarter.
Core net interest margin was 3.16%, compared to 3.14% for the prior quarter. ⁽²⁾
Efficiency ratio was 59.8%.

Continued Financial and Credit Strength

Common Equity Tier 1 ratio was 10.74%.
Total equity has grown 19.8% from a year ago.
Tangible book value per share was $32.53, up 13.8% from a year ago.
Nonperforming assets were a low 9 basis points of total assets.
Net charge-offs were $1.0 million for the quarter, or only 1 basis point of average loans.

Franchise Development

Loans outstanding, excluding loans held for sale, totaled $47.6 billion, up 16.0% from a year ago.
Deposits were $51.2 billion, up 22.1% from a year ago.
Wealth management assets were $75.8 billion, up 31.7% from a year ago.
Wealth management revenues were $70.6 million, up 27.4% from a year ago.

"Revenues grew 17.5% from a year ago, driven by strong performance across all lines of business," said Chief Financial Officer Mike Roffler. "Net interest margin was stable and our efficiency ratio improved."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the second quarter of $0.16 per share of common stock, which is payable on August 11, 2016 to shareholders of record as of July 28, 2016.

Strong Asset Quality

Credit quality remains very strong. Nonperforming assets were only 9 basis points of total assets at June 30, 2016.

The Bank had net charge-offs for the quarter of only $1.0 million, while adding $14.2 million to its allowance for loan losses due to continued loan growth.

Continued Capital Strength

Total equity has grown 19.8% from a year ago.

During the second quarter, the Bank issued 2.9 million shares of new common stock, which added approximately $202 million to common equity.

The Bank's Common Equity Tier 1 ratio was 10.74% at June 30, 2016, up from 10.61% last quarter and 10.87% a year ago.

Tangible Book Value Growth

Tangible book value per common share was $32.53 at June 30, 2016, up 13.8% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations totaled a record $6.5 billion for the quarter, compared to $5.8 billion for the second quarter a year ago, up 11.3%.

Loans outstanding, excluding loans held for sale, totaled $47.6 billion at June 30, 2016, up 7.9% for the first six months of 2016 and up 16.0% compared to a year ago.

Deposit Growth

Total deposits increased to $51.2 billion, up 6.8% for the first six months of 2016 and up 22.1% compared to a year ago.

At June 30, 2016, checking accounts totaled 63.4% of deposits.

The average rate paid on deposits was 0.13% for both the second quarter and the prior quarter.

Investments

Total investments at June 30, 2016 were $11.6 billion, up 10.9% for the first six months of 2016 and up 49.3% compared to a year ago.

High-quality liquid assets totaled $6.3 billion at June 30, 2016, up 8.2% for the first six months of 2016 and up 53.2% compared to a year ago. Such assets represent 9.7% of total assets at June 30, 2016.

Mortgage Banking Activity

During the second quarter, the Bank sold $920.8 million of loans and recorded a gain on sale of $822,000, compared to loan sales of $887.2 million and a gain on sale of $3.5 million during the second quarter of last year.

Loans serviced for investors at quarter-end totaled $11.1 billion, up 5.0% for the first six months of 2016 and up 7.3% from a year ago. Net loan servicing fees for the quarter were $3.5 million, up 20.2% from a year ago.

Continued Expansion of Wealth Management

Wealth management revenues totaled $70.6 million for the quarter, up 27.4% compared to last year's second quarter. Such revenues represented 13% of total revenues for the quarter.

Total wealth management assets were $75.8 billion at June 30, 2016, up 4.9% for the first six months of 2016 and up 31.7% compared to a year ago.

The growth in wealth management assets for the quarter was primarily due to net new assets from both existing and new clients. Wealth management assets include investment management assets of $38.3 billion, brokerage assets and money market mutual funds of $30.3 billion, and trust and custody assets of $7.3 billion.

Income Statement and Key Ratios

Highlights

Strong Revenue Growth

Total revenues were $535.1 million for the quarter, up 17.5% compared to last year's second quarter.

Continued Net Interest Income Growth

Net interest income was $441.6 million for the quarter, up 17.7% compared to last year's second quarter, resulting primarily from growth in average earning assets.

Net Interest Margin

The Bank's net interest margin was 3.21% for the second quarter, compared to 3.20% for the prior quarter.

The core net interest margin was 3.16% for the quarter, compared to 3.14% for the prior quarter. The increase from the prior quarter was primarily due to lower average cash balances. ⁽²⁾

Noninterest Income

Noninterest income was $93.5 million for the quarter, up 16.5% compared to the second quarter a year ago, which was primarily from increased wealth management revenues.

Efficiency Ratio

The Bank's efficiency ratio was 59.8% for the quarter, compared to 61.4% for the prior quarter and 57.8% for the second quarter a year ago.

Noninterest expense was $320.1 million for the quarter, up 21.7% from the second quarter of last year. The increase was primarily due to increased salaries and benefits from the continued expansion of the franchise, along with growth across all areas of the Bank.

Income Tax Rate ⁽¹⁾

In accordance with the amendments to ASC 718, which the Bank adopted effective January 1, 2016, the effective tax rate for the quarter is inclusive of excess tax benefits recognized during the period. As a result, such excess tax benefits reduced the Bank's effective tax rate for the second quarter of 2016 to 17.8%, from 24.5%. See "Adoption of Amendments to ASC 718" for additional information.

__________

⁽¹⁾On March 30, 2016, the Financial Accounting Standards Board issued amendments to Accounting Standards Codification ("ASC") 718, "Compensation—Stock Compensation," which simplifies certain aspects of accounting for share-based compensation. This guidance is effective January 1, 2017, with early adoption permitted. During the second quarter of 2016, the Bank elected to adopt this guidance, with such guidance retroactively effective as of January 1, 2016. See "Adoption of Amendments to ASC 718" for additional information.
⁽²⁾Core net interest margin is a non-GAAP financial measure that excludes the positive impact of purchase accounting and also the one-time special dividend from the FHLB in the second quarter of 2015. See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."

Conference Call Details

First Republic Bank's second quarter 2016 earnings conference call is scheduled for July 14, 2016 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (855) 224-3902 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #40786516. 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.

For those unable to join the live presentation, a replay of the call will be available beginning July 14, 2016, at 10:00 a.m. PT / 1:00 p.m. ET, through July 21, 2016, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (855) 859-2056 and use conference ID #40786516. International callers should dial (404) 537-3406 and enter the same conference ID number. A replay of the webcast also will be available for 90 days following, accessible in the Investor Relations section of First Republic Bank's website at www.firstrepublic.com.

The Bank's press releases are available after release in the Investor Relations section of First Republic 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 and 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; economic and market conditions affecting the valuation of our investment securities portfolio; our geographic concentration; our opportunities for growth; expectations about the performance of any new offices; demand for our products and services; projections about loan premiums and discounts; our future provisions for loan losses; projections about future levels of loan originations or loan repayments; projections regarding costs; our regulatory compliance and future regulatory requirements; the phase-in of the Basel III Capital Rules; legislative and regulatory actions affecting us and the financial services industry; new accounting standards; future FDIC special assessments or changes to regular assessments; and our ability to successfully execute on initiatives relating to enhancements of our technology. 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 June 30,				Quarter Ended March 31,		Six Months Ended June 30,
(in thousands, except per share amounts)	2016		2015		2016 ⁽¹⁾		2016		2015
Interest income:
Loans	$	383,431	$	333,966	$	368,250	$	751,681	$	655,841
Investments	91,653		63,412		85,388		177,041		120,771
Other	2,931		13,811		2,815		5,746		18,375
Cash and cash equivalents	1,397		766		3,100		4,497		1,871
Total interest income	479,412		411,955		459,553		938,965		796,858

Interest expense:
Deposits	16,390		14,543		16,508		32,898		28,531
Borrowings	21,404		22,348		18,730		40,134		45,244
Total interest expense	37,794		36,891		35,238		73,032		73,775

Net interest income	441,618		375,064		424,315		865,933		723,083
Provision for loan losses	14,200		17,005		4,492		18,692		28,892
Net interest income after provision for loan losses	427,418		358,059		419,823		847,241		694,191

Noninterest income:
Investment management fees	55,168		43,502		52,760		107,928		84,713
Brokerage and investment fees	7,230		4,407		7,860		15,090		8,106
Trust fees	2,991		2,501		2,985		5,976		4,886
Foreign exchange fee income	5,244		5,023		5,318		10,562		10,171
Deposit fees	5,122		4,870		4,958		10,080		9,499
Gain on sale of loans	822		3,476		1,403		2,225		5,288
Loan servicing fees, net	3,512		2,923		3,749		7,261		6,153
Loan and related fees	3,498		3,428		3,240		6,738		6,149
Income from investments in life insurance	9,513		8,451		9,026		18,539		17,630
Gain (loss) on investment securities, net	(187)		1,112		3,268		3,081		1,412
Other income	544		543		683		1,227		1,148
Total noninterest income	93,457		80,236		95,250		188,707		155,155

Noninterest expense:
Salaries and employee benefits	183,281		138,758		185,917		369,198		278,706
Information systems	36,170		28,282		35,037		71,207		54,134
Occupancy	28,269		27,533		27,648		55,917		53,105
Professional fees	12,105		20,048		13,371		25,476		39,561
FDIC assessments	9,800		8,700		9,600		19,400		17,050
Advertising and marketing	8,257		6,564		7,190		15,447		11,778
Amortization of intangibles	6,386		4,941		6,661		13,047		10,096
Other expenses	35,814		28,289		33,770		69,584		54,358
Total noninterest expense	320,082		263,115		319,194		639,276		518,788

Income before provision for income taxes	200,793		175,180		195,879		396,672		330,558
Provision for income taxes	35,796		43,835		38,384		74,180		83,301
Net income	164,997		131,345		157,495		322,492		247,257
Dividends on preferred stock	17,376		14,411		16,460		33,836		28,300
Net income available to common shareholders	$	147,621	$	116,934	$	141,035	$	288,656	$	218,957

Basic earnings per common share	$	1.00	$	0.82	$	0.97	$	1.97	$	1.56
Diluted earnings per common share	$	0.97	$	0.80	$	0.93	$	1.90	$	1.52
Dividends per common share	$	0.16	$	0.15	$	0.15	$	0.31	$	0.29

Weighted average shares—basic	147,208		141,927		145,963		146,586		140,276
Weighted average shares—diluted	152,602		145,713		151,701		152,152		144,150

CONSOLIDATED BALANCE SHEET

	As of
($ in thousands)	June 30, 2016		March 31, 2016⁽¹⁾		June 30, 2015
ASSETS
Cash and cash equivalents	$	1,564,057	$	1,946,147	$	1,367,879
Securities purchased under agreements to resell	100		100		3,250
Investment securities available-for-sale	1,482,765		1,809,820		1,250,005
Investment securities held-to-maturity	10,110,596		9,580,850		6,516,374

Loans:
Single family (1-4 units)	24,115,915		23,674,216		21,777,063
Home equity lines of credit	2,588,603		2,431,527		2,256,022
Multifamily (5+ units)	6,034,725		5,605,914		5,057,034
Commercial real estate	5,034,136		4,818,890		4,219,336
Single family construction	450,183		426,220		451,428
Multifamily/commercial construction	792,205		743,900		585,837
Business	6,397,488		5,887,850		5,506,246
Stock secured	780,434		660,923		371,720
Other secured	619,343		585,617		538,836
Unsecured loans and lines of credit	833,305		609,917		293,634
Total unpaid principal balance	47,646,337		45,444,974		41,057,156
Net unaccreted discount	(93,529)		(101,071)		(128,928)
Net deferred fees and costs	54,798		52,216		37,625
Allowance for loan losses	(278,731)		(265,579)		(235,868)
Loans, net	47,328,875		45,130,540		40,729,985

Loans held for sale	438,911		42,380		162,841
Investments in life insurance	1,238,646		1,177,692		1,031,137
Tax credit investments	1,058,761		1,085,034		880,321
Prepaid expenses and other assets	971,136		797,116		753,886
Premises, equipment and leasehold improvements, net	181,647		174,857		163,758
Goodwill	171,616		171,616		106,549
Other intangible assets	124,354		130,740		99,905
Mortgage servicing rights	57,203		54,225		52,685
Other real estate owned	1,196		1,393		—
Total Assets	$	64,729,863	$	62,102,510	$	53,118,575

LIABILITIES AND EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking	$	19,586,815	$	19,693,998	$	16,306,078
Interest-bearing checking	12,866,658		12,910,792		9,049,662
Money market checking	6,511,313		6,405,530		5,691,554
Money market savings and passbooks	7,701,456		7,462,675		6,807,413
Certificates of deposit	4,495,001		4,462,260		4,032,859
Total Deposits	51,161,243		50,935,255		41,887,566

Short-term borrowings	950,000		100,000		100,000
Long-term FHLB advances	5,050,000		3,800,000		4,725,000
Senior notes	397,555		397,357		396,769
Debt related to variable interest entities	27,199		28,750		31,108
Other liabilities	837,653		856,423		713,066
Total Liabilities	58,423,650		56,117,785		47,853,509

Shareholders' Equity:
Preferred stock	1,139,525		1,139,525		989,525
Common stock	1,497		1,463		1,424
Additional paid-in capital	2,959,168		2,764,626		2,523,239
Retained earnings	2,192,313		2,068,500		1,748,750
Accumulated other comprehensive income	13,710		10,611		2,128
Total Shareholders' Equity	6,306,213		5,984,725		5,265,066
Total Liabilities and Shareholders' Equity	$	64,729,863	$	62,102,510	$	53,118,575

	Quarter Ended June 30,						Quarter Ended March 31,			Six Months Ended June 30,
*Operating Information and Yields/Rates*	2016			2015			2016 ⁽¹⁾			2016			2015
($ in thousands)
Operating Information
Net income to average assets ⁽³⁾	1.05		%	1.01		%	1.03		%	1.04		%	0.98		%
Net income available to common shareholders to average common equity ⁽³⁾	11.84		%	10.97		%	11.73		%	11.79		%	10.66		%
Dividend payout ratio	16.5		%	18.7		%	16.1		%	16.3		%	19.1		%
Efficiency ratio ⁽⁴⁾	59.8		%	57.8		%	61.4		%	60.6		%	59.1		%

Net loan charge-offs (recoveries)	$	1,048		$	353		$	(29)		$	1,019		$	366
Net loan charge-offs to average total loans ⁽³⁾	0.01		%	0.00		%	0.00		%	0.00		%	0.00		%

Yields/Rates ⁽³⁾
Cash and cash equivalents	0.46		%	0.24		%	0.50		%	0.49		%	0.25		%
Investment securities ^{(5), (6)}	4.20		%	4.52		%	4.32		%	4.26		%	4.58		%
Loans ^{(5), (7)}	3.35		%	3.41		%	3.38		%	3.36		%	3.43		%
FHLB stock ⁽⁸⁾	7.26		%	25.64		%	8.55		%	7.84		%	15.91		%

Total interest-earning assets	3.47		%	3.60		%	3.44		%	3.45		%	3.56		%

Checking	0.01		%	0.00		%	0.01		%	0.01		%	0.01		%
Money market checking and savings	0.08		%	0.07		%	0.07		%	0.07		%	0.07		%
CDs ⁽⁷⁾	1.19		%	1.24		%	1.21		%	1.20		%	1.23		%
Total deposits	0.13		%	0.14		%	0.13		%	0.13		%	0.15		%

Short-term borrowings	0.48		%	0.33		%	1.45		%	0.54		%	0.32		%
Long-term FHLB advances	1.59		%	1.58		%	1.63		%	1.61		%	1.58		%
Senior notes ⁽⁹⁾	2.59		%	2.59		%	2.59		%	2.59		%	2.59		%
Other borrowings	1.88		%	1.64		%	1.83		%	1.86		%	1.62		%
Total borrowings	1.37		%	1.59		%	1.71		%	1.51		%	1.62		%

Total interest-bearing liabilities	0.27		%	0.32		%	0.26		%	0.27		%	0.33		%

Net interest spread	3.20		%	3.28		%	3.18		%	3.18		%	3.23		%

Net interest margin ⁽⁵⁾	3.21		%	3.30		%	3.20		%	3.20		%	3.26		%

Core net interest margin (non-GAAP) ^{(2), (5)}	3.16		%	3.12		%	3.14		%	3.14		%	3.11		%
__________

⁽³⁾

Ratios are annualized.

⁽⁴⁾

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

⁽⁵⁾

Calculated on a fully taxable-equivalent basis.

⁽⁶⁾

Includes securities purchased under agreements to resell.

⁽⁷⁾

Yield/rate includes accretion/amortization of purchase accounting discounts/premiums. For CDs, the premiums were fully amortized as of June 30, 2015, therefore there was no amortization in 2016.

⁽⁸⁾

Yield for 2015 periods includes a $9.1 million one-time special FHLB dividend received in the second quarter of 2015.

⁽⁹⁾

Rate includes amortization of issuance discounts and costs.

	Quarter Ended June 30,						Quarter Ended March 31,			Six Months Ended June 30,
*Mortgage Loan Sales*	2016			2015			2016			2016			2015
($ in thousands)
Loans sold:
Agency	$	55,729		$	91,366		$	60,228		$	115,957		$	127,961
Non-agency	865,034			795,882			417,474			1,282,508			1,333,959
Total loans sold	$	920,763		$	887,248		$	477,702		$	1,398,465		$	1,461,920

Gain on sale of loans:
Amount	$	822		$	3,476		$	1,403		$	2,225		$	5,288
Gain as a percentage of loans sold	0.09		%	0.39		%	0.29		%	0.16		%	0.36		%

	As of
*Loan Servicing Portfolio*	June 30, 2016		March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015
($ in millions)
Loans serviced for investors	$	11,061	$	10,654	$	10,531	$	10,550	$	10,305

	Quarter Ended June 30,				Quarter Ended March 31,		Six Months Ended June 30,
*Loan Originations*	2016		2015		2016		2016		2015
($ in thousands)
Single family (1-4 units)	$	2,933,128	$	2,436,464	$	1,812,817	$	4,745,945	$	4,134,907
Home equity lines of credit	482,546		465,955		425,732		908,278		724,947
Multifamily (5+ units)	603,016		453,454		630,016		1,233,032		787,422
Commercial real estate	355,339		351,499		241,045		596,384		730,125
Construction	252,020		315,603		199,366		451,386		552,662
Business	1,248,255		1,533,498		657,206		1,905,461		2,667,377
Stock and other secured	368,242		204,043		497,971		866,213		365,506
Unsecured loans and lines of credit	266,480		87,527		337,494		603,974		134,127
Total loans originated	$	6,509,026	$	5,848,043	$	4,801,647	$	11,310,673	$	10,097,073

	As of June 30, 2016
*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)	$	2,147,828	$	21,968,087	$	24,115,915
Home equity lines of credit	382,495		2,206,108		2,588,603
Multifamily (5+ units)	249,357		5,785,368		6,034,725
Commercial real estate	344,847		4,689,289		5,034,136
Single family construction	3,098		447,085		450,183
Multifamily/commercial construction	1,226		790,979		792,205
Business	330,751		6,066,737		6,397,488
Stock secured	4,268		776,166		780,434
Other secured	12,449		606,894		619,343
Unsecured loans and lines of credit	27,299		806,006		833,305
Total unpaid principal balance	3,503,618		44,142,719		47,646,337
Net unaccreted discount	(93,455)		(74)		(93,529)
Net deferred fees and costs	(3,495)		58,293		54,798
Allowance for loan losses	(5,863)		(272,868)		(278,731)
Loans, net	$	3,400,805	$	43,928,070	$	47,328,875

	As of
*Asset Quality Information*	June 30, 2016			March 31, 2016			December 31, 2015			September 30, 2015			June 30, 2015
($ in thousands)
Nonperforming assets:
Nonaccrual loans	$	57,953		$	59,203		$	73,545		$	51,987		$	55,872
Other real estate owned	1,196			1,393			—			2,541			—
Total nonperforming assets	$	59,149		$	60,596		$	73,545		$	54,528		$	55,872

Nonperforming assets to total assets	0.09		%	0.10		%	0.12		%	0.10		%	0.11		%

Accruing loans 90 days or more past due	$	451		$	3,189		$	4,199		$	698		$	2,118

Restructured accruing loans	$	11,822		$	13,978		$	14,043		$	14,539		$	15,624

	As of
*Book Value Ratios*	June 30, 2016		March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015
(in thousands, except per share amounts)
Number of shares of common stock outstanding	149,722		146,314		146,110		142,477		142,389
Book value per common share	$	34.51	$	33.12	$	32.28	$	30.84	$	30.03
Tangible book value per common share	$	32.53	$	31.05	$	30.16	$	29.43	$	28.58

	As of
	2016						2015
	June 30, ⁽¹⁰⁾				March 31,		December 31,		September 30,		June 30,
*Capital Ratios*	Actual		Fully Phased-in⁽¹¹⁾		Actual
Tier 1 leverage ratio	9.58	%	9.51	%	9.38	%	9.21	%	9.38	%	9.86	%
Common Equity Tier 1 ratio	10.74	%	10.62	%	10.61	%	10.76	%	10.71	%	10.87	%
Tier 1 risk-based capital ratio	13.23	%	13.11	%	13.24	%	13.13	%	13.21	%	13.47	%
Total risk-based capital ratio	13.86	%	13.74	%	13.88	%	13.78	%	13.87	%	14.13	%
__________

⁽¹⁰⁾

Ratios as of June 30, 2016 are preliminary.

⁽¹¹⁾

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 June 30, 2016.

	As of
*Wealth Management Assets*	June 30, 2016		March 31, 2016		December 31, 2015		September 30, 2015		June 30, 2015
($ in millions)
First Republic Investment Management	$	38,288	$	36,872	$	35,230	$	28,969	$	28,998

Brokerage and investment:
Brokerage	28,644		27,296		26,059		19,746		19,852
Money market mutual funds	1,610		1,906		4,155		3,012		1,732
Total brokerage and investment	30,254		29,202		30,214		22,758		21,584

Trust Company:
Trust	3,434		3,343		3,375		3,618		3,370
Custody	3,835		4,004		3,474		3,477		3,613
Total Trust Company	7,269		7,347		6,849		7,095		6,983
Total Wealth Management Assets	$	75,811	$	73,421	$	72,293	$	58,822	$	57,565

	Quarter Ended June 30,				Quarter Ended March 31,		Six Months Ended June 30,
*Average Balance Sheet*	2016		2015		2016		2016		2015
($ in thousands)
Assets:
Cash and cash equivalents	$	1,214,206	$	1,269,880	$	2,502,864	$	1,858,535	$	1,534,980
Investment securities ⁽¹²⁾	11,680,240		7,622,451		10,561,401		11,120,821		7,180,116
Loans ⁽¹³⁾	46,845,931		40,058,305		44,618,029		45,731,980		39,157,180
FHLB stock	162,320		216,034		132,440		147,380		231,580
Total interest-earning assets	59,902,697		49,166,670		57,814,734		58,858,716		48,103,856

Noninterest-earning cash	273,438		255,702		269,185		271,311		254,341
Goodwill and other intangibles	299,036		208,846		305,588		302,312		211,359
Other assets	2,965,006		2,453,750		2,947,952		2,956,479		2,427,559
Total noninterest-earning assets	3,537,480		2,918,298		3,522,725		3,530,102		2,893,259

Total Assets	$	63,440,177	$	52,084,968	$	61,337,459	$	62,388,818	$	50,997,115

Liabilities and Equity:
Checking	$	31,969,559	$	24,099,157	$	31,782,794	$	31,876,177	$	23,243,052
Money market checking and savings	13,687,722		12,451,743		13,529,204		13,608,463		12,384,524
CDs ⁽¹³⁾	4,423,240		3,893,313		4,543,388		4,483,314		3,845,075
Total deposits	50,080,521		40,444,213		49,855,386		49,967,954		39,472,651

Short-term borrowings	1,621,978		280,478		105,494		863,736		141,014
Long-term FHLB advances	4,225,824		4,922,802		3,857,143		4,041,484		5,069,475
Senior notes	397,458		396,675		397,261		397,359		396,579
Other borrowings	28,788		32,289		29,273		29,031		33,368
Total borrowings	6,274,048		5,632,244		4,389,171		5,331,610		5,640,436

Total interest-bearing liabilities	56,354,569		46,076,457		54,244,557		55,299,564		45,113,087

Noninterest-bearing liabilities	932,418		804,458		1,184,329		1,058,373		831,491
Preferred equity	1,139,525		927,987		1,073,591		1,106,558		908,862
Common equity	5,013,665		4,276,066		4,834,982		4,924,323		4,143,675
Total Liabilities and Equity	$	63,440,177	$	52,084,968	$	61,337,459	$	62,388,818	$	50,997,115
__________

⁽¹²⁾

Includes securities purchased under agreements to resell.

⁽¹³⁾

Average balances are presented net of purchase accounting discounts or premiums. For CDs, the premiums were fully amortized as of June 30, 2015.

	Quarter Ended June 30,				Quarter Ended March 31,		Six Months Ended June 30,
*Purchase Accounting Accretion and Amortization ⁽¹⁴⁾*	2016		2015		2016		2016		2015
($ in thousands)
Accretion/amortization to net interest income:
Loans	$	7,532	$	11,708	$	7,425	$	14,957	$	23,830
Deposits	—		278		—		—		1,006
Total	$	7,532	$	11,986	$	7,425	$	14,957	$	24,836

Amortization to noninterest expense:
Intangible assets	$	2,688	$	3,327	$	2,848	$	5,536	$	6,816

Net pre-tax impact of purchase accounting	$	4,844	$	8,659	$	4,577	$	9,421	$	18,020
__________

⁽¹⁴⁾

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. Due to the application of purchase accounting from the Bank's re-establishment as an independent institution, management has historically used certain non-GAAP (i.e., core) measures and ratios that excluded the impact of these net positive purchase accounting items to evaluate our performance, including net income, earnings per share, revenues, yield on average loans, cost of average deposits, net interest margin and the efficiency ratio. However, because of the diminishing impact of these positive purchase accounting items, beginning in 2016, only the yield on average loans and net interest margin continue to be presented on a non-GAAP, or core, basis.

The accretion and amortization of the fair value adjustments recorded in purchase accounting from the Bank's re-establishment as an independent institution affect our net interest margin and yield on average loans as we accrete loan discounts to interest income and amortize premiums on CDs to interest expense.

In addition, in the second quarter of 2015, the Bank received a one-time special dividend of $9.1 million from the FHLB. Management has also excluded the positive impact of this item from the non-GAAP net interest margin.

We believe these two non-GAAP measures, when taken together with the corresponding GAAP measures, 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 should be considered in addition to, and not as a substitute for or preferable to, the measurements prepared in accordance with GAAP. In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures to the non-GAAP financial measures, or a reconciliation of the non-GAAP calculation of the financial measure:

	Quarter Ended June 30,						Quarter Ended March 31,			Six Months Ended June 30,
*Yield on Average Loans*	2016			2015			2016			2016			2015
($ in thousands)
Interest income on loans	$	383,431		$	333,966		$	368,250		$	751,681		$	655,841
Add: Tax-equivalent adjustment on loans	10,866			9,313			10,753			21,619			18,041
Interest income on loans (tax-equivalent basis)	394,297			343,279			379,003			773,300			673,882
Less: Accretion	(7,532)			(11,708)			(7,425)			(14,957)			(23,830)
Core interest income on loans (tax-equivalent basis) (non-GAAP)	$	386,765		$	331,571		$	371,578		$	758,343		$	650,052

Average loans	$	46,845,931		$	40,058,305		$	44,618,029		$	45,731,980		$	39,157,180
Add: Average unaccreted loan discounts	98,446			136,533			105,948			102,197			142,530
Average loans (non-GAAP)	$	46,944,377		$	40,194,838		$	44,723,977		$	45,834,177		$	39,299,710

Yield on average loans—reported ⁽⁵⁾	3.35		%	3.41		%	3.38		%	3.36		%	3.43		%

Contractual yield on average loans (non-GAAP) ⁽⁵⁾	3.28		%	3.28		%	3.31		%	3.29		%	3.30		%

	Quarter Ended June 30,						Quarter Ended March 31,			Six Months Ended June 30,
*Net Interest Margin*	2016			2015			2016			2016			2015
($ in thousands)
Net interest income	$	441,618		$	375,064		$	424,315		$	865,933		$	723,083
Add: Tax-equivalent adjustment	41,854			32,148			39,434			81,288			61,806
Net interest income (tax-equivalent basis)	483,472			407,212			463,749			947,221			784,889
Less: Accretion/amortization	(7,532)			(11,986)			(7,425)			(14,957)			(24,836)
Less: One-time special FHLB dividend	—			(9,134)			—			—			(9,134)
Core net interest income (tax-equivalent basis) (non-GAAP)	$	475,940		$	386,092		$	456,324		$	932,264		$	750,919

Average interest-earning assets	$	59,902,697		$	49,166,670		$	57,814,734		$	58,858,716		$	48,103,856
Add: Average unaccreted loan discounts	98,446			136,533			105,948			102,197			142,530
Average interest-earning assets (non-GAAP)	$	60,001,143		$	49,303,203		$	57,920,682		$	58,960,913		$	48,246,386

Net interest margin—reported⁽⁵⁾	3.21		%	3.30		%	3.20		%	3.20		%	3.26		%

Core net interest margin (non-GAAP)⁽⁵⁾	3.16		%	3.12		%	3.14		%	3.14		%	3.11		%

Adoption of Amendments to ASC 718

The Bank adopted the amendments to ASC 718, retroactively effective as of January 1, 2016. Previously, excess tax benefits resulting from the exercise or vesting of share-based awards were recorded directly to additional paid-in capital. Under this new guidance, such excess tax benefits are recorded as a reduction in provision for income taxes in the quarter of exercise or vesting, rather than increasing additional paid-in capital. In addition, this guidance increases average diluted shares, since the Bank no longer includes such excess tax benefits in the calculation of diluted shares. For the first quarter of 2016, adoption of this guidance reduced the provision for income taxes by $8.6 million of excess tax benefits, resulting in a positive impact of $0.05 per diluted earnings per share. This new accounting guidance does not change the Bank's total equity, book value per share, or regulatory capital ratios.

The following table presents the impact of the adoption of the new accounting guidance to our previously reported financial results:

	Quarter Ended March 31, 2016
*Impact of Adoption of Amendments to ASC 718*	As Previously Reported			As Reported Under New Guidance
(in thousands, except per share amounts)
Statement of Income
Provision for income taxes	$	47,013		$	38,384
Net income	$	148,866		$	157,495
Net income available to common shareholders	$	132,406		$	141,035
Basic earnings per common share	$	0.91		$	0.97
Diluted earnings per common share	$	0.88		$	0.93
Weighted average diluted shares	149,719			151,701

Balance Sheet
Additional paid-in capital	$	2,773,255		$	2,764,626
Retained earnings	$	2,059,871		$	2,068,500

Ratios
Net income to average assets ⁽³⁾	0.98		%	1.03		%
Net income available to common shareholders to average common equity ⁽³⁾	11.01		%	11.73		%
Dividend payout ratio	17.0		%	16.1		%