First Republic Reports Strong Second Quarter Results

Year-Over-Year: Core Revenues Up 12%; Wealth Management Revenues Up 19%

Jul 16, 2015, 08:00 ET from First Republic Bank

SAN FRANCISCO, July 16, 2015 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended June 30, 2015.

"We are very pleased with second quarter results, which were driven by revenue growth," said CEO Jim Herbert.  "Loans, deposits and assets under management increased nicely.  Costs remained under control, and credit quality was excellent."

Quarterly Highlights

Financial Results

  • Core revenues were up 11.7% compared to last year's second quarter. (1)
  • Net income was $131.3 million.
  • Diluted earnings per share ("EPS") of $0.80, including $0.04 from a one-time special dividend from the FHLB.
  • Core net income was $121.1 million. (1)
  • Core diluted EPS of $0.73. (1)
  • Loan originations totaled $5.8 billion, our highest quarter ever.
  • Loans sold totaled $887.2 million, compared to $574.7 million for the prior quarter.
  • Core net interest margin was 3.12%. (1)
  • Core efficiency ratio was 59.8%. (1)

Continued Financial and Credit Strength

  • Tier 1 leverage ratio was 9.76% and Common Equity Tier 1 ratio was 10.71%. (2)
  • Book value per share was $30.03, up 12.0% from a year ago.
  • Nonperforming assets were a low 11 basis points of total assets.
  • Net charge-offs were $352,000 for the quarter.

Franchise Development

  • Loans outstanding, excluding loans held for sale, totaled $41.1 billion, up 12.7% from a year ago.
  • Deposits were $41.9 billion, up 19.6% from a year ago.
  • Checking balances represented 60.5% of total deposits.
  • Wealth management assets were $57.6 billion, up 18.3% from a year ago.
  • Wealth management revenues were $50.4 million, up 18.8% from a year ago.

"This quarter was our best ever loan volume, while wealth management and business banking each continued to make significant contributions," said President Katherine August-deWilde.  "We continue to deepen and expand our relationships with existing clients while winning new business throughout our economically vibrant urban, coastal markets."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the second quarter of $0.15 per share of common stock, which is payable on August 13, 2015 to shareholders of record as of July 30, 2015. 

Strong Asset Quality

The Bank's credit quality remains very strong.  Nonperforming assets were 11 basis points of total assets. 

Net charge-offs were only $352,000, while the Bank provided $17.0 million to its allowance for loan losses during the quarter.

Continued Capital Strength

During the second quarter, the Bank issued $100.0 million of 5.70% Noncumulative Perpetual Preferred Stock, which qualifies as Tier 1 capital.

The Bank's Tier 1 leverage ratio was 9.76% and Common Equity Tier 1 ratio was 10.71% at June 30, 2015. (2)

Book Value Growth

Book value per common share was $30.03 at June 30, 2015, up 12.0% from a year ago. 

Continued Franchise Development

Total Assets

The average of the last four quarter-end total assets was $49.8 billion.

Loan Originations

Loan originations totaled $5.8 billion for the quarter, a record.  Single family originations were $2.9 billion, of which 49% were for purchases. 

Loans outstanding, excluding loans held for sale, totaled $41.1 billion, up 12.7% compared to a year ago.

Deposit Growth

Total deposits increased to $41.9 billion, up 4.9% for the quarter and up 19.6% compared to a year ago.  At June 30, 2015, checking accounts totaled 60.5% of deposits.

The average contractual rate paid on all deposits declined to 0.15% for the quarter, compared to 0.16% for the prior quarter.

Mortgage Banking Activity

The Bank sold $887.2 million of loans during the quarter and recorded a gain on sale of $3.5 million, compared to loan sales of $1.3 billion and a gain on sale of $14.9 million during the second quarter of last year.  The margin on this quarter's loan sales was 0.39%.

The Bank utilizes loan sales in the ordinary course of business in order to provide a full range of lending options for its clients, while also managing asset growth and interest rate risk.

Loans serviced for investors at quarter-end totaled $10.3 billion, up 4.7% for the quarter and 41.5% from a year ago.  Loan servicing fees, net, for the quarter were $2.9 million, up from $2.0 million a year ago.

Investments

Total investments at June 30, 2015 were $7.8 billion, up 3.6% for the quarter and 44.6% compared to a year ago. 

Our holdings of assets that are considered high-quality liquid assets, including eligible cash, totaled $4.1 billion at June 30, 2015.

Expansion of Wealth Management

Wealth management revenues totaled $50.4 million for the quarter, up 18.8% compared to last year's second quarter. 

Total wealth management assets were $57.6 billion, up 2.1% for the quarter and up 18.3% compared to a year ago.  The growth in wealth management assets was primarily due to net new assets from both existing and new clients.  Wealth management assets include investment management assets of $29.0 billion, brokerage assets and money market mutual funds of $21.6 billion, and trust and custody assets of $7.0 billion.

To further expand wealth management, First Republic Investment Management, Inc., a wholly-owned subsidiary of the Bank, has agreed to purchase the assets of Constellation Wealth Advisors.  The transaction is expected to close in the third quarter of 2015, subject to the satisfaction of customary closing conditions.

Income Statement and Key Ratios

Quarterly Highlights

Strong Core Revenue Growth

Total revenues were $455.3 million for the quarter, an 11.0% increase from the second quarter of last year.

Core revenues were $434.2 million for the quarter, an 11.7% increase from the second quarter of last year. (1)

Continued Core Net Interest Income Growth

Net interest income was $375.1 million for the quarter, a 12.6% increase from the second quarter of last year.   

Core net interest income was $353.9 million for the quarter, a 13.5% increase from the second quarter of last year. (1)

Core Net Interest Margin

The Bank's net interest margin was 3.30% for the quarter, compared to 3.21% for the prior quarter. 

The core net interest margin was 3.12% for the quarter, compared to 3.09% for the prior quarter. (1)  The modest increase was primarily the result of lower average cash balances, which were invested in loans and investment securities.

Strong Noninterest Income Growth

Noninterest income, excluding gain on sale of loans, increased 23.8% compared to the second quarter of last year, primarily due to increases in investment advisory fees, gain on investment securities, income from investments in life insurance, loan and related fees, and brokerage and investment fees.

Steady Core Efficiency Ratio

Noninterest expense for the quarter was $263.1 million, an 18.1% increase from the second quarter of last year.  The increase was primarily due to increased salaries, professional fees, information systems and occupancy costs.  The year-over-year increase in these expenses was significantly attributable to the Bank's ongoing investments in infrastructure build-out to address enhanced regulatory standards.

The Bank's efficiency ratio was 57.8% for the quarter, compared to 60.5% for the prior quarter and 54.3% for the second quarter a year ago.   

The Bank's core efficiency ratio was 59.8% for the quarter, compared to 61.5% for the prior quarter and 56.3% for the second quarter a year ago. (1)  The improvement in the efficiency ratio compared to the prior quarter was predominantly the result of higher seasonal payroll taxes in the first quarter.

Income Tax Rate

The Bank's effective tax rate for the six months ended June 30, 2015 was 25.2% and represents the current estimated tax rate for the full year 2015.  By comparison, the effective tax rate was 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.

Adoption of Accounting Guidance

During the quarter ended March 31, 2015, the Bank adopted new accounting guidance issued by the FASB that requires debt issuance costs to be presented within borrowings, rather than other assets, on the balance sheet.  This accounting change resulted in revisions to the June 30, 2014 balance sheet by reducing prepaid expenses and other assets as well as senior notes each by approximately $3 million.

_________

(1) "Core" measures are non-GAAP financial measures that exclude the impact of purchase accounting and also the one-time special dividend from the FHLB received in the second quarter of 2015.  See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."

(2) Represents the ratio under Basel III fully phased-in. See "Capital Ratios" table for additional information.

Conference Call Details

First Republic Bank's second quarter 2015 earnings conference call is scheduled for July 16, 2015 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 #72609271.  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 July 16, 2015, at 10:00 a.m. PT / 1:00 p.m. ET, through July 23, 2015, 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 #72609271.  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 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 become applicable as we become a U.S. 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 June 30,

Quarter Ended March 31,

Six Months Ended June 30,

(in thousands, except per share amounts)

2015

2014

2015

2015

2014

Interest income:

Loans

$

333,966

$

318,711

$

321,875

$

655,841

$

626,398

Investments

77,223

50,811

61,923

139,146

99,655

Cash and cash equivalents

766

781

1,105

1,871

1,561

Total interest income

411,955

370,303

384,903

796,858

727,614

Interest expense:

Deposits

14,543

14,818

13,988

28,531

30,049

Borrowings

22,348

22,272

22,896

45,244

43,649

Total interest expense

36,891

37,090

36,884

73,775

73,698

Net interest income

375,064

333,213

348,019

723,083

653,916

Provision for loan losses

17,005

21,800

11,887

28,892

28,895

Net interest income after provision for loan losses

358,059

311,413

336,132

694,191

625,021

Noninterest income:

Investment advisory fees

43,502

36,197

41,211

84,713

69,505

Brokerage and investment fees

4,407

3,393

3,699

8,106

6,398

Trust fees

2,501

2,860

2,385

4,886

5,279

Foreign exchange fee income

5,023

5,052

5,148

10,171

8,559

Deposit fees

4,870

4,637

4,629

9,499

9,181

Gain on sale of loans

3,476

14,850

1,812

5,288

17,695

Loan servicing fees, net

2,923

2,008

3,230

6,153

4,004

Loan and related fees

3,428

1,695

2,721

6,149

3,603

Income from investments in life insurance

8,451

6,424

9,179

17,630

13,399

Gain (loss) on investment securities, net

1,112

(1,085)

300

1,412

(1,176)

Other income

543

807

605

1,148

1,403

Total noninterest income

80,236

76,838

74,919

155,155

137,850

Noninterest expense:

Salaries and employee benefits

138,758

117,191

139,948

278,706

237,776

Occupancy

27,533

23,438

25,572

53,105

47,543

Information systems

28,282

23,161

25,852

54,134

44,582

Professional fees

20,048

10,816

19,513

39,561

18,032

FDIC and other deposit assessments

8,700

7,650

8,350

17,050

15,094

Advertising and marketing

6,564

8,001

5,214

11,778

14,015

Amortization of intangibles

4,941

5,792

5,155

10,096

11,796

Other expenses

28,289

26,679

26,069

54,358

51,381

Total noninterest expense

263,115

222,728

255,673

518,788

440,219

Income before provision for income taxes

175,180

165,523

155,378

330,558

322,652

Provision for income taxes

43,835

44,691

39,466

83,301

87,116

Net income

131,345

120,832

115,912

247,257

235,536

Dividends on preferred stock

14,411

13,889

13,889

28,300

27,778

Net income available to common shareholders

$

116,934

$

106,943

$

102,023

$

218,957

$

207,758

Basic earnings per common share

$

0.82

$

0.78

$

0.73

$

1.56

$

1.54

Diluted earnings per common share

$

0.80

$

0.76

$

0.71

$

1.52

$

1.49

Dividends per common share

$

0.15

$

0.14

$

0.14

$

0.29

$

0.26

Weighted average shares—basic

141,927

137,279

138,839

140,276

135,091

Weighted average shares—diluted

145,713

141,473

142,791

144,150

139,392

 

 

CONSOLIDATED BALANCE SHEET

As of

($ in thousands)

June 30, 2015

March 31, 2015

June 30, 2014

ASSETS

Cash and cash equivalents

$

1,367,879

$

1,644,534

$

1,751,017

Securities purchased under agreements to resell

3,250

100

100

Investment securities available-for-sale

1,250,005

1,428,898

1,991,826

Investment securities held-to-maturity

6,516,374

6,064,700

3,380,479

Loans:

Single family (1-4 units)

21,777,063

21,167,697

20,545,900

Home equity lines of credit

2,256,022

2,121,713

2,055,352

Multifamily (5+ units)

5,057,034

4,851,874

4,366,068

Commercial real estate

4,219,336

4,021,575

3,582,174

Single family construction

451,428

399,814

348,322

Multifamily/commercial construction

585,837

494,539

363,416

Commercial business

5,506,246

5,059,337

4,150,075

Other secured

538,836

444,690

528,775

Stock secured

371,720

306,793

256,106

Unsecured loans and lines of credit

293,634

245,942

232,800

Total unpaid principal balance

41,057,156

39,113,974

36,428,988

Net unaccreted discount

(128,928)

(140,639)

(182,866)

Net deferred fees and costs

37,625

33,423

29,640

Allowance for loan losses

(235,868)

(219,216)

(181,311)

Loans, net

40,729,985

38,787,542

36,094,451

Loans held for sale

162,841

63,824

236,467

Investments in life insurance

1,031,137

1,022,466

878,935

Tax credit investments

880,321

844,213

756,655

Prepaid expenses and other assets (3)

753,886

786,488

705,122

Premises, equipment and leasehold improvements, net

163,758

162,051

162,742

Goodwill

106,549

106,549

106,549

Other intangible assets

99,905

104,846

120,949

Mortgage servicing rights

52,685

50,249

36,079

Other real estate owned

4,767

Total Assets

$

53,118,575

$

51,066,460

$

46,226,138

LIABILITIES AND EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking accounts

$

16,306,078

$

14,523,454

$

11,285,200

Interest-bearing checking accounts

9,049,662

9,261,476

7,416,578

Money Market (MM) checking accounts

5,691,554

5,261,424

5,282,809

MM savings and passbooks

6,807,413

7,062,013

7,460,048

Certificates of deposit

4,032,859

3,830,823

3,589,844

Total Deposits

41,887,566

39,939,190

35,034,479

Securities sold under agreements to repurchase

100,000

Long-term FHLB advances

4,725,000

4,925,000

5,550,000

Senior notes (3)

396,769

396,576

396,255

Debt related to variable interest entities

31,108

32,800

37,126

Other liabilities

713,066

697,897

618,219

Total Liabilities

47,853,509

45,991,463

41,636,079

Shareholders' Equity:

Preferred stock

989,525

889,525

889,525

Common stock

1,424

1,421

1,380

Additional paid-in capital

2,523,239

2,522,159

2,296,647

Retained earnings

1,748,750

1,653,338

1,386,235

Accumulated other comprehensive income

2,128

8,554

16,272

Total Shareholders' Equity

5,265,066

5,074,997

4,590,059

Total Liabilities and Shareholders' Equity

$

53,118,575

$

51,066,460

$

46,226,138

(3)

The Bank's balance sheet for June 30, 2014 was adjusted to reduce prepaid expenses and other assets and senior notes each by approximately $3 million. See "Adoption of Accounting Guidance" section of the earnings release for additional information.

 

Quarter Ended  June 30,

Quarter Ended  March 31,

Six Months Ended  June 30,

Operating Information and Yields/Rates

2015

2014

2015

2015

2014

($ in thousands)

Operating Information

Net income to average assets (4)

1.01%

1.08%

0.94%

0.98%

1.08%

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

10.97%

11.67%

10.32%

10.66%

11.88%

Dividend payout ratio

18.7%

18.5%

19.6%

19.1%

17.4%

Efficiency ratio (5)

57.8%

54.3%

60.5%

59.1%

55.6%

Core efficiency ratio (non-GAAP) (1), (5)

59.8%

56.3%

61.5%

60.6%

57.5%

Net loan charge-offs

$

352

$

130

$

13

$

366

$

589

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

0.00%

0.00%

0.00%

0.00%

0.00%

Yields/Rates (4)

Cash and cash equivalents

0.24%

0.25%

0.25%

0.25%

0.25%

Investment securities (6), (7), (8)

5.11%

5.19%

4.75%

4.94%

5.17%

Loans (6), (9)

3.41%

3.62%

3.46%

3.43%

3.64%

Total interest-earning assets

3.60%

3.73%

3.53%

3.56%

3.73%

Checking

0.00%

0.01%

0.01%

0.01%

0.01%

Money market checking and savings

0.07%

0.15%

0.07%

0.07%

0.15%

CDs (9)

1.24%

1.08%

1.22%

1.23%

1.07%

Total deposits

0.14%

0.17%

0.15%

0.15%

0.18%

Long-term FHLB advances

1.58%

1.56%

1.57%

1.58%

1.56%

Senior notes (10)

2.59%

2.60%

2.59%

2.59%

2.59%

Other borrowings

0.46%

1.65%

1.61%

0.57%

1.73%

Total borrowings

1.59%

1.57%

1.64%

1.62%

1.56%

Total interest-bearing liabilities

0.32%

0.37%

0.34%

0.33%

0.38%

Net interest spread

3.28%

3.36%

3.19%

3.23%

3.35%

Net interest margin

3.30%

3.38%

3.21%

3.26%

3.38%

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

3.12%

3.16%

3.09%

3.11%

3.16%

(4)

Ratios are annualized.

(5)

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

(6)

Yield is calculated on a tax-equivalent basis.

(7)

Includes FHLB stock and securities purchased under agreements to resell.

(8)

Yield on investment securities includes a $9.1 million one-time special FHLB dividend received in the second quarter of 2015 (47 basis point positive impact to the second quarter of 2015 investment yield).

(9)

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

(10)

Rate includes amortization of issuance discounts and costs.

 

 

Quarter Ended June 30,

Quarter Ended March 31,

Six Months Ended June 30,

Mortgage Loan Sales

2015

2014

2015

2015

2014

($ in thousands)

Loans sold:

Agency

$

91,366

$

30,478

$

36,595

$

127,961

$

61,043

Non-agency

795,882

1,244,621

538,077

1,333,959

1,560,256

Total loans sold

$

887,248

$

1,275,099

$

574,672

$

1,461,920

$

1,621,299

Gain on sale of loans:

Amount

$

3,476

$

14,850

$

1,812

$

5,288

$

17,695

Gain as a percentage of loans sold

0.39%

1.16%

0.32%

0.36%

1.09%

 

 

Quarter Ended June 30,

Quarter Ended March 31,

Six Months Ended June 30,

Loan Originations

2015

2014

2015

2015

2014

($ in thousands)

Single family (1-4 units)

$

2,436,464

$

2,349,203

$

1,698,443

$

4,134,907

$

3,795,415

Home equity lines of credit

465,955

414,356

258,992

724,947

741,073

Multifamily (5+ units)

453,454

342,038

333,968

787,422

729,036

Commercial real estate

351,499

187,233

378,626

730,125

413,821

Construction

315,603

276,200

237,059

552,662

427,482

Commercial business

1,533,498

914,805

1,133,879

2,667,377

1,384,758

Other loans

291,570

212,364

208,063

499,633

426,112

Total loans originated

$

5,848,043

$

4,696,199

$

4,249,030

$

10,097,073

$

7,917,697

 

As of June 30, 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)

$

2,605,933

$

19,171,130

$

21,777,063

Home equity lines of credit

541,250

1,714,772

2,256,022

Multifamily (5+ units)

321,210

4,735,824

5,057,034

Commercial real estate

496,528

3,722,808

4,219,336

Single family construction

4,256

447,172

451,428

Multifamily/commercial construction

1,151

584,686

585,837

Commercial business

288,159

5,218,087

5,506,246

Other secured

29,887

508,949

538,836

Stock secured

4,275

367,445

371,720

Unsecured loans and lines of credit

30,103

263,531

293,634

Total unpaid principal balance

4,322,752

36,734,404

41,057,156

Net unaccreted discount

(128,630)

(298)

(128,928)

Net deferred fees and costs

(4,207)

41,832

37,625

Allowance for loan losses

(6,923)

(228,945)

(235,868)

Loans, net

$

4,182,992

$

36,546,993

$

40,729,985

 

As of

Asset Quality Information

June 30, 2015

March 31, 2015

December 31, 2014

September 30, 2014

June 30, 2014

($ in thousands)

Nonperforming assets:

Nonaccrual loans

$

55,872

$

49,830

$

45,962

$

50,179

$

47,373

Other real estate owned

4,767

  Total nonperforming assets

$

55,872

$

49,830

$

45,962

$

50,179

$

52,140

Nonperforming assets to total assets

0.11%

0.10%

0.10%

0.11%

0.11%

Accruing loans 90 days or more past due

$

2,118

$

202

$

4,380

$

$

Restructured accruing loans

$

15,624

$

14,855

$

16,252

$

16,966

$

18,453

 

As of

Book Value Ratios

June 30, 2015

March 31, 2015

December 31, 2014

September 30, 2014

June 30, 2014

(in thousands, except per share amounts)

Number of shares of common stock outstanding

142,389

142,105

138,269

138,155

137,977

Book value per common share

$

30.03

$

29.45

$

28.13

$

27.48

$

26.82

Tangible book value per common share

$

28.58

$

27.97

$

26.56

$

25.87

$

25.17

 

As of

2015

2014

June 30, (11)

March 31,

December 31,

September 30,

June 30,

Capital Ratios

Actual (12)

Fully

Phased-in (13)

Actual (12)

Actual (12)

Tier 1 leverage ratio

9.86%

9.76%

9.90%

9.43%

9.51%

9.73%

Common Equity Tier 1 ratio (14)

10.87%

10.71%

11.25%

n/a

n/a

n/a

Tier 1 common equity ratio (14)

n/a

n/a

n/a

10.90%

11.07%

10.93%

Tier 1 risk-based capital ratio

13.47%

13.31%

13.73%

13.55%

13.83%

13.74%

Total risk-based capital ratio

14.13%

13.96%

14.37%

14.20%

14.47%

14.35%

(11)

Ratios as of June 30, 2015 are preliminary.

(12)

Ratios for 2015 periods reflect the adoption of the Basel III Capital Rules in effect beginning January 1, 2015. Ratios for 2014 periods 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 June 30, 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). In 2014 periods, the Tier 1 common equity ratio represents common equity, less goodwill and intangible assets, divided by risk-weighted assets.

 

 

As of

Assets Under Management

June 30,  2015

March 31,  2015

December 31,  2014

September 30,  2014

June 30,  2014

($ in millions)

First Republic Investment Management

$

28,998

$

28,530

$

27,453

$

26,255

$

25,132

Brokerage and Investment:

Brokerage

19,852

18,973

17,653

17,184

16,152

Money Market Mutual Funds

1,732

2,100

2,025

1,796

1,092

Total Brokerage and Investment

21,584

21,073

19,678

18,980

17,244

Trust Company:

Trust

3,370

3,149

3,057

3,044

3,149

Custody

3,613

3,617

3,189

3,103

3,143

Total Trust Company

6,983

6,766

6,246

6,147

6,292

  Total Wealth Management Assets

57,565

56,369

53,377

51,382

48,668

Loans serviced for investors

10,305

9,840

9,590

8,859

7,283

Total fee-based assets

$

67,870

$

66,209

$

62,967

$

60,241

$

55,951

 

 

Quarter Ended  June 30,

Quarter Ended  March 31,

Six Months Ended  June 30,

Average Balance Sheet

2015

2014

2015

2015

2014

($ in thousands)

Assets:

Cash and cash equivalents

$

1,269,880

$

1,229,510

$

1,803,026

$

1,534,980

$

1,237,491

Investment securities (15)

7,838,485

5,456,367

6,980,165

7,411,696

5,370,356

Loans (16)

40,058,305

35,792,956

38,246,042

39,157,180

35,140,005

Total interest-earning assets

49,166,670

42,478,833

47,029,233

48,103,856

41,747,852

Noninterest-earning cash

255,702

227,488

252,964

254,341

222,914

Goodwill and other intangibles

208,846

230,303

213,900

211,359

233,240

Other assets

2,453,750

2,003,870

2,401,077

2,427,559

1,954,422

Total noninterest-earning assets

2,918,298

2,461,661

2,867,941

2,893,259

2,410,576

Total Assets

$

52,084,968

$

44,940,494

$

49,897,174

$

50,997,115

$

44,158,428

Liabilities and Equity:

Checking

$

24,099,157

$

17,767,019

$

22,377,436

$

23,243,052

$

17,169,188

Money market checking and savings

12,451,743

12,714,426

12,316,558

12,384,524

12,692,382

CDs (16)

3,893,313

3,574,414

3,796,301

3,845,075

3,639,541

Total deposits

40,444,213

34,055,859

38,490,295

39,472,651

33,501,111

Long-term FHLB advances

4,922,802

5,587,363

5,217,778

5,069,475

5,552,762

Senior notes (17)

396,675

61,074

396,482

396,579

30,706

Other borrowings

312,767

41,513

34,460

174,382

42,050

Total borrowings

5,632,244

5,689,950

5,648,720

5,640,436

5,625,518

Total interest-bearing liabilities

46,076,457

39,745,809

44,139,015

45,113,087

39,126,629

Noninterest-bearing liabilities

804,458

630,185

858,821

831,491

616,457

Preferred equity

927,987

889,525

889,525

908,862

889,525

Common equity

4,276,066

3,674,975

4,009,813

4,143,675

3,525,817

Total Liabilities and Equity

$

52,084,968

$

44,940,494

$

49,897,174

$

50,997,115

$

44,158,428

(15)

Includes FHLB stock and securities purchased under agreements to resell.

(16)

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

(17)

Average balances include unamortized issuance discounts and costs.

 

 

Quarter Ended  June 30,

Quarter Ended  March 31,

Six Months Ended  June 30,

Purchase Accounting Accretion and Amortization (18)

2015

2014

2015

2015

2014

($ in thousands)

Accretion/amortization to net interest income:

Loans

$

11,708

$

19,614

$

12,122

$

23,830

$

37,229

Deposits

278

1,648

728

1,006

3,571

Total

$

11,986

$

21,262

$

12,850

$

24,836

$

40,800

Amortization to noninterest expense:

Intangible assets

$

3,327

$

3,968

$

3,489

$

6,816

$

8,095

(18)

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.

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 following non-GAAP measures and ratios: net income, earnings per share, net interest income, net interest margin 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 for the periods indicated:

Quarter Ended  June 30,

Quarter Ended March 31,

Six Months Ended June 30,

Non-GAAP Earnings

2015

2014

2015

2015

2014

(in thousands, except per share amounts)

Net income

$

131,345

$

120,832

$

115,912

$

247,257

$

235,536

Accretion/amortization added to net interest income

(11,986)

(21,262)

(12,850)

(24,836)

(40,800)

One-time special FHLB dividend

(9,134)

(9,134)

Amortization of intangible assets

3,327

3,968

3,489

6,816

8,095

Add back tax impact of the above items

7,563

7,350

3,978

11,541

13,900

Core net income (non-GAAP)

121,115

110,888

110,529

231,644

216,731

Dividends on preferred stock

(14,411)

(13,889)

(13,889)

(28,300)

(27,778)

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

$

106,704

$

96,999

$

96,640

$

203,344

$

188,953

GAAP earnings per common share—diluted

$

0.80

$

0.76

$

0.71

$

1.52

$

1.49

Impact of purchase accounting, net of tax

(0.03)

(0.07)

(0.03)

(0.07)

(0.13)

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

(0.04)

(0.04)

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

$

0.73

$

0.69

$

0.68

$

1.41

$

1.36

Weighted average diluted common shares outstanding

145,713

141,473

142,791

144,150

139,392

 

 

Quarter Ended  June 30,

Quarter Ended March 31,

Six Months Ended June 30,

Yield on Average Loans

2015

2014

2015

2015

2014

($ in thousands)

Interest income on loans

$

333,966

$

318,711

$

321,875

$

655,841

$

626,398

Add: Tax-equivalent adjustment on loans

9,313

7,028

8,728

18,041

13,547

Interest income on loans (tax-equivalent basis)

343,279

325,739

330,603

673,882

639,945

Less: Accretion

(11,708)

(19,614)

(12,122)

(23,830)

(37,229)

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

$

331,571

$

306,125

$

318,481

$

650,052

$

602,716

Average loans

$

40,058,305

$

35,792,956

$

38,246,042

$

39,157,180

$

35,140,005

Add: Average unaccreted loan discounts

136,533

196,082

148,595

142,530

205,019

Average loans (non-GAAP)

$

40,194,838

$

35,989,038

$

38,394,637

$

39,299,710

$

35,345,024

Yield on average loans—reported (6)

3.41%

3.62%

3.46%

3.43%

3.64%

Contractual yield on average loans (non-GAAP) (6)

3.28%

3.39%

3.32%

3.30%

3.40%

 

Quarter Ended  June 30,

Quarter Ended  March 31,

Six Months Ended  June 30,

Cost of Average Deposits

2015

2014

2015

2015

2014

($ in thousands)

Interest expense on deposits

$

14,543

$

14,818

$

13,988

$

28,531

$

30,049

Add: Amortization of CD premiums

278

1,648

728

1,006

3,571

Core interest expense on deposits (non-GAAP)

$

14,821

$

16,466

$

14,716

$

29,537

$

33,620

Average deposits

$

40,444,213

$

34,055,859

$

38,490,295

$

39,472,651

$

33,501,111

Less: Average unamortized CD premiums

(43)

(4,555)

(602)

(321)

(5,458)

Average deposits (non-GAAP)

$

40,444,170

$

34,051,304

$

38,489,693

$

39,472,330

$

33,495,653

Cost of average deposits—reported

0.14%

0.17%

0.15%

0.15%

0.18%

Contractual cost of average deposits (non-GAAP)

0.15%

0.19%

0.16%

0.15%

0.20%

 

 

Quarter Ended  June 30,

Quarter Ended March 31,

Six Months Ended  June 30,

Net Interest Margin

2015

2014

2015

2015

2014

($ in thousands)

Net interest income

$

375,064

$

333,213

$

348,019

$

723,083

$

653,916

Add: Tax-equivalent adjustment

32,148

26,994

29,658

61,806

52,847

Net interest income (tax-equivalent basis)

407,212

360,207

377,677

784,889

706,763

Less: Accretion/amortization

(11,986)

(21,262)

(12,850)

(24,836)

(40,800)

Less: One-time special FHLB dividend

(9,134)

(9,134)

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

$

386,092

$

338,945

$

364,827

$

750,919

$

665,963

Average interest-earning assets

$

49,166,670

$

42,478,833

$

47,029,233

$

48,103,856

$

41,747,852

Add: Average unaccreted loan discounts

136,533

196,082

148,595

142,530

205,019

Average interest-earning assets (non-GAAP)

$

49,303,203

$

42,674,915

$

47,177,828

$

48,246,386

$

41,952,871

Net interest margin—reported

3.30%

3.38%

3.21%

3.26%

3.38%

Core net interest margin (non-GAAP)

3.12%

3.16%

3.09%

3.11%

3.16%

 

 

Quarter Ended  June 30,

Quarter Ended  March 31,

Six Months Ended  June 30,

Efficiency Ratio

2015

2014

2015

2015

2014

($ in thousands)

Net interest income

$

375,064

$

333,213

$

348,019

$

723,083

$

653,916

Less: Accretion/amortization

(11,986)

(21,262)

(12,850)

(24,836)

(40,800)

Less: One-time special FHLB dividend

(9,134)

(9,134)

Core net interest income (non-GAAP)

$

353,944

$

311,951

$

335,169

$

689,113

$

613,116

Noninterest income

$

80,236

$

76,838

$

74,919

$

155,155

$

137,850

Total revenue

$

455,300

$

410,051

$

422,938

$

878,238

$

791,766

Total core revenue (non-GAAP)

$

434,180

$

388,789

$

410,088

$

844,268

$

750,966

Noninterest expense

$

263,115

$

222,728

$

255,673

$

518,788

$

440,219

Less: Intangible amortization

(3,327)

(3,968)

(3,489)

(6,816)

(8,095)

Core noninterest expense (non-GAAP)

$

259,788

$

218,760

$

252,184

$

511,972

$

432,124

Efficiency ratio

57.8%

54.3%

60.5%

59.1%

55.6%

Core efficiency ratio (non-GAAP)

59.8%

56.3%

61.5%

60.6%

57.5%

 

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

 

SOURCE First Republic Bank



RELATED LINKS

http://www.firstrepublic.com