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First Republic Reports Strong First Quarter Results
Year-Over-Year Core Revenues Up 13% and Wealth Management Revenues Up 22%
Quarterly Dividend Increased to $0.15 per Share

SAN FRANCISCO, April 16, 2015 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2015.

First Republic Bank's logo

"First Republic had a strong first quarter, driven by revenue growth across the franchise," said CEO Jim Herbert.  "Loans, deposits and assets under management all increased nicely, while credit quality remained excellent.  Our client-centric business model continues to perform well."

Quarterly Highlights

Financial Results

  • Core revenues were up 13.2% compared to last year's first quarter. (1)
  • Net income was $115.9 million.
  • Diluted earnings per share ("EPS") of $0.71.
  • Core net income was $110.5 million. (1)
  • Core diluted EPS of $0.68. (1)
  • Loan originations totaled $4.2 billion, our largest first quarter volume ever.
  • Loans sold totaled $574.7 million.
  • Core net interest margin was 3.09%, compared to 3.06% for the prior quarter. (1)
  • Core efficiency ratio was 61.5%. (1)

Continued Financial and Credit Strength

  • Tier 1 leverage ratio was 9.78% and Common Equity Tier 1 ratio was 11.07%. (2)
  • Book value per share was $29.45, up 12.4% from a year ago.
  • Nonperforming assets continued to be low at 10 basis points of total assets.
  • Net charge-offs were $13,000 for the quarter.

Franchise Development

  • Loans outstanding, excluding loans held for sale, totaled $39.1 billion, up 3.1% for the quarter.
  • Deposits were $39.9 billion, up 7.6% for the quarter.
  • Checking balances represented 59.6% of total deposits.
  • Wealth management assets were $56.4 billion, up 5.6% for the quarter.
  • Wealth management revenues were $47.3 million, up 22.1% from a year ago.

"Loan volume was the best first quarter ever, while wealth management and business banking continued to each make significant contributions," said President Katherine August-deWilde.  "We continue to deepen our relationships with clients and win new business in our well-performing urban, coastal markets."

Increased Quarterly Cash Dividend 7% to $0.15 per Share

The Bank today announced an increase in its quarterly cash dividend for the first quarter to $0.15 per share of common stock, which is payable on May 14, 2015 to shareholders of record as of April 30, 2015. 

Strong Asset Quality

The Bank's credit quality remains very strong.  Nonperforming assets were 10 basis points of total assets. 

Net charge-offs were only $13,000 for the quarter.

Continued Capital Strength

During the first quarter, the Bank sold 3.5 million shares of new common stock, which added approximately $203 million to common equity. 

New capital rules under the Basel III framework became effective for the Bank on January 1, 2015 ("Basel III Capital Rules").  The Basel III Capital Rules introduce new, more stringent requirements for what qualifies as "Common Equity Tier 1" ("CET1").  The Basel III Capital Rules also revise the definitions and components of required capital and establish a new approach for risk-weighting assets.

The Bank's Tier 1 leverage ratio was 9.78% and CET1 ratio was 11.07% at March 31, 2015.(2)

Growing Book Value

Book value per common share was $29.45 at March 31, 2015, up 12.4% from a year ago. 

Franchise Development

Loan Originations

Loan originations totaled $4.2 billion for the quarter, our highest first quarter ever.  Single family originations were $2.0 billion.  In addition, 50% of the quarter's single family originations were for purchases. 

Loans outstanding, excluding loans held for sale, totaled $39.1 billion, up 3.1% for the quarter and up 12.5% compared to a year ago.

Mortgage Banking Activity

The Bank sold $574.7 million of primarily longer-term, fixed-rate home loans during the quarter and recorded a gain on sale of $1.8 million, compared to loan sales of $346.2 million and a gain on sale of $2.8 million a year ago.  The margin on such loan sales was 0.32% for the quarter, compared to 0.82% a year ago.

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 $9.8 billion, up 2.6% for the quarter and 58.8% from a year ago.  Loan servicing fees for the quarter were $3.2 million, up from $2.0 million a year ago.

Investments

Total investments at March 31, 2015 were $7.5 billion, up 12.9% for the quarter and 50.6% compared to a year ago. 

As of March 31, 2015, investments that are qualified as high-quality liquid assets from a regulatory perspective totaled $3.7 billion.

Expansion of Wealth Management

Wealth management revenues totaled $47.3 million for the quarter, up 22.1% compared to last year's first quarter. 

Total wealth management assets were $56.4 billion, up 5.6% for the quarter and up 24.9% 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 $28.5 billion, brokerage assets and money market mutual funds of $21.1 billion, and trust and custody assets of $6.8 billion.

Deposit Results

Total deposits increased to $39.9 billion, up 7.6% for the quarter and up 19.0% compared to a year ago.  At March 31, 2015, 59.6% of deposits were checking accounts.

The average contractual rate paid on all deposits declined to 0.16% for the quarter, compared to 0.17% for the prior quarter.

Income Statement and Key Ratios

Quarterly Highlights

Strong Core Revenue Growth

Total revenues were $422.9 million for the quarter, a 10.8% increase from the first quarter of last year.

Core revenues were $410.1 million for the quarter, a 13.2% increase from the first quarter of last year. (1)

Continued Net Interest Income Growth

Net interest income was $348.0 million for the quarter, an 8.5% increase from the first quarter of last year.

Core net interest income was $335.2 million for the quarter, an 11.3% increase from the first quarter of last year. (1)

Stable Net Interest Margin

The Bank's net interest margin was 3.21% for both the current and prior quarter.

The core net interest margin was 3.09% for the quarter, compared to 3.06% for the prior quarter. (1)  The modest increase was primarily the result of a slight decrease in deposit and borrowing costs.

Strong Noninterest Income Growth

Noninterest income for the quarter was $74.9 million, up 22.8% from the first quarter of last year.  The increase was primarily due to increases in investment advisory fees, income from investments in life insurance, foreign exchange fees and loan servicing fees.

Noninterest income represented 18.3% of total core revenues for the quarter, up from 16.8% for the same period a year ago.

Noninterest Expense and Efficiency Ratio

Noninterest expense for the quarter was $255.7 million, a 17.6% increase from the first quarter of last year.  The increase was primarily due to increased salaries, professional fees and information systems costs.  The increase in these expenses was primarily attributable to the Bank's investments in infrastructure build-out to address enhanced regulatory standards.

The Bank's efficiency ratio was 60.5% for the quarter, compared to 58.6% for the prior quarter and 57.0% for the first quarter a year ago.   

The Bank's core efficiency ratio was 61.5% for the quarter, compared to 59.9% for the prior quarter and 58.9% for the first quarter a year ago. (1)  The increase in the efficiency ratio compared to the prior quarter was predominantly the result of a seasonal increase in payroll taxes.

Income Tax Rate

The Bank's effective tax rate for 2015 is expected to be 25.4%, compared to 27.3% for 2014.  The decrease in the effective tax rate results from the steady increase in tax-exempt securities, bank-owned life insurance, tax credit investments and tax-advantaged loans.

Adoption of New 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 December 31, 2014 balance sheet by reducing prepaid expenses and other assets and senior notes each by approximately $3 million.

_________
(1)    "Core" measures are non-GAAP financial measures that exclude the impact of purchase accounting.  See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."
(2)   Represents the ratio under Basel III with all applicable requirements fully phased-in.  See "Capital Ratios" table for additional information.

Conference Call Details

First Republic Bank's first quarter 2015 earnings conference call is scheduled for April 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 #15124618.  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 April 16, 2015, at 10:30 a.m. PT / 1:30 p.m. ET, through April 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 #15124618.  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.  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 from those discussed in the forward-looking statements include, but are not limited to: our ability to compete 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; changes in interest rates 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 consolidated assets in excess of $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 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




Quarter Ended
 March 31,


Quarter Ended
 December 31,

(in thousands, except per share amounts)


2015


2014


2014

Interest income:







     Loans


$

321,875


$

307,687


$

322,177

     Investments


61,923


48,844


55,652

     Cash and cash equivalents


1,105


780


1,170

        Total interest income


384,903


357,311


378,999








Interest expense:







     Deposits


13,988


15,231


14,470

     Borrowings


22,896


21,377


23,674

        Total interest expense


36,884


36,608


38,144








Net interest income


348,019


320,703


340,855

Provision for loan losses


11,887


7,095


14,076

Net interest income after provision for loan losses


336,132


313,608


326,779








Noninterest income:







     Investment advisory fees


41,211


33,308


39,892

     Brokerage and investment fees


3,699


3,005


4,341

     Trust fees


2,385


2,419


2,600

     Foreign exchange fee income


5,148


3,507


6,265

     Deposit fees


4,629


4,544


4,634

     Gain on sale of loans


1,812


2,845


4,107

     Loan servicing fees, net


3,230


1,996


3,174

     Loan and related fees


2,721


1,908


2,465

     Income from investments in life insurance


9,179


6,975


8,389

     Gain (loss) on investment securities, net


300


(91)


(567)

     Other income


605


596


534

        Total noninterest income


74,919


61,012


75,834








Noninterest expense:







     Salaries and employee benefits


139,948


120,585


129,980

     Occupancy


25,572


24,105


26,082

     Information systems


25,852


21,421


26,360

     Professional fees


19,513


7,216


17,042

     FDIC and other deposit assessments


8,350


7,444


8,300

     Advertising and marketing


5,214


6,014


5,484

     Amortization of intangibles


5,155


6,004


5,368

     Other expenses


26,069


24,702


25,534

        Total noninterest expense


255,673


217,491


244,150








Income before provision for income taxes


155,378


157,129


158,463

Provision for income taxes


39,466


42,425


43,004

Net income


115,912


114,704


115,459

Dividends on preferred stock


13,889


13,889


13,889

Net income available to common shareholders


$

102,023


$

100,815


$

101,570








Basic earnings per common share


$

0.73


$

0.76


$

0.74

Diluted earnings per common share


$

0.71


$

0.73


$

0.72

Dividends per common share


$

0.14


$

0.12


$

0.14








Weighted average shares—basic


138,839


132,880


137,794

Weighted average shares—diluted


142,791


137,295


141,753

 




CONSOLIDATED BALANCE SHEET




As of

($ in thousands)


March 31,
 2015


December 31,
 2014


March 31,
 2014

ASSETS







Cash and cash equivalents


$

1,644,534


$

817,150


$

1,762,222

Securities purchased under agreements to resell


100


100


28,889

Investment securities available-for-sale


1,428,898


1,393,357


1,639,760

Investment securities held-to-maturity


6,064,700


5,244,707


3,337,518








Loans:







     Single family (1-4 units)


21,167,697


20,494,402


19,967,016

     Home equity lines of credit


2,121,713


2,211,621


1,979,494

     Multifamily (5+ units)


4,851,874


4,689,692


4,231,518

     Commercial real estate


4,021,575


3,824,835


3,526,209

     Single family construction


399,814


428,358


319,904

     Multifamily/commercial construction


494,539


453,732


322,505

     Commercial business


5,059,337


4,873,580


3,593,142

     Other secured


444,690


436,918


427,913

     Stock secured


306,793


285,240


200,884

     Unsecured loans and lines of credit


245,942


231,552


205,644

     Total unpaid principal balance


39,113,974


37,929,930


34,774,229

     Net unaccreted discount


(140,639)


(152,764)


(202,481)

     Net deferred fees and costs


33,423


31,203


24,331

     Allowance for loan losses


(219,216)


(207,342)


(159,641)

     Loans, net


38,787,542


37,601,027


34,436,438








Loans held for sale


63,824


271,448


505,445

Investments in life insurance


1,022,466


1,014,734


772,216

Tax credit investments


844,213


828,640


742,682

Prepaid expenses and other assets (3)


786,488


747,763


689,397

Premises, equipment and leasehold improvements, net


162,051


165,703


164,507

Goodwill


106,549


106,549


106,549

Other intangible assets


104,846


110,001


126,741

Mortgage servicing rights


50,249


49,023


30,333

Other real estate owned




3,200

        Total Assets


$

51,066,460


$

48,350,202


$

44,345,897








LIABILITIES AND EQUITY







Liabilities:







Deposits:







     Noninterest-bearing checking accounts


$

14,523,454


$

12,542,881


$

9,367,439

     Interest-bearing checking accounts


9,261,476


8,809,590


7,773,825

     Money Market (MM) checking accounts


5,261,424


5,216,253


5,194,631

     MM savings and passbooks


7,062,013


6,795,189


7,617,688

     Certificates of deposit


3,830,823


3,767,016


3,614,355

        Total Deposits


39,939,190


37,130,929


33,567,938








Long-term FHLB advances


4,925,000


5,275,000


5,650,000

Senior notes (3)


396,576


396,384


Debt related to variable interest entities


32,800


36,039


41,743

Other liabilities


697,897


733,383


592,181

        Total Liabilities


45,991,463


43,571,735


39,851,862








Shareholders' Equity:







     Preferred stock


889,525


889,525


889,525

     Common stock


1,421


1,383


1,375

     Additional paid-in capital


2,522,159


2,313,592


2,289,799

     Retained earnings


1,653,338


1,570,871


1,298,667

     Accumulated other comprehensive income


8,554


3,096


14,669

        Total Shareholders' Equity


5,074,997


4,778,467


4,494,035

              Total Liabilities and Shareholders' Equity


$

51,066,460


$

48,350,202


$

44,345,897



(3)

The Bank's balance sheet for December 31, 2014 was adjusted to reduce prepaid expenses and other assets and senior notes each by approximately $3 million. See "Adoption of New Accounting Guidance" section of the earnings release for additional information.







Quarter Ended
 March 31,


Quarter Ended
 December 31,

Operating Information and Yields/Rates


2015


2014


2014

($ in thousands)







Operating Information







Net income to average assets (4)


0.94%


1.07%


0.94%

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


10.32%


12.11%


10.37%

Dividend payout ratio


19.6%


16.3%


19.5%

Efficiency ratio (5)


60.5%


57.0%


58.6%

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


61.5%


58.9%


59.9%








Net loan charge-offs to allowance for loan losses


$

13


$

459


$

1,783

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


0.00%


0.01%


0.02%








Yields/Rates (4)







Cash and cash equivalents


0.25%


0.25%


0.25%

Investment securities (6), (7)


4.75%


5.17%


4.81%

Loans (6), (8)


3.46%


3.65%


3.48%








     Total interest-earning assets


3.53%


3.74%


3.54%








Checking


0.01%


0.02%


0.01%

Money market checking and savings


0.07%


0.16%


0.08%

CDs (8)


1.22%


1.06%


1.21%

     Total deposits


0.15%


0.19%


0.15%








Long-term FHLB advances


1.57%


1.56%


1.58%

Senior notes (9)


2.59%


—%


2.59%

Debt related to variable interest entities


1.61%


1.80%


1.67%

     Total borrowings


1.64%


1.56%


1.65%








     Total interest-bearing liabilities


0.34%


0.39%


0.35%








Net interest spread


3.19%


3.35%


3.19%








Net interest margin


3.21%


3.37%


3.21%








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


3.09%


3.17%


3.06%








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

(9)

Rate includes amortization of issuance discounts and costs.





Quarter Ended
 March 31,


Quarter Ended
 December 31,

Mortgage Loan Sales


2015


2014


2014

($ in thousands)







Loans sold:







     Agency


$

36,595


$

30,565


$

29,319

      Non-agency


538,077


315,635


961,965

     Total loans sold


$

574,672


$

346,200


$

991,284








Gain on sale of loans:







     Amount


$

1,812


$

2,845


$

4,107

     Gain as a percentage of loans sold


0.32%


0.82%


0.41%






















 



Quarter Ended
 March 31,


Quarter Ended
 December 31,

Loan Originations


2015


2014


2014

($ in thousands)







Single family (1-4 units)


$

1,698,443


$

1,446,212


$

1,885,418

Home equity lines of credit


258,992


326,717


339,001

Multifamily (5+ units)


333,968


386,998


339,505

Commercial real estate


378,626


226,588


272,211

Construction


237,059


151,282


210,312

Commercial business


1,133,879


469,953


1,044,474

Other loans


208,063


213,748


197,654

     Total loans originated


$

4,249,030


$

3,221,498


$

4,288,575

 



As of March 31, 2015

Composition of Loan Portfolio


Loans acquired
on July 1, 2010


Loans originated
since July 1, 2010


Total
Loans

($ in thousands)







Single family (1-4 units)


$

2,774,174


$

18,393,523


$

21,167,697

Home equity lines of credit


564,615


1,557,098


2,121,713

Multifamily (5+ units)


344,037


4,507,837


4,851,874

Commercial real estate


532,781


3,488,794


4,021,575

Single family construction


4,184


395,630


399,814

Multifamily/commercial construction


1,151


493,388


494,539

Commercial business


281,926


4,777,411


5,059,337

Other secured


31,488


413,202


444,690

Stock secured


5,460


301,333


306,793

Unsecured loans and lines of credit


24,690


221,252


245,942

     Total unpaid principal balance


4,564,506


34,549,468


39,113,974

Net unaccreted discount


(140,337)


(302)


(140,639)

Net deferred fees and costs


(4,550)


37,973


33,423

Allowance for loan losses


(7,149)


(212,067)


(219,216)

     Loans, net


$

4,412,470


$

34,375,072


$

38,787,542

 



As of

Asset Quality Information


March 31,
 2015


December 31,
 2014


September 30,
 2014


June 30,
 2014


March 31,
 2014

($ in thousands)











Nonperforming assets:











   Nonaccrual loans


$

49,830


$

45,962


$

50,179


$

47,373


$

52,109

   Other real estate owned





4,767


3,200

      Total nonperforming assets


$

49,830


$

45,962


$

50,179


$

52,140


$

55,309












Nonperforming assets to total assets


0.10%


0.10%


0.11%


0.11%


0.12%












Accruing loans 90 days or more past due


$

202


$

4,380


$


$


$












Restructured accruing loans


$

14,855


$

16,252


$

16,966


$

18,453


$

18,278

 



As of

Book Value Ratios


March 31,
2015


December 31,
 2014


September 30,
 2014


June 30,
 2014


March 31,
 2014

(in thousands, except per share amounts)











Number of shares of common stock outstanding


142,105


138,269


138,155


137,977


137,521

Book value per common share


$

29.45


$

28.13


$

27.48


$

26.82


$

26.21

Tangible book value per common share


$

27.97


$

26.56


$

25.87


$

25.17


$

24.51












 




As of



2015


2014



March 31,


December 31,


September 30,


June 30,


March 31,

Capital Ratios


Actual (10)


Fully

Phased-in (11)


Actual (10)

Tier 1 leverage ratio


9.90%


9.78%


9.43%


9.51%


9.73%


9.85%

Common Equity Tier 1 ratio (12)


11.25%


11.07%


n/a


n/a


n/a


n/a

Tier 1 common equity ratio (12)


n/a


n/a


10.90%


11.07%


10.93%


11.12%

Tier 1 risk-based capital ratio


13.73%


13.55%


13.55%


13.83%


13.74%


14.07%

Total risk-based capital ratio


14.37%


14.19%


14.20%


14.47%


14.35%


14.64%














(10)

Ratios as of March 31, 2015 are preliminary and reflect the adoption of the Basel III Capital Rules in effect beginning January 1, 2015. Ratios for prior periods represent the previous capital rules under Basel I.

(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 March 31, 2015.

(12)

As of March 31, 2015, 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 11 above). In prior 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


March 31,
 2015


December 31,
 2014


September 30,
 2014


June 30,
 2014


March 31,
 2014

($ in millions)











First Republic Investment Management


$

28,530


$

27,453


$

26,255


$

25,132


$

23,286












Brokerage and Investment:











   Brokerage


18,973


17,653


17,184


16,152


14,474

   Money Market Mutual Funds


2,100


2,025


1,796


1,092


1,224

     Total Brokerage and Investment


21,073


19,678


18,980


17,244


15,698












Trust Company:











   Trust


3,149


3,057


3,044


3,149


3,173

   Custody


3,617


3,189


3,103


3,143


2,985

     Total Trust Company


6,766


6,246


6,147


6,292


6,158

       Total Wealth Management Assets


56,369


53,377


51,382


48,668


45,142












Loans serviced for investors


9,840


9,590


8,859


7,283


6,198

        Total fee-based assets


$

66,209


$

62,967


$

60,241


$

55,951


$

51,340

 


















Quarter Ended
 March 31,


Quarter Ended
 December 31,

Average Balance Sheet


2015


2014


2014

($ in thousands)







Assets:







Cash and cash equivalents


$

1,803,026


$

1,245,562


$

1,845,498

Investment securities (13)


6,980,165


5,283,388


6,304,984

Loans (14)


38,246,042


34,479,799


37,573,433

   Total interest-earning assets


47,029,233


41,008,749


45,723,915








Noninterest-earning cash


252,964


218,288


263,915

Goodwill and other intangibles


213,900


236,210


219,140

Other assets


2,401,077


1,904,425


2,350,513

   Total noninterest-earning assets


2,867,941


2,358,923


2,833,568








   Total Assets


$

49,897,174


$

43,367,672


$

48,557,483








Liabilities and Equity:







Checking


$

22,377,436


$

16,564,715


$

20,694,274

Money market checking and savings


12,316,558


12,670,094


12,661,395

CDs (14)


3,796,301


3,705,391


3,772,544

   Total deposits


38,490,295


32,940,200


37,128,213








Short-term borrowings




2

Long-term FHLB advances


5,217,778


5,517,778


5,275,000

Senior notes (15)


396,482



396,291

Debt related to variable interest entities


34,460


42,592


37,615

   Total borrowings


5,648,720


5,560,370


5,708,908










   Total interest-bearing liabilities


44,139,015


38,500,570


42,837,121










Noninterest-bearing liabilities


858,821


602,576


943,984

Preferred equity


889,525


889,525


889,525

Common equity


4,009,813


3,375,001


3,886,853

   Total Liabilities and Equity


$

49,897,174


$

43,367,672


$

48,557,483








(13)

Includes FHLB stock and securities purchased under agreements to resell.

(14)

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

(15)

Average balances include unamortized issuance discounts and costs.

 




Quarter Ended
 March 31,


Quarter Ended
 December 31,

Purchase Accounting Accretion and Amortization (16)


2015


2014


2014

($ in thousands)







Accretion/amortization to net interest income:







   Loans


$

12,122


$

17,615


$

14,086

   Deposits


728


1,923


1,313

     Total


$

12,850


$

19,538


$

15,399








Amortization to noninterest expense:







   Intangible assets


$

3,489


$

4,127


$

3,649








(16) 

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.

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
 March 31,


Quarter Ended
 December 31,

Non-GAAP Earnings


2015


2014


2014

(in thousands, except per share amounts)







Net income


$

115,912


$

114,704


$

115,459

Accretion/amortization added to net interest income


(12,850)


(19,538)


(15,399)

Amortization of intangible assets


3,489


4,127


3,649

Add back tax impact of the above items


3,978


6,550


4,994

Non-GAAP net income


110,529


105,843


108,703

Dividends on preferred stock


(13,889)


(13,889)


(13,889)

Non-GAAP net income available to common shareholders


$

96,640


$

91,954


$

94,814








GAAP earnings per common share—diluted


$

0.71


$

0.73


$

0.72

Impact of purchase accounting, net of tax


(0.03)


(0.06)


(0.05)

Non-GAAP earnings per common share—diluted


$

0.68


$

0.67


$

0.67








Weighted average diluted common shares outstanding


142,791


137,295


141,753







Quarter Ended
 March 31,


Quarter Ended
 December 31,

Yield on Average Loans


2015


2014


2014

($ in thousands)







Interest income on loans


$

321,875


$

307,687


$

322,177

Add: Tax-equivalent adjustment on loans


8,728


6,519


8,520

Interest income on loans (tax-equivalent basis)


330,603


314,206


330,697

Less: Accretion


(12,122)


(17,615)


(14,086)

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


$

318,481


$

296,591


$

316,611








Average loans


$

38,246,042


$

34,479,799


$

37,573,433

Add: Average unaccreted loan discounts


148,595


214,055


161,556

Average loans (non-GAAP)


$

38,394,637


$

34,693,854


$

37,734,989








Yield on average loans—reported (6)


3.46%


3.65%


3.48%








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


3.32%


3.42%


3.32%

















Quarter Ended
 March 31,


Quarter Ended
 December 31,

Cost of Average Deposits


2015


2014


2014

($ in thousands)







Interest expense on deposits


$

13,988


$

15,231


$

14,470

Add: Amortization of CD premiums


728


1,923


1,313

Non-GAAP interest expense on deposits


$

14,716


$

17,154


$

15,783








Average deposits


$

38,490,295


$

32,940,200


$

37,128,213

Less: Average unamortized CD premiums


(602)


(6,371)


(1,607)

Average deposits (non-GAAP)


$

38,489,693


$

32,933,829


$

37,126,606








Cost of average deposits—reported


0.15%


0.19%


0.15%








Contractual cost of average deposits (non-GAAP)


0.16%


0.21%


0.17%

















Quarter Ended
 March 31,


Quarter Ended
 December 31,

Net Interest Margin


2015


2014


2014

($ in thousands)







Net interest income


$

348,019


$

320,703


$

340,855

Add: Tax-equivalent adjustment


29,658


25,853


28,766

Net interest income (tax-equivalent basis)


377,677


346,556


369,621

Less: Accretion/amortization


(12,850)


(19,538)


(15,399)

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


$

364,827


$

327,018


$

354,222








Average interest-earning assets


$

47,029,233


$

41,008,749


$

45,723,915

Add: Average unaccreted loan discounts


148,595


214,055


161,556

Average interest-earning assets (non-GAAP)


$

47,177,828


$

41,222,804


$

45,885,471








Net interest margin—reported


3.21%


3.37%


3.21%








Core net interest margin (non-GAAP)


3.09%


3.17%


3.06%

















Quarter Ended
 March 31,


Quarter Ended
 December 31,

Efficiency Ratio


2015


2014


2014

($ in thousands)







Net interest income


$

348,019


$

320,703


$

340,855

Less: Accretion/amortization


(12,850)


(19,538)


(15,399)

Net interest income (non-GAAP)


$

335,169


$

301,165


$

325,456








Noninterest income


$

74,919


$

61,012


$

75,834








Total revenue


$

422,938


$

381,715


$

416,689








Total revenue (non-GAAP)


$

410,088


$

362,177


$

401,290








Noninterest expense


$

255,673


$

217,491


$

244,150

Less: Intangible amortization


(3,489)


(4,127)


(3,649)

Noninterest expense (non-GAAP)


$

252,184


$

213,364


$

240,501








Efficiency ratio


60.5%


57.0%


58.6%








Core efficiency ratio (non-GAAP)


61.5%


58.9%


59.9%

 

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SOURCE First Republic Bank

Investors: Andrew Greenebaum / Lasse Glassen, Addo Communications, andrewg@addocommunications.com, lasseg@addocommunications.com, (310) 829-5400; Media: Greg Berardi, Blue Marlin Partners, greg@bluemarlinpartners.com, (415) 239-7826