First Republic Reports Strong Quarterly and Annual Results

Annual Revenues Increased 20.1% and Diluted EPS Increased 23.6%

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

Results for the fourth quarter 2016 and full year were very strong and were a record in many respects,” said Jim Herbert, Chairman and CEO. “Asset quality remains excellent. We are also pleased to have completed the acquisition of Gradifi, the leading provider of student debt repayment benefit plans.”

Full Year Highlights

Financial Results

– Revenues for the year were $2.2 billion, up 20.1%.

– Net income was $673.4 million, up 29.0%.

– Diluted earnings per share (“EPS”) of $3.93, up 23.6%.

– Loan originations were a record $25.7 billion for the year.

– Efficiency ratio of 60.5%, compared to 59.5% for the prior year.

Continued Capital and Credit Strength

– Common Equity Tier 1 ratio was 10.75%.

– Total regulatory capital has grown 27.3% from a year ago (23.8% (1) after the redemption of Series A Preferred Stock).

– Tangible book value per share was $35.35, up 17.2% from a year ago.

– Nonperforming assets remained very low at 7 basis points of total assets.

– Net charge-offs were only $1.9 million for the year, less than a basis point of average loans.

Continued Franchise Development

– Loans outstanding, excluding loans held for sale, totaled $52.0 billion, up 17.8% from a year ago.

– Deposits were $58.6 billion, up 22.4% from a year ago.

– Wealth management assets were $83.6 billion, up 15.6% from a year ago.

– Wealth management revenues were $291.3 million, up 25.7% from a year ago.

– Acquired Gradifi, Inc. (“Gradifi”), the leading provider of student debt repayment benefit plans nationwide, in December 2016.

Quarterly Highlights

– Compared to last year’s fourth quarter:

– Revenues were $599.5 million, up 21.1%.

– Net income was $179.1 million, up 27.9%.

– Diluted EPS of $1.03, up 22.6%.

– Loan originations were a record $7.9 billion for the quarter.

– Net interest margin was 3.16% for both the fourth quarter of 2016 and the prior quarter.

– Core net interest margin was 3.08%, compared to 3.11% for the prior quarter. (2)

– Efficiency ratio was 60.1%, compared to 60.5% for the prior quarter.

– Wealth management assets were $83.6 billion, up 4.2% from the prior quarter.

Revenue growth was strong, and net interest margin remained stable,” said Mike Roffler, Chief Financial Officer. “During the fourth quarter, we were pleased to complete another successful common stock offering, bringing total new capital raised in 2016 to over $1 billion.”

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the fourth quarter of $0.16 per share of common stock, which is payable on February 9, 2017 to shareholders of record as of January 26, 2017.

Continued Strong Asset Quality

Credit quality remains very strong. Nonperforming assets were 7 basis points of total assets at December 31, 2016.

The Bank had net charge-offs for the quarter of $207,000, while adding $10.5 million to its allowance for loan losses due to continued loan growth. Net charge-offs for the year were $1.9 million. A total of $47.2 million was added to the Bank’s allowance for loan losses during the year.

Continued Capital Strength

Total regulatory capital has grown 27.3% from a year ago (23.8% (1) after the redemption of Series A Preferred Stock).

The Bank’s Common Equity Tier 1 ratio was 10.75% at December 31, 2016, compared to 10.52% last quarter.

During the fourth quarter, the Bank issued and sold approximately 4.0 million new shares of common stock in an underwritten public offering, which added approximately $325 million to common equity.

Tangible Book Value Growth

Tangible book value per common share at December 31, 2016 was $35.35, up 17.2% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations were a record $7.9 billion for the quarter, compared to $4.7 billion for the fourth quarter a year ago. For 2016, loans originations totaled $25.7 billion, compared to $19.7 billion for the prior year.

Loans outstanding, excluding loans held for sale, totaled $52.0 billion at December 31, 2016, up 4.3% for the quarter and up 17.8% compared to a year ago.

Deposit Growth

Total deposits increased to $58.6 billion, up 6.4% for the quarter and up 22.4% compared to a year ago.

At December 31, 2016, checking accounts totaled 63.7% of deposits.

The average rate paid on deposits was 15 basis points for both the fourth quarter and the prior quarter.

Investments

Total investment securities at December 31, 2016 were $15.2 billion, up 18.4% for the quarter and up 45.0% compared to a year ago.

The growth in investments reflected the completion of increasing our level of high-quality liquid assets to 12.7% of average total assets for the fourth quarter. High-quality liquid assets totaled $9.0 billion at December 31, 2016, up 34.5% for the quarter and up 55.5% compared to a year ago.

Mortgage Banking Activity

During the fourth quarter, the Bank sold $801.0 million of loans and recorded a gain on sale of $818,000. For the year ended December 31, 2016, the Bank sold $3.1 billion of loans and recorded a gain on sale of $4.8 million.

Loans serviced for investors at year-end totaled $11.7 billion, up 10.7% from a year ago. Net loan servicing fees for the year were $13.5 million.

Continued Expansion of Wealth Management

Wealth management revenues totaled $79.8 million for the quarter, up 18.8% compared to last year’s fourth quarter. For the year ended December 31, 2016, wealth management revenues were $291.3 million, an increase of 25.7% compared to the prior year. Such revenues represented 13% of total revenues for both the quarter and the year. Wealth management revenues for 2016 include the full benefit of the Constellation Wealth Advisors acquisition on October 1, 2015.

Total wealth management assets were $83.6 billion at December 31, 2016, up 4.2% for the quarter and up 15.6% 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 included investment management assets of $41.2 billion, brokerage assets and money market mutual funds of $34.3 billion, and trust and custody assets of $8.2 billion.

Gradifi Acquisition

To further expand First Republic’s franchise, the Bank completed the acquisition of Gradifi, the leading provider of student debt repayment benefit plans nationwide. Gradifi is now a wholly-owned subsidiary of the Bank.

Income Statement and Key Ratios

Highlights

Strong Revenue Growth

Total revenues were $599.5 million for the quarter, up 21.1% compared to the fourth quarter a year ago and $2.2 billion for 2016, up 20.1% compared to the prior year.

Continued Net Interest Income Growth

Net interest income was $490.6 million for the quarter, up 21.2% compared to the fourth quarter a year ago and $1.8 billion for 2016, up 19.8% compared to the prior year. The increase in net interest income resulted primarily from growth in average earning assets.

Net Interest Margin

For 2016, the Bank’s net interest margin was 3.20%, compared to 3.21% for the prior year. The net interest margin was 3.16% for both the fourth quarter of 2016 and the prior quarter.

The core net interest margin was 3.14% for 2016, compared to 3.09% for the prior year. The core net interest margin was 3.08% for the quarter, compared to 3.11% for the prior quarter. (2)

Noninterest Income

Noninterest income was $108.8 million for the quarter, up 20.7% compared to the fourth quarter a year ago. Noninterest income was $394.8 million for 2016, up 21.5% compared to the prior year. The increases were primarily from increased wealth management revenues.

Efficiency Ratio

The Bank’s efficiency ratio was 60.1% for the quarter, compared to 60.5% for the prior quarter and 60.8% for the fourth quarter a year ago. For all of 2016, the efficiency ratio was 60.5%, compared to 59.5% for 2015.

Noninterest expense was $360.2 million for the quarter, up 19.7% from the fourth quarter of last year. For 2016, noninterest expense was $1.3 billion, up 22.0% from the prior year. The increases were primarily due to increased salaries and benefits from the continued investments in the expansion of the franchise and regulatory compliance activities, along with growth across all areas of the Bank.

Income Tax Rate

The Bank’s effective tax rate for the fourth quarter of 2016 was 21.7%, compared to 15.0% for the prior quarter. The increase in the effective tax rate was primarily due to lower tax benefits from exercised stock options.

The effective tax rate for 2016 was 18.6%, compared to 24.4% in 2015. The decrease in 2016 was due to the adoption of Accounting Standards Codification 718, “Compensation—Stock Compensation,” along with higher levels of income associated with tax-advantaged investments.

__________

(1) Regulatory capital growth excluding the $199.5 million 6.70% Series A Preferred Stock, which will be redeemed on January 30, 2017.

(2) Core net interest margin is a non-GAAP financial measure that excludes the positive impact of purchase accounting and also the special FHLB dividends received in the fourth quarter of 2016 and 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 fourth quarter and full year 2016 earnings conference call is scheduled for January 13, 2017 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 #44886677. 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 firstrepublic.com. To listen to the live webcast, please visit the site at least 10 minutes prior to the start time 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 January 13, 2017, at 10:00 a.m. PT / 1:00 p.m. ET, through January 20, 2017, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (855) 859-2056 and use conference ID #44886677. 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 firstrepublic.com.

The Bank’s press releases are available after release in the Investor Relations section of First Republic Bank’s website at 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 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, New York City, Greenwich and Palm Beach. First Republic offers a complete line of banking and wealth management services for individuals and businesses. For more information, visit 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; our ability to recruit and retain key managers, employees and board members; 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; real estate prices generally and in our markets; our geographic and product concentrations; 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; our ability to avoid litigation and its associated costs and liabilities; new accounting standards; future FDIC special assessments or changes to regular assessments; fraud, cybersecurity and privacy risks; 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 STATEMENTS OF INCOME

 
 
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
(in thousands, except per share amounts)   2016     2015 2016 2016     2015
Interest income:
Loans $ 418,423 $ 357,446 $ 403,299 $ 1,573,403 $ 1,361,654
Investments 106,994 77,333 94,684 378,719 268,682
Other 9,819 3,697 3,701 19,266 27,464
Cash and cash equivalents 2,358   2,730   2,630   9,485   6,292
Total interest income 537,594   441,206   504,314   1,980,873   1,664,092
 
Interest expense:
Deposits 21,206 16,638 19,661 73,765 61,072
Borrowings 25,763   19,869   24,049   89,946   86,357
Total interest expense 46,969   36,507   43,710   163,711   147,429
 
Net interest income 490,625 404,699 460,604 1,817,162 1,516,663
Provision for loan losses 10,500   12,045   18,000   47,192   55,439
Net interest income after provision for loan losses 480,125   392,654   442,604   1,769,970   1,461,224
 
Noninterest income:
Investment management fees 59,855 49,814 56,843 224,626 178,738
Brokerage and investment fees 10,151 7,654 6,627 31,868 19,659
Trust fees 3,374 3,259 3,015 12,365 10,745
Foreign exchange fee income 6,384 6,413 5,460 22,406 22,517
Deposit fees 5,341 4,914 5,278 20,699 19,311
Gain on sale of loans 818 1,480 1,785 4,828 9,725
Loan servicing fees, net 3,022 3,752 3,182 13,465 13,040
Loan and related fees 3,650 3,161 3,709 14,097 12,393
Income from investments in life insurance 17,515 9,289 12,065 48,119 35,474
Gain (loss) on investment securities, net (1,363 ) (515 ) (663 ) 1,055 821
Other income (loss) 87   930   (30 ) 1,284   2,630
Total noninterest income 108,834   90,151   97,271   394,812   325,053
 
Noninterest expense:
Salaries and employee benefits 201,087 168,424 193,340 763,625 596,593
Information systems 43,083 33,416 38,917 153,207 119,114
Occupancy 32,277 27,220 30,945 119,139 106,856
Professional fees 14,798 16,487 12,466 52,740 73,022
FDIC assessments 13,000 9,500 11,800 44,200 35,250
Advertising and marketing 10,167 7,617 7,169 32,783 25,562
Amortization of intangibles 5,839 6,933 6,116 25,002 21,760
Other expenses 39,923   31,327   36,983   146,490   117,452

Total noninterest expense

360,174   300,924   337,736   1,337,186   1,095,609
 
Income before provision for income taxes 228,785 181,881 202,139 827,596 690,668
Provision for income taxes 49,667   41,835   30,321   154,168   168,523
Net income 179,118 140,046 171,818 673,428 522,145
Dividends on preferred stock 17,376   15,314   17,377   68,589   58,928
Net income available to common shareholders $ 161,742   $ 124,732   $ 154,441   $ 604,839   $ 463,217
 
Basic earnings per common share $ 1.06   $ 0.87   $ 1.03   $ 4.07   $ 3.27
Diluted earnings per common share $ 1.03   $ 0.84   $ 1.00   $ 3.93   $ 3.18
Dividends per common share $ 0.16   $ 0.15   $ 0.16   $ 0.63   $ 0.59
 
Weighted average shares—basic 151,990   144,006   149,800   148,752   141,689
Weighted average shares—diluted 157,217   147,814   154,824   154,095   145,510
 
     

CONSOLIDATED BALANCE SHEETS

 
 
As of
December 31,     September 30,     December 31,
($ in thousands)   2016 2016 2015

ASSETS

Cash and cash equivalents $ 2,107,722 $ 1,386,967 $ 1,131,110
Securities purchased under agreements to resell 100 100 100
Investment securities available-for-sale 2,007,258 1,710,571 2,910,801
Investment securities held-to-maturity 13,150,157 11,094,535 7,540,678
 
Loans:
Single family (1-4 units) 26,234,768 24,923,746 23,092,346
Home equity lines of credit 2,622,231 2,575,253 2,370,188
Multifamily (5+ units) 6,688,203 6,227,304 5,371,484
Commercial real estate 5,484,620 5,205,888 4,462,834
Single family construction 496,631 496,357 436,774
Multifamily/commercial construction 929,076 847,303 693,364
Business 6,886,816 7,128,758 6,232,378
Stock secured 821,708 871,195 521,005
Other secured 723,250 684,328 541,637
Unsecured 1,130,614   925,066   423,795  
Total unpaid principal balance 52,017,917   49,885,198   44,145,805  
Net unaccreted discount (75,975 ) (85,645 ) (108,499 )
Net deferred fees and costs 66,375 59,262 46,263
Allowance for loan losses (306,398 ) (296,105 ) (261,058 )
Loans, net 51,701,919   49,562,710   43,822,511  
 
Loans held for sale 407,226 514,291 48,681
Investments in life insurance 1,273,172 1,266,194 1,168,596
Tax credit investments 1,121,416 1,071,255 1,006,836
Prepaid expenses and other assets 923,224 845,229 817,410
Premises, equipment and leasehold improvements, net 207,592 190,213 172,008
Goodwill 203,177 171,616 171,616
Other intangible assets 112,399 118,238 137,400
Mortgage servicing rights 62,410 60,432 53,538
Other real estate owned   1,196    
Total Assets $ 73,277,772   $ 67,993,547   $ 58,981,285  
 

LIABILITIES AND EQUITY

Liabilities:
Deposits:
Noninterest-bearing checking $ 22,740,303 $ 20,965,249 $ 18,252,007
Interest-bearing checking 14,575,890 12,747,952 12,027,363
Money market checking 7,969,787 8,381,381 5,756,821
Money market savings and passbooks 8,203,340 8,126,741 7,270,396
Certificates of deposit 5,113,061   4,840,374   4,586,878  

Total Deposits

58,602,381   55,061,697   47,893,465  
 
Short-term borrowings 100,000 200,000 100,000
Long-term FHLB advances 5,900,000 4,600,000 4,000,000
Senior notes 397,955 397,755 397,159
Subordinated notes 387,380 387,329
Debt related to variable interest entities 25,980 26,981 29,643
Other liabilities 955,424   875,287   855,335  
Total Liabilities 66,369,120   61,549,049   53,275,602  
 
Shareholders’ Equity:
Preferred stock 1,139,525 1,139,525 989,525
Common stock 1,543 1,501 1,461
Additional paid-in capital 3,301,705 2,962,355 2,770,265
Retained earnings 2,459,540 2,322,296 1,949,652
Accumulated other comprehensive income (loss) 6,339   18,821   (5,220 )
Total Shareholders’ Equity 6,908,652   6,444,498   5,705,683  
Total Liabilities and Shareholders’ Equity $ 73,277,772   $ 67,993,547   $ 58,981,285  
 
             
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
Operating Information and Yields/Rates   2016     2015 2016 2016     2015
($ in thousands)

Operating Information

Net income to average assets (3) 1.00 % 0.93 % 1.02 % 1.02 % 0.96 %
Net income available to common shareholders to average common equity (3) 11.51 % 10.74 % 11.62 % 11.67 % 10.72 %
Dividend payout ratio 15.6 % 17.8 % 16.0 % 16.1 % 18.5 %
Efficiency ratio (4) 60.1 % 60.8 % 60.5 % 60.5 % 59.5 %
 
Net loan charge-offs (recoveries) $ 207 $ 1,395 $ 626 $ 1,852 $ 1,723
Net loan charge-offs to average total loans (3) 0.00 % 0.01 % 0.01 % 0.00 % 0.00 %
 

Yields/Rates (3)

Cash and cash equivalents 0.53 % 0.28 % 0.48 % 0.50 % 0.26 %
Investment securities (5), (6) 3.97 % 4.39 % 4.22 % 4.16 % 4.58 %
Loans (5), (7) 3.33 % 3.39 % 3.35 % 3.38 % 3.42 %
FHLB stock (8) 26.45 % 10.49 % 8.48 % 12.51 % 14.29 %
 
Total interest-earning assets 3.44 % 3.36 % 3.43 % 3.46 % 3.49 %
 
Checking 0.01 % 0.01 % 0.02 % 0.01 % 0.00 %
Money market checking and savings 0.13 % 0.07 % 0.12 % 0.10 % 0.07 %
CDs (7) 1.17 % 1.24 % 1.15 % 1.18 % 1.24 %
Total deposits 0.15 % 0.14 % 0.15 % 0.14 % 0.14 %
 
Short-term borrowings 1.80 % 1.31 % 1.18 % 0.66 % 0.73 %
Long-term FHLB advances 1.46 % 1.55 % 1.49 % 1.54 % 1.57 %
Senior notes (9) 2.59 % 2.59 % 2.59 % 2.59 % 2.59 %
Subordinated notes (9) 4.57 % % 4.60 % 4.56 % %
Other borrowings 1.83 % 1.67 % 1.23 % 1.69 % 1.62 %
Total borrowings 1.75 % 1.63 % 1.70 % 1.62 % 1.62 %
 
Total interest-bearing liabilities 0.30 % 0.27 % 0.29 % 0.28 % 0.31 %
 
Net interest spread 3.14 % 3.09 % 3.14 % 3.18 % 3.18 %
 
Net interest margin (5) 3.16 % 3.10 % 3.16 % 3.20 % 3.21 %
 
Core net interest margin (non-GAAP) (2), (5) 3.08 % 3.02 % 3.11 % 3.14 % 3.09 %

__________

(3)

 

For periods less than a year, ratios are annualized.

(4)

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

(5)

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 the quarter and year ended December 31, 2016 includes a special FHLB dividend of $5.9 million. Yield for the year ended December 31, 2015 includes a special FHLB dividend of $9.1 million.

(9)

Rate includes amortization of issuance discounts and costs.

 
             
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
Mortgage Loan Sales   2016     2015 2016 2016     2015
($ in thousands)
Loans sold:
Agency $ 180,188 $ 73,244 $ 137,949 $ 434,094 $ 273,128
Non-agency 620,819   294,359   810,006   2,713,333   2,156,132  
Total loans sold $ 801,007   $ 367,603   $ 947,955   $ 3,147,427   $ 2,429,260  
 
Gain on sale of loans:
Amount $ 818 $ 1,480 $ 1,785 $ 4,828 $ 9,725
Gain as a percentage of loans sold 0.10 % 0.40 % 0.19 % 0.15 % 0.40 %
 
     
As of
December 31,     September 30,     June 30,     March 31,     December 31,

Loan Servicing Portfolio

  2016 2016 2016 2016 2015

($ in millions)

Loans serviced for investors $ 11,655   $ 11,494   $ 11,061   $ 10,654   $ 10,531
 
             
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
Loan Originations   2016     2015 2016 2016     2015
($ in thousands)
Single family (1-4 units) $ 3,064,315 $ 1,635,350 $ 2,805,361 $ 10,615,621 $ 7,633,653
Home equity lines of credit 452,445 398,267 454,529 1,815,252 1,575,262
Multifamily (5+ units) 742,991 302,435 566,528 2,542,551 1,461,123
Commercial real estate 446,677 292,369 311,466 1,354,527 1,344,072
Construction 480,480 305,085 410,538 1,342,404 1,291,902
Business 2,137,549 1,343,953 1,529,400 5,572,410 5,138,716
Stock and other secured 328,105 270,259 207,241 1,401,559 808,567
Unsecured 281,740   161,753   190,836   1,076,550   418,667
Total loans originated $ 7,934,302   $ 4,709,471   $ 6,475,899   $ 25,720,874   $ 19,671,962
 
     
As of
December 31,     September 30,     June 30,     March 31,     December 31,

Asset Quality Information

  2016 2016 2016 2016 2015
($ in thousands)
Nonperforming assets:
Nonaccrual loans $ 49,020 $ 52,759 $ 57,953 $ 59,203 $ 73,545
Other real estate owned   1,196   1,196   1,393    
Total nonperforming assets $ 49,020   $ 53,955   $ 59,149   $ 60,596   $ 73,545  
 
Nonperforming assets to total assets 0.07 % 0.08 % 0.09 % 0.10 % 0.12 %
 
Accruing loans 90 days or more past due $ $ 3,083 $ 451 $ 3,189 $ 4,199
 
Restructured accruing loans $ 14,278 $ 13,968 $ 11,822 $ 13,978 $ 14,043
 
     
As of
December 31,     September 30,     June 30,     March 31,     December 31,

Book Value Ratios

  2016 2016 2016 2016 2015

(in thousands, except per share amounts)

Number of shares of common stock outstanding 154,292   150,109   149,722   146,314   146,110
Book value per common share $ 37.39   $ 35.34   $ 34.51   $ 33.12   $ 32.28
Tangible book value per common share $ 35.35   $ 33.41   $ 32.53   $ 31.05   $ 30.16
 
     
As of
2016     2015
December 31 (10)     September 30     June 30     March 31 December 31
Capital Ratios   Actual     Fully
Phased-in (11)
Actual

Tier 1 leverage ratio (Tier 1 capital to average assets)

9.37 % 9.31 % 9.26 % 9.58 % 9.38 % 9.21 %

Common Equity Tier 1 capital to risk-weighted assets

10.75 % 10.64 % 10.52 % 10.74 % 10.61 % 10.76 %
Tier 1 capital to risk-weighted assets 12.97 % 12.87 % 12.88 % 13.23 % 13.24 % 13.13 %
Total capital to risk-weighted assets 14.35 % 14.25 % 14.33 % 13.86 % 13.88 % 13.78 %
 
Regulatory Capital (12)  
($ in thousands)
Common Equity Tier 1 capital $ 5,496,610 $ 5,446,945 $ 5,046,133 $ 4,916,224 $ 4,592,972 $ 4,502,206
Tier 1 capital $ 6,631,429 $ 6,586,470 $ 6,180,343 $ 6,055,749 $ 5,732,497 $ 5,491,731
Total capital $ 7,337,771 $ 7,292,812 $ 6,875,478 $ 6,346,692 $ 6,010,910 $ 5,765,254
 
Assets (12)  
($ in thousands)
Average assets $ 70,779,234 $ 70,734,276 $ 66,758,108 $ 63,191,099 $ 61,092,211 $ 59,603,505
Risk-weighted assets $ 51,132,230 $ 51,180,885 $ 47,969,927 $ 45,785,355 $ 43,298,200 $ 41,839,779

__________

(10)

 

Ratios and amounts as of December 31, 2016 are preliminary.

(11)

Certain adjustments required under the Basel III Capital Rules will be phased in through the end of 2018. The ratios and amounts shown in this column are calculated assuming a fully phased-in basis of all such adjustments as if they were effective as of December 31, 2016.

(12)

As defined by regulatory capital rules.

 
     
As of
December 31,     September 30,     June 30,     March 31,     December 31,

Wealth Management Assets

  2016 2016 2016 2016 2015
($ in millions)
First Republic Investment Management $ 41,154 $ 40,103 $ 38,288 $ 36,872 $ 35,230
 
Brokerage and investment:
Brokerage 32,218 31,058 28,644 27,296 26,059
Money market mutual funds 2,048   1,902   1,610   1,906   4,155
Total brokerage and investment 34,266   32,960   30,254   29,202   30,214
 
Trust Company:
Trust 3,754 3,171 3,434 3,343 3,375
Custody 4,406   3,954   3,835   4,004   3,474
Total Trust Company 8,160   7,125   7,269   7,347   6,849
Total Wealth Management Assets $ 83,580   $ 80,188   $ 75,811   $ 73,421   $ 72,293
 
             
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,

Average Balance Sheet

  2016     2015 2016 2016     2015
($ in thousands)
Assets:
Cash and cash equivalents $ 1,773,312 $ 3,921,839 $ 2,162,287 $ 1,913,466 $ 2,425,747
Investment securities (13) 14,343,171 9,442,168 12,082,827 12,172,626 7,963,001
Loans (14) 51,107,467 43,042,968 49,030,453 47,912,320 40,889,434
FHLB stock 147,697   139,784   173,543   154,036   192,135
Total interest-earning assets 67,371,647   56,546,759   63,449,110   62,152,448   51,470,317
 
Noninterest-earning cash 312,323 287,695 277,963 283,292 263,627
Goodwill and other intangibles 294,699 312,665 292,824 298,014 235,044
Other assets 3,091,686   2,694,402   3,002,033   3,001,916   2,504,807
Total noninterest-earning assets 3,698,708 3,294,762 3,572,820 3,583,222 3,003,478
         
Total Assets $ 71,070,355   $ 59,841,521   $ 67,021,930   $ 65,735,670   $ 54,473,795
 
Liabilities and Equity:
Checking $ 35,547,235 $ 30,189,409 $ 33,276,648 $ 33,150,987 $ 25,993,413
Money market checking and savings 16,751,447 13,607,852 15,921,781 14,979,993 12,905,039
CDs (14) 4,911,972   4,485,104   4,688,438   4,642,625   4,086,327
Total deposits 57,210,654   48,282,365   53,886,867   52,773,605   42,984,779
 
Short-term borrowings 103,261 100,000 174,205 499,253 120,339
Long-term FHLB advances 4,953,261 4,302,174 4,794,022 4,459,836 4,772,192
Senior notes (15) 397,857 397,064 397,657 397,559 396,774
Subordinated notes (15) 387,356 256,805 161,920
Other borrowings 26,700   30,211   27,557   28,076   32,017
Total borrowings 5,868,435   4,829,449   5,650,246   5,546,644   5,321,322
 
Total interest-bearing liabilities 63,079,089   53,111,814   59,537,113   58,320,249   48,306,101
 
Noninterest-bearing liabilities 1,262,604 1,133,650 1,055,656 1,109,027 899,116
Preferred equity 1,139,525 989,525 1,139,525 1,123,132 949,525
Common equity 5,589,137   4,606,532   5,289,636   5,183,262   4,319,053
Total Liabilities and Equity $ 71,070,355   $ 59,841,521   $ 67,021,930   $ 65,735,670   $ 54,473,795
__________

(13)

 

Includes securities purchased under agreements to resell.

(14)

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

(15)

Average balances include unamortized issuance discounts and costs.

 
             
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,

Purchase Accounting Accretion and Amortization (16)

  2016     2015 2016 2016     2015
($ in thousands)
Accretion/amortization to net interest income:
Loans $ 6,487 $ 9,974 $ 7,804 $ 29,248 $ 43,467
Deposits         1,006
Total $ 6,487   $ 9,974   $ 7,804   $ 29,248   $ 44,473
 
Amortization to noninterest expense:
Intangible assets $ 2,368   $ 3,007   $ 2,530   $ 10,434   $ 12,993
 
Net pre-tax impact of purchase accounting $ 4,119   $ 6,967   $ 5,274   $ 18,814   $ 31,480
__________
(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. 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, due to the diminishing impact of these positive purchase accounting items since the beginning of 2016, only the yield on average loans and net interest margin are 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 fourth quarter of 2016 and in the second quarter of 2015, the Bank received special dividends from the FHLB of $5.9 million and $9.1 million, respectively. Management has also excluded the positive impact of these items 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
December 31,
Quarter
Ended
September 30,
Year Ended
December 31,

Yield on Average Loans

  2016     2015 2016 2016     2015
($ in thousands)
Interest income on loans $ 418,423 $ 357,446 $ 403,299 $ 1,573,403 $ 1,361,654
Add: Tax-equivalent adjustment on loans 11,403   10,571   11,513   44,535   38,657  
Interest income on loans (tax-equivalent basis) 429,826 368,017 414,812 1,617,938 1,400,311
Less: Accretion (6,487 ) (9,974 ) (7,804 ) (29,248 ) (43,467 )

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

$ 423,339   $ 358,043   $ 407,008   $ 1,588,690   $ 1,356,844  
Average loans $ 51,107,467 $ 43,042,968 $ 49,030,453 $ 47,912,320 $ 40,889,434
Add: Average unaccreted loan discounts 83,195   114,338   90,723   94,537   131,111  
Average loans (non-GAAP) $ 51,190,662   $ 43,157,306   $ 49,121,176   $ 48,006,857   $ 41,020,545  
Yield on average loans—reported (5) 3.33 % 3.39 % 3.35 % 3.38 % 3.42 %
Contractual yield on average loans (non-GAAP) (5) 3.27 % 3.28 % 3.28 % 3.31 % 3.31 %
 
                     

Net Interest Margin

 
($ in thousands)
Net interest income $ 490,625 $ 404,699 $ 460,604 $ 1,817,162 $ 1,516,663
Add: Tax-equivalent adjustment 46,693   36,927   44,443   172,424   134,352  
Net interest income (tax-equivalent basis) 537,318 441,626 505,047 1,989,586 1,651,015
Less: Accretion/amortization (6,487 ) (9,974 ) (7,804 ) (29,248 ) (44,473 )
Less: Special FHLB dividend (5,920 )     (5,920 ) (9,134 )

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

$ 524,911   $ 431,652   $ 497,243   $ 1,954,418   $ 1,597,408  
Average interest-earning assets $ 67,371,647 $ 56,546,759 $ 63,449,110 $ 62,152,448 $ 51,470,317
Add: Average unaccreted loan discounts 83,195   114,338   90,723   94,537   131,111  
Average interest-earning assets (non-GAAP) $ 67,454,842   $ 56,661,097   $ 63,539,833   $ 62,246,985   $ 51,601,428  
Net interest margin—reported (5) 3.16 % 3.10 % 3.16 % 3.20 % 3.21 %
Core net interest margin (non-GAAP) (5) 3.08 % 3.02 % 3.11 % 3.14 % 3.09 %

Contacts

Investors:
Addo Investor Relations
Andrew Greenebaum, 310-829-5400
agreenebaum@addoir.com
Lasse Glassen, 310-829-5400
lglassen@addoir.com
or
Media:
Blue Marlin Partners
Greg Berardi, 415-239-7826
greg@bluemarlinpartners.com

Contacts

Investors:
Addo Investor Relations
Andrew Greenebaum, 310-829-5400
agreenebaum@addoir.com
Lasse Glassen, 310-829-5400
lglassen@addoir.com
or
Media:
Blue Marlin Partners
Greg Berardi, 415-239-7826
greg@bluemarlinpartners.com