First Republic Reports Strong Second Quarter 2018 Results

Year-Over-Year Total Revenues Increased 16% and Wealth Management Assets Increased 27%

SAN FRANCISCO--()--First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended June 30, 2018.

First Republic had an excellent second quarter and first half of the year,” said Jim Herbert, Chairman and CEO. “Our client-focused service model continues to attract many new households, and business remains very good across the enterprise.”

Quarterly Highlights

Financial Results

  • Year-over-year:

    • Revenues were $744.1 million, up 16.0%.
    • Net income was $209.8 million, up 12.4%.
    • Diluted earnings per share of $1.20, up 13.2%.
    • Loan originations totaled $9.4 billion, our best quarter ever.
    • Tangible book value per share was $42.15, up 11.4%.
  • Net interest margin was 2.95%, compared to 2.97% last quarter.
  • Efficiency ratio was 63.5%, compared to 64.0% last quarter.

Continued Capital and Credit Strength

  • Common Equity Tier 1 ratio was 10.18%, compared to 10.72% a year ago.
  • Nonperforming assets remained very low at 5 basis points of total assets.
  • Net charge-offs were only $771,000, or less than 1 basis point of average loans.

Continued Franchise Development

  • Year-over-year:

    • Loans, excluding loans held for sale, totaled $69.1 billion, up 19.7%.
    • Deposits were $72.8 billion, up 15.0%.
    • Wealth management assets were $121.1 billion, up 26.9%.
    • Wealth management revenues were $104.9 million, up 21.5%.

Total revenues increased 16% and net interest income grew 15% compared to a year ago,” said Mike Roffler, Chief Financial Officer. “We are pleased to have very successfully accessed the capital markets with a perpetual preferred stock offering during the quarter.”

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the second quarter of $0.18 per share of common stock, which is payable on August 9, 2018 to shareholders of record as of July 26, 2018.

Very Strong Asset Quality

Credit quality remains very strong. Nonperforming assets were only 5 basis points of total assets at June 30, 2018.

The Bank had net charge-offs for the quarter of $771,000, while adding $19.4 million to its allowance for loan losses due to continued loan growth.

Continued Capital Strength and Access to Capital Markets

The Bank’s Common Equity Tier 1 ratio was 10.18% at June 30, 2018, compared to 10.72% a year ago.

During the second quarter, the Bank issued $300.0 million of 5.50% noncumulative perpetual preferred stock, which qualifies as Tier 1 capital. The Bank currently expects to redeem its $200.0 million of 7.00% Noncumulative Perpetual Series E Preferred Stock when such stock becomes redeemable at the Bank’s option on or after December 28, 2018, subject to all applicable regulatory approvals.

Tangible Book Value Growth

Tangible book value per common share at June 30, 2018 was $42.15, up 11.4% from a year ago.

Continued Franchise Development

Strong Loan Originations

Loan originations were $9.4 billion for the quarter, compared to $7.3 billion for the same quarter a year ago, an increase of 28.1%, primarily due to increases in business lines of credit, multifamily, stock secured and other secured lending.

Loans, excluding loans held for sale, totaled $69.1 billion at June 30, 2018, up 19.7% compared to a year ago.

Deposit Growth

Total deposits increased to $72.8 billion, up 15.0% compared to a year ago.

At June 30, 2018, checking accounts totaled 60.4% of deposits.

Investments

Total investment securities at June 30, 2018 were $16.5 billion, consistent with the prior quarter and down 2.4% compared to a year ago.

High-quality liquid assets, including eligible cash, totaled $11.0 billion at June 30, 2018, and represented 12.3% of average total assets.

Mortgage Banking Activity

During the second quarter, the Bank sold $721.9 million of loans and recorded a gain on sale of $4.0 million, compared to loan sales of $439.8 million and a gain of $841,000 during the second quarter of last year.

Loans serviced for investors at quarter-end totaled $12.4 billion, up 4.9% from a year ago.

Continued Expansion of Wealth Management

Wealth management revenues totaled $104.9 million for the quarter, up 21.5% compared to last year’s second quarter. Such revenues represented 14.1% of the Bank’s total revenues for the quarter.

Total wealth management assets were $121.1 billion at June 30, 2018, up 7.2% for the quarter and up 26.9% compared to a year ago. The growth in wealth management assets was due to both net new assets from existing and new clients, and market appreciation.

Wealth management assets included investment management assets of $59.3 billion, brokerage assets and money market mutual funds of $51.9 billion, and trust and custody assets of $9.9 billion.

Income Statement and Key Ratios

Strong Revenue Growth

Total revenues were $744.1 million for the quarter, up 16.0% compared to the second quarter a year ago.

Strong Net Interest Income Growth

Net interest income was $611.7 million for the quarter, up 15.0% compared to the second quarter a year ago. The increase in net interest income resulted primarily from growth in average earning assets.

Net Interest Margin

The net interest margin was 2.95% for the second quarter, compared to 2.97% for the prior quarter.

Noninterest Income

Noninterest income was $132.4 million for the quarter, up 21.1% compared to the second quarter a year ago. The increase was primarily from growth in wealth management revenues and gain on sale of loans.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $472.6 million for the quarter, up 19.0% compared to the second quarter a year ago. The efficiency ratio was 63.5% for the quarter, compared to 61.9% for the second quarter a year ago. The increases were primarily due to increased salaries and benefits and information systems costs from the continued investments in the expansion of the franchise.

Income Taxes

Beginning in 2018, federal tax reform legislation reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain tax deductions.

The Bank’s effective tax rate for the second quarter of 2018 was 16.8%, compared to 19.2% for the first quarter of 2018. The decrease in the second quarter was the result of increased tax benefits from the vesting of stock awards. For the first six months of 2018, the Bank’s effective tax rate was 18.0%.

Conference Call Details

First Republic Bank’s second quarter 2018 earnings conference call is scheduled for July 13, 2018 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (877) 407-0792 approximately 10 minutes prior to the start time (to allow time for registration). International callers should dial +1 (201) 689-8263.

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 July 13, 2018, at 10:00 a.m. PT / 1:00 p.m. ET, through July 20, 2018, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 and use conference ID #13680929. International callers should dial +1 (412) 317-6671 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 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 and San Diego, California; Portland, Oregon; Boston, Massachusetts; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; and later in 2018, Jackson, Wyoming. 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 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. 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: significant competition to attract and retain banking and wealth management customers, from both traditional and non-traditional financial services and technology companies; our ability to recruit and retain key managers, employees and board members; the possibility of earthquakes, fires and other natural disasters affecting the markets in which we operate; interest rate risk and credit risk; our ability to maintain and follow high underwriting standards; economic and market conditions affecting the valuation of our investment securities portfolio, which could result in other-than-temporary impairment if the general economy deteriorates, credit ratings decline, the financial condition of issuers deteriorates, interest rates increase or the liquidity for securities is limited; real estate prices generally and in our markets; our geographic and product concentrations; demand for our products and services; the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements; the impact of tax reform legislation; the phase-in of the capital requirements under the Basel III framework, and any future changes to regulatory capital requirements; legislative and regulatory actions affecting us and the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, including increased compliance costs, limitations on activities and requirements to hold additional capital; our ability to avoid litigation and its associated costs and liabilities; the impact of new accounting standards; future Federal Deposit Insurance Corporation (“FDIC”) special assessments or changes to regular assessments; fraud, cybersecurity and privacy risks; and custom technology preferences of our customers and our ability to successfully execute on initiatives relating to enhancements of our technology infrastructure, including client-facing systems and applications. 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 any subsequent reports filed by First Republic with the FDIC. 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. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout our public filings. 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
June 30,
Quarter Ended
March 31,
Six Months Ended
June 30,
(in thousands, except per share amounts) 2018   2017 2018 2018   2017
Interest income:
Loans $ 589,912 $ 462,810 $ 541,313 $ 1,131,225 $ 891,208
Investments 133,992 130,435 138,270 272,262 248,493
Other 4,850 2,784 4,978 9,828 6,155
Cash and cash equivalents 5,685   3,126   3,913   9,598   5,794  
Total interest income 734,439   599,155   688,474   1,422,913   1,151,650  
 
Interest expense:
Deposits 62,027 26,355 50,387 112,414 48,406
Borrowings 60,719   40,836   50,329   111,048   71,595  
Total interest expense 122,746   67,191   100,716   223,462   120,001  
 
Net interest income 611,693 531,964 587,758 1,199,451 1,031,649
Provision for loan losses 19,370   23,938   13,000   32,370   33,026  
Net interest income after provision for loan losses 592,323   508,026   574,758   1,167,081   998,623  
 
Noninterest income:
Investment management fees 82,925 68,819 78,117 161,042 129,714
Brokerage and investment fees 8,826 6,965 10,532 19,358 15,004
Trust fees 3,606 3,448 3,489 7,095 6,650
Foreign exchange fee income 9,547 7,081 7,397 16,944 12,942
Deposit fees 6,280 5,655 5,985 12,265 11,027
Loan and related fees 4,134 3,375 3,617 7,751 6,641
Loan servicing fees, net 3,186 3,577 3,519 6,705 6,348
Gain on sale of loans 4,045 841 689 4,734 4,205
Gain (loss) on investment securities, net (1,027 ) (602 ) 9,197 8,170 (2,037 )
Income from investments in life insurance 9,612 9,538 9,477 19,089 19,173
Other income 1,287   675   1,083   2,370   1,164  
Total noninterest income 132,421   109,372   133,102   265,523   210,831  
 
Noninterest expense:
Salaries and employee benefits 271,935 221,929 277,024 548,959 443,836
Information systems 59,530 51,053 58,964 118,494 96,823
Occupancy 37,216 33,631 36,172 73,388 66,997
Professional fees 15,588 12,236 13,414 29,002 23,401
FDIC assessments 16,064 13,601 15,532 31,596 26,751
Advertising and marketing 15,120 11,560 11,928 27,048 20,586
Other expenses 57,104   53,090   48,547   105,651   97,245  
Total noninterest expense 472,557   397,100   461,581   934,138   775,639  
 
Income before provision for income taxes 252,187 220,298 246,279 498,466 433,815
Provision for income taxes 42,406   33,698   47,196   89,602   70,441  
Net income 209,781 186,600 199,083 408,864 363,374
Dividends on preferred stock 12,163   14,344   12,222   24,385   29,496  
Net income available to common shareholders $ 197,618   $ 172,256   $ 186,861   $ 384,479   $ 333,878  
 
Basic earnings per common share $ 1.22   $ 1.10   $ 1.16   $ 2.37   $ 2.14  
Diluted earnings per common share $ 1.20   $ 1.06   $ 1.13   $ 2.33   $ 2.07  
Dividends per common share $ 0.18   $ 0.17   $ 0.17   $ 0.35   $ 0.33  
 
Weighted average shares—basic 162,152   157,302   161,752   161,953   156,163  
Weighted average shares—diluted 165,013   162,335   164,839   164,929   161,390  
 
 

CONSOLIDATED BALANCE SHEETS

 
As of
($ in thousands) June 30,
2018
  March 31,
2018
  June 30,
2017

ASSETS

Cash and cash equivalents $ 3,993,226 $ 3,839,931 $ 2,295,125
Investment securities available-for-sale 2,163,773 2,256,295 2,235,923
Investment securities held-to-maturity 14,284,071 14,264,992 14,642,402
Equity securities (fair value) 19,997 19,734
 
Loans:
Single family (1-4 units) 34,276,540 32,211,100 29,078,735
Home equity lines of credit 2,613,639 2,575,234 2,681,502
Multifamily (5+ units) 9,707,084 9,152,736 7,453,388
Commercial real estate 6,321,195 6,173,825 5,809,698
Single family construction 650,181 621,847 523,478
Multifamily/commercial construction 1,285,072 1,256,370 987,712
Business 9,603,626 8,991,752 7,981,609
Stock secured 1,380,255 1,207,646 994,413
Other secured 1,039,448 954,317 837,423
Unsecured 2,269,854   2,047,107   1,412,117  
Total loans 69,146,894   65,191,934   57,760,075  
Allowance for loan losses (397,377 ) (378,778 ) (338,307 )
Loans, net 68,749,517   64,813,156   57,421,768  
 
Loans held for sale 46,753 686,393 202,348
Investments in life insurance 1,349,823 1,340,170 1,292,238
Tax credit investments 1,054,536 1,088,602 1,113,378
Prepaid expenses and other assets 1,533,840 1,265,806 1,146,712
Premises, equipment and leasehold improvements, net 312,278 299,587 260,308
Goodwill and other intangible assets 281,550 285,749 304,716
Mortgage servicing rights 62,096 63,093 61,383
Other real estate owned     1,930  
Total Assets $ 93,851,460   $ 90,223,508   $ 80,978,231  
 

LIABILITIES AND EQUITY

Liabilities:
Deposits:
Noninterest-bearing checking $ 28,428,832 $ 27,496,642 $ 25,769,912
Interest-bearing checking 15,490,545 16,809,785 14,374,273
Money market checking 10,054,060 9,088,019 9,019,626
Money market savings and passbooks 8,599,957 8,865,304 8,099,880
Certificates of deposit 10,198,556   8,995,322   6,030,015  
Total Deposits 72,771,950   71,255,072   63,293,706  
 
Short-term borrowings 600,000 150,000
Long-term FHLB advances 9,650,000 8,500,000 7,550,000
Senior notes 895,572 895,147 893,865
Subordinated notes 777,278 777,180 776,895
Other liabilities 880,687   959,571   1,053,682  
Total Liabilities 85,575,487   82,386,970   73,718,148  
 
Shareholders’ Equity:
Preferred stock 1,140,000 840,000 990,000
Common stock 1,626 1,619 1,577
Additional paid-in capital 3,772,323 3,797,419 3,525,283
Retained earnings 3,379,725 3,211,804 2,741,041
Accumulated other comprehensive income (loss) (17,701 ) (14,304 ) 2,182  
Total Shareholders’ Equity 8,275,973   7,836,538   7,260,083  
Total Liabilities and Shareholders’ Equity $ 93,851,460   $ 90,223,508   $ 80,978,231  
 
   
Quarter Ended June 30, Quarter Ended March 31,
2018   2017 2018

Average Balances, Yields and Rates

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

($ in thousands)
Assets:
Cash and cash equivalents $ 1,404,683 $ 5,685 1.62 % $ 1,321,995 $ 3,126 0.95 % $ 1,126,806 $ 3,913 1.41 %
Investment securities (3) 16,536,827 153,257 3.70 % 16,522,412 171,954 4.17 % 17,199,928 158,446 3.68 %
Loans (3) 67,579,518 596,434 3.51 % 55,752,697 474,401 3.39 % 64,062,925 547,610 3.42 %
FHLB stock 300,068   4,850   6.48 % 221,393   2,784   5.04 % 280,962   4,978   7.19 %

Total interest-earning assets

85,821,096   760,226   3.53 % 73,818,497   652,265   3.52 % 82,670,621   714,947   3.46 %
 
Noninterest-earning cash 344,451 333,651 347,567

Goodwill and other intangibles

283,575 307,275 287,948
Other assets 3,472,410   3,258,671   3,440,748  

Total noninterest-earning assets

4,100,436   3,899,597   4,076,263  
Total Assets $ 89,921,532   $ 77,718,094   $ 86,746,884  
 
Liabilities and Equity:
Checking $ 43,377,084 5,478 0.05 % $ 38,014,639 1,435 0.02 % $ 42,440,377 5,509 0.05 %

Money market checking and savings

16,885,281 21,787 0.52 % 16,336,980 7,130 0.18 % 17,132,181 18,138 0.43 %
CDs 8,710,862   34,762   1.60 % 5,774,830   17,790   1.24 % 7,641,580   26,740   1.42 %
Total deposits 68,973,227   62,027   0.36 % 60,126,449   26,355   0.18 % 67,214,138   50,387   0.30 %
 
Short-term borrowings 1,419,945 6,652 1.88 % 1,433,516 3,698 1.03 % 685,000 2,510 1.49 %
Long-term FHLB advances 8,904,396 39,045 1.76 % 6,541,209 24,439 1.50 % 8,354,444 32,800 1.59 %
Senior notes (4) 895,364 5,925 2.65 % 534,418 3,469 2.60 % 894,940 5,923 2.65 %
Subordinated notes (4) 777,230 9,097 4.68 % 776,850 9,093 4.68 % 777,133 9,096 4.68 %
Other borrowings     % 25,147   137   2.20 %     %
Total borrowings 11,996,935   60,719   2.03 % 9,311,140   40,836   1.76 % 10,711,517   50,329   1.90 %

Total interest-bearing liabilities

80,970,162   122,746   0.61 % 69,437,589   67,191   0.39 % 77,925,655   100,716   0.52 %
 
Noninterest-bearing liabilities 899,451 1,036,242 980,290
Preferred equity 900,989 966,374 841,667
Common equity 7,150,930   6,277,889   6,999,272  

Total Liabilities and Equity

$ 89,921,532   $ 77,718,094   $ 86,746,884  
 
Net interest spread (5) 2.92 % 3.13 % 2.94 %

Net interest income (fully taxable-equivalent basis) and net interest margin (3), (6)

$ 637,480   2.95 % $ 585,074   3.16 % $ 614,231   2.97 %
 

Reconciliation of tax-equivalent net interest income to reported net interest income:

Tax-equivalent adjustment (3) (25,787 ) (53,110 ) (26,473 )

Net interest income, as reported

$ 611,693   $ 531,964   $ 587,758  

__________

(1) Interest income is presented on a fully taxable-equivalent basis.
(2) Yields/rates are annualized.
(3) Beginning in 2018, tax equivalent adjustments to interest income and yields reflect the corporate federal tax rate of 21%.
(4) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs.
(5) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(6) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets.
 

 

           
Six Months Ended June 30,
2018 2017
Average Balances, Yields and Rates

Average
Balance

Interest
Income/
Expense (1)

Yields/
Rates (2)

Average
Balance

Interest
Income/
Expense (1)

Yields/
Rates (2)

($ in thousands)
Assets:
Cash and cash equivalents $ 1,266,512 $ 9,598 1.53 % $ 1,385,012 $ 5,794 0.84 %
Investment securities (3) 16,866,545 311,703 3.70 % 15,981,192 327,359 4.10 %
Loans (3) 65,830,937 1,144,044 3.47 % 54,428,721 914,055 3.35 %
FHLB stock 290,568   9,828   6.82 % 191,517   6,155   6.48 %
Total interest-earning assets 84,254,562   1,475,173   3.50 % 71,986,442   1,253,363   3.48 %
 
Noninterest-earning cash 346,000 320,576
Goodwill and other intangibles 285,750 309,937
Other assets 3,456,666   3,213,682  
Total noninterest-earning assets 4,088,416   3,844,195  
Total Assets $ 88,342,978   $ 75,830,637  
 
Liabilities and Equity:
Checking $ 42,911,318 10,987 0.05 % $ 37,684,917 2,561 0.01 %
Money market checking and savings 17,008,048 39,925 0.47 % 16,318,179 12,119 0.15 %
CDs 8,179,175   61,502   1.52 % 5,561,809   33,726   1.22 %
Total deposits 68,098,541   112,414   0.33 % 59,564,905   48,406   0.16 %
 
Short-term borrowings 1,054,503 9,161 1.75 % 781,353 4,217 1.09 %
Long-term FHLB advances 8,630,939 71,845 1.68 % 6,165,746 45,054 1.47 %
Senior notes (4) 895,153 11,849 2.65 % 466,615 6,046 2.59 %
Subordinated notes (4) 777,182 18,193 4.68 % 684,284 16,008 4.68 %
Other borrowings     % 25,509   270   2.12 %
Total borrowings 11,357,777   111,048   1.97 % 8,123,507   71,595   1.77 %
Total interest-bearing liabilities 79,456,318   223,462   0.57 % 67,688,412   120,001   0.36 %
 
Noninterest-bearing liabilities 939,648 1,038,605
Preferred equity 871,492 985,228
Common equity 7,075,520   6,118,392  
Total Liabilities and Equity $ 88,342,978   $ 75,830,637  
 
Net interest spread (5) 2.93 % 3.12 %
Net interest income (fully taxable-equivalent basis)

and net interest margin (3), (6)

$ 1,251,711   2.96 % $ 1,133,362   3.14 %
 

Reconciliation of tax-equivalent net interest income to reported net interest income:

Tax-equivalent adjustment (3) (52,260 ) (101,713 )
Net interest income, as reported $ 1,199,451   $ 1,031,649  

__________

(1) Interest income is presented on a fully taxable-equivalent basis.
(2) Yields/rates are annualized.
(3) Beginning in 2018, tax equivalent adjustments to interest income and yields reflect the corporate federal tax rate of 21%.
(4) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs.
(5) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(6) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets.
     

Quarter Ended
June 30,

Quarter Ended
March 31,

Six Months Ended
June 30,
Operating Information 2018   2017 2018 2018   2017
($ in thousands)
Net income to average assets (1) 0.94 % 0.96 % 0.93 % 0.93 % 0.97 %
Net income available to common shareholders to average common equity (1) 11.08 % 11.01 % 10.83 % 10.96 % 11.00 %
Net income available to common shareholders to average tangible common equity (1) 11.54 % 11.57 % 11.29 % 11.42 % 11.59 %

Net interest income to average interest-earning assets (1)

2.86 % 2.89 % 2.88 % 2.87 % 2.89 %
Dividend payout ratio 15.0 % 16.0 % 15.0 % 15.0 % 16.0 %
Efficiency ratio (2) 63.5 % 61.9 % 64.0 % 63.8 % 62.4 %
 
Net loan charge-offs $ 771 $ 609 $ 154 $ 925 $ 1,117
Net loan charge-offs to average total loans (1) 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
 
Allowance for loan losses to:
Total loans 0.57 % 0.59 % 0.58 % 0.57 % 0.59 %
Nonaccrual loans 780.4 % 779.8 % 774.7 % 780.4 % 779.8 %
__________
(1) Ratios are annualized.
(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
 
     
Quarter Ended
June 30,
Quarter Ended
March 31,
Six Months Ended
June 30,
Effective Tax Rate 2018   2017 2018 2018   2017
Effective tax rate, prior to excess tax benefits 21.5 % 23.1 % 21.1

%

21.3 % 23.1 %

 

Excess tax benefits—stock options (1.3 )% (3.5

)%

(1.8

)%

(1.5 )% (4.1 )%
Excess tax benefits—other stock awards (3.4 )% (4.3 )% (0.1 )% (1.8 )% (2.8 )%
Total excess tax benefits (4.7 )% (7.8 )% (1.9 )% (3.3 )% (6.9 )%

 

Effective tax rate 16.8 % 15.3 % 19.2

%

18.0 % 16.2 %

 

 

     
Quarter Ended
June 30,
Quarter Ended
March 31,
Six Months Ended
June 30,
Mortgage Loan Sales 2018   2017 2018 2018   2017
($ in thousands)
Loans sold:
Flow sales:
Agency $ 7,724 $ 34,261 $ 14,047 $ 21,771 $ 83,993
Non-agency 32,865   72,829   55,655   88,520   129,031  
Total flow sales 40,589 107,090 69,702 110,291 213,024
 
Bulk sales:
Non-agency 681,332   332,735   91,709   773,041   872,556  
Total loans sold $ 721,921   $ 439,825   $ 161,411   $ 883,332   $ 1,085,580  
 
Gain on sale of loans:
Amount $ 4,045 $ 841 $ 689 $ 4,734 $ 4,205
Gain as a percentage of loans sold 0.56 % 0.19 % 0.43 % 0.54 % 0.39 %
 
     
Quarter Ended
June 30,
Quarter Ended
March 31,
Six Months Ended
June 30,
Loan Originations 2018   2017 2018 2018   2017
($ in thousands)
Single family (1-4 units) $ 3,125,316 $ 3,053,014 $ 2,326,712 $ 5,452,028 $ 5,569,688
Home equity lines of credit 416,098 424,223 346,333 762,431 838,546
Multifamily (5+ units) 921,723 646,538 761,584 1,683,307 1,055,484
Commercial real estate 341,707 336,054 275,683 617,390 731,623
Construction 384,236 496,813 464,806 849,042 735,614
Business 3,097,056 1,654,184 2,057,454 5,154,510 2,606,612
Stock and other secured 748,450 450,674 666,546 1,414,996 934,196
Unsecured 318,227   236,884   428,342   746,569   467,758
Total loans originated $ 9,352,813   $ 7,298,384   $ 7,327,460   $ 16,680,273   $ 12,939,521
 
 
As of
Loan Servicing Portfolio

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

($ in millions)
Loans serviced for investors $ 12,374   $ 12,192   $ 12,495   $ 12,111   $ 11,791
 
 
As of
Asset Quality Information

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

($ in thousands)
Nonperforming assets:
Nonaccrual loans $ 50,920 $ 48,895 $ 37,656 $ 37,922 $ 43,384
Other real estate owned         1,930  
Total nonperforming assets $ 50,920   $ 48,895   $ 37,656   $ 37,922   $ 45,314  
 
Nonperforming assets to total assets 0.05 % 0.05 % 0.04 % 0.04 % 0.06 %
 
Accruing loans 90 days or more past due $ $ $ $ $
 
Restructured accruing loans $ 11,568 $ 11,853 $ 12,605 $ 18,242 $ 13,001
 
 
As of
Book Value Ratios

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

(in thousands, except per share amounts)
Number of shares of common stock outstanding 162,638   161,863   161,696   157,930   157,686
Book value per common share $ 43.88   $ 43.23   $ 42.23   $ 40.76   $ 39.76
Tangible book value per common share $ 42.15   $ 41.46   $ 40.43   $ 38.90   $ 37.83
 
 
As of
2018   2017
Capital Ratios June 30 (1)   March 31 December 31   September 30   June 30
Tier 1 leverage ratio (Tier 1 capital to average assets) 8.83 % 8.64 % 8.85 % 8.78 % 8.99 %
Common Equity Tier 1 capital to risk-weighted assets 10.18 % 10.47 % 10.63 % 10.58 % 10.72 %
Tier 1 capital to risk-weighted assets 11.90 % 11.80 % 12.22 % 12.27 % 12.49 %
Total capital to risk-weighted assets 13.68 % 13.65 % 14.11 % 14.23 % 14.51 %
Regulatory Capital (2)
($ in thousands)
Common Equity Tier 1 capital $ 6,766,573 $ 6,624,101 $ 6,488,618 $ 6,140,330 $ 5,975,457
Tier 1 capital $ 7,906,573 $ 7,464,101 $ 7,457,944 $ 7,121,330 $ 6,960,057
Total capital $ 9,095,028 $ 8,633,859 $ 8,615,389 $ 8,259,581 $ 8,087,714
Assets (2)
($ in thousands)
Average assets $ 89,560,555 $ 86,378,664 $ 84,238,404 $ 81,125,539 $ 77,419,255
Risk-weighted assets $ 66,461,528 $ 63,239,135 $ 61,054,077 $ 58,027,938 $ 55,730,798

__________

(1) Ratios and amounts as of June 30, 2018 are preliminary.
(2) As defined by regulatory capital rules.
 
 
As of
Wealth Management Assets

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

 

June 30,
2017

($ in millions)
First Republic Investment Management $ 59,329 $ 55,104 $ 52,712 $ 50,318 $ 47,530
 
Brokerage and investment:
Brokerage 50,356 46,150 43,015 40,652 37,658
Money market mutual funds 1,575   2,104   1,671   1,201   1,402
Total brokerage and investment 51,931   48,254   44,686   41,853   39,060
 
Trust Company:
Trust 5,125 4,694 4,678 4,441 4,276
Custody 4,739   4,938   4,885   4,734   4,559
Total Trust Company 9,864   9,632   9,563   9,175   8,835
Total Wealth Management Assets $ 121,124   $ 112,990   $ 106,961   $ 101,346   $ 95,425
 

Contacts

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

Contacts

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