SAN FRANCISCO--(BUSINESS WIRE)--First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended September 30, 2018.
“First Republic had a terrific quarter,” said Jim Herbert, Chairman and CEO. “Growth and new client acquisition across the franchise remain very strong. Credit quality remains excellent.”
Quarterly Highlights
Financial Results
-
Year-over-year:
- Revenues were $768.8 million, up 14.7%.
- Net income was $213.5 million, up 6.8%.
- Diluted earnings per share of $1.19, up 4.4%.
- Loan originations totaled $7.0 billion.
- Tangible book value per share was $44.00, up 13.1%.
- Net interest margin was 2.94%, compared to 2.95% last quarter.
- Efficiency ratio was 63.0%, compared to 63.5% last quarter.
Continued Capital and Credit Strength
- Common Equity Tier 1 ratio was 10.47%, compared to 10.58% a year ago.
- Nonperforming assets remained very low at 4 basis points of total assets.
- Net charge-offs were only $185,000, or less than 1 basis point of average loans.
Continued Franchise Development
-
Year-over-year:
- Loans, excluding loans held for sale, totaled $72.3 billion, up 21.6%.
- Deposits were $74.8 billion, up 14.2%.
- Wealth management assets were $131.0 billion, up 29.2%.
- Wealth management revenues were $109.7 million, up 24.0%.
“Total revenues and net interest income both increased 15% compared to a year ago,” said Mike Roffler, Chief Financial Officer. “We are pleased that the efficiency ratio remained stable, while we continue to invest in the franchise.”
Quarterly Cash Dividend Declared
The Bank declared a cash dividend for the third quarter of $0.18 per share of common stock, which is payable on November 8, 2018 to shareholders of record as of October 25, 2018.
Very Strong Asset Quality
Credit quality remains very strong. Nonperforming assets were only 4 basis points of total assets at September 30, 2018.
The Bank had net charge-offs for the quarter of $185,000, while adding $18.6 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 10.47% at September 30, 2018, compared to 10.58% a year ago.
During the third quarter, the Bank issued and sold 2,000,000 new shares of common stock in an underwritten public offering, which added $200.6 million to common equity.
As previously indicated, 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 September 30, 2018 was $44.00, up 13.1% from a year ago.
Continued Franchise Development
Loan Originations
Loan originations were $7.0 billion for the quarter, down 3.0% from last year’s third quarter, largely due to a decline in single family refinance volume.
Loans, excluding loans held for sale, totaled $72.3 billion at September 30, 2018, up 21.6% compared to a year ago, primarily due to increases in single family, business and multifamily loans.
Deposit Growth
Total deposits increased to $74.8 billion, up 14.2% compared to a year ago.
At September 30, 2018, checking accounts totaled 60.0% of deposits.
Investments
Total investment securities at September 30, 2018 were $16.3 billion, down 1% for the quarter and down 6.9% compared to a year ago.
High-quality liquid assets totaled $15.0 billion at September 30, 2018, and represented 16.2% of average total assets. High-quality liquid assets now include $5.0 billion of municipal securities that qualify under the amended definition of high-quality liquid assets from a recent FDIC rule.
Mortgage Banking Activity
During the third quarter, the Bank sold $92.1 million of loans and recorded a gain on sale of $303,000, compared to loan sales of $822.4 million and a gain of $2.0 million during the third quarter of last year.
Loans serviced for investors at quarter-end totaled $11.7 billion, down 3.1% from a year ago.
Continued Expansion of Wealth Management
Wealth management revenues totaled $109.7 million for the quarter, up 24.0% compared to last year’s third quarter. Such revenues represented 14.3% of the Bank’s total revenues for the quarter.
Total wealth management assets were $131.0 billion at September 30, 2018, up 8.1% for the quarter and up 29.2% 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 $62.5 billion, brokerage assets and money market mutual funds of $58.0 billion, and trust and custody assets of $10.5 billion.
Income Statement and Key Ratios
Strong Revenue Growth
Total revenues were $768.8 million for the quarter, up 14.7% compared to the third quarter a year ago.
Strong Net Interest Income Growth
Net interest income was $634.5 million for the quarter, up 15.2% compared to the third 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 2.94% for the third quarter, compared to 2.95% for the prior quarter.
Noninterest Income
Noninterest income was $134.4 million for the quarter, up 12.6% compared to the third quarter a year ago. The increase was primarily from growth in wealth management revenues.
Noninterest Expense and Efficiency Ratio
Noninterest expense was $484.0 million for the quarter, up 15.7% compared to the third quarter a year ago. The increase was primarily due to increased salaries and benefits and information systems costs from the continued investments in the expansion of the franchise.
The efficiency ratio was 63.0% for the quarter, compared to 62.4% for the third quarter a year ago.
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 third quarter of 2018 was 19.8%, compared to 16.8% for the second quarter of 2018 and 17.3% for the third quarter of 2017. The increase compared to the prior quarter was primarily the result of lower tax benefits from the decreased vesting of stock awards. The increase compared to the third quarter of 2017 was primarily the result of lower tax benefits from a decrease in both stock option exercises and vesting of stock awards, partially offset by a decrease in the corporate federal tax rate.
Conference Call Details
First Republic Bank’s third quarter 2018 earnings conference call is scheduled for October 12, 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 October 12, 2018, at 10:00 a.m. PT / 1:00 p.m. ET, through October 17, 2018, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 and use conference ID #13683358. 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 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 (the “Dodd-Frank Act”), including increased compliance costs, limitations on activities and requirements to hold additional capital, as well as changes to the Dodd-Frank Act pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act; 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 |
Quarter Ended |
Nine Months Ended |
||||||||||||||||||
| (in thousands, except per share amounts) | 2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans | $ | 633,794 | $ | 497,162 | $ | 589,912 | $ | 1,765,019 | $ | 1,388,370 | ||||||||||
| Investments | 134,111 | 132,948 | 133,992 | 406,373 | 381,441 | |||||||||||||||
| Other | 5,237 | 3,864 | 4,850 | 15,065 | 10,019 | |||||||||||||||
| Cash and cash equivalents | 6,896 | 3,193 | 5,685 | 16,494 | 8,987 | |||||||||||||||
| Total interest income | 780,038 | 637,167 | 734,439 | 2,202,951 | 1,788,817 | |||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 81,438 | 40,260 | 62,027 | 193,852 | 88,666 | |||||||||||||||
| Borrowings | 64,146 | 45,954 | 60,719 | 175,194 | 117,549 | |||||||||||||||
| Total interest expense | 145,584 | 86,214 | 122,746 | 369,046 | 206,215 | |||||||||||||||
| Net interest income | 634,454 | 550,953 | 611,693 | 1,833,905 | 1,582,602 | |||||||||||||||
| Provision for loan losses | 18,633 | 10,113 | 19,370 | 51,003 | 43,139 | |||||||||||||||
| Net interest income after provision for loan losses | 615,821 | 540,840 | 592,323 | 1,782,902 | 1,539,463 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Investment management fees | 88,560 | 70,796 | 82,925 | 249,602 | 200,510 | |||||||||||||||
| Brokerage and investment fees | 9,058 | 7,843 | 8,826 | 28,416 | 22,847 | |||||||||||||||
| Trust fees | 3,599 | 3,246 | 3,606 | 10,694 | 9,896 | |||||||||||||||
| Foreign exchange fee income | 8,439 | 6,551 | 9,547 | 25,383 | 19,493 | |||||||||||||||
| Deposit fees | 6,225 | 5,736 | 6,280 | 18,490 | 16,763 | |||||||||||||||
| Loan and related fees | 4,091 | 3,270 | 4,134 | 11,842 | 9,911 | |||||||||||||||
| Loan servicing fees, net | 3,151 | 3,520 | 3,186 | 9,856 | 9,868 | |||||||||||||||
| Gain on sale of loans | 303 | 1,963 | 4,045 | 5,037 | 6,168 | |||||||||||||||
| Gain (loss) on investment securities, net | (1,655 | ) | 1,204 | (1,027 | ) | 6,515 | (833 | ) | ||||||||||||
| Income from investments in life insurance | 11,608 | 8,865 | 9,612 | 30,697 | 28,038 | |||||||||||||||
| Other income | 996 | 6,339 | 1,287 | 3,366 | 7,503 | |||||||||||||||
| Total noninterest income | 134,375 | 119,333 | 132,421 | 399,898 | 330,164 | |||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and employee benefits | 279,248 | 236,996 | 271,935 | 828,207 | 680,832 | |||||||||||||||
| Information systems | 59,259 | 53,663 | 59,530 | 177,753 | 150,486 | |||||||||||||||
| Occupancy | 38,792 | 34,129 | 37,216 | 112,180 | 101,126 | |||||||||||||||
| Professional fees | 15,718 | 17,573 | 15,588 | 44,720 | 40,974 | |||||||||||||||
| FDIC assessments | 17,679 | 14,197 | 16,064 | 49,275 | 40,948 | |||||||||||||||
| Advertising and marketing | 13,527 | 10,639 | 15,120 | 40,575 | 31,225 | |||||||||||||||
| Other expenses | 59,776 | 51,162 | 57,104 | 165,427 | 148,407 | |||||||||||||||
| Total noninterest expense | 483,999 | 418,359 | 472,557 | 1,418,137 | 1,193,998 | |||||||||||||||
| Income before provision for income taxes | 266,197 | 241,814 | 252,187 | 764,663 | 675,629 | |||||||||||||||
| Provision for income taxes | 52,651 | 41,805 | 42,406 | 142,253 | 112,246 | |||||||||||||||
| Net income | 213,546 | 200,009 | 209,781 | 622,410 | 563,383 | |||||||||||||||
| Dividends on preferred stock | 17,112 | 14,272 | 12,163 | 41,497 | 43,768 | |||||||||||||||
| Net income available to common shareholders | $ | 196,434 | $ | 185,737 | $ | 197,618 | $ | 580,913 | $ | 519,615 | ||||||||||
| Basic earnings per common share | $ | 1.20 | $ | 1.18 | $ | 1.22 | $ | 3.58 | $ | 3.32 | ||||||||||
| Diluted earnings per common share | $ | 1.19 | $ | 1.14 | $ | 1.20 | $ | 3.52 | $ | 3.21 | ||||||||||
| Weighted average shares—basic | 163,048 | 157,752 | 162,152 | 162,322 | 156,699 | |||||||||||||||
| Weighted average shares—diluted | 165,498 | 162,377 | 165,013 | 165,109 | 161,725 | |||||||||||||||
|
CONSOLIDATED BALANCE SHEETS |
||||||||||||||||
| As of | ||||||||||||||||
| ($ in thousands) |
September 30, |
June 30, |
December 31, |
September 30, |
||||||||||||
|
ASSETS |
||||||||||||||||
| Cash and cash equivalents | $ | 3,013,645 | $ | 3,993,226 | $ | 2,297,021 | $ | 2,681,599 | ||||||||
| Investment securities available-for-sale | 2,000,271 | 2,163,773 | 2,418,088 | 2,312,218 | ||||||||||||
| Investment securities held-to-maturity | 14,294,769 | 14,284,071 | 16,157,945 | 15,218,615 | ||||||||||||
| Equity securities (fair value) | 19,121 | 19,997 | — | — | ||||||||||||
| Loans: | ||||||||||||||||
| Single family (1-4 units) | 36,213,714 | 34,276,540 | 31,508,468 | 29,799,762 | ||||||||||||
| Home equity lines of credit | 2,543,652 | 2,613,639 | 2,735,612 | 2,668,604 | ||||||||||||
| Multifamily (5+ units) | 9,779,693 | 9,707,084 | 8,640,233 | 8,060,467 | ||||||||||||
| Commercial real estate | 6,459,654 | 6,321,195 | 6,083,152 | 5,879,437 | ||||||||||||
| Single family construction | 654,643 | 650,181 | 591,066 | 549,978 | ||||||||||||
| Multifamily/commercial construction | 1,422,746 | 1,285,072 | 1,116,855 | 1,053,708 | ||||||||||||
| Business | 10,382,050 | 9,603,626 | 8,295,224 | 7,952,335 | ||||||||||||
| Stock secured | 1,371,546 | 1,380,255 | 1,083,553 | 1,029,463 | ||||||||||||
| Other secured | 1,101,721 | 1,039,448 | 1,015,039 | 974,933 | ||||||||||||
| Unsecured | 2,399,078 | 2,269,854 | 1,771,013 | 1,504,263 | ||||||||||||
| Total loans | 72,328,497 | 69,146,894 | 62,840,215 | 59,472,950 | ||||||||||||
| Allowance for loan losses | (415,825 | ) | (397,377 | ) | (365,932 | ) | (347,765 | ) | ||||||||
| Loans, net | 71,912,672 | 68,749,517 | 62,474,283 | 59,125,185 | ||||||||||||
| Loans held for sale | 274,181 | 46,753 | 87,695 | 716,046 | ||||||||||||
| Investments in life insurance | 1,361,473 | 1,349,823 | 1,330,652 | 1,320,775 | ||||||||||||
| Tax credit investments | 1,074,834 | 1,054,536 | 1,107,546 | 1,126,647 | ||||||||||||
| Prepaid expenses and other assets | 1,483,892 | 1,533,840 | 1,254,720 | 1,183,044 | ||||||||||||
| Premises, equipment and leasehold improvements, net | 324,052 | 312,278 | 296,197 | 277,809 | ||||||||||||
| Goodwill and other intangible assets | 277,625 | 281,550 | 290,221 | 294,967 | ||||||||||||
| Mortgage servicing rights | 57,687 | 62,096 | 66,139 | 63,191 | ||||||||||||
| Total Assets | $ | 96,094,222 | $ | 93,851,460 | $ | 87,780,507 | $ | 84,320,096 | ||||||||
|
LIABILITIES AND EQUITY |
||||||||||||||||
| Liabilities: | ||||||||||||||||
| Deposits: | ||||||||||||||||
| Noninterest-bearing checking | $ | 29,317,754 | $ | 28,428,832 | $ | 26,355,331 | $ | 25,122,856 | ||||||||
| Interest-bearing checking | 15,517,614 | 15,490,545 | 17,324,683 | 14,457,910 | ||||||||||||
| Money market checking | 9,708,305 | 10,054,060 | 9,251,504 | 9,895,827 | ||||||||||||
| Money market savings and passbooks | 8,961,311 | 8,599,957 | 8,752,396 | 8,843,432 | ||||||||||||
| Certificates of deposit | 11,254,268 | 10,198,556 | 7,234,794 | 7,116,298 | ||||||||||||
| Total Deposits | 74,759,252 | 72,771,950 | 68,918,708 | 65,436,323 | ||||||||||||
| Short-term borrowings | 100,000 | 600,000 | 100,000 | 450,000 | ||||||||||||
| Long-term FHLB advances | 9,600,000 | 9,650,000 | 8,300,000 | 8,300,000 | ||||||||||||
| Senior notes | 896,001 | 895,572 | 894,723 | 894,304 | ||||||||||||
| Subordinated notes | 777,376 | 777,278 | 777,084 | 776,989 | ||||||||||||
| Other liabilities | 1,294,906 | 880,687 | 971,691 | 1,034,534 | ||||||||||||
| Total Liabilities | 87,427,535 | 85,575,487 | 79,962,206 | 76,892,150 | ||||||||||||
| Shareholders’ Equity: | ||||||||||||||||
| Preferred stock | 1,140,000 | 1,140,000 | 990,000 | 990,000 | ||||||||||||
| Common stock | 1,648 | 1,626 | 1,617 | 1,579 | ||||||||||||
| Additional paid-in capital | 4,000,146 | 3,772,323 | 3,778,913 | 3,536,400 | ||||||||||||
| Retained earnings | 3,546,298 | 3,379,725 | 3,051,611 | 2,899,417 | ||||||||||||
| Accumulated other comprehensive income (loss) | (21,405 | ) | (17,701 | ) | (3,840 | ) | 550 | |||||||||
| Total Shareholders’ Equity | 8,666,687 | 8,275,973 | 7,818,301 | 7,427,946 | ||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 96,094,222 | $ | 93,851,460 | $ | 87,780,507 | $ | 84,320,096 | ||||||||
| Quarter Ended September 30, | Quarter Ended June 30, | ||||||||||||||||||||||||||||||||
| 2018 | 2017 | 2018 | |||||||||||||||||||||||||||||||
|
Average Balances, Yields and Rates |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,490,468 | $ | 6,896 | 1.84 | % | $ | 1,121,328 | $ | 3,193 | 1.13 | % | $ | 1,404,683 | $ | 5,685 | 1.62 | % | |||||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||||||
|
U.S. Treasury and other
U.S. Government agency securities |
— | — | — | % | 110,365 | 201 | 0.73 | % | — | — | — | % | |||||||||||||||||||||
|
U.S. Government-sponsored
agency securities |
1,044,897 | 7,776 | 2.98 | % | 1,211,157 | 8,491 | 2.80 | % | 1,044,897 | 7,772 | 2.98 | % | |||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||
|
Agency residential and
commercial MBS |
7,355,930 | 51,705 | 2.81 | % | 7,529,020 | 47,528 | 2.53 | % | 7,423,001 | 50,842 | 2.74 | % | |||||||||||||||||||||
|
Other residential and
commercial MBS |
4,690 | 37 | 3.16 | % | 7,956 | 57 | 2.84 | % | 4,753 | 38 | 3.21 | % | |||||||||||||||||||||
| Municipal securities (3) | 7,989,269 | 93,425 | 4.68 | % | 8,303,878 | 118,189 | 5.70 | % | 8,044,313 | 94,478 | 4.69 | % | |||||||||||||||||||||
| Other investment securities (4) | 19,669 | 115 | 2.34 | % | 10,308 | 49 | 1.89 | % | 19,863 | 127 | 2.55 | % | |||||||||||||||||||||
| Total investment securities | 16,414,455 | 153,058 | 3.73 | % | 17,172,684 | 174,515 | 4.07 | % | 16,536,827 | 153,257 | 3.70 | % | |||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||
| Residential real estate | 37,929,270 | 306,521 | 3.23 | % | 32,677,895 | 247,645 | 3.03 | % | 36,424,028 | 287,872 | 3.16 | % | |||||||||||||||||||||
| Multifamily | 9,907,089 | 94,352 | 3.73 | % | 7,710,418 | 69,804 | 3.54 | % | 9,389,300 | 87,044 | 3.67 | % | |||||||||||||||||||||
| Commercial real estate | 6,369,984 | 67,360 | 4.14 | % | 5,852,988 | 60,811 | 4.07 | % | 6,276,975 | 65,473 | 4.13 | % | |||||||||||||||||||||
| Construction | 1,996,313 | 24,286 | 4.76 | % | 1,542,172 | 18,302 | 4.64 | % | 1,893,614 | 22,238 | 4.65 | % | |||||||||||||||||||||
| Business (3) | 9,828,856 | 108,350 | 4.31 | % | 7,849,348 | 86,835 | 4.33 | % | 9,181,127 | 98,061 | 4.22 | % | |||||||||||||||||||||
| Other | 4,744,162 | 39,593 | 3.27 | % | 3,332,893 | 25,825 | 3.03 | % | 4,414,474 | 35,746 | 3.20 | % | |||||||||||||||||||||
| Total loans | 70,775,674 | 640,462 | 3.58 | % | 58,965,714 | 509,222 | 3.41 | % | 67,579,518 | 596,434 | 3.51 | % | |||||||||||||||||||||
| FHLB stock | 298,880 | 5,237 | 6.95 | % | 274,424 | 3,864 | 5.59 | % | 300,068 | 4,850 | 6.48 | % | |||||||||||||||||||||
|
Total interest-earning assets |
88,979,477 | 805,653 | 3.59 | % | 77,534,150 | 690,794 | 3.53 | % | 85,821,096 | 760,226 | 3.53 | % | |||||||||||||||||||||
| Noninterest-earning cash | 353,753 | 315,592 | 344,451 | ||||||||||||||||||||||||||||||
| Goodwill and other intangibles | 279,523 | 301,823 | 283,575 | ||||||||||||||||||||||||||||||
| Other assets | 3,518,736 | 3,280,800 | 3,472,410 | ||||||||||||||||||||||||||||||
|
Total noninterest-earning assets |
4,152,012 | 3,898,215 | 4,100,436 | ||||||||||||||||||||||||||||||
| Total Assets | $ | 93,131,489 | $ | 81,432,365 | $ | 89,921,532 | |||||||||||||||||||||||||||
| Liabilities and Equity: | |||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||
| Checking | $ | 44,102,853 | 5,186 | 0.05 | % | $ | 39,109,681 | 3,585 | 0.04 | % | $ | 43,377,084 | 5,478 | 0.05 | % | ||||||||||||||||||
|
Money market checking and savings |
18,095,858 | 31,313 | 0.69 | % | 17,641,318 | 16,156 | 0.36 | % | 16,885,281 | 21,787 | 0.52 | % | |||||||||||||||||||||
| CDs | 9,770,083 | 44,939 | 1.82 | % | 6,327,378 | 20,519 | 1.29 | % | 8,710,862 | 34,762 | 1.60 | % | |||||||||||||||||||||
| Total deposits | 71,968,794 | 81,438 | 0.45 | % | 63,078,377 | 40,260 | 0.25 | % | 68,973,227 | 62,027 | 0.36 | % | |||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||
| Short-term borrowings | 423,383 | 2,248 | 2.11 | % | 653,263 | 1,968 | 1.20 | % | 1,419,945 | 6,652 | 1.88 | % | |||||||||||||||||||||
| Long-term FHLB advances | 9,681,793 | 46,872 | 1.92 | % | 7,558,696 | 28,828 | 1.51 | % | 8,904,396 | 39,045 | 1.76 | % | |||||||||||||||||||||
| Senior notes (5) | 895,791 | 5,928 | 2.65 | % | 894,086 | 5,918 | 2.65 | % | 895,364 | 5,925 | 2.65 | % | |||||||||||||||||||||
| Subordinated notes (5) | 777,328 | 9,098 | 4.68 | % | 776,943 | 9,094 | 4.68 | % | 777,230 | 9,097 | 4.68 | % | |||||||||||||||||||||
| Other borrowings | — | — | — | % | 20,123 | 146 | 2.90 | % | — | — | — | % | |||||||||||||||||||||
| Total borrowings | 11,778,295 | 64,146 | 2.16 | % | 9,903,111 | 45,954 | 1.85 | % | 11,996,935 | 60,719 | 2.03 | % | |||||||||||||||||||||
|
Total interest-bearing liabilities |
83,747,089 | 145,584 | 0.69 | % | 72,981,488 | 86,214 | 0.47 | % | 80,970,162 | 122,746 | 0.61 | % | |||||||||||||||||||||
| Noninterest-bearing liabilities | 894,573 | 1,029,656 | 899,451 | ||||||||||||||||||||||||||||||
| Preferred equity | 1,140,000 | 990,000 | 900,989 | ||||||||||||||||||||||||||||||
| Common equity | 7,349,827 | 6,431,221 | 7,150,930 | ||||||||||||||||||||||||||||||
|
Total Liabilities and Equity |
$ | 93,131,489 | $ | 81,432,365 | $ | 89,921,532 | |||||||||||||||||||||||||||
| Net interest spread (6) | 2.90 | % | 3.06 | % | 2.92 | % | |||||||||||||||||||||||||||
|
Net interest income (fully taxable-equivalent basis) and net interest margin (3), (7) |
$ | 660,069 | 2.94 | % | $ | 604,580 | 3.09 | % | $ | 637,480 | 2.95 | % | |||||||||||||||||||||
|
Reconciliation of tax-equivalent net interest
income to reported net interest income: |
|||||||||||||||||||||||||||||||||
| Tax-equivalent adjustment (3) | (25,615 | ) | (53,627 | ) | (25,787 | ) | |||||||||||||||||||||||||||
| Net interest income, as reported | $ | 634,454 | $ | 550,953 | $ | 611,693 | |||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||
| Average Balances, Yields and Rates |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,341,984 | $ | 16,494 | 1.64 | % | $ | 1,296,152 | $ | 8,987 | 0.93 | % | ||||||||||
| Investment securities: | ||||||||||||||||||||||
|
U.S. Treasury and other U.S. Government agency securities |
6,277 | 87 | 1.85 | % | 110,642 | 602 | 0.73 | % | ||||||||||||||
| U.S. Government-sponsored agency securities | 1,081,651 | 23,989 | 2.96 | % | 1,133,976 | 23,302 | 2.74 | % | ||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||||
| Agency residential and commercial MBS | 7,462,205 | 152,656 | 2.73 | % | 7,279,790 | 136,817 | 2.51 | % | ||||||||||||||
| Other residential and commercial MBS | 5,167 | 222 | 5.73 | % | 8,455 | 180 | 2.84 | % | ||||||||||||||
| Municipal securities (3) | 8,139,055 | 287,447 | 4.71 | % | 7,844,979 | 340,915 | 5.79 | % | ||||||||||||||
| Other investment securities (4) | 19,838 | 359 | 2.41 | % | 4,878 | 58 | 1.58 | % | ||||||||||||||
| Total investment securities | 16,714,193 | 464,760 | 3.71 | % | 16,382,720 | 501,874 | 4.08 | % | ||||||||||||||
| Loans: | ||||||||||||||||||||||
| Residential real estate | 36,374,722 | 859,923 | 3.15 | % | 31,189,436 | 698,749 | 2.99 | % | ||||||||||||||
| Multifamily | 9,386,554 | 260,084 | 3.65 | % | 7,216,408 | 193,024 | 3.53 | % | ||||||||||||||
| Commercial real estate | 6,264,665 | 195,345 | 4.11 | % | 5,701,200 | 175,546 | 4.06 | % | ||||||||||||||
| Construction | 1,889,493 | 67,149 | 4.69 | % | 1,486,799 | 52,118 | 4.62 | % | ||||||||||||||
| Business (3) | 9,204,049 | 295,925 | 4.24 | % | 7,310,072 | 236,264 | 4.26 | % | ||||||||||||||
| Other | 4,377,812 | 106,081 | 3.20 | % | 3,053,755 | 67,576 | 2.92 | % | ||||||||||||||
| Total loans | 67,497,295 | 1,784,507 | 3.51 | % | 55,957,670 | 1,423,277 | 3.37 | % | ||||||||||||||
| FHLB stock | 293,369 | 15,065 | 6.87 | % | 219,457 | 10,019 | 6.10 | % | ||||||||||||||
| Total interest-earning assets | 85,846,841 | 2,280,826 | 3.53 | % | 73,855,999 | 1,944,157 | 3.50 | % | ||||||||||||||
| Noninterest-earning cash | 348,613 | 318,898 | ||||||||||||||||||||
| Goodwill and other intangibles | 283,651 | 307,202 | ||||||||||||||||||||
| Other assets | 3,477,584 | 3,236,300 | ||||||||||||||||||||
| Total noninterest-earning assets | 4,109,848 | 3,862,400 | ||||||||||||||||||||
| Total Assets | $ | 89,956,689 | $ | 77,718,399 | ||||||||||||||||||
| Liabilities and Equity: | ||||||||||||||||||||||
| Deposits: | ||||||||||||||||||||||
| Checking | $ | 43,312,861 | 16,173 | 0.05 | % | $ | 38,165,057 | 6,146 | 0.02 | % | ||||||||||||
| Money market checking and savings | 17,374,636 | 71,238 | 0.55 | % | 16,764,072 | 28,275 | 0.23 | % | ||||||||||||||
| CDs | 8,715,306 | 106,441 | 1.63 | % | 5,819,803 | 54,245 | 1.25 | % | ||||||||||||||
| Total deposits | 69,402,803 | 193,852 | 0.37 | % | 60,748,932 | 88,666 | 0.20 | % | ||||||||||||||
| Borrowings: | ||||||||||||||||||||||
| Short-term borrowings | 841,818 | 11,409 | 1.81 | % | 738,187 | 6,185 | 1.12 | % | ||||||||||||||
| Long-term FHLB advances | 8,985,073 | 118,716 | 1.77 | % | 6,635,165 | 73,882 | 1.49 | % | ||||||||||||||
| Senior notes (5) | 895,368 | 17,777 | 2.65 | % | 610,671 | 11,964 | 2.61 | % | ||||||||||||||
| Subordinated notes (5) | 777,231 | 27,292 | 4.68 | % | 715,510 | 25,102 | 4.68 | % | ||||||||||||||
| Other borrowings | — | — | — | % | 23,694 | 416 | 2.34 | % | ||||||||||||||
| Total borrowings | 11,499,490 | 175,194 | 2.04 | % | 8,723,227 | 117,549 | 1.80 | % | ||||||||||||||
| Total interest-bearing liabilities | 80,902,293 | 369,046 | 0.61 | % | 69,472,159 | 206,215 | 0.40 | % | ||||||||||||||
| Noninterest-bearing liabilities | 924,458 | 1,035,590 | ||||||||||||||||||||
| Preferred equity | 961,978 | 986,836 | ||||||||||||||||||||
| Common equity | 7,167,960 | 6,223,814 | ||||||||||||||||||||
| Total Liabilities and Equity | $ | 89,956,689 | $ | 77,718,399 | ||||||||||||||||||
| Net interest spread (6) | 2.92 | % | 3.10 | % | ||||||||||||||||||
|
Net interest income (fully taxable-equivalent basis)
and net interest margin (3), (7) |
$ | 1,911,780 | 2.95 | % | $ | 1,737,942 | 3.12 | % | ||||||||||||||
|
Reconciliation of tax-equivalent net interest
income to reported net interest income: |
||||||||||||||||||||||
| Tax-equivalent adjustment (3) | (77,875 | ) | (155,340 | ) | ||||||||||||||||||
| Net interest income, as reported | $ | 1,833,905 | $ | 1,582,602 | ||||||||||||||||||
|
__________ |
||||||||||||||||||||||
| (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) Includes mutual funds and marketable equity securities. | ||||||||||||||||||||||
| (5) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs. | ||||||||||||||||||||||
| (6) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities. | ||||||||||||||||||||||
| (7) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets. | ||||||||||||||||||||||
|
Quarter Ended September 30, |
Quarter Ended |
Nine Months Ended September 30, |
||||||||||||||||||
| Operating Information | 2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
| ($ in thousands, except per share amounts) | ||||||||||||||||||||
| Net income to average assets (1) | 0.91 | % | 0.97 | % | 0.94 | % | 0.93 | % | 0.97 | % | ||||||||||
| Net income available to common shareholders to average common equity (1) | 10.60 | % | 11.46 | % | 11.08 | % | 10.84 | % | 11.16 | % | ||||||||||
| Net income available to common shareholders to average tangible common equity (1) | 11.02 | % | 12.02 | % | 11.54 | % | 11.28 | % | 11.74 | % | ||||||||||
|
Net interest income to average interest-earning assets (1) |
2.83 | % | 2.82 | % | 2.86 | % | 2.86 | % | 2.86 | % | ||||||||||
| Dividends per common share | $ | 0.18 | $ | 0.17 | $ | 0.18 | $ | 0.53 | $ | 0.50 | ||||||||||
| Dividend payout ratio | 15.2 | % | 14.9 | % | 15.0 | % | 15.1 | % | 15.6 | % | ||||||||||
| Efficiency ratio (2) | 63.0 | % | 62.4 | % | 63.5 | % | 63.5 | % | 62.4 | % | ||||||||||
| Net loan charge-offs | $ | 185 | $ | 655 | $ | 771 | $ | 1,110 | $ | 1,772 | ||||||||||
| 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 | % | 0.58 | % | 0.57 | % | 0.57 | % | 0.58 | % | ||||||||||
| Nonaccrual loans | 976.6 | % | 917.1 | % | 780.4 | % | 976.6 | % | 917.1 | % | ||||||||||
| __________ | ||||||||||||||||||||
| (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 September 30, |
Quarter Ended |
Nine Months Ended September 30, |
|||||||||||||
| Effective Tax Rate | 2018 | 2017 | 2018 | 2018 | 2017 | ||||||||||
| Effective tax rate, prior to excess tax benefits | 20.8 | % | 23.1 | % | 21.5 | % | 21.1 | % | 23.1 | % | |||||
| Excess tax benefits—stock options | (0.9 | )% | (3.9 | )% | (1.3 | )% | (1.3 | )% | (3.8 | )% | |||||
| Excess tax benefits—other stock awards | (0.1 | )% | (1.9 | )% | (3.4 | )% | (1.2 | )% | (2.7 | )% | |||||
| Total excess tax benefits | (1.0 | )% | (5.8 | )% | (4.7 | )% | (2.5 | )% | (6.5 | )% | |||||
| Effective tax rate | 19.8 | % | 17.3 | % | 16.8 | % | 18.6 | % | 16.6 | % | |||||
|
Quarter Ended September 30, |
Quarter Ended |
Nine Months Ended September 30, |
||||||||||||||||||
| Mortgage Loan Sales | 2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Loans sold: | ||||||||||||||||||||
| Flow sales: | ||||||||||||||||||||
| Agency | $ | 15,365 | $ | 26,152 | $ | 7,724 | $ | 37,136 | $ | 110,145 | ||||||||||
| Non-agency | 76,772 | 88,534 | 32,865 | 165,292 | 217,565 | |||||||||||||||
| Total flow sales | 92,137 | 114,686 | 40,589 | 202,428 | 327,710 | |||||||||||||||
| Bulk sales: | ||||||||||||||||||||
| Non-agency | — | 707,669 | 681,332 | 773,041 | 1,580,225 | |||||||||||||||
| Total loans sold | $ | 92,137 | $ | 822,355 | $ | 721,921 | $ | 975,469 | $ | 1,907,935 | ||||||||||
| Gain on sale of loans: | ||||||||||||||||||||
| Amount | $ | 303 | $ | 1,963 | $ | 4,045 | $ | 5,037 | $ | 6,168 | ||||||||||
| Gain as a percentage of loans sold | 0.33 | % | 0.24 | % | 0.56 | % | 0.52 | % | 0.32 | % | ||||||||||
|
Quarter Ended September 30, |
Quarter Ended |
Nine Months Ended September 30, |
|||||||||||||||||
| Loan Originations | 2018 | 2017 | 2018 | 2018 | 2017 | ||||||||||||||
| ($ in thousands) | |||||||||||||||||||
| Single family (1-4 units) | $ | 2,623,429 | $ | 2,987,278 | $ | 3,125,316 | $ | 8,075,457 | $ | 8,556,966 | |||||||||
| Home equity lines of credit | 399,606 | 459,709 | 416,098 | 1,162,037 | 1,298,255 | ||||||||||||||
| Multifamily (5+ units) | 781,450 | 805,429 | 921,723 | 2,464,757 | 1,860,913 | ||||||||||||||
| Commercial real estate | 263,292 | 197,596 | 341,707 | 880,682 | 929,219 | ||||||||||||||
| Construction | 373,842 | 413,842 | 384,236 | 1,222,884 | 1,149,456 | ||||||||||||||
| Business | 1,978,596 | 1,879,393 | 3,097,056 | 7,133,106 | 4,486,005 | ||||||||||||||
| Stock and other secured | 321,020 | 320,952 | 748,450 | 1,736,016 | 1,255,148 | ||||||||||||||
| Unsecured | 287,748 | 179,686 | 318,227 | 1,034,317 | 647,444 | ||||||||||||||
| Total loans originated | $ | 7,028,983 | $ | 7,243,885 | $ | 9,352,813 | $ | 23,709,256 | $ | 20,183,406 | |||||||||
| As of | |||||||||||||||||||
| Loan Servicing Portfolio |
September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
||||||||||||||
| ($ in millions) | |||||||||||||||||||
| Loans serviced for investors | $ | 11,733 | $ | 12,374 | $ | 12,192 | $ | 12,495 | $ | 12,111 | |||||||||
| As of | ||||||||||||||||||||
| Asset Quality Information |
September 30, 2018 |
June 30, |
March 31, 2018 |
December 31, |
September 30, |
|||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||
| Nonaccrual loans | $ | 42,578 | $ | 50,920 | $ | 48,895 | $ | 37,656 | $ | 37,922 | ||||||||||
| Other real estate owned | — | — | — | — | — | |||||||||||||||
| Total nonperforming assets | $ | 42,578 | $ | 50,920 | $ | 48,895 | $ | 37,656 | $ | 37,922 | ||||||||||
| Nonperforming assets to total assets | 0.04 | % | 0.05 | % | 0.05 | % | 0.04 | % | 0.04 | % | ||||||||||
| Accruing loans 90 days or more past due | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Restructured accruing loans | $ | 11,830 | $ | 11,568 | $ | 11,853 | $ | 12,605 | $ | 18,242 | ||||||||||
| As of | |||||||||||||||||||
| Book Value Ratios |
September 30, 2018 |
June 30, |
March 31, 2018 |
December 31, |
September 30, |
||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||
| Number of shares of common stock outstanding | 164,761 | 162,638 | 161,863 | 161,696 | 157,930 | ||||||||||||||
| Book value per common share | $ | 45.68 | $ | 43.88 | $ | 43.23 | $ | 42.23 | $ | 40.76 | |||||||||
| Tangible book value per common share | $ | 44.00 | $ | 42.15 | $ | 41.46 | $ | 40.43 | $ | 38.90 | |||||||||
| As of | ||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||
| Capital Ratios | September 30 (1) | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
|
Tier 1 leverage ratio (Tier 1 capital to average
assets) |
8.94 | % | 8.83 | % | 8.64 | % | 8.85 | % | 8.78 | % | ||||||||||
|
Common Equity Tier 1 capital to risk-weighted
assets |
10.47 | % | 10.18 | % | 10.47 | % | 10.63 | % | 10.58 | % | ||||||||||
| Tier 1 capital to risk-weighted assets | 12.14 | % | 11.90 | % | 11.80 | % | 12.22 | % | 12.27 | % | ||||||||||
| Total capital to risk-weighted assets | 13.90 | % | 13.68 | % | 13.65 | % | 14.11 | % | 14.23 | % | ||||||||||
| Regulatory Capital (2) | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Common Equity Tier 1 capital | $ | 7,158,043 | $ | 6,766,573 | $ | 6,624,101 | $ | 6,488,618 | $ | 6,140,330 | ||||||||||
| Tier 1 capital | $ | 8,298,043 | $ | 7,906,573 | $ | 7,464,101 | $ | 7,457,944 | $ | 7,121,330 | ||||||||||
| Total capital | $ | 9,505,044 | $ | 9,095,028 | $ | 8,633,859 | $ | 8,615,389 | $ | 8,259,581 | ||||||||||
| Assets (2) | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Average assets | $ | 92,771,143 | $ | 89,560,555 | $ | 86,378,664 | $ | 84,238,404 | $ | 81,125,539 | ||||||||||
| Risk-weighted assets | $ | 68,370,790 | $ | 66,461,529 | $ | 63,239,135 | $ | 61,054,077 | $ | 58,027,938 | ||||||||||
| __________ | ||||||||||||||||||||
| (1) Ratios and amounts as of September 30, 2018 are preliminary. | ||||||||||||||||||||
| (2) As defined by regulatory capital rules. | ||||||||||||||||||||
| As of | |||||||||||||||||||
| Wealth Management Assets |
September 30, 2018 |
June 30, |
March 31, |
December 31, |
September 30, |
||||||||||||||
| ($ in millions) | |||||||||||||||||||
| First Republic Investment Management | $ | 62,506 | $ | 59,329 | $ | 55,104 | $ | 52,712 | $ | 50,318 | |||||||||
| Brokerage and investment: | |||||||||||||||||||
| Brokerage | 54,823 | 50,356 | 46,150 | 43,015 | 40,652 | ||||||||||||||
| Money market mutual funds | 3,149 | 1,575 | 2,104 | 1,671 | 1,201 | ||||||||||||||
| Total brokerage and investment | 57,972 | 51,931 | 48,254 | 44,686 | 41,853 | ||||||||||||||
| Trust Company: | |||||||||||||||||||
| Trust | 5,406 | 5,125 | 4,694 | 4,678 | 4,441 | ||||||||||||||
| Custody | 5,105 | 4,739 | 4,938 | 4,885 | 4,734 | ||||||||||||||
| Total Trust Company | 10,511 | 9,864 | 9,632 | 9,563 | 9,175 | ||||||||||||||
| Total Wealth Management Assets | $ | 130,989 | $ | 121,124 | $ | 112,990 | $ | 106,961 | $ | 101,346 | |||||||||
