Total Revenues Increased 17% for the
Year
Wealth Management Revenues Increased 22% for
the Year
First Republic Bank (NYSE: FRC) today announced financial
results for the quarter and year ended December 31, 2018.
“Results for 2018 were excellent,” said Jim Herbert, Chairman
and CEO. “Organic growth continues to be strong across the
franchise. Our client-focused business model is driving our growth
and delivering consistent results in all types of economic
conditions.”
Full Year Highlights
Financial Results
- Revenues were $3.0 billion, up
16.6%.
- Net income was $853.8 million, up
12.7%.
- Diluted earnings per share of $4.81, up
11.6%.
- Loan originations totaled $32.1
billion, our best year ever.
- Tangible book value per share was
$45.26, up 11.9%.
- Efficiency ratio was 63.0%, compared to
62.8% last year.
Continued Capital and Credit Strength
- Common Equity Tier 1 ratio was 10.38%,
compared to 10.63% a year ago.
- Nonperforming assets remained very low
at 5 basis points of total assets.
- Net charge-offs were only $3.0 million,
or less than 1 basis point of average loans.
Continued Franchise Development
- Loans, excluding loans held for sale,
totaled $75.9 billion, up 20.7%.
- Deposits were $79.1 billion, up
14.7%.
- Wealth management assets were $126.2
billion, up 18.0%.
- Wealth management revenues were $433.7
million, up 21.7%.
Quarterly Highlights
- Compared to last year’s fourth quarter:
- Revenues were $810.8 million, up
16.0%.
- Net interest income was $667.2 million,
up 17.3%.
- Net income was $231.4 million, up
19.1%.
- Diluted EPS of $1.29, up 17.3%.
- Loan originations were $8.4 billion,
our best fourth quarter ever.
- Loans sold totaled $263.7 million for
the quarter.
- Net charge-offs were $1.9 million.
- Net interest margin was 2.98%, compared
to 2.94% for the prior quarter. The fourth quarter’s net interest
margin included a 2 basis point positive impact from an FHLB
special dividend.
- Efficiency ratio was 61.5%, compared to
63.0% for the prior quarter (includes 0.4% positive impact from an
FHLB special dividend).
- Wealth management assets were $126.2
billion, down 3.6% from the prior quarter due to market
declines.
“First Republic’s differentiated business model continues to
perform very well,” said Mike Roffler, Chief Financial Officer.
“Loans, deposits and wealth management assets all grew nicely, and
client acquisition remains strong. We’re very pleased with revenue
growth of 17% and net interest income growth of 16% for the full
year 2018. Capital and credit quality remain consistently
strong.”
Quarterly Cash Dividend
Declared
The Bank declared a cash dividend for the fourth quarter of
$0.18 per share of common stock, which is payable on
February 14, 2019 to shareholders of record as of
January 31, 2019.
Very Strong Asset
Quality
Credit quality remains very strong. Nonperforming assets were
only 5 basis points of total assets at December 31, 2018.
The Bank had net charge-offs for the quarter of $1.9 million,
while adding $25.1 million to its allowance for loan losses due to
continued loan growth. During the full year, the Bank had net
charge-offs of only $3.0 million, while adding $76.1 million to its
allowance for loan losses.
Continued Capital Strength and Access
to Capital Markets
The Bank’s Common Equity Tier 1 ratio was 10.38% at
December 31, 2018, compared to 10.63% a year ago.
On December 28, 2018, the Bank redeemed all of the outstanding
shares of its 7.00% Noncumulative Perpetual Series E Preferred
Stock, which totaled $200.0 million.
On December 31, 2018, the Bank traded 2,000,000 new shares of
common stock as part of an “at-the-market” equity offering program,
in conjunction with the addition of our common stock in the S&P
500 Index prior to the market opening on January 2, 2019. This
offering settled on January 3, 2019 and added approximately $170
million to common equity in the first quarter of 2019.
Tangible Book Value
Growth
Tangible book value per common share at December 31, 2018
was $45.26, up 11.9% from a year ago.
Continued Franchise
Development
Loan Originations
Loan originations were $8.4 billion for the quarter, compared to
$7.4 billion for the same quarter a year ago, up 12.2%. For 2018,
loan originations totaled $32.1 billion, up 16.0% compared to the
prior year. The increases for the quarter and year ended
December 31, 2018 were primarily due to increases in
multifamily and business lending, partially offset by a decline in
single family refinance volume.
Loans, excluding loans held for sale, totaled $75.9 billion at
December 31, 2018, up 20.7% compared to a year ago, primarily
due to increases in single family, business and multifamily
loans.
Deposit Growth
Total deposits increased to $79.1 billion, up 14.7% compared to
a year ago.
At December 31, 2018, checking accounts totaled 59.6% of
deposits.
Investments
Total investment securities at December 31, 2018 were $16.2
billion, a slight decrease for the quarter and a 12.6% decrease
compared to a year ago.
High-quality liquid assets totaled $14.8 billion at
December 31, 2018, and represented 15.4% of average total
assets.
Mortgage Banking Activity
During the fourth quarter, the Bank sold $263.7 million of loans
and recorded a gain on sale of $579,000, compared to loan sales of
$969.2 million and a gain of $3.1 million during the fourth quarter
of last year. Loan sales for the quarter and year ended
December 31, 2018 included $251.9 million of multifamily loans
sold through a securitization. For 2018, the Bank sold $1.2 billion
of loans and recorded a gain on sale of $5.6 million.
Loans serviced for investors at year-end totaled $11.6 billion,
down 7.4% from a year ago.
Continued Expansion of Wealth
Management
Wealth management revenues totaled $119.6 million for the
quarter, up 15.4% compared to last year’s fourth quarter. For all
of 2018, wealth management revenues were $433.7 million, an
increase of 21.7% compared to the prior year. Such revenues
represented 14.8% of the Bank’s total revenues for the quarter and
14.2% of the Bank’s total revenues for the year, up from 13.6% for
2017.
Total wealth management assets were $126.2 billion at
December 31, 2018, down 3.6% for the quarter, but up 18.0%
compared to a year ago. The decline in wealth management assets for
the quarter was due to market depreciation, partially offset by net
new assets from both existing and new clients. The growth in wealth
management assets for the year was due to net new assets from both
existing and new clients, partially offset by market
depreciation.
Wealth management assets included investment management assets
of $60.6 billion, brokerage assets and money market mutual funds of
$55.4 billion, and trust and custody assets of $10.2 billion.
Income Statement and Key
Ratios
Strong Revenue Growth
Total revenues were $810.8 million for the quarter, up 16.0%
compared to the fourth quarter a year ago and were $3.0 billion for
2018, up 16.6% compared to the prior year.
Strong Net Interest Income
Growth
Net interest income was $667.2 million for the quarter, up 17.3%
compared to the fourth quarter a year ago, and was $2.5 billion for
2018, up 16.3% compared to the prior year. The increases in net
interest income resulted primarily from growth in average earning
assets.
Net Interest Margin
The net interest margin was 2.98% for the fourth quarter,
compared to 2.94% for the prior quarter. For 2018, the Bank’s net
interest margin was 2.96%, compared to 3.13% for the prior year.
The decline in net interest margin compared to the prior year was
primarily the result of lower tax-equivalent yields on
tax-advantaged investments and tax-exempt loans from the reduction
of the federal tax rate for corporations from 35% to 21%.
Noninterest Income
Noninterest income was $143.5 million for the quarter, up 10.2%
compared to the fourth quarter a year ago, and was $543.4 million
for 2018, up 18.0% compared to the prior year. The increases were
primarily from growth in wealth management revenues.
Noninterest Expense and Efficiency
Ratio
Noninterest expense was $498.6 million for the quarter, up 11.9%
compared to the fourth quarter a year ago. The increase for the
quarter was primarily due to increased salaries and benefits,
information systems and other expenses, partially offset by an $8.5
million decrease in FDIC assessments due to the elimination of an
FDIC surcharge as of October 1, 2018. For 2018, noninterest expense
was $1.9 billion, up 16.9% from the prior year, due to increased
salaries and benefits, information systems and other expenses from
the continued investments in the expansion of the franchise.
The efficiency ratio was 61.5% for the quarter, compared to
63.7% for the fourth quarter a year ago. For 2018, the efficiency
ratio was 63.0%, compared to 62.8% for 2017.
Income Taxes
Beginning in 2018, federal tax reform legislation reduced the
federal tax rate for corporations from 35% to 21% and changed or
limited certain tax deductions.
The Bank’s effective tax rate for the fourth quarter of 2018 was
19.4%, compared to 19.8% for the third quarter of 2018.
The effective tax rate for 2018 was 18.8%, compared to 16.9% for
2017. The increase in 2018 was primarily the result of lower tax
benefits from a decrease in both stock option exercises and vesting
of stock awards in 2018, partially offset by a one-time revaluation
of deferred tax assets in 2017 and the decrease in the corporate
federal tax rate in 2018. During 2017, the volume of stock option
exercises by Bank employees and directors was elevated in response
to tax reform legislation.
Conference Call Details
First Republic Bank’s fourth quarter and full year 2018 earnings
conference call is scheduled for January 15, 2019 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 January 15, 2019, at 10:00
a.m. PT / 1:00 p.m. ET, through January 22, 2019, at 8:59 p.m. PT /
11:59 p.m. ET. To access the replay, dial (844) 512-2921 and use
conference ID #13685747. 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 and offers a complete line of products,
including residential, commercial and personal loans, deposit
services, and wealth management. 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 Jackson Hole, Wyoming. First Republic is a constituent of the
S&P 500 Index and KBW Nasdaq Bank Index. 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, including
those 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 December
31,
Quarter Ended September
30,
Year Ended December 31,
(in thousands, except per share amounts) 2018
2017 2018 2018 2017 Interest
income: Loans $ 677,450 $ 514,700 $ 633,794 $ 2,442,469 $ 1,903,070
Investments 134,380 140,396 134,111 540,753 521,837 Other 10,122
4,842 5,237 25,187 14,861 Cash and cash equivalents 6,703
2,863 6,896 23,197 11,850 Total
interest income 828,655 662,801 780,038
3,031,606 2,451,618
Interest expense: Deposits 96,188 46,120 81,438 290,040 134,786
Borrowings 65,264 47,820 64,146 240,458
165,369 Total interest expense 161,452 93,940
145,584 530,498 300,155 Net interest
income 667,203 568,861 634,454 2,501,108 2,151,463 Provision for
loan losses 25,089 17,042 18,633 76,092
60,181 Net interest income after provision for loan losses
642,114 551,819 615,821 2,425,016
2,091,282 Noninterest income: Investment management
fees 91,937 82,358 88,560 341,539 282,868 Brokerage and investment
fees 8,097 6,832 7,207 31,867 26,666 Insurance fees 5,444 2,542
1,851 10,090 5,555 Trust fees 3,939 3,762 3,599 14,633 13,658
Foreign exchange fee income 10,223 8,198 8,439 35,606 27,691
Deposit fees 6,484 5,870 6,225 24,974 22,633 Loan and related fees
3,871 3,101 4,091 15,713 13,012 Loan servicing fees, net 3,446
3,932 3,151 13,302 13,800 Gain on sale of loans 579 3,065 303 5,616
9,233 Gain (loss) on investment securities, net (1,313 ) — (1,655 )
5,202 (833 ) Income from investments in life insurance 9,973 9,836
11,608 40,670 37,874 Other income 867 801 996
4,233 8,304 Total noninterest income 143,547
130,297 134,375 543,445 460,461
Noninterest expense: Salaries and employee benefits 281,021 250,076
279,248 1,109,228 930,908 Information systems 63,999 58,139 59,259
241,752 208,625 Occupancy 40,078 35,620 38,792 152,258 136,746
Professional fees 15,338 15,976 15,718 60,058 56,950 Advertising
and marketing 19,888 17,173 13,527 60,463 48,398 FDIC assessments
8,847 14,844 17,679 58,122 55,792 Other expenses 69,411
53,715 59,776 234,838 202,122 Total
noninterest expense 498,582 445,543 483,999
1,916,719 1,639,541 Income before provision
for income taxes 287,079 236,573 266,197 1,051,742 912,202
Provision for income taxes 55,661 42,296 52,651
197,914 154,542 Net income 231,418 194,277
213,546 853,828 757,660 Dividends on preferred stock 16,228
14,272 17,112 57,725 58,040 Net income
available to common shareholders $ 215,190 $ 180,005
$ 196,434 $ 796,103 $ 699,620 Basic
earnings per common share $ 1.31 $ 1.12 $ 1.20
$ 4.89 $ 4.44 Diluted earnings per common share $
1.29 $ 1.10 $ 1.19 $ 4.81 $ 4.31
Weighted average shares—basic 164,804 160,371
163,048 162,948 157,624 Weighted average
shares—diluted 167,100 164,197 165,498 165,612
162,340
CONSOLIDATED
BALANCE SHEETS
As of ($ in thousands) December 31,
2018 September 30, 2018
December 31, 2017
ASSETS
Cash and cash equivalents $ 2,811,159 $ 3,013,645 $ 2,297,021
Investment securities available-for-sale 1,779,116 2,000,271
2,418,088 Investment securities held-to-maturity 14,436,973
14,294,769 16,157,945 Equity securities (fair value) 18,719 19,121
— Loans: Single family (1-4 units) 37,955,252 36,213,714
31,508,468 Home equity lines of credit 2,542,713 2,543,652
2,735,612 Multifamily (5+ units) 10,357,839 9,779,693 8,640,233
Commercial real estate 6,677,440 6,459,654 6,083,152 Single family
construction 645,924 654,643 591,066 Multifamily/commercial
construction 1,576,582 1,422,746 1,116,855 Business 10,998,503
10,382,050 8,295,224 Stock secured 1,432,911 1,371,546 1,083,553
Other secured 1,105,751 1,101,721 1,015,039 Unsecured 2,572,367
2,399,078 1,771,013 Total loans 75,865,282
72,328,497 62,840,215 Allowance for loan
losses (439,048 ) (415,825 ) (365,932 ) Loans, net 75,426,234
71,912,672 62,474,283 Loans held for
sale 98,985 274,181 87,695 Investments in life insurance 1,376,579
1,361,473 1,330,652 Tax credit investments 1,057,541 1,074,834
1,107,546 Prepaid expenses and other assets 1,538,971 1,483,892
1,254,720 Premises, equipment and leasehold improvements, net
332,483 324,052 296,197 Goodwill and other intangible assets
273,974 277,625 290,221 Mortgage servicing rights 54,470
57,687 66,139 Total Assets $ 99,205,204 $
96,094,222 $ 87,780,507
LIABILITIES AND
EQUITY
Liabilities: Deposits: Noninterest-bearing checking $ 30,033,658 $
29,317,754 $ 26,355,331 Interest-bearing checking 17,089,520
15,517,614 17,324,683 Money market checking 10,317,436 9,708,305
9,251,504 Money market savings and passbooks 10,245,107 8,961,311
8,752,396 Certificates of deposit 11,377,515 11,254,268
7,234,794 Total Deposits 79,063,236 74,759,252
68,918,708 Short-term borrowings 100,000
100,000 100,000 Long-term FHLB advances 8,700,000 9,600,000
8,300,000 Senior notes 896,432 896,001 894,723 Subordinated notes
777,475 777,376 777,084 Other liabilities 990,284 1,294,906
971,691 Total Liabilities 90,527,427
87,427,535 79,962,206 Shareholders’ Equity:
Preferred stock 940,000 1,140,000 990,000 Common stock 1,649 1,648
1,617 Additional paid-in capital 4,024,306 4,000,146 3,778,913
Retained earnings 3,731,205 3,546,298 3,051,611 Accumulated other
comprehensive loss (19,383 ) (21,405 ) (3,840 ) Total Shareholders’
Equity 8,677,777 8,666,687 7,818,301 Total
Liabilities and Shareholders’ Equity $ 99,205,204 $
96,094,222 $ 87,780,507
Quarter Ended December 31, Quarter Ended September
30, 2018 2017 2018
Average Balances, Yields and
Rates
AverageBalance
Interest
Income/Expense (1)
Yields/Rates (2)
AverageBalance
Interest
Income/Expense (1)
Yields/Rates (2)
Average Balance
Interest
Income/Expense (1)
Yields/Rates (2)
($ in thousands)
Assets: Cash and cash equivalents $
1,275,293 $ 6,702 2.09 % $ 983,289 $ 2,863 1.16 % $ 1,490,468 $
6,896 1.84 % Investment securities:
U.S. Treasury and other U.S. Government
agency securities
— — — % 73,041 140 0.77 % — — — %
U.S. Government-sponsored agency
securities
1,044,914 7,772 2.98 % 1,321,938 9,225 2.79 % 1,044,897 7,776 2.98
% Mortgage-backed securities:
Agency residential and commercial MBS
7,098,381 50,849 2.87 % 7,882,793 49,908 2.53 % 7,355,930 51,705
2.81 %
Other residential and commercial MBS
4,611 44 3.78 % 6,933 51 2.94 % 4,690 37 3.16 %
Municipal securities (3)
8,087,947 94,909 4.69 % 8,845,376 125,387 5.66 % 7,989,269 93,425
4.68 % Other investment securities (4) 18,955 120
2.54 % 20,387 116 2.29 % 19,669 115
2.34 %
Total investment securities
16,254,808 153,694 3.78 % 18,150,468 184,827
4.07 % 16,414,455 153,058 3.73 % Loans:
Residential real estate 39,587,922 325,318 3.28 % 33,550,612
254,200 3.03 % 37,929,270 306,521 3.23 % Multifamily 10,243,384
97,696 3.73 % 8,334,092 75,117 3.53 % 9,907,089 94,352 3.73 %
Commercial real estate 6,612,822 70,319 4.16 % 5,938,936 61,489
4.05 % 6,369,984 67,360 4.14 % Construction 2,145,727 26,464 4.83 %
1,654,987 19,527 4.62 % 1,996,313 24,286 4.76 % Business (3)
10,694,770 121,711 4.45 % 8,039,073 88,884 4.32 % 9,828,856 108,350
4.31 % Other 4,943,880 42,791 3.39 % 3,645,782
28,010 3.01 % 4,744,162 39,593 3.27 % Total
loans 74,228,505 684,299 3.64 % 61,163,482
527,227 3.41 % 70,775,674 640,462 3.58 % FHLB
stock (5) 293,331 10,122 13.69 % 282,150 4,842
6.81 % 298,880 5,237 6.95 %
Total interest-earning assets
92,051,937 854,817 3.68 % 80,579,389 719,759
3.54 % 88,979,477 805,653 3.59 %
Noninterest-earning cash 344,749 341,903 353,753 Goodwill and other
intangibles 275,645 292,505 279,523 Other assets 3,572,767
3,380,998 3,518,736
Total noninterest-earning assets
4,193,161 4,015,406 4,152,012 Total Assets $
96,245,098 $ 84,594,795 $ 93,131,489
Liabilities and Equity:
Deposits: Checking $ 45,218,239 5,720 0.05 % $ 40,653,195 4,672
0.05 % $ 44,102,853 5,186 0.05 %
Money market checking and savings
18,960,266 37,051 0.78 % 17,699,117 17,577 0.39 % 18,095,858 31,313
0.69 % CDs 10,720,940 53,417 1.98 % 7,062,947
23,871 1.34 % 9,770,083 44,939 1.82 % Total
deposits 74,899,445 96,188 0.51 % 65,415,259
46,120 0.28 % 71,968,794 81,438 0.45 %
Borrowings: Short-term borrowings 650,543 3,868 2.36 % 471,304
1,416 1.19 % 423,383 2,248 2.11 % Long-term FHLB advances 9,201,630
46,365 2.00 % 8,159,783 31,390 1.53 % 9,681,793 46,872 1.92 %
Senior notes (6) 896,223 5,931 2.65 % 894,519 5,919 2.65 % 895,791
5,928 2.65 % Subordinated notes (6) 777,427 9,099
4.68 % 777,038 9,095 4.68 % 777,328 9,098
4.68 % Total borrowings 11,525,823 65,263 2.25
% 10,302,644 47,820 1.85 % 11,778,295 64,146
2.16 %
Total interest-bearing liabilities
86,425,268 161,451 0.74 % 75,717,903 93,940
0.49 % 83,747,089 145,584 0.69 %
Noninterest-bearing liabilities 982,269 1,103,473 894,573 Preferred
equity 1,129,130 990,000 1,140,000 Common equity 7,708,431
6,783,419 7,349,827
Total Liabilities and Equity
$ 96,245,098 $ 84,594,795 $ 93,131,489
Net interest spread (7) 2.94 % 3.05 % 2.90 %
Net interest income (fully
taxable-equivalent basis) and net interest margin (3), (8)
$ 693,366 2.98 % $ 625,819 3.08 % $ 660,069
2.94 %
Reconciliation of tax-equivalent net
interest income to reported net interest income:
Tax-equivalent adjustment (3) (26,163 ) (56,958 ) (25,615 ) Net
interest income, as reported $ 667,203 $ 568,861 $
634,454
Year Ended December 31, 2018 2017 Average
Balances, Yields and Rates
Average Balance
Interest
Income/Expense (1)
Yields/Rates
AverageBalance
Interest
Income/Expense (1)
Yields/Rates
($ in thousands)
Assets: Cash and cash equivalents $
1,325,174 $ 23,197 1.75 % $ 1,217,293 $ 11,850 0.97 % Investment
securities: U.S. Treasury and other U.S. Government agency
securities 4,694 87 1.85 % 101,164 742 0.73 % U.S.
Government-sponsored agency securities 1,072,391 31,761 2.96 %
1,181,353 32,527 2.75 % Mortgage-backed securities: Agency
residential and commercial MBS 7,370,501 203,505 2.76 % 7,431,780
186,725 2.51 % Other residential and commercial MBS 5,027 265 5.28
% 8,072 231 2.86 % Municipal securities (3) 8,126,173 382,662 4.71
% 8,097,134 466,302 5.76 % Other investment securities (4) 19,617
480 2.44 % 8,787 174 1.99 % Total
investment securities 16,598,403 618,760 3.73 %
16,828,290 686,701 4.08 % Loans: Residential
real estate 37,184,625 1,185,240 3.19 % 31,784,581 952,949 3.00 %
Multifamily 9,602,522 357,780 3.67 % 7,498,125 268,141 3.58 %
Commercial real estate 6,352,419 265,664 4.12 % 5,761,123 237,035
4.11 % Construction 1,954,078 93,613 4.73 % 1,529,192 71,645 4.69 %
Business (3) 9,579,793 417,636 4.30 % 7,493,820 325,148 4.34 %
Other 4,520,492 148,873 3.25 % 3,202,979
95,586 2.98 % Total loans 69,193,929 2,468,806
3.54 % 57,269,820 1,950,504 3.41 % FHLB stock (5)
293,359 25,187 8.59 % 235,259 14,861
6.32 % Total interest-earning assets 87,410,865 3,135,950
3.57 % 75,550,662 2,663,916 3.53 %
Noninterest-earning cash 347,639 324,696 Goodwill and other
intangibles 281,633 303,498 Other assets 3,501,575 3,272,772
Total noninterest-earning assets 4,130,847 3,900,966
Total Assets $ 91,541,712 $ 79,451,628
Liabilities and Equity: Deposits: Checking $ 43,793,120
21,892 0.05 % $ 38,792,204 10,818 0.03 % Money market checking and
savings 17,774,302 108,290 0.61 % 16,999,755 45,852 0.27 % CDs
9,220,835 159,858 1.73 % 6,133,143 78,116
1.27 % Total deposits 70,788,257 290,040 0.41
% 61,925,102 134,786 0.22 % Borrowings:
Short-term borrowings 793,606 15,277 1.93 % 670,919 7,601 1.13 %
Long-term FHLB advances 9,039,658 165,081 1.83 % 7,019,452 105,272
1.50 % Senior notes (6) 895,584 23,709 2.65 % 682,216 17,883 2.62 %
Subordinated notes (6) 777,280 36,391 4.68 % 731,018 34,197 4.68 %
Other borrowings — — — % 17,722 416
2.35 % Total borrowings 11,506,128 240,458 2.09 %
9,121,327 165,369 1.81 % Total interest-bearing
liabilities 82,294,385 530,498 0.64 % 71,046,429
300,155 0.42 % Noninterest-bearing liabilities
939,028 1,052,700 Preferred equity 1,004,110 987,633 Common equity
7,304,189 6,364,866 Total Liabilities and Equity $
91,541,712 $ 79,451,628 Net interest spread
(7) 2.92 % 3.11 %
Net interest income (fully
taxable-equivalent basis) and net interest margin (3), (8)
$ 2,605,452 2.96 % $ 2,363,761 3.13 %
Reconciliation of tax-equivalent net
interest income to reported net interest income:
Tax-equivalent adjustment (3) (104,344 ) (212,298 ) Net interest
income, as reported $ 2,501,108 $ 2,151,463
__________ (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) Yield
for the quarter and year ended December 31, 2018 includes an FHLB
special dividend of $4.8 million. (6) Average balances include
unamortized issuance discounts and costs. Interest expense includes
amortization of issuance discounts and costs. (7) Net interest
spread represents the average yield on interest-earning assets less
the average rate on interest-bearing liabilities. (8) Net interest
margin represents net interest income on a fully taxable-equivalent
basis divided by total average interest-earning assets.
Quarter Ended December
31,
Quarter Ended September
30,
Year Ended December 31,
Operating Information
2018 2017 2018 2018
2017 ($ in thousands, except per share amounts) Net income
to average assets (1) 0.95 % 0.91 % 0.91 % 0.93 % 0.95 % Net income
available to common shareholders to average common equity (1) 11.08
% 10.53 % 10.60 % 10.90 % 10.99 % Net income available to common
shareholders to average tangible common equity (1) 11.49 % 11.00 %
11.02 % 11.34 % 11.54 % Dividends per common share $ 0.18 $ 0.17 $
0.18 $ 0.71 $ 0.67 Dividend payout ratio 14.0 % 15.5 % 15.2 % 14.8
% 15.5 % Efficiency ratio (2) 61.5 % 63.7 % 63.0 % 63.0 % 62.8 %
Net loan charge-offs (recoveries) $ 1,866 $ (1,125 ) $ 185 $
2,976 $ 647
Net loan charge-offs (recoveries) to
average total loans (1)
0.01 % (0.01 %) 0.00 % 0.00 % 0.00 % Allowance for loan
losses to: Total loans 0.58 % 0.58 % 0.57 % 0.58 % 0.58 %
Nonaccrual loans 944.9 % 971.8 % 976.6 % 944.9 % 971.8 % __________
(1) For periods less than a year, ratios are annualized. (2)
Efficiency ratio is the ratio of noninterest expense to the sum of
net interest income and noninterest income.
Quarter Ended December 31,
Quarter Ended September
30,
Year Ended December 31,
Effective Tax Rate
2018 2017 2018 2018
2017 Effective tax rate, prior to excess tax benefits and
deferred tax assets valuation adjustment 20.7 % 22.4 % 20.8 % 21.0
% 22.9 % Excess tax benefits—stock options (1.2 )% (21.1 )%
(0.9 )% (1.3 )% (8.3 )% Excess tax benefits—other stock awards (0.1
)% (0.2 )% (0.1 )% (0.9 )% (2.1 )% Total excess tax benefits (1.3
)% (21.3 )% (1.0 )% (2.2 )% (10.4 )% Deferred tax assets
valuation adjustment (1) — % 16.8 % — % — % 4.4 % Effective tax
rate 19.4 % 17.9 % 19.8 % 18.8 % 16.9 % (1) For the quarter
and year ended December 31, 2017, as a result of tax reform
legislation, the Bank recorded a one-time revaluation adjustment of
$39.7 million to reduce its deferred tax assets, which increased
the provision for income taxes.
Quarter Ended December 31,
Quarter Ended September
30,
Year Ended December 31, Mortgage Loan Sales
2018 2017 2018 2018
2017 ($ in thousands) Loans sold: Flow sales: Agency $ 4,945
$ 20,967 $ 15,365 $ 42,081 $ 131,111 Non-agency 6,785 91,916
76,772 172,077 309,482 Total flow sales
11,730 112,883 92,137 214,158 440,593 Bulk sales: Non-agency
— 856,359 — 773,041 2,436,584 Securitizations 251,931 — —
251,931 — Total loans sold $
263,661 $ 969,242 $ 92,137 $ 1,239,130
$ 2,877,177 Gain on sale of loans: Amount $ 579 $
3,065 $ 303 $ 5,616 $ 9,233 Gain as a percentage of loans sold 0.22
% 0.32 % 0.33 % 0.45 % 0.32 %
Quarter Ended December 31,
Quarter Ended September
30,
Year Ended December 31, Loan Originations
2018 2017 2018 2018
2017 ($ in thousands) Single family (1-4 units) $ 2,709,197
$ 3,011,145 $ 2,623,429 $ 10,784,654 $ 11,568,111 Home equity lines
of credit 380,710 433,733 399,606 1,542,747 1,731,988 Multifamily
(5+ units) 856,577 842,329 781,450 3,321,334 2,703,242 Commercial
real estate 355,137 334,557 263,292 1,235,819 1,263,776
Construction 471,904 331,501 373,842 1,694,788 1,480,957 Business
2,871,533 1,766,978 1,978,596 10,004,639 6,252,983 Stock and other
secured 365,374 332,245 321,020 2,101,390 1,587,393 Unsecured
348,235 397,325 287,748 1,382,552
1,044,769 Total loans originated $ 8,358,667 $ 7,449,813
$ 7,028,983 $ 32,067,923 $ 27,633,219
As of Loan Servicing Portfolio
December 31,2018
September 30,2018
June 30,2018
March 31,2018
December 31,2017
($ in millions) Loans serviced for investors $ 11,573 $
11,733 $ 12,374 $ 12,192 $ 12,495
As of Asset Quality Information
December 31,2018
September 30,2018
June 30,2018
March 31,2018
December 31,2017
($ in thousands) Nonperforming assets: Nonaccrual loans $ 46,465 $
42,578 $ 50,920 $ 48,895 $ 37,656 Other real estate owned —
— — — — Total nonperforming assets $
46,465 $ 42,578 $ 50,920 $ 48,895 $
37,656 Nonperforming assets to total assets 0.05 %
0.04 % 0.05 % 0.05 % 0.04 % Accruing loans 90 days or more
past due $ — $ — $ — $ — $ — Restructured accruing loans $
11,514 $ 11,830 $ 11,568 $ 11,853 $ 12,605
As
of Book Value Ratios December 31, 2018
September 30,2018
June 30,2018
March 31,2018
December 31,2017
(in thousands, except per share amounts) Number of shares of common
stock outstanding 164,902 164,761 162,638
161,863 161,696 Book value per common share $ 46.92 $
45.68 $ 43.88 $ 43.23 $ 42.23 Tangible book
value per common share $ 45.26 $ 44.00 $ 42.15
$ 41.46 $ 40.43
As of Capital
Ratios
December 31, 2018
(1)
September 30, 2018
June 30, 2018 March 31,
2018 December 31, 2017
Tier 1 leverage ratio (Tier 1 capital to
average assets)
8.68 % 8.94 % 8.83 % 8.64 % 8.85 %
Common Equity Tier 1 capital to
risk-weighted assets
10.38 % 10.47 % 10.18 % 10.47 % 10.63 %
Tier 1 capital to risk-weighted assets
11.70 % 12.14 % 11.90 % 11.80 % 12.22 %
Total capital to risk-weighted assets
13.43 % 13.90 % 13.68 % 13.65 % 14.11 %
Regulatory Capital (2)
($ in thousands) Common Equity Tier 1 capital $ 7,379,997 $
7,158,043 $ 6,766,573 $ 6,624,101 $ 6,488,618 Tier 1 capital $
8,319,997 $ 8,298,043 $ 7,906,573 $ 7,464,101 $ 7,457,944 Total
capital $ 9,549,738 $ 9,505,044 $ 9,095,028 $ 8,633,859 $ 8,615,389
Assets (2) ($ in thousands) Average assets $
95,905,266 $ 92,771,143 $ 89,560,555 $ 86,378,664 $ 84,238,404
Risk-weighted assets $ 71,116,468 $ 68,370,630 $ 66,461,529 $
63,239,135 $ 61,054,077 __________ (1) Ratios and amounts as of
December 31, 2018 are preliminary. (2) As defined by regulatory
capital rules.
As of Wealth Management
Assets
December 31,2018
September 30,2018
June 30,2018
March 31,2018
December 31,2017
($ in millions) First Republic Investment Management $ 60,591 $
62,506 $ 59,329 $ 55,104 $ 52,712 Brokerage and investment:
Brokerage 53,046 54,823 50,356 46,150 43,015 Money market mutual
funds 2,358 3,149 1,575 2,104 1,671
Total brokerage and investment 55,404 57,972 51,931
48,254 44,686 Trust Company: Trust 5,350 5,406
5,125 4,694 4,678 Custody 4,868 5,105 4,739
4,938 4,885 Total Trust Company 10,218 10,511
9,864 9,632 9,563 Total Wealth Management Assets $
126,213 $ 130,989 $ 121,124 $ 112,990 $
106,961
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190115005269/en/
Investors:Andrew Greenebaum / Lasse GlassenAddo Investor
Relationsagreenebaum@addoir.comlglassen@addoir.com(310)
829-5400
Media:Greg BerardiBlue Marlin
Partnersgreg@bluemarlinpartners.com(415) 239-7826
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