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First Republic Bank$109.93$.27.25%

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 First Republic Reports Strong 2018 Results
   Tuesday, January 15, 2019 8:00:00 AM ET

Total Revenues Increased 17% for the Year

Wealth Management Revenues Increased 22% for the Year

SAN FRANCISCO--(BUSINESS WIRE)-- 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.”



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%.

  • 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.”

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.

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.

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 per common share at December 31, 2018 was $45.26, up 11.9% from a year ago.

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.

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.

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.

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.

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.

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.

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.

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 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 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.

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.

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 .

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 .

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.

     

 

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  
 
 

 
As of
($ in thousands) December 31,
2018
  September 30,
2018
  December 31,
2017

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:
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

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 $ 1,275,293 $ 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

Average
Balance

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
 

Investors:
Andrew Greenebaum / Lasse Glassen
Addo Investor Relations
agreenebaum@addoir.com
lglassen@addoir.com
(310) 829-5400

Media:
Greg Berardi
Blue Marlin Partners
greg@bluemarlinpartners.com
(415) 239-7826

Source: First Republic Bank



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