FIRST REPUBLIC BANK SAN FRANCISCO, Jan. 14, 2016 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter and year ended December 31, 2015.
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"First Republic reported record revenue and net income for both the quarter and the year," said CEO Jim Herbert. "Our asset quality and capital continue to be very strong."
Full Year Highlights
Financial Results
-- Core revenues were up 15.2%. ((1))
-- Net income was $522.1 million.
-- Diluted earnings per share ("EPS") of $3.18.
-- Core net income was $498.8 million, up 13.4%. ((1))
-- Core diluted EPS of $3.02, up 10.2%. ((1))
-- Loan originations totaled a record $19.7 billion for the year, up 16.0%
over last year.
-- Loans sold totaled $2.4 billion.
-- Core net interest margin was 3.09%, compared to 3.14% for the prior
year. ((1))
-- Core efficiency ratio was 60.5%. ((1))
Continued Financial and Credit Strength
-- Tier 1 leverage ratio was 9.21%.
-- Common Equity Tier 1 ratio was 10.76%.
-- Tangible book value per share was $30.16, up 13.6% from a year ago.
-- Nonperforming assets were low at 12 basis points of total assets.
-- Credit quality remains very strong, with net charge-offs of only $1.7
million for the year, less than 1 basis point.
Franchise Development
-- Loans outstanding, excluding loans held for sale, totaled $44.1 billion,
up 16.4% from a year ago.
-- Deposits were $47.9 billion, up 29.0% from a year ago.
-- Checking balances represented 63.2% of total deposits.
-- Wealth management assets were $72.3 billion, up 35.4% from a year ago.
-- Wealth management revenues were $231.7 million, up 20.5% from a year
ago. ((2))
Quarterly Highlights
-- Compared to last year's fourth quarter:
-- Core revenues were $484.9 million, up 20.8%. ((1))
-- Core net income was $136.0 million, up 25.1%. ((1))
-- Core diluted EPS of $0.82, up 22.4%. ((1))
-- Net income was $140.0 million.
-- Diluted EPS of $0.84.
-- Loan originations totaled $4.7 billion.
-- Loans sold totaled $367.6 million.
-- Core net interest margin was 3.02%, compared to 3.09% for the prior
quarter. ((1))
-- Core efficiency ratio was 61.4%. ((1))
-- Wealth management assets were $72.3 billion, up 22.9% from the prior
quarter.
"Wealth management had a terrific quarter and year," said Vice Chair Katherine August-deWilde. "For the year, wealth management revenues were up over 20% and now represent 13% of core revenues. During the quarter, in addition to closing Constellation Wealth Advisors, we were pleased to welcome several wealth management teams to First Republic."
Quarterly Cash Dividend Declared
The Bank declared a cash dividend for the fourth quarter of $0.15 per share of common stock, which is payable on February 11, 2016 to shareholders of record as of January 28, 2016.
Strong Asset Quality
Credit quality remains very strong. Nonperforming assets were 12 basis points of total assets at December 31, 2015.
The Bank had net charge-offs for the quarter of $1.4 million, while adding $12.0 million to its allowance for loan losses due to continued loan growth. Net charge-offs for the year were $1.7 million, less than 1 basis point of average loans. A total of $55.4 million was added to the Bank's allowance for loan losses during the year.
Continued Capital Strength
During the fourth quarter, the Bank issued 3.5 million shares of common stock, which added approximately $226 million to common equity.
The Bank's Tier 1 leverage ratio was 9.21% and Common Equity Tier 1 ratio was 10.76% at December 31, 2015.
Tangible Book Value Growth
Tangible book value per common share was $30.16 at December 31, 2015, up 13.6% from a year ago. Since repurchasing the Bank five and a half years ago, tangible book value per common share has grown 16% per year.
Continued Franchise Development
Loan Originations
Loan originations totaled $4.7 billion for the quarter, compared to $4.3 billion for the fourth quarter a year ago. For 2015, loan originations totaled $19.7 billion, compared to $17.0 billion for the prior year, up 16.0%.
Loans outstanding, excluding loans held for sale, totaled $44.1 billion at December 31, 2015, up 16.4% compared to a year ago.
Deposit Growth
Total deposits increased to $47.9 billion, up 8.0% for the quarter and up 29.0% compared to a year ago. At December 31, 2015, checking accounts totaled 63.2% of deposits. The Bank is almost entirely deposit-funded, with deposits representing 90% of total liabilities at December 31, 2015.
The average rate paid on all deposits was 0.14% for both the fourth quarter and the prior quarter.
Investments
Total investments at December 31, 2015 were $10.5 billion, up 28.1% for the quarter and 57.4% compared to a year ago.
High-quality liquid assets, from a regulatory perspective, totaled $5.8 billion at December 31, 2015, up 22.6% from $4.7 billion at September 30, 2015. Such assets were up 80.4% for the year.
Mortgage Banking Activity
During the fourth quarter, the Bank sold $367.6 million of loans and recorded a gain on sale of $1.5 million, compared to loan sales of $991.3 million and a gain on sale of $4.1 million during the fourth quarter of last year.
For the year ended December 31, 2015, the Bank sold $2.4 billion of loans, compared to $4.4 billion for the prior year. Gain on sale of loans for the year ended December 31, 2015 was $9.7 million, compared to $35.5 million for the prior year.
Loans serviced for investors at year-end totaled $10.5 billion, up 9.8% from a year ago. Net loan servicing fees for the year were $13.0 million, up 34.4% from $9.7 million for the prior year.
Continued Expansion of Wealth Management
Wealth management revenues totaled $67.1 million for the quarter, up 26.4% compared to last year's fourth quarter. For the year ended December 31, 2015, wealth management revenues were $231.7 million, an increase of 20.5% compared to the prior year.
Total wealth management assets were $72.3 billion at December 31, 2015, up 22.9% for the quarter and up 35.4% compared to a year ago. The increase in wealth management assets includes assets under management from the Constellation acquisition on October 1, 2015.
In addition, the growth in wealth management assets was due to net new assets from both existing and new clients. Wealth management assets include investment management assets of $35.2 billion, brokerage assets and money market mutual funds of $30.2 billion, and trust and custody assets of $6.8 billion.
Income Statement and Key Ratios
Highlights
Strong Core Revenue Growth
Total revenues were $494.9 million for the quarter and $1.8 billion for 2015.
Core revenues were $484.9 million for the fourth quarter and $1.8 billion for 2015, up 20.8% compared to last year's fourth quarter and up 15.2% compared to 2014. ((1))
Continued Core Net Interest Income Growth
Net interest income was $404.7 million for the quarter and $1.5 billion for 2015.
Core net interest income was $394.7 million for the fourth quarter, a 21.3% increase from the fourth quarter of last year. Core net interest income was $1.5 billion for all of 2015, a 16.2% increase from the prior year, resulting primarily from growth in average earning assets. ((1))
Core Net Interest Margin
The Bank's net interest margin was 3.10% for the fourth quarter and 3.21% for 2015.
For 2015, the core net interest margin was 3.09%, compared to 3.14% for the prior year. For the fourth quarter, the core net interest margin was 3.02%, compared to 3.09% for the prior quarter. The decrease from the prior quarter was entirely the result of higher average cash balances due to strong deposit activity during the fourth quarter. ((1))
Noninterest Income
Noninterest income was $90.2 million for the quarter, an 18.9% increase compared to the fourth quarter a year ago. Noninterest income was $325.1 million for 2015, up 2.1% compared to the prior year.
Core noninterest income was $90.2 million for the quarter, up 18.9% compared to the fourth quarter a year ago, which was primarily from increased wealth management revenues. Core noninterest income was $325.1 million for 2015, up 10.9% compared to the prior year. ((1))
Core Efficiency Ratio
For 2015, noninterest expense was $1.1 billion, up 18.7% from the prior year. Noninterest expense for the fourth quarter was $300.9 million, a 23.3% increase from the fourth quarter of last year.
The Bank's GAAP efficiency ratio was 60.8% for the quarter. For all of 2015, the GAAP efficiency ratio was 59.5%.
The Bank's core efficiency ratio was 61.4% for the quarter, compared to 59.4% for the prior quarter and 59.9% for the fourth quarter a year ago. The increase from the prior quarter was substantially driven by investments in the wealth management business. ((1))
For all of 2015, the core efficiency ratio was 60.5%, compared to 58.5% for 2014. ((1))
Income Tax Rate
The Bank's effective tax rate for 2015 was 24.4%, compared to 27.3% for 2014. The decrease in the effective tax rate results from the steady increase in tax credit investments, tax-exempt securities, tax-advantaged loans and bank-owned life insurance. The effective tax rate for the fourth quarter was 23.0%, compared to 24.3% for the prior quarter. The decrease during the fourth quarter was due to an increase in tax benefits from tax credit investments.
_________
((1) )"Core" measures are non-GAAP financial measures that exclude the positive impact of purchase accounting. In addition, core measures also exclude other positive, but one-time, impacts from the special FHLB dividend in the second quarter of 2015, and the gain from repositioning of investment portfolio in the third quarter of 2014. See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."
((2) )( )Wealth management revenues include investment advisory, brokerage and investment, trust, and foreign exchange fee income.
Conference Call Details
First Republic Bank's fourth quarter and full year 2015 earnings conference call is scheduled for January 14, 2016 at 7:00 a.m. PT / 10:00 a.m. ET. To listen to the live call by telephone, please dial (855) 224-3902 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #15929141. International callers should dial (734) 823-3244 and enter the same conference ID number. The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of First Republic's website at www.firstrepublic.com. To listen to the live webcast, please visit the site at least 10 minutes prior to the start of the call to register, download and install any necessary audio software. A replay of the call will also be available for 90 days on the website. For those unable to participate in the live presentation, a replay will be available beginning January 14, 2016, at 10:00 a.m. PT / 1:00 p.m. ET, through January 21, 2016, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (855) 859-2056 (U.S.) and use conference ID #15929141. International callers should dial (404) 537-3406 and enter the same conference ID number. The Bank's press releases are available after release on the Bank's website at www.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, San Diego, Portland, Boston, Palm Beach, Greenwich and New York City. 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 www.firstrepublic.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release that are not historical facts are hereby identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimates," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases and include statements about economic performance in our markets, growth in our loan originations and wealth management assets, our progress in preparing for, and our compliance with, any enhanced regulatory requirements, and our projected tax rate. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: our ability to deal with significant competition for banking and wealth management customers; our projections for certain financial items, expectations concerning the bank and wealth management industries; earthquakes and other natural disasters in our markets; interest rate or credit risk; our plans or objectives for future operations, products or services; our ability to maintain and follow high underwriting standards; economic conditions generally and in our markets; our geographic concentration; our opportunities for growth; our future provisions for loan losses; our regulatory compliance and future regulatory requirements, including any requirements that have become applicable to us as a bank with a four-quarter average of total consolidated assets of at least $50 billion; any increased compliance costs; the phase-in of the Basel III Capital Rules; and new accounting standards. For a discussion of these and other risks and uncertainties, see First Republic's FDIC filings, including, but not limited to, the risk factors in First Republic's Annual Report on Form 10-K. These filings are available in the Investor Relations section of our website. All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
CONSOLIDATED STATEMENT OF INCOME
--------------------------------
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
(in thousands, except per share amounts) 2015 2014 2015 2015 2014
---- ---- ---- ---- ----
Interest income:
Loans $357,446 $322,177 $348,367 $1,361,654 $1,271,562
Investments 81,030 55,652 75,970 296,146 207,736
Cash and cash equivalents 2,730 1,170 1,691 6,292 3,711
----- ----- ----- -----
Total interest income 441,206 378,999 426,028 1,664,092 1,483,009
------- ------- ------- --------- ---------
Interest expense:
Deposits 16,638 14,470 15,903 61,072 60,454
Borrowings 19,869 23,674 21,244 86,357 91,795
Total interest expense 36,507 38,144 37,147 147,429 152,249
------ ------ ------ ------- -------
Net interest income 404,699 340,855 388,881 1,516,663 1,330,760
Provision for loan losses 12,045 14,076 14,502 55,439 56,486
Net interest income after provision for loan losses 392,654 326,779 374,379 1,461,224 1,274,274
------- ------- ------- --------- ---------
Noninterest income:
Investment advisory fees 49,814 39,892 44,211 178,738 147,840
Brokerage and investment fees 7,654 4,341 3,899 19,659 14,404
Trust fees 3,259 2,600 2,600 10,745 10,483
Foreign exchange fee income 6,413 6,265 5,933 22,517 19,552
Deposit fees 4,914 4,634 4,898 19,311 18,468
Gain on sale of loans 1,480 4,107 2,957 9,725 35,515
Loan servicing fees, net 3,752 3,174 3,135 13,040 9,701
Loan and related fees 3,161 2,465 3,083 12,393 8,658
Income from investments in life insurance 9,289 8,389 8,555 35,474 29,558
Gain (loss) on investment securities, net (515) (567) (76) 821 21,837
Other income 930 534 552 2,630 2,339
--- -----
Total noninterest income 90,151 75,834 79,747 325,053 318,355
------ ------ ------ ------- -------
Noninterest expense:
Salaries and employee benefits 168,424 129,980 149,463 596,593 490,341
Occupancy 27,220 26,082 26,531 106,856 98,466
Information systems 33,416 26,360 31,564 119,114 95,387
Professional fees 16,487 17,042 16,974 73,022 53,429
FDIC assessments 9,500 8,300 8,700 35,250 31,294
Advertising and marketing 7,617 5,484 6,167 25,562 25,703
Amortization of intangibles 6,933 5,368 4,731 21,760 22,744
Other expenses 31,327 25,534 31,767 117,452 105,382
------ -------
Total noninterest expense 300,924 244,150 275,897 1,095,609 922,746
------- ------- ------- --------- -------
Income before provision for income taxes 181,881 158,463 178,229 690,668 669,883
Provision for income taxes 41,835 43,004 43,387 168,523 182,877
------ ------ ------ ------- -------
Net income 140,046 115,459 134,842 522,145 487,006
Dividends on preferred stock 15,314 13,889 15,314 58,928 55,556
Net income available to common shareholders $124,732 $101,570 $119,528 $463,217 $431,450
======== ======== ======== ======== ========
Basic earnings per common share $0.87 $0.74 $0.84 $3.27 $3.16
===== ===== ===== ===== =====
Diluted earnings per common share $0.84 $0.72 $0.82 $3.18 $3.07
===== ===== ===== ===== =====
Dividends per common share $0.15 $0.14 $0.15 $0.59 $0.54
===== ===== ===== ===== =====
Weighted average shares-basic 144,006 137,794 142,152 141,689 136,420
======= ======= ======= ======= =======
Weighted average shares-diluted 147,814 141,753 145,890 145,510 140,497
======= ======= ======= ======= =======
CONSOLIDATED BALANCE SHEET
--------------------------
As of
-----
($ in thousands) December 31, September 30, December 31,
2015 2015 2014
---- ---- ----
ASSETS
------
Cash and cash equivalents $1,131,110 $1,795,780 $817,150
Securities purchased under agreements to resell 100 100 100
Investment securities available-for-sale 2,910,801 1,584,142 1,393,357
Investment securities held-to-maturity 7,540,678 6,572,289 5,244,707
Loans:
Single family (1-4 units) 23,092,346 22,273,533 20,494,402
Home equity lines of credit 2,370,188 2,316,120 2,211,621
Multifamily (5+ units) 5,371,484 5,211,200 4,689,692
Commercial real estate 4,462,834 4,353,000 3,824,835
Single family construction 436,774 465,549 428,358
Multifamily/commercial construction 693,364 645,230 453,732
Commercial business 6,232,378 5,836,330 4,873,580
Other secured 541,637 546,407 436,918
Stock secured 521,005 421,084 285,240
Unsecured loans and lines of credit 423,795 361,351 231,552
------- ------- -------
Total unpaid principal balance 44,145,805 42,429,804 37,929,930
---------- ---------- ----------
Net unaccreted discount (108,499) (118,567) (152,764)
Net deferred fees and costs 46,263 40,308 31,203
Allowance for loan losses (261,058) (250,408) (207,342)
-------- --------
Loans, net 43,822,511 42,101,137 37,601,027
---------- ---------- ----------
Loans held for sale 48,681 250,494 271,448
Investments in life insurance 1,168,596 1,059,237 1,014,734
Tax credit investments 1,006,836 890,430 828,640
Prepaid expenses and other assets 817,410 702,125 747,763
Premises, equipment and leasehold improvements, net 172,008 161,634 165,703
Goodwill and other intangible assets 309,016 201,723 216,550
Mortgage servicing rights 53,538 53,588 49,023
Other real estate owned - 2,541 -
--- ---
Total Assets $58,981,285 $55,375,220 $48,350,202
=========== =========== ===========
LIABILITIES AND EQUITY
----------------------
Liabilities:
Deposits:
Noninterest-bearing checking $18,252,007 $17,546,255 $12,542,881
Interest-bearing checking 12,027,363 9,472,995 8,809,590
Money market checking 5,756,821 5,892,419 5,216,253
Money market savings and passbooks 7,270,396 7,167,514 6,795,189
Certificates of deposit 4,586,878 4,263,761 3,767,016
--------- ---------
Total Deposits 47,893,465 44,342,944 37,130,929
---------- ---------- ----------
Securities sold under agreements to repurchase 100,000 100,000 -
Long-term FHLB advances 4,000,000 4,350,000 5,275,000
Senior notes 397,159 396,964 396,384
Debt related to variable interest entities 29,643 30,716 36,039
Other liabilities 855,335 770,422 733,383
-------
Total Liabilities 53,275,602 49,991,046 43,571,735
---------- ---------- ----------
Shareholders' Equity:
Preferred stock 989,525 989,525 889,525
Common stock 1,461 1,425 1,383
Additional paid-in capital 2,770,265 2,533,713 2,313,592
Retained earnings 1,949,652 1,846,604 1,570,871
Accumulated other comprehensive income (loss) (5,220) 12,907 3,096
Total Shareholders' Equity 5,705,683 5,384,174 4,778,467
Total Liabilities and Shareholders' Equity $58,981,285 $55,375,220 $48,350,202
=========== =========== ===========
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Operating Information and Yields/Rates 2015 2014 2015 2015 2014
-------------------------------------- ---- ---- ---- ---- ----
($ in thousands)
Operating Information
---------------------
Net income to average assets (3) 0.93% 0.94% 0.96% 0.96% 1.06%
Net income available to common shareholders to average common equity (3) 10.74% 10.37% 10.84% 10.72% 11.72%
Dividend payout ratio 17.8% 19.5% 18.3% 18.5% 17.6%
Efficiency ratio (4) 60.8% 58.6% 58.9% 59.5% 56.0%
Core efficiency ratio (non-GAAP) (1), (4) 61.4% 59.9% 59.4% 60.5% 58.5%
Net loan charge-offs (recoveries) $1,395 $1,783 $(38) $1,723 $2,149
Net loan charge-offs to average total loans (3) 0.01% 0.02% 0.00% 0.00% 0.01%
Yields/Rates (3)
----------------
Cash and cash equivalents 0.28% 0.25% 0.25% 0.26% 0.25%
Investment securities (5), (6), (7) 4.48% 4.81% 4.96% 4.80% 5.06%
Loans (5), (8) 3.39% 3.48% 3.36% 3.42% 3.59%
---- ---- ---- ---- ----
Total interest-earning assets 3.36% 3.54% 3.45% 3.49% 3.67%
Checking 0.01% 0.01% 0.00% 0.00% 0.01%
Money market checking and savings 0.07% 0.08% 0.07% 0.07% 0.13%
CDs (8) 1.24% 1.21% 1.27% 1.24% 1.13%
---- ---- ---- ---- ----
Total deposits 0.14% 0.15% 0.14% 0.14% 0.17%
Long-term FHLB advances 1.55% 1.58% 1.55% 1.57% 1.56%
Senior notes (9) 2.59% 2.59% 2.59% 2.59% 2.57%
Other borrowings 1.39% 1.67% 1.35% 0.92% 1.70%
---- ---- ---- ---- ----
Total borrowings 1.63% 1.65% 1.63% 1.62% 1.60%
---- ---- ---- ---- ----
Total interest-bearing liabilities 0.27% 0.35% 0.30% 0.31% 0.37%
Net interest spread 3.09% 3.19% 3.15% 3.18% 3.30%
Net interest margin 3.10% 3.21% 3.17% 3.21% 3.32%
Core net interest margin (non-GAAP) (1) 3.02% 3.06% 3.09% 3.09% 3.14%
(3) For periods less than a year, ratios are
annualized.
(4) Efficiency ratio is the ratio of noninterest
expense to the sum of net interest income and
noninterest income.
(5) Yield is calculated on a tax-equivalent basis.
(6) Includes FHLB stock and securities purchased under
agreements to resell.
(7) Yield on investment securities for the year ended
December 31, 2015 includes a $9.1 million one-
time special FHLB dividend received in the second
quarter of 2015, which resulted in an 11 basis
point positive impact to the investment yield for
this period.
(8) Yield/rate includes accretion/amortization of
purchase accounting discounts/premiums.
(9) Rate includes amortization of issuance discounts
and costs.
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Mortgage Loan Sales 2015 2014 2015 2015 2014
------------------- ---- ---- ---- ---- ----
($ in thousands)
Loans sold:
Agency $73,244 $29,319 $71,923 $273,128 $135,681
Non-agency 294,359 961,965 527,814 2,156,132 4,273,851
Total loans sold $367,603 $991,284 $599,737 $2,429,260 $4,409,532
======== ======== ======== ========== ==========
Gain on sale of loans:
Amount $1,480 $4,107 $2,957 $9,725 $35,515
Gain as a percentage of loans sold (10) 0.40% 0.41% 0.49% 0.40% 0.81%
(10) For the year ended December 31,
2014, gain on sale of loans
includes discounts established in
purchase accounting, which
increase gain on sale of loans.
Excluding the impact of purchase
accounting, the gain as a
percentage of loans sold for 2014
would be 0.77%.
As of
-----
Loan Servicing Portfolio December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
--- ---- ---- ---- ---- ----
($ in millions)
Loans serviced for investors $10,531 $10,550 $10,305 $9,840 $9,590
======= ======= ======= ====== ======
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Loan Originations 2015 2014 2015 2015 2014
----------------- ---- ---- ---- ---- ----
($ in thousands)
Single family (1-4 units) $1,635,350 $1,885,418 $1,863,396 $7,633,653 $7,932,174
Home equity lines of credit 398,267 339,001 452,048 1,575,262 1,458,448
Multifamily (5+ units) 302,435 339,505 371,266 1,461,123 1,443,357
Commercial real estate 292,369 272,211 321,578 1,344,072 998,700
Construction 305,085 210,312 434,155 1,291,902 894,786
Commercial business 1,343,953 1,044,474 1,127,386 5,138,716 3,445,664
Other loans 432,012 197,654 295,589 1,227,234 779,072
------- --------- -------
Total loans originated $4,709,471 $4,288,575 $4,865,418 $19,671,962 $16,952,201
========== ========== ========== =========== ===========
As of December 31, 2015
-----------------------
Composition of Loan Portfolio Loans acquired Loans originated Total
on July 1, 2010 since July 1, 2010 Loans
--- --------------- ------------------ -----
($ in thousands)
Single family (1-4 units) $2,358,231 $20,734,115 $23,092,346
Home equity lines of credit 443,075 1,927,113 2,370,188
Multifamily (5+ units) 269,758 5,101,726 5,371,484
Commercial real estate 412,213 4,050,621 4,462,834
Single family construction 4,012 432,762 436,774
Multifamily/commercial construction 1,226 692,138 693,364
Commercial business 299,834 5,932,544 6,232,378
Other secured 12,979 528,658 541,637
Stock secured 4,286 516,719 521,005
Unsecured loans and lines of credit 28,707 395,088 423,795
------ ------- -------
Total unpaid principal balance 3,834,321 40,311,484 44,145,805
--------- ---------- ----------
Net unaccreted discount (108,235) (264) (108,499)
Net deferred fees and costs (3,765) 50,028 46,263
Allowance for loan losses (6,115) (254,943) (261,058)
--------
Loans, net $3,716,206 $40,106,305 $43,822,511
========== =========== ===========
As of
-----
Asset Quality Information December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
--- ---- ---- ---- ---- ----
($ in thousands)
Nonperforming assets:
Nonaccrual loans $73,545 $51,987 $55,872 $49,830 $45,962
Other real estate owned - 2,541 - - -
--- ----- --- --- ---
Total nonperforming assets $73,545 $54,528 $55,872 $49,830 $45,962
======= ======= ======= ======= =======
Nonperforming assets to total assets 0.12% 0.10% 0.11% 0.10% 0.10%
Accruing loans 90 days or more past due $4,199 $698 $2,118 $202 $4,380
Restructured accruing loans $14,043 $14,539 $15,624 $14,855 $16,252
As of
-----
Book Value Ratios December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
--- ---- ---- ---- ---- ----
(in thousands, except per share amounts)
Number of shares of common stock outstanding 146,110 142,477 142,389 142,105 138,269
======= ======= ======= ======= =======
Book value per common share $32.28 $30.84 $30.03 $29.45 $28.13
====== ====== ====== ====== ======
Tangible book value per common share $30.16 $29.43 $28.58 $27.97 $26.56
====== ====== ====== ====== ======
As of
-----
2015 2014
---- ----
December 31, (11) September 30, June 30, March 31, December 31,
---------------- ------------- -------- --------- ------------
Capital Ratios Actual (12) Fully Actual (12) Actual (12)
Phased-in (13)
--- -------------
Tier 1 leverage ratio 9.21% 9.09% 9.38% 9.86% 9.90% 9.43%
Common Equity Tier 1 ratio (14) 10.76% 10.56% 10.71% 10.87% 11.25% n/a
Tier 1 common equity ratio (14) n/a n/a n/a n/a n/a 10.90%
Tier 1 risk-based capital ratio 13.12% 12.93% 13.21% 13.47% 13.73% 13.55%
Total risk-based capital ratio 13.78% 13.58% 13.87% 14.13% 14.37% 14.20%
(11) Ratios as of December 31, 2015
are preliminary.
(12) Ratios for 2015 periods
reflect the adoption of the
Basel III Capital Rules in
effect beginning January 1,
2015. Ratios as of December
31, 2014 represent the
previous capital rules under
Basel I.
(13) Certain adjustments required
under the Basel III Capital
Rules will be phased in
through the end of 2018. The
ratios shown in this column
are calculated assuming a
fully phased-in basis of all
such adjustments as if they
were effective as of December
31, 2015.
(14) Beginning in 2015, the Common
Equity Tier 1 ratio is a new
ratio requirement under the
Basel III Capital Rules and
represents common equity,
less goodwill and intangible
assets net of any associated
deferred tax liabilities,
divided by risk-weighted
assets (subject to phase-in
adjustments as indicated in
footnote 13 above). As of
December 31, 2014, the Tier 1
common equity ratio
represents common equity,
less goodwill and intangible
assets, divided by risk-
weighted assets.
As of
-----
Wealth Management Assets December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
--- ---- ---- ---- ---- ----
($ in millions)
First Republic Investment Management $35,230 $28,969 $28,998 $28,530 $27,453
Brokerage and investment:
Brokerage 26,059 19,746 19,852 18,973 17,653
Money market mutual funds 4,155 3,012 1,732 2,100 2,025
Total brokerage and investment 30,214 22,758 21,584 21,073 19,678
------ ------ ------ ------ ------
Trust Company:
Trust 3,375 3,618 3,370 3,149 3,057
Custody 3,474 3,477 3,613 3,617 3,189
----- ----- ----- ----- -----
Total Trust Company 6,849 7,095 6,983 6,766 6,246
----- ----- ----- -----
Total Wealth Management Assets $72,293 $58,822 $57,565 $56,369 $53,377
======= ======= ======= ======= =======
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Average Balance Sheet 2015 2014 2015 2015 2014
--------------------- ---- ---- ---- ---- ----
($ in thousands)
Assets:
Cash and cash equivalents $3,921,839 $1,845,498 $2,682,142 $2,425,747 $1,468,877
Investment securities (15) 9,581,952 6,304,984 8,190,959 8,155,136 5,697,744
Loans (16) 43,042,968 37,573,433 42,143,922 40,889,434 36,271,956
---------- ---------- ---------- ---------- ----------
Total interest-earning assets 56,546,759 45,723,915 53,017,023 51,470,317 43,438,577
---------- ---------- ---------- ---------- ----------
Noninterest-earning cash 287,695 263,915 257,826 263,627 239,345
Goodwill and other intangibles 312,665 219,140 204,021 235,044 227,516
Other assets 2,694,402 2,350,513 2,467,187 2,504,807 2,127,302
--------- --------- --------- --------- ---------
Total noninterest-earning assets 3,294,762 2,833,568 2,929,034 3,003,478 2,594,163
Total Assets $59,841,521 $48,557,483 $55,946,057 $54,473,795 $46,032,740
=========== =========== =========== =========== ===========
Liabilities and Equity:
Checking $30,189,409 $20,694,274 $27,208,451 $25,993,413 $18,572,545
Money market checking and savings 13,607,852 12,661,395 13,226,282 12,905,039 12,737,635
CDs (16) 4,485,104 3,772,544 4,162,188 4,086,327 3,687,912
Total deposits 48,282,365 37,128,213 44,596,921 42,984,779 34,998,092
---------- ---------- ---------- ---------- ----------
Long-term FHLB advances 4,302,174 5,275,000 4,657,337 4,772,192 5,474,726
Senior notes 397,064 396,291 396,869 396,774 214,966
Other borrowings 130,211 37,617 131,168 152,356 40,073
------- ------- ------
Total borrowings 4,829,449 5,708,908 5,185,374 5,321,322 5,729,765
--------- --------- --------- --------- ---------
Total interest-bearing liabilities 53,111,814 42,837,121 49,782,295 48,306,101 40,727,857
---------- ---------- ---------- ---------- ----------
Noninterest-bearing liabilities 1,133,650 943,984 797,627 899,116 733,347
Preferred equity 989,525 889,525 989,525 949,525 889,525
Common equity 4,606,532 3,886,853 4,376,610 4,319,053 3,682,011
Total Liabilities and Equity $59,841,521 $48,557,483 $55,946,057 $54,473,795 $46,032,740
=========== =========== =========== =========== ===========
(15) Includes FHLB stock and
securities purchased under
agreements to resell.
(16) Average balances are presented
net of purchase accounting
discounts or premiums.
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Purchase Accounting Accretion and Amortization (17) 2015 2014 2015 2015 2014
-------------------------------------------------- ---- ---- ---- ---- ----
($ in thousands)
Accretion/amortization to net interest income:
Loans $9,974 $14,086 $9,663 $43,467 $65,647
Deposits - 1,313 - 1,006 6,352
Total $9,974 $15,399 $9,663 $44,473 $71,999
====== ======= ====== ======= =======
Noninterest income:
Discounts recognized in gain on sale of loans $ - $ - $ - $ - $1,679
=== === === === === === === === ======
Amortization to noninterest expense:
Intangible assets $3,007 $3,649 $3,170 $12,993 $15,552
====== ====== ====== ======= =======
(17) Related to
the Bank's
re-
establishment
as an
independent
institution.
Use of Non-GAAP Financial Measures
Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry. However, due to the application of purchase accounting from the Bank's re-establishment as an independent institution, management uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate our performance, including net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and the efficiency ratio.
Our net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and efficiency ratio were significantly impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting from the Bank's re-establishment as an independent institution. The accretion and amortization affect our net income, earnings per share and certain operating ratios as we accrete loan discounts to interest income; recognize discounts established in purchase accounting on the sale of loans, which increase gain on sale of loans; amortize premiums on CDs to interest expense; and amortize intangible assets to noninterest expense.
The Bank's non-GAAP measures also exclude the positive impact of certain nonrecurring items. In the second quarter of 2015, the Bank received a one-time special dividend of $9.1 million from the FHLB, which is excluded from non-GAAP net income, earnings per share, net interest income, net interest margin and efficiency ratio. In addition, in the third quarter of 2014, as a result of the restructuring of its investment securities portfolio, the Bank had a gain on sale of investments of $23.6 million, which is excluded from non-GAAP net income, earnings per share, noninterest income, revenue and efficiency ratio.
We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. Our management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing our operating results and related trends. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure:
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Non-GAAP Earnings 2015 2014 2015 2015 2014
----------------- ---- ---- ---- ---- ----
(in thousands, except per share amounts)
Net income $140,046 $115,459 $134,842 $522,145 $487,006
Accretion/amortization added to net interest income (9,974) (15,399) (9,663) (44,473) (71,999)
One-time special FHLB dividend - - - (9,134) -
Discounts recognized in gain on sale of loans - - - - (1,679)
One-time gain on sale of investments - - - - (23,580)
Amortization of intangible assets 3,007 3,649 3,170 12,993 15,552
Add back tax impact of the above items 2,961 4,994 2,759 17,261 34,726
Core net income (non-GAAP) 136,040 108,703 131,108 498,792 440,026
Dividends on preferred stock (15,314) (13,889) (15,314) (58,928) (55,556)
Core net income available to common shareholders (non-GAAP) $120,726 $94,814 $115,794 $439,864 $384,470
======== ======= ======== ======== ========
GAAP earnings per common share-diluted $0.84 $0.72 $0.82 $3.18 $3.07
Impact of purchase accounting, net of tax (0.02) (0.05) (0.03) (0.12) (0.23)
Impact of one-time special FHLB dividend, net of tax - - - (0.04) -
Impact of one-time gain on sale of investments, net of tax - - - - (0.10)
--- --- --- --- -----
Core earnings per common share-diluted (non-GAAP) $0.82 $0.67 $0.79 $3.02 $2.74
===== ===== ===== ===== =====
Weighted average diluted common shares outstanding 147,814 141,753 145,890 145,510 140,497
======= ======= ======= ======= =======
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Yield on Average Loans 2015 2014 2015 2015 2014
---------------------- ---- ---- ---- ---- ----
($ in thousands)
Interest income on loans $357,446 $322,177 $348,367 $1,361,654 $1,271,562
Add: Tax-equivalent adjustment on loans 10,571 8,520 10,045 38,657 29,859
------ ----- ------ ------ ------
Interest income on loans (tax-equivalent basis) 368,017 330,697 358,412 1,400,311 1,301,421
Less: Accretion (9,974) (14,086) (9,663) (43,467) (65,647)
Core interest income on loans (tax-equivalent basis) (non-GAAP) $358,043 $316,611 $348,749 $1,356,844 $1,235,774
======== ======== ======== ========== ==========
Average loans $43,042,968 $37,573,433 $42,143,922 $40,889,434 $36,271,956
Add: Average unaccreted loan discounts 114,338 161,556 125,315 131,111 187,097
------- ------- ------- -------
Average loans (non-GAAP) $43,157,306 $37,734,989 $42,269,237 $41,020,545 $36,459,053
=========== =========== =========== =========== ===========
Yield on average loans-reported (5) 3.39% 3.48% 3.36% 3.42% 3.59%
Contractual yield on average loans (non-GAAP) (5) 3.28% 3.32% 3.26% 3.31% 3.39%
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Cost of Average Deposits 2015 2014 2015 2015 2014
------------------------ ---- ---- ---- ---- ----
($ in thousands)
Interest expense on deposits $16,638 $14,470 $15,903 $61,072 $60,454
Add: Amortization of CD premiums - 1,313 - 1,006 6,352
--- ----- ----- -----
Core interest expense on deposits (non-GAAP) $16,638 $15,783 $15,903 $62,078 $66,806
======= ======= ======= ======= =======
Average deposits $48,282,365 $37,128,213 $44,596,921 $42,984,779 $34,998,092
Less: Average unamortized CD premiums - (1,607) - (159) (3,876)
Average deposits (non-GAAP) $48,282,365 $37,126,606 $44,596,921 $42,984,620 $34,994,216
=========== =========== =========== =========== ===========
Cost of average deposits-reported 0.14% 0.15% 0.14% 0.14% 0.17%
Contractual cost of average deposits (non-GAAP) 0.14% 0.17% 0.14% 0.14% 0.19%
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Net Interest Margin 2015 2014 2015 2015 2014
------------------- ---- ---- ---- ---- ----
($ in thousands)
Net interest income $404,699 $340,855 $388,881 $1,516,663 $1,330,760
Add: Tax-equivalent adjustment 36,927 28,766 35,619 134,352 109,323
------ ------ ------ ------- -------
Net interest income (tax-equivalent basis) 441,626 369,621 424,500 1,651,015 1,440,083
Less: Accretion/amortization (9,974) (15,399) (9,663) (44,473) (71,999)
Less: One-time special FHLB dividend - - - (9,134) -
--- --- --- ------ ---
Core net interest income (tax-equivalent basis) (non-GAAP) $431,652 $354,222 $414,837 $1,597,408 $1,368,084
======== ======== ======== ========== ==========
Average interest-earning assets $56,546,759 $45,723,915 $53,017,023 $51,470,317 $43,438,577
Add: Average unaccreted loan discounts 114,338 161,556 125,315 131,111 187,097
------- ------- ------- ------- -------
Average interest-earning assets (non-GAAP) $56,661,097 $45,885,471 $53,142,338 $51,601,428 $43,625,674
=========== =========== =========== =========== ===========
Net interest margin-reported 3.10% 3.21% 3.17% 3.21% 3.32%
Core net interest margin (non-GAAP) 3.02% 3.06% 3.09% 3.09% 3.14%
Quarter Ended Quarter Ended Year Ended
December 31, September 30, December 31,
------------ ------------- ------------
Efficiency Ratio 2015 2014 2015 2015 2014
---------------- ---- ---- ---- ---- ----
($ in thousands)
Net interest income $404,699 $340,855 $388,881 $1,516,663 $1,330,760
Less: Accretion/amortization (9,974) (15,399) (9,663) (44,473) (71,999)
Less: One-time special FHLB dividend - - - (9,134) -
--- --- --- ------ ---
Core net interest income (non-GAAP) $394,725 $325,456 $379,218 $1,463,056 $1,258,761
======== ======== ======== ========== ==========
Noninterest income $90,151 $75,834 $79,747 $325,053 $318,355
Less: Discounts recognized in gain on sale of loans - - - - (1,679)
Less: One-time gain on sale of investments - - - - (23,580)
--- --- --- --- -------
Core noninterest income (non-GAAP) $90,151 $75,834 $79,747 $325,053 $293,096
======= ======= ======= ======== ========
Total revenue $494,850 $416,689 $468,628 $1,841,716 $1,649,115
Total core revenue (non-GAAP) $484,876 $401,290 $458,965 $1,788,109 $1,551,857
Noninterest expense $300,924 $244,150 $275,897 $1,095,609 $922,746
Less: Intangible amortization (3,007) (3,649) (3,170) (12,993) (15,552)
Core noninterest expense (non-GAAP) $297,917 $240,501 $272,727 $1,082,616 $907,194
======== ======== ======== ========== ========
Efficiency ratio 60.8% 58.6% 58.9% 59.5% 56.0%
Core efficiency ratio (non-GAAP) 61.4% 59.9% 59.4% 60.5% 58.5%
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SOURCE First Republic Bank
