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Share Name | Share Symbol | Market | Type |
---|---|---|---|
First Republic Bank | NYSE:FRC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3.51 | 0 | 01:00:00 |
Revenues Increased 12% Year-Over-Year
Net Income Increased 15% Year-Over-Year
First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended June 30, 2020.
“Second quarter results were very strong,” said Jim Herbert, Founder, Chairman and CEO of First Republic. “Loan origination volume was our best ever, while deposits and wealth management assets also grew very nicely. Since its founding 35 years ago, First Republic’s simple, conservative, client-centric business model has delivered consistently strong results.”
Quarterly Highlights
Financial Results
– Year-over-year:
– Revenues were $919.0 million, up 12.2%.
– Net interest income was $787.4 million, up 16.8%.
– Provision for credit losses was $31.1 million, compared to $21.2 million for the second quarter of 2019.
– Net income was $256.8 million, up 15.4%.
– Diluted earnings per share of $1.40, up 12.9%.
– Tangible book value per share was $53.46, up 12.2%.
– Loan originations totaled $11.4 billion (excluding originations under the Small Business Administration’s Paycheck Protection Program (“PPP”)), our best quarter ever.
– Net interest margin was 2.70%, compared to 2.74% for the prior quarter.
– Efficiency ratio was 62.0%, compared to 63.5% for the prior quarter. (1)
Continued Capital and Credit Strength
– Tier 1 leverage ratio was 8.15%.
– Nonperforming assets remained at a low 13 basis points of total assets.
– Net charge-offs were only $1.1 million, or less than 1 basis point of average loans.
Continued Franchise Development
– Year-over-year:
– Loans totaled $97.9 billion, up 19.1% (excluding PPP and for sale loans).
– Deposits were $98.5 billion, up 18.1%.
– Wealth management assets were $155.8 billion, up 13.2%.
– Wealth management revenues were $113.9 million, down 5.3%.
“We’re very pleased with the continued double-digit growth in total revenue, net interest income and earnings per share,” said Mike Roffler, Chief Financial Officer. “Credit quality, capital and liquidity remain strong.”
Quarterly Cash Dividend of $0.20 per Share
The Bank declared a cash dividend for the second quarter of $0.20 per share of common stock, which is payable on August 13, 2020 to shareholders of record as of July 30, 2020. The current quarterly dividend is an increase from the same quarter last year.
Strong Asset Quality
Credit quality remains strong. Nonperforming assets were only 13 basis points of total assets at June 30, 2020. The Bank had modest net loan charge-offs of $1.1 million for the quarter.
During the second quarter, the Bank recorded a provision for credit losses of $31.1 million, which included a provision for credit losses of $43.5 million for loans and held-to-maturity debt securities, offset by a reversal of a prior provision for unfunded loan commitments of $12.4 million. In the second quarter of 2019, the provision for credit losses for loans was $21.2 million. The increase in the provision for credit losses compared to a year ago reflects loan growth, as well as the CECL methodology beginning in 2020, which incorporates a significant change in economic outlook compared to the prior year.
COVID-19
Our response to the pandemic includes: quite successful company-wide remote working arrangements, modified openings and hours in our preferred banking offices, social distancing and other measures to ensure the safety of our colleagues and clients; and community support through corporate contributions for those in need. In addition, we continue to support those of our clients who are experiencing financial challenges by offering loan modifications. We have also provided loans to small businesses under the PPP.
Loan Modifications
Loan modifications to those borrowers experiencing financial challenges as a result of COVID-19 (not classified as troubled debt restructurings) totaled approximately $3.9 billion, and an additional $345 million were in process as of June 30, 2020. Total completed and in process modifications as of June 30, 2020 were 4.3% of total loans.
The Bank has limited exposure to several of the areas most directly impacted by COVID-19, such as the retail, hotel and restaurant industries, which totaled $2.4 billion as of June 30, 2020, only 2.4% of total loans. As of June 30, 2020, the Bank had completed and in process modifications of these portfolios for approximately $650 million, or 27%.
Continued Capital Strength
The Bank’s Tier 1 leverage ratio was 8.15% at June 30, 2020, compared to 8.46% at March 31, 2020.
The Bank has not and does not engage in common stock buybacks.
Tangible Book Value Growth
Tangible book value per common share at June 30, 2020 was $53.46, up 12.2% from a year ago.
Continued Franchise Development
Loan Originations and Sales
Loan originations (excluding PPP loans) were $11.4 billion for the quarter, up 23.1% from the same quarter a year ago primarily due to increases in single family and business lending. The Bank also originated $2.0 billion of PPP loans during the quarter.
Single family loan originations were 51% of the total for the quarter (excluding PPP loans) and had a weighted average loan-to-value ratio of 53%. In addition, multifamily and commercial real estate loans originated were 11% of total originations (excluding PPP loans), and had a weighted average loan-to-value ratio of 47%.
Loans, excluding PPP loans and loans held for sale, totaled $97.9 billion at June 30, 2020, up 19.1% compared to a year ago primarily due to increases in single family and multifamily loans.
During the second quarter, the Bank sold approximately $300 million of single family loans through its own securitization.
Deposit Growth
Total deposits increased to $98.5 billion, up 18.1% compared to a year ago, and had an average cost of 30 basis points during the quarter.
At June 30, 2020, checking deposit balances were 62.3% of total deposits.
Investments
Total investment securities at June 30, 2020 were $19.1 billion, an 18.1% increase compared to a year ago.
High-quality liquid assets, including eligible cash, totaled $16.9 billion at June 30, 2020, and represented 13.4% of quarterly average total assets.
Wealth Management
Total wealth management assets were $155.8 billion at June 30, 2020, up 13.0% for the quarter and up 13.2% compared to a year ago. The increases in wealth management assets were due to market appreciation and net client inflow.
Wealth management revenues totaled $113.9 million for the quarter, down 5.3% compared to last year’s second quarter primarily due to the market decline in the prior quarter. Such revenues represented 12.4% of the Bank’s total revenues for the quarter.
Wealth management assets at June 30, 2020 included investment management assets of $68.1 billion, brokerage assets and money market mutual funds of $76.1 billion, and trust and custody assets of $11.6 billion.
Income Statement and Key Ratios
Revenue Growth
Total revenues were $919.0 million for the quarter, up 12.2% compared to the second quarter a year ago.
Net Interest Income Growth
Net interest income was $787.4 million for the quarter, up 16.8% compared to the second quarter a year ago. The increase in net interest income resulted primarily from growth in average interest-earning assets, partially offset by a decrease in net interest margin.
Net Interest Margin
The net interest margin was 2.70% for the second quarter, compared to 2.74% for the prior quarter. The modest decline was primarily due to average yields on earning assets declining slightly more than the offsetting decrease in average funding costs.
Noninterest Income
Noninterest income was $131.6 million for the quarter, down 9.5% compared to the second quarter a year ago. The decrease was primarily the result of lower investment management fees due to a market decline in the prior quarter and lower loan servicing fees due to a valuation allowance established on mortgage servicing rights from accelerated repayments of loans in the servicing portfolio.
Noninterest Expense and Efficiency Ratio
Noninterest expense was $569.5 million for the quarter, up 7.7% compared to the second quarter a year ago. The increase was primarily due to higher staffing levels and resultant higher salaries and benefits from the continued investments in the expansion of the franchise, offset by lower travel, advertising and marketing.
The efficiency ratio was 62.0% for the quarter, compared to 64.5% for the second quarter a year ago.
Income Taxes
The Bank’s effective tax rate for the second quarter of 2020 was 19.4%, compared to 19.5% for the prior quarter, and 17.4% for the second quarter a year ago. For the first six months of 2020, the Bank’s effective tax rate was 19.4%.
_____
(1)
The provision for unfunded loan commitments is included in the provision for credit losses for 2020 periods. The efficiency ratio for the quarter ended March 31, 2020 has been updated to conform to this change in presentation.
Conference Call Details
First Republic Bank’s second quarter 2020 earnings conference call is scheduled for July 14, 2020 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (800) 949-2175 and use confirmation code 3743466# approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (720) 543-0197 and enter the same confirmation code.
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 15 minutes prior to the start time to register, download and install any necessary audio software.
For those unable to join the live presentation, a replay of the call will be available beginning July 14, 2020, at 11:00 a.m. PT / 2:00 p.m. ET, through July 21, 2020, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (888) 203-1112 and use confirmation code 3743466#. International callers should dial +1 (719) 457-0820 and enter the same confirmation code. 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, 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 (the “Exchange Act”). 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.
Forward-looking statements involving such risks and uncertainties include, but are not limited to, statements regarding: projections of loans, assets, deposits, liabilities, revenues, expenses, tax liabilities, net income, capital expenditures, liquidity, dividends, capital structure, investments or other financial items; expectations regarding the banking and wealth management industries; descriptions of plans or objectives of management for future operations, products or services; forecasts of future economic conditions generally and in our market areas in particular, which may affect the ability of borrowers to repay their loans and the value of real property or other property held as collateral for such loans; our opportunities for growth and our plans for expansion (including opening new offices); expectations about the performance of any new offices; projections about the amount and the value of intangible assets, as well as amortization of recorded amounts; future provisions for credit losses on loans and debt securities, as well as for unfunded loan commitments; changes in nonperforming assets; expectations regarding the impact and duration of the COVID-19 pandemic (collectively referred to as “COVID-19” herein); projections about future levels of loan originations or loan repayments; projections regarding costs, including the impact on our efficiency ratio; and descriptions of assumptions underlying or relating to any of the foregoing.
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; the negative impacts and disruptions resulting from COVID-19 on our colleagues and clients, the communities we serve and the domestic and global economy, which may have an adverse effect on our business, financial position and results of operations; 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 and credit losses on our loans and debt securities; real estate prices generally and in our markets; our geographic and product concentrations; demand for our products and services; developments and uncertainty related to the future use and availability of some reference rates, such as the London Interbank Offered Rate and the 11th District Monthly Weighted Average Cost of Funds Index, as well as other alternative reference rates; the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements; 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; 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, Quarterly Reports on Form 10-Q 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 under the Exchange Act. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
(in thousands, except per share amounts)
2020
2019
2020
2020
2019
Interest income:
Loans
$
791,286
$
741,328
$
796,652
$
1,587,938
$
1,441,416
Investments
146,515
134,044
148,569
295,084
267,809
Other
5,059
4,813
6,960
12,019
9,988
Cash and cash equivalents
564
5,547
3,940
4,504
13,536
Total interest income
943,424
885,732
956,121
1,899,545
1,732,749
Interest expense:
Deposits
72,480
129,188
118,845
191,325
236,935
Borrowings
83,532
82,518
85,144
168,676
146,750
Total interest expense
156,012
211,706
203,989
360,001
383,685
Net interest income
787,412
674,026
752,132
1,539,544
1,349,064
Provision for credit losses
31,117
21,200
62,370
93,487
35,400
Net interest income after provision for credit losses
756,295
652,826
689,762
1,446,057
1,313,664
Noninterest income:
Investment management fees
85,083
93,720
99,296
184,379
178,644
Brokerage and investment fees
12,406
8,287
15,826
28,232
15,946
Insurance fees
1,713
3,696
2,157
3,870
5,810
Trust fees
4,599
4,227
4,976
9,575
8,116
Foreign exchange fee income
10,105
10,345
12,184
22,289
18,976
Deposit fees
5,248
6,579
6,597
11,845
12,899
Loan and related fees
7,456
4,296
6,114
13,570
8,303
Loan servicing fees, net
(4,445)
3,425
1,652
(2,793)
7,213
Gain (loss) on sale of loans
(1,147)
(15)
1,925
778
344
Gain (loss) on investment securities
1,529
(1,063)
2,628
4,157
(1,212)
Income from investments in life insurance
7,800
10,049
8,160
15,960
19,384
Other income
1,222
1,804
2,529
3,751
3,245
Total noninterest income
131,569
145,350
164,044
295,613
277,668
Noninterest expense:
Salaries and employee benefits
344,204
297,524
361,204
705,408
610,777
Information systems
74,037
70,277
70,715
144,752
137,447
Occupancy
54,941
47,587
53,641
108,582
91,482
Professional fees
15,517
16,435
13,117
28,634
28,116
Advertising and marketing
8,621
16,700
11,843
20,464
32,434
FDIC assessments
11,275
9,196
10,185
21,460
18,099
Other expenses
60,863
71,135
61,312
122,175
135,311
Total noninterest expense
569,458
528,854
582,017
1,151,475
1,053,666
Income before provision for income taxes
318,406
269,322
271,789
590,195
537,666
Provision for income taxes
61,638
46,758
53,103
114,741
88,511
Net income
256,768
222,564
218,686
475,454
449,155
Dividends on preferred stock
14,817
12,788
13,020
27,837
25,575
Net income available to common shareholders
$
241,951
$
209,776
$
205,666
$
447,617
$
423,580
Basic earnings per common share
$
1.41
$
1.25
$
1.20
$
2.61
$
2.53
Diluted earnings per common share
$
1.40
$
1.24
$
1.20
$
2.60
$
2.50
Weighted average shares—basic
171,627
167,685
170,835
171,231
167,400
Weighted average shares—diluted
172,659
169,572
172,039
172,343
169,503
CONSOLIDATED BALANCE SHEETS
As of
($ in thousands)
June 30, 2020
March 31, 2020
December 31, 2019 (1)
June 30, 2019 (1)
ASSETS
Cash and cash equivalents
$
3,099,170
$
3,949,378
$
1,699,557
$
2,220,073
Debt securities available-for-sale
1,576,956
1,243,798
1,282,169
1,438,061
Debt securities held-to-maturity
17,513,211
17,534,920
17,147,633
14,721,568
Less: Allowance for credit losses
(5,383)
(5,087)
—
—
Debt securities held-to-maturity, net
17,507,828
17,529,833
17,147,633
14,721,568
Equity securities (fair value)
21,104
19,575
19,586
19,529
Loans: (1)
Single family (1-4 units)
52,435,246
49,063,193
47,985,651
41,758,981
Home equity lines of credit
2,419,359
2,703,919
2,501,432
2,587,554
Single family construction
733,909
779,239
761,589
702,928
Multifamily (5+ units)
13,187,857
12,823,392
12,353,359
11,160,686
Commercial real estate
7,793,137
7,715,266
7,449,058
7,166,368
Multifamily/commercial construction
1,966,292
1,839,445
1,695,954
1,611,794
Capital call lines of credit
6,173,992
7,512,231
5,570,322
5,660,887
Tax-exempt
3,186,066
3,087,751
3,042,193
3,035,959
Other business
3,179,023
3,094,922
3,034,301
2,989,664
PPP
2,092,307
—
—
—
Stock secured
1,924,107
1,919,971
1,897,511
1,514,855
Other secured
1,702,535
1,531,705
1,433,399
1,235,588
Unsecured
3,221,405
3,214,028
3,072,062
2,812,357
Total loans
100,015,235
95,285,062
90,796,831
82,237,621
Allowance for credit losses
(583,997)
(541,906)
(496,104)
(473,095)
Loans, net
99,431,238
94,743,156
90,300,727
81,764,526
Loans held for sale
313,655
354,873
23,304
12,502
Investments in life insurance
1,468,712
1,460,909
1,434,642
1,412,883
Tax credit investments
1,105,853
1,106,693
1,100,509
1,054,192
Premises, equipment and leasehold improvements, net
388,256
392,953
386,841
348,609
Goodwill and other intangible assets
230,975
232,985
235,269
267,490
Other real estate owned
1,071
1,071
—
—
Other assets
3,159,069
2,879,705
2,633,397
2,440,203
Total Assets
$
128,303,887
$
123,914,929
$
116,263,634
$
105,699,636
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking
$
37,586,940
$
36,920,635
$
33,124,265
$
32,023,125
Interest-bearing checking
23,833,458
20,941,790
19,696,859
16,649,251
Money market checking
14,639,069
12,636,674
12,790,707
10,874,671
Money market savings and passbooks
10,236,015
9,052,690
10,586,355
9,921,688
Certificates of deposit
12,238,479
14,140,550
13,935,060
13,962,348
Total Deposits
98,533,961
93,692,339
90,133,246
83,431,083
Short-term borrowings
5,000
—
800,000
—
Long-term FHLB advances
15,405,000
16,250,000
12,200,000
9,800,000
Senior notes
995,109
994,742
497,719
497,269
Subordinated notes
778,096
777,990
777,885
777,678
Other liabilities
2,010,793
1,840,093
2,003,677
1,973,963
Total Liabilities
117,727,959
113,555,164
106,412,527
96,479,993
Shareholders’ Equity:
Preferred stock
1,145,000
1,145,000
1,145,000
940,000
Common stock
1,721
1,714
1,686
1,682
Additional paid-in capital
4,543,051
4,543,650
4,214,915
4,186,304
Retained earnings
4,858,965
4,652,089
4,484,375
4,091,636
Accumulated other comprehensive income
27,191
17,312
5,131
21
Total Shareholders’ Equity
10,575,928
10,359,765
9,851,107
9,219,643
Total Liabilities and Shareholders’ Equity
$
128,303,887
$
123,914,929
$
116,263,634
$
105,699,636
____________
(1) For comparability, the Bank has adjusted certain prior period loan amounts to conform to the current period presentation under the Current Expected Credit Losses (“CECL”) methodology.
Quarter Ended June 30,
Quarter Ended March 31,
2020
2019 (4)
2020
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
$
2,789,666
$
564
0.08
%
$
1,091,353
$
5,547
2.04
%
$
1,853,579
$
3,940
0.85
%
Investment securities:
U.S. Government-sponsored agency securities
214,835
1,367
2.55
%
1,031,797
7,675
2.98
%
307,449
2,207
2.87
%
Mortgage-backed securities:
Agency residential and commercial MBS
6,615,707
42,661
2.58
%
6,669,868
47,724
2.86
%
6,746,664
47,186
2.80
%
Other residential and commercial MBS
27,499
182
2.65
%
4,523
43
3.78
%
3,834
32
3.33
%
Municipal securities
11,949,615
126,906
4.25
%
8,497,645
96,980
4.57
%
11,358,749
122,542
4.32
%
Other investment securities (3)
43,800
309
2.83
%
19,332
127
2.63
%
43,783
320
2.92
%
Total investment securities
18,851,456
171,425
3.64
%
16,223,165
152,549
3.76
%
18,460,479
172,287
3.73
%
Loans: (4)
Residential real estate (5)
53,737,207
404,691
3.01
%
42,856,354
357,475
3.34
%
51,300,013
404,982
3.16
%
Multifamily (6)
12,887,676
120,657
3.70
%
11,004,251
109,548
3.94
%
12,565,723
118,944
3.74
%
Commercial real estate
7,718,257
77,635
3.98
%
6,948,173
74,002
4.21
%
7,574,573
78,609
4.11
%
Multifamily/commercial construction
2,632,682
29,468
4.43
%
2,287,098
28,672
4.96
%
2,550,647
30,285
4.70
%
Business (7)
14,690,412
123,325
3.32
%
11,410,239
131,658
4.57
%
12,390,386
122,971
3.93
%
Other (8)
6,658,487
42,116
2.50
%
5,346,380
46,581
3.45
%
6,453,056
47,572
2.92
%
Total loans
98,324,721
797,892
3.23
%
79,852,495
747,936
3.73
%
92,834,398
803,363
3.44
%
FHLB stock
491,938
5,059
4.14
%
331,218
4,813
5.83
%
406,974
6,960
6.88
%
Total interest-earning assets
120,457,781
974,940
3.22
%
97,498,231
910,845
3.72
%
113,555,430
986,550
3.46
%
Noninterest-earning cash
425,440
345,174
443,255
Goodwill and other intangibles
231,934
269,404
234,078
Other assets
4,905,493
4,312,290
4,721,313
Total noninterest-earning assets
5,562,867
4,926,868
5,398,646
Total Assets
$
126,020,648
$
102,425,099
$
118,954,076
Liabilities and Equity:
Deposits:
Checking
$
58,978,081
3,127
0.02
%
$
45,813,205
6,946
0.06
%
$
53,863,519
8,432
0.06
%
Money market checking and savings
24,133,700
15,224
0.25
%
19,323,615
51,536
1.07
%
22,475,109
44,869
0.80
%
CDs
12,721,452
54,129
1.71
%
12,799,189
70,706
2.22
%
14,185,945
65,544
1.86
%
Total deposits
95,833,233
72,480
0.30
%
77,936,009
129,188
0.66
%
90,524,573
118,845
0.53
%
Borrowings:
Short-term borrowings
2,747
0
0.04
%
2,875,590
18,282
2.55
%
1,231,827
4,700
1.53
%
Long-term FHLB advances
15,868,682
68,391
1.73
%
9,132,967
49,601
2.18
%
13,420,604
66,566
1.99
%
Senior notes (9)
994,905
6,034
2.43
%
835,544
5,534
2.65
%
765,308
4,773
2.49
%
Subordinated notes (9)
778,044
9,107
4.68
%
777,628
9,101
4.68
%
777,938
9,105
4.68
%
Total borrowings
17,644,378
83,532
1.90
%
13,621,729
82,518
2.43
%
16,195,677
85,144
2.11
%
Total interest-bearing liabilities
113,477,611
156,012
0.55
%
91,557,738
211,706
0.93
%
106,720,250
203,989
0.77
%
Noninterest-bearing liabilities
2,067,585
1,733,674
2,030,107
Preferred equity
1,145,000
940,000
1,145,000
Common equity
9,330,452
8,193,687
9,058,719
Total Liabilities and Equity
$
126,020,648
$
102,425,099
$
118,954,076
Net interest spread (10)
2.67
%
2.79
%
2.69
%
Net interest income (fully taxable-equivalent basis) and net interest margin (11)
$
818,928
2.70
%
$
699,139
2.85
%
$
782,561
2.74
%
Reconciliation of tax-equivalent net interest income to reported net interest income:
Tax-equivalent adjustment
(31,516)
(25,113)
(30,429)
Net interest income, as reported
$
787,412
$
674,026
$
752,132
Six Months Ended June 30,
2020
2019 (4)
Average Balances, Yields and Rates
Average Balance
Interest Income/ Expense (1)
Yields/ Rates (2)
Average Balance
Interest Income/ Expense (1)
Yields/ Rates (2)
($ in thousands)
Assets:
Cash and cash equivalents
$
2,321,623
$
4,504
0.39
%
$
1,267,228
$
13,536
2.15
%
Investment securities:
U.S. Government-sponsored agency securities
261,142
3,574
2.74
%
1,038,310
15,452
2.98
%
Mortgage-backed securities:
Agency residential and commercial MBS
6,681,185
89,846
2.69
%
6,761,842
97,343
2.88
%
Other residential and commercial MBS
15,667
214
2.73
%
4,525
88
3.91
%
Municipal securities
11,654,183
249,935
4.29
%
8,340,025
191,481
4.59
%
Other investment securities (3)
43,791
629
2.87
%
19,161
247
2.58
%
Total investment securities
18,655,968
344,198
3.69
%
16,163,863
304,611
3.77
%
Loans: (4)
Residential real estate (5)
52,518,610
809,674
3.08
%
41,920,005
699,259
3.34
%
Multifamily (6)
12,726,699
239,601
3.72
%
10,770,882
209,249
3.86
%
Commercial real estate
7,646,415
156,244
4.04
%
6,825,897
145,949
4.25
%
Multifamily/commercial construction
2,591,664
59,753
4.56
%
2,282,720
56,916
4.96
%
Business (7)
13,540,399
246,357
3.60
%
11,046,209
252,702
4.55
%
Other (8)
6,555,772
89,687
2.71
%
5,218,077
90,528
3.45
%
Total loans
95,579,559
1,601,316
3.33
%
78,063,790
1,454,603
3.72
%
FHLB stock
449,455
12,019
5.38
%
305,157
9,988
6.60
%
Total interest-earning assets
117,006,605
1,962,037
3.34
%
95,800,038
1,782,738
3.71
%
Noninterest-earning cash
434,348
345,205
Goodwill and other intangibles
233,006
270,879
Other assets
4,813,403
4,254,502
Total noninterest-earning assets
5,480,757
4,870,586
Total Assets
$
122,487,362
$
100,670,624
Liabilities and Equity:
Deposits:
Checking
$
56,420,801
11,559
0.04
%
$
46,162,715
13,040
0.06
%
Money market checking and savings
23,304,404
60,094
0.52
%
19,296,363
93,854
0.98
%
CDs
13,453,699
119,672
1.79
%
12,095,546
130,041
2.17
%
Total deposits
93,178,904
191,325
0.41
%
77,554,624
236,935
0.62
%
Borrowings:
Short-term borrowings
617,287
4,700
1.53
%
1,921,431
24,312
2.55
%
Long-term FHLB advances
14,644,643
134,957
1.85
%
8,820,165
92,768
2.12
%
Senior notes (9)
880,106
10,807
2.46
%
865,930
11,468
2.65
%
Subordinated notes (9)
777,991
18,212
4.68
%
777,578
18,202
4.68
%
Total borrowings
16,920,027
168,676
2.00
%
12,385,104
146,750
2.39
%
Total interest-bearing liabilities
110,098,931
360,001
0.66
%
89,939,728
383,685
0.86
%
Noninterest-bearing liabilities
2,048,845
1,649,443
Preferred equity
1,145,000
940,000
Common equity
9,194,586
8,141,453
Total Liabilities and Equity
$
122,487,362
$
100,670,624
Net interest spread (10)
2.68
%
2.85
%
Net interest income (fully taxable-equivalent basis) and net interest margin (11)
$
1,602,036
2.72
%
$
1,399,053
2.91
%
Reconciliation of tax-equivalent net interest income to reported net interest income:
Tax-equivalent adjustment
(62,492)
(49,989)
Net interest income, as reported
$
1,539,544
$
1,349,064
____________
(1) Interest income is presented on a fully taxable-equivalent basis.
(2) Yields/rates are annualized.
(3) Includes corporate debt securities, mutual funds and marketable equity securities.
(4) For comparability, the Bank has adjusted certain prior period loan amounts to conform to the current period presentation under CECL.
(5) Includes single family, home equity lines of credit, and single family construction loans. Also includes single family loans held for sale.
(6) Includes multifamily loans held for sale.
(7) Includes capital call lines of credit, tax-exempt, other business, and PPP loans.
(8) Includes stock secured, other secured and unsecured loans.
(9) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs.
(10) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(11) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets.
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
Operating Information
2020
2019
2020
2020
2019
($ in thousands, except per share amounts)
Net income to average assets (1)
0.82
%
0.87
%
0.74
%
0.78
%
0.90
%
Net income available to common shareholders to average common equity (1)
10.43
%
10.27
%
9.13
%
9.79
%
10.49
%
Net income available to common shareholders to average tangible common equity (1)
10.70
%
10.62
%
9.37
%
10.04
%
10.85
%
Dividends per common share
$
0.20
$
0.19
$
0.19
$
0.39
$
0.37
Dividend payout ratio
14.3
%
15.4
%
15.9
%
15.0
%
14.8
%
Efficiency ratio (2), (3)
62.0
%
64.5
%
63.5
%
62.7
%
64.8
%
Net loan charge-offs
$
1,098
$
1,226
$
202
$
1,300
$
1,353
Net loan charge-offs to average total loans (1)
0.00
%
0.01
%
0.00
%
0.00
%
0.00
%
Allowance for loan credit losses to:
Total loans
0.58
%
0.58
%
0.57
%
0.58
%
0.58
%
Nonaccrual loans
354.1
%
326.3
%
432.1
%
354.1
%
326.3
%
__________
(1) Ratios are annualized.
(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(3) The provision for unfunded loan commitments is included in the provision for credit losses for 2020 periods. For 2019 periods, the provision for unfunded loan commitments is included in other noninterest expense. The efficiency ratio for the quarter ended March 31, 2020 has been updated to conform to this change in presentation.
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
Effective Tax Rate
2020
2019
2020
2020
2019
Effective tax rate, prior to excess tax benefits
22.5
%
20.9
%
21.3
%
21.9
%
21.4
%
Excess tax benefits—stock options
(1.0)
(1.3)
(1.5)
(1.3)
(3.8)
Excess tax benefits—other stock awards
(2.1)
(2.2)
(0.3)
(1.2)
(1.1)
Total excess tax benefits
(3.1)
(3.5)
(1.8)
(2.5)
(4.9)
Effective tax rate
19.4
%
17.4
%
19.5
%
19.4
%
16.5
%
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
Provision for Credit Losses
2020
2019
2020
2020
2019
($ in thousands)
Debt securities held-to-maturity
$
296
$
—
$
418
$
714
$
—
Loans
43,189
21,200
47,679
90,868
35,400
Unfunded loan commitments (1)
(12,368)
—
14,273
1,905
—
Total provision
$
31,117
$
21,200
$
62,370
$
93,487
$
35,400
__________
(1) The provision for unfunded loan commitments is included in the provision for credit losses for 2020 periods. For 2019 periods, the provision for unfunded loan commitments is included in other noninterest expense, which is not presented in this table.
Quarter Ended June 30, 2020
Six Months Ended June 30, 2020
Allowance for Credit Losses
Debt Securities Held-to-Maturity
Loans
Unfunded Loan Commitments (2)
Total
Debt Securities Held-to-Maturity
Loans
Unfunded Loan Commitments (2)
Total
($ in thousands)
Balance at beginning of period (1)
$
5,087
$
541,906
$
29,970
$
576,963
$
4,669
$
494,429
$
15,697
$
514,795
Provision for credit losses
296
43,189
(12,368)
31,117
714
90,868
1,905
93,487
Net charge-offs
—
(1,098)
—
(1,098)
—
(1,300)
—
(1,300)
Balance at end of period
$
5,383
$
583,997
$
17,602
$
606,982
$
5,383
$
583,997
$
17,602
$
606,982
__________
(1) For the six months ended June 30, 2020, represents the balance after the cumulative effect adjustment from the adoption of CECL.
(2) The allowance for credit losses on unfunded loan commitments is included in other liabilities.
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
Mortgage Loan Sales
2020
2019
2020
2020
2019
($ in thousands)
Loans sold:
Flow sales:
Agency
$
10,810
$
14,533
$
25,774
$
36,584
$
26,212
Non-agency
—
14,503
31,870
31,870
31,334
Total flow sales
10,810
29,036
57,644
68,454
57,546
Bulk sales:
Non-agency
—
—
437,669
437,669
152,119
Securitizations
300,116
—
—
300,116
—
Total loans sold
$
310,926
$
29,036
$
495,313
$
806,239
$
209,665
Gain (loss) on sale of loans:
Amount
$
(1,147)
$
(15)
$
1,925
$
778
$
344
Gain (loss) as a percentage of loans sold
(0.37)
%
(0.05)
%
0.39
%
0.10
%
0.16
%
Quarter Ended June 30,
Quarter Ended March 31,
Six Months Ended June 30,
Loan Originations
2020
2019 (1)
2020
2020
2019 (1)
($ in thousands)
Single family (1-4 units)
$
5,875,184
$
4,067,326
$
3,519,336
$
9,394,520
$
6,257,221
Home equity lines of credit
457,737
356,589
395,508
853,245
708,727
Single family construction
119,318
155,431
109,162
228,480
279,700
Multifamily (5+ units)
946,820
812,638
781,303
1,728,123
1,395,581
Commercial real estate
330,683
519,244
451,858
782,541
765,772
Multifamily/commercial construction
131,414
318,015
620,921
752,335
448,128
Capital call lines of credit
1,405,347
1,423,451
2,385,229
3,790,576
3,126,174
Tax-exempt
184,054
101,920
100,019
284,073
186,345
Other business
914,257
424,180
619,779
1,534,036
680,179
PPP
1,981,797
—
—
1,981,797
—
Stock secured
519,416
468,741
592,560
1,111,976
675,454
Other secured
358,730
355,421
413,824
772,554
622,170
Unsecured
203,270
296,373
322,888
526,158
630,681
Total loans originated
$
13,428,027
$
9,299,329
$
10,312,387
$
23,740,414
$
15,776,132
__________
(1) For comparability, the Bank has adjusted certain prior period amounts to conform to the current period presentation under CECL.
As of
Asset Quality Information
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
($ in thousands)
Nonperforming assets:
Nonaccrual loans
$
164,930
$
125,418
$
143,181
$
136,928
$
144,993
Other real estate owned
1,071
1,071
—
—
—
Total nonperforming assets
$
166,001
$
126,489
$
143,181
$
136,928
$
144,993
Nonperforming assets to total assets
0.13
%
0.10
%
0.12
%
0.12
%
0.14
%
Accruing loans 90 days or more past due
$
3,764
$
—
$
—
$
—
$
—
Restructured accruing loans
$
11,501
$
13,418
$
13,287
$
14,964
$
12,176
As of June 30, 2020
Completed
In Process (2)
Loan Modifications (1)
Unpaid Principal Balance
LTV
Average Loan Size
Number of Loans
Unpaid Principal Balance
LTV
Average Loan Size
Number of Loans
($ in millions)
Single family (1-4 units)
$
1,741
59
%
$
1.0
1,787
$
230
64
%
$
1.3
175
Home equity lines of credit
78
56
%
0.4
178
26
59
%
0.6
56
Single family construction
17
49
%
1.9
9
—
—
%
—
—
Multifamily (5+ units)
554
51
%
3.0
183
4
53
%
0.7
5
Commercial real estate
1,038
48
%
3.7
283
58
54
%
4.2
14
Multifamily/commercial construction
52
44
%
5.2
10
4
29
%
3.9
1
Capital call lines of credit
—
n/a
—
—
—
n/a
—
—
Tax-exempt
72
n/a
18.0
4
12
n/a
6.1
2
Other business
210
n/a
1.3
157
4
n/a
0.3
14
Stock secured
—
n/a
—
—
—
n/a
—
—
Other secured
6
n/a
0.4
13
—
n/a
—
—
Unsecured (3)
136
n/a
0.1
999
7
n/a
0.4
19
Total
$
3,904
$
345
__________
(1) COVID-19 loan modifications are not classified as troubled debt restructurings.
(2) Loan modifications requested by borrowers that have not yet been completed.
(3) Unsecured loan modifications completed and in process include $135 million and $2 million, respectively, of household debt refinance loans.
As of June 30, 2020
Loan Industry Information
Unpaid Principal Balance
LTV
Average Loan Size
Number of Loans
Personal Guarantee %
($ in millions)
Retail
$
1,772
50
%
$
2.7
674
76
%
Hotel
431
48
%
6.8
66
74
%
Restaurant (1)
224
51
%
1.1
215
94
%
Total (2)
$
2,427
__________
(1) Approximately 70% of loans to restaurants are real estate secured.
(2) Amounts in the table above exclude $43 million of loans for hotels and $135 million of loans for restaurants under the PPP.
As of
Loan Servicing Portfolio
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
($ in millions)
Loans serviced for investors
$
8,316
$
9,203
$
9,298
$
10,080
$
10,746
As of
Common Shares, Book Value per Common Share and Tangible Book Value per Common Share
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
(in thousands, except per share amounts)
Number of shares of common stock outstanding
172,094
171,395
168,621
168,450
168,176
Book value per common share
$
54.80
$
53.76
$
51.63
$
50.41
$
49.23
Tangible book value per common share
$
53.46
$
52.40
$
50.24
$
48.84
$
47.64
As of
Capital Ratios
June 30, 2020 (1),(2)
March 31, 2020 (2)
December 31, 2019
September 30, 2019
June 30, 2019
Tier 1 leverage ratio (Tier 1 capital to average assets)
8.15
%
8.46
%
8.39
%
8.50
%
8.69
%
Common Equity Tier 1 capital to risk-weighted assets
9.80
%
9.87
%
9.86
%
9.91
%
10.19
%
Tier 1 capital to risk-weighted assets
11.04
%
11.14
%
11.21
%
11.05
%
11.39
%
Total capital to risk-weighted assets
12.49
%
12.62
%
12.73
%
12.61
%
13.02
%
Regulatory Capital (3)
($ in thousands)
Common Equity Tier 1 capital
$
9,103,771
$
8,887,905
$
8,371,192
$
8,124,179
$
7,934,602
Tier 1 capital
$
10,248,771
$
10,032,905
$
9,516,192
$
9,064,179
$
8,874,602
Total capital
$
11,604,141
$
11,365,654
$
10,802,209
$
10,340,902
$
10,138,375
Assets (3)
($ in thousands)
Average assets
$
125,690,830
$
118,626,842
$
113,403,507
$
106,659,003
$
102,097,363
Risk-weighted assets
$
92,870,859
$
90,072,400
$
84,885,943
$
81,994,651
$
77,889,111
__________
(1) Ratios and amounts as of June 30, 2020 are preliminary.
(2) In accordance with the CECL Interim Final Rule, the Bank elected to delay the estimated impact of CECL on its regulatory capital and risk-weighted assets over a five-year transition period ending December 31, 2024. Ratios and amounts for 2020 periods have been adjusted to exclude the following impacts attributed to the adoption of CECL: decreases in retained earnings, increases in allowance for credit losses on loans, held-to-maturity debt securities and unfunded loan commitments, decreases in average assets, and increases in risk-weighted assets.
(3) As defined by regulatory capital rules.
As of
Wealth Management Assets
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
($ in millions)
First Republic Investment Management
$
68,124
$
60,056
$
66,029
$
61,204
$
61,192
Brokerage and investment:
Brokerage
70,178
60,189
68,807
63,053
61,583
Money market mutual funds
5,933
6,893
4,268
4,402
3,312
Total brokerage and investment
76,111
67,082
73,075
67,455
64,895
Trust Company:
Trust
7,905
7,288
7,121
6,366
6,319
Custody
3,646
3,461
4,818
5,210
5,225
Total Trust Company
11,551
10,749
11,939
11,576
11,544
Total Wealth Management Assets
$
155,786
$
137,887
$
151,043
$
140,235
$
137,631
View source version on businesswire.com: https://www.businesswire.com/news/home/20200714005369/en/
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
1 Year First Republic Bank Chart |
1 Month First Republic Bank Chart |
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