December 15th, 2015

First Republic Reports Third Quarter 2020 Results

First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended September 30, 2020.

“First Republic’s client-centric business model delivered another quarter of safe, consistent growth,” said Jim Herbert, Founder, Chairman and CEO of First Republic. “Lending, deposits and wealth management all continued to grow strongly due to our focus on exceptional, differentiated client service.”

Quarterly Highlights

Financial Results

  • Year-over-year:
    • Revenues were $1.0 billion, up 19.6%.
    • Net interest income was $830.3 million, up 19.5%.
    • Net income was $293.1 million, up 24.8%.
    • Diluted earnings per share of $1.61, up 22.9% (included $0.09 positive impact from discounts on loans sold, insurance proceeds and an amended tax return refund).
    • Tangible book value per share was $55.00, up 12.6%.
  • Loan originations totaled $12.2 billion, our best quarter ever.
  • Net interest margin was 2.71%, compared to 2.70% for the prior quarter.
  • Efficiency ratio was 60.7%, compared to 62.0% for the prior quarter.

Continued Capital and Credit Strength

  • Tier 1 leverage ratio was 8.38%. 
  • Nonperforming assets remained at a low 12 basis points of total assets.
  • Net charge-offs were only $1.7 million, or less than 1 basis point of average loans.

Continued Franchise Development

  • Year-over-year:
    • Loans totaled $102.7 billion, up 19.0% (excluding SBA Paycheck Protection Program (“PPP”) and for sale loans).
    • Deposits were $104.4 billion, up 21.8%.
    • Wealth management assets were $168.2 billion, up 19.9%.
    • Wealth management revenues were $126.8 million, up 10.5%.

“We’re very pleased with the double-digit growth of revenue, net interest income and earnings per share, both this quarter and year to date,” said Mike Roffler, Chief Financial Officer. “Credit quality, capital and liquidity remain strong. We’re pleased to have raised $500 million of Tier 1 fixed-for-life perpetual, preferred stock during the quarter at the lowest dividend rate ever for a bank.”

Quarterly Cash Dividend of $0.20 per Share

The Bank declared a cash dividend for the third quarter of $0.20 per share of common stock, which is payable on November 12, 2020 to shareholders of record as of October 29, 2020. The current quarterly dividend is an increase over last year, our ninth consecutive year of dividend increases.

Strong Asset Quality

Credit quality remains strong. Nonperforming assets were only 12 basis points of total assets at September 30, 2020.

The provision for credit losses for the quarter was $28.5 million, which was driven by loan growth and an economic outlook reflecting the impact of COVID-19. For the first nine months of 2020, the provision for credit losses was $122.0 million, with net loan charge-offs of only $3.0 million.

Continued Capital Strength

The Bank’s Tier 1 leverage ratio was 8.38% at September 30, 2020, up from 8.15% at June 30, 2020.

During the third quarter, the Bank issued $500.0 million of 4.125% Noncumulative Perpetual Series K Preferred Stock, which qualifies as Tier 1 capital. In addition, on October 9, 2020, the Bank redeemed the $100.0 million of outstanding shares of its 5.70% Noncumulative Perpetual Series F Preferred Stock.

The Bank has not and does not engage in common stock buybacks.

Tangible Book Value Growth

Tangible book value per common share at September 30, 2020 was $55.00, up 12.6% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations were $12.2 billion for the quarter, up 11.6% from the same quarter a year ago primarily due to an increase in single family lending.

Single family loan originations were 56% of the total for the quarter and had a weighted average loan-to-value ratio of 58%. In addition, multifamily and commercial real estate loans originated were 9% of total originations, and had a weighted average loan-to-value ratio of 50%.

Loans, excluding PPP loans and loans held for sale, totaled $102.7 billion at September 30, 2020, up 19.0% compared to a year ago primarily due to increases in single family and multifamily loans.

COVID-19 Loan Modifications

Loan modifications to those borrowers experiencing financial challenges as a result of COVID-19 (not classified as troubled debt restructurings) totaled $3.9 billion, and were 3.7% 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 September 30, 2020, only 2.3% of total loans. As of September 30, 2020, the Bank had modifications of these portfolios for $640 million, or 26%.

Deposit Growth

Total deposits increased to $104.4 billion, up 21.8% compared to a year ago, and had an average rate paid of 21 basis points during the quarter.

At September 30, 2020, checking deposit balances were 64.8% of total deposits.

Investments

Total investment securities at September 30, 2020 were $18.7 billion, a 7.1% increase compared to a year ago.

High-quality liquid assets, including eligible cash, totaled $17.1 billion at September 30, 2020, and represented 12.9% of quarterly average total assets.

Wealth Management

Total wealth management assets were $168.2 billion at September 30, 2020, up 8.0% for the quarter and up 19.9% compared to a year ago. The increases in wealth management assets were due to market appreciation and net client inflow.

Wealth management revenues totaled $126.8 million for the quarter, up 10.5% compared to last year’s third quarter. Such revenues represented 12.7% of the Bank’s total revenues for the quarter.

Wealth management assets at September 30, 2020 included investment management assets of $74.7 billion, brokerage assets and money market mutual funds of $81.2 billion, and trust and custody assets of $12.3 billion.

Income Statement and Key Ratios

Revenue Growth

Total revenues were $1.0 billion for the quarter, up 19.6% compared to the third quarter a year ago.

Net Interest Income Growth

Net interest income was $830.3 million for the quarter, up 19.5% compared to the third 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 increased to 2.71% in the third quarter, from 2.70% in the prior quarter.

Noninterest Income

Noninterest income was $171.0 million for the quarter, up 20.2% compared to the third quarter a year ago. The increase was primarily driven by the elevated gain on sale of loans, which included $10.3 million related to discounts on loans purchased, higher investment management fees, and income from investments in life insurance, which included a $5.3 million gain from life insurance proceeds.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $608.2 million for the quarter, up 13.9% compared to the third quarter a year ago. The increase was primarily due to increased salaries and benefits and information systems costs from the continued investments in the quality and expansion of the franchise, partially offset by lower travel and entertainment, as well as advertising and marketing expenses.

The efficiency ratio was 60.7% for the quarter, compared to 63.8% for the third quarter a year ago. For the first nine months of 2020, the efficiency ratio was 62.0%.

Income Taxes

The Bank’s effective tax rate for the third quarter of 2020 was 19.6%, compared to 19.4% for the prior quarter, and 18.0% for the third quarter a year ago. For the first nine months of 2020, the Bank’s effective tax rate was 19.5%, compared to 17.0% a year ago. The increases were primarily the result of lower excess tax benefits from a decrease in stock option exercises by employees, partially offset by a tax refund from an amended tax return.

Conference Call Details

First Republic Bank’s third quarter 2020 earnings conference call is scheduled for October 13, 2020 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (800) 353-6461 and use confirmation code 2953562# approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (334) 323-0501 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 October 13, 2020, at 11:00 a.m. PT / 2:00 p.m. ET, through October 20, 2020, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (888) 203-1112 and use confirmation code 2953562#. 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
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

(in thousands, except per share amounts)

2020

2019

2020

2020

2019

Interest income:

Loans

$

811,708

$

764,468

$

791,286

$

2,399,646

$

2,205,884

Investments

142,971

134,099

146,515

438,055

401,908

Other

6,116

5,779

5,059

18,135

15,767

Cash and cash equivalents

1,181

5,430

564

5,685

18,966

Total interest income

961,976

909,776

943,424

2,861,521

2,642,525

Interest expense:

Deposits

54,355

134,917

72,480

245,680

371,852

Borrowings

77,341

79,874

83,532

246,017

226,624

Total interest expense

131,696

214,791

156,012

491,697

598,476

Net interest income

830,280

694,985

787,412

2,369,824

2,044,049

Provision for credit losses

28,538

16,711

31,117

122,025

52,111

Net interest income after provision for credit losses

801,742

678,274

756,295

2,247,799

1,991,938

Noninterest income:

Investment management fees

96,638

83,582

85,083

281,017

262,226

Brokerage and investment fees

10,796

12,673

12,406

39,028

28,619

Insurance fees

2,216

2,712

1,713

6,086

8,522

Trust fees

4,543

4,105

4,599

14,118

12,221

Foreign exchange fee income

12,575

11,685

10,105

34,864

30,661

Deposit fees

5,753

6,563

5,248

17,598

19,462

Loan and related fees

7,171

5,341

7,456

20,741

13,644

Loan servicing fees, net

144

2,347

(4,445)

(2,649)

9,560

Gain (loss) on sale of loans

13,797

122

(1,147)

14,575

466

Gain (loss) on investment securities

(405)

(683)

1,529

3,752

(1,895)

Income from investments in life insurance

20,546

12,152

7,800

36,506

31,536

Other income (loss)

(2,791)

1,608

1,222

960

4,853

Total noninterest income

170,983

142,207

131,569

466,596

419,875

Noninterest expense:

Salaries and employee benefits

373,225

309,655

344,204

1,078,633

920,432

Information systems

74,549

66,612

74,037

219,301

204,059

Occupancy

55,543

50,722

54,941

164,125

142,204

Professional fees

19,845

17,507

15,517

48,479

45,623

Advertising and marketing

8,909

15,912

8,621

29,373

48,346

FDIC assessments

11,003

9,748

11,275

32,463

27,847

Other expenses

65,136

63,794

60,863

187,311

199,105

Total noninterest expense

608,210

533,950

569,458

1,759,685

1,587,616

Income before provision for income taxes

364,515

286,531

318,406

954,710

824,197

Provision for income taxes

71,378

51,687

61,638

186,119

140,198

Net income

293,137

234,844

256,768

768,591

683,999

Dividends on preferred stock

14,816

12,787

14,817

42,653

38,362

Net income available to common shareholders

$

278,321

$

222,057

$

241,951

$

725,938

$

645,637

Basic earnings per common share

$

1.62

$

1.32

$

1.41

$

4.23

$

3.85

Diluted earnings per common share

$

1.61

$

1.31

$

1.40

$

4.21

$

3.81

Weighted average shares—basic

172,142

168,272

171,627

171,537

167,694

Weighted average shares—diluted

172,932

169,346

172,659

172,514

169,449

CONSOLIDATED BALANCE SHEETS

 

As of

($ in thousands)

September 30,
2020

June 30,
2020

December 31,
2019 (1)

September 30,
2019 (1)

ASSETS

Cash and cash equivalents

$

3,691,149

$

3,099,170

$

1,699,557

$

2,181,600

Debt securities available-for-sale

1,711,202

1,576,956

1,282,169

1,401,105

Debt securities held-to-maturity

16,929,422

17,513,211

17,147,633

16,002,722

Less: Allowance for credit losses

(5,716)

(5,383)

Debt securities held-to-maturity, net

16,923,706

17,507,828

17,147,633

16,002,722

Equity securities (fair value)

20,478

21,104

19,586

19,736

Loans: (1)

Single family (1-4 units)

56,628,359

52,435,246

47,985,651

44,882,363

Home equity lines of credit

2,431,991

2,419,359

2,501,432

2,530,740

Single family construction

739,091

733,909

761,589

743,699

Multifamily (5+ units)

13,392,531

13,187,857

12,353,359

11,672,916

Commercial real estate

7,781,797

7,793,137

7,449,058

7,415,677

Multifamily/commercial construction

2,038,949

1,966,292

1,695,954

1,583,968

Capital call lines of credit

6,203,877

6,173,992

5,570,322

5,568,342

Tax-exempt

3,276,705

3,186,066

3,042,193

3,042,765

Other business

2,982,532

3,179,023

3,034,301

2,953,756

PPP

2,091,102

2,092,307

Stock secured

2,311,754

1,924,107

1,897,511

1,610,914

Other secured

1,780,652

1,702,535

1,433,399

1,293,084

Unsecured

3,102,311

3,221,405

3,072,062

3,006,586

Total loans

104,761,651

100,015,235

90,796,831

86,304,810

Allowance for credit losses

(604,747)

(583,997)

(496,104)

(485,465)

Loans, net

104,156,904

99,431,238

90,300,727

85,819,345

Loans held for sale

33,655

313,655

23,304

31,693

Investments in life insurance

1,949,360

1,468,712

1,434,642

1,425,057

Tax credit investments

1,099,713

1,105,853

1,100,509

1,039,061

Premises, equipment and leasehold improvements, net

390,241

388,256

386,841

373,693

Goodwill and other intangible assets

229,185

230,975

235,269

264,658

Other real estate owned

1,071

Other assets

3,020,178

3,159,069

2,633,397

2,470,065

Total Assets

$

133,225,771

$

128,303,887

$

116,263,634

$

111,028,735

LIABILITIES AND EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking

$

41,538,676

$

37,586,940

$

33,124,265

$

32,720,317

Interest-bearing checking

26,081,189

23,833,458

19,696,859

17,438,402

Money market checking

15,868,769

14,639,069

12,790,707

11,242,205

Money market savings and passbooks

11,419,289

10,236,015

10,586,355

10,277,249

Certificates of deposit

9,495,453

12,238,479

13,935,060

14,042,346

Total Deposits

104,403,376

98,533,961

90,133,246

85,720,519

Short-term borrowings

5,000

5,000

800,000

775,000

Long-term FHLB advances

13,505,000

15,405,000

12,200,000

10,900,000

Senior notes

995,626

995,109

497,719

497,494

Subordinated notes

778,204

778,096

777,885

777,781

Other liabilities

2,193,956

2,010,793

2,003,677

2,926,735

Total Liabilities

121,881,162

117,727,959

106,412,527

101,597,529

Shareholders’ Equity:

Preferred stock

1,645,000

1,145,000

1,145,000

940,000

Common stock

1,722

1,721

1,686

1,685

Additional paid-in capital

4,571,499

4,543,051

4,214,915

4,198,442

Retained earnings

5,102,229

4,858,965

4,484,375

4,281,249

Accumulated other comprehensive income

24,159

27,191

5,131

9,830

Total Shareholders’ Equity

11,344,609

10,575,928

9,851,107

9,431,206

Total Liabilities and Shareholders’ Equity

$

133,225,771

$

128,303,887

$

116,263,634

$

111,028,735

____________

(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 September 30,

Quarter Ended June 30,

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

$

4,427,985

$

1,181

0.11

%

$

1,161,441

$

5,430

1.86

%

$

2,789,666

$

564

0.08

%

Investment securities:

U.S. Government-sponsored agency securities

202,174

1,186

2.35

%

740,893

5,375

2.90

%

214,835

1,367

2.55

%

Agency residential and commercial MBS

6,250,577

37,437

2.40

%

6,593,422

46,762

2.84

%

6,615,707

42,661

2.58

%

Other residential and commercial MBS

37,860

201

2.13

%

4,473

43

3.84

%

27,499

182

2.65

%

Municipal securities

12,309,647

129,097

4.19

%

9,184,274

101,154

4.41

%

11,949,615

126,906

4.25

%

Other investment securities (3)

44,782

309

2.76

%

24,977

156

2.49

%

43,800

309

2.83

%

Total investment securities

18,845,040

168,230

3.57

%

16,548,039

153,490

3.71

%

18,851,456

171,425

3.64

%

Loans: (4)

Residential real estate (5)

56,906,612

421,545

2.96

%

45,754,902

374,690

3.27

%

53,737,207

404,691

3.01

%

Multifamily (6)

13,312,631

124,759

3.67

%

11,391,573

111,727

3.84

%

12,887,676

120,657

3.70

%

Commercial real estate

7,801,603

78,412

3.93

%

7,280,053

77,654

4.17

%

7,718,257

77,635

3.98

%

Multifamily/commercial construction

2,739,717

30,608

4.37

%

2,294,560

29,055

4.95

%

2,632,682

29,468

4.43

%

Business (7)

12,538,201

110,487

3.45

%

11,551,439

129,314

4.38

%

13,069,640

115,666

3.50

%

PPP

2,091,580

10,825

2.03

%

%

1,620,772

7,659

1.87

%

Other (8)

6,995,592

41,735

2.33

%

5,704,872

48,746

3.34

%

6,658,487

42,116

2.50

%

Total loans

102,385,936

818,371

3.16

%

83,977,399

771,186

3.63

%

98,324,721

797,892

3.23

%

FHLB stock

457,808

6,116

5.31

%

321,778

5,779

7.13

%

491,938

5,059

4.14

%

Total interest-earning assets

126,116,769

993,898

3.12

%

102,008,657

935,885

3.63

%

120,457,781

974,940

3.22

%

Noninterest-earning cash

433,852

335,648

425,440

Goodwill and other intangibles

230,051

266,032

231,934

Other assets

5,074,504

4,409,665

4,905,493

Total noninterest-earning assets

5,738,407

5,011,345

5,562,867

Total Assets

$

131,855,176

$

107,020,002

$

126,020,648

Liabilities and Equity:

Deposits:

Checking

$

64,895,753

2,413

0.01

%

$

48,666,948

8,501

0.07

%

$

58,978,081

3,127

0.02

%

Money market checking and savings

26,220,043

13,675

0.21

%

20,536,777

53,046

1.02

%

24,133,700

15,224

0.25

%

CDs

11,334,100

38,267

1.34

%

13,170,046

73,370

2.21

%

12,721,452

54,129

1.71

%

Total deposits

102,449,896

54,355

0.21

%

82,373,771

134,917

0.65

%

95,833,233

72,480

0.30

%

Borrowings:

Short-term borrowings

5,030

0

0.00

%

2,204,262

12,520

2.25

%

2,747

0

0.04

%

Long-term FHLB advances

14,739,238

62,201

1.68

%

9,796,739

54,901

2.22

%

15,868,682

68,391

1.73

%

Senior notes (9)

995,373

6,032

2.42

%

497,384

3,350

2.69

%

994,905

6,034

2.43

%

Subordinated notes (9)

778,151

9,108

4.68

%

777,730

9,103

4.68

%

778,044

9,107

4.68

%

Total borrowings

16,517,792

77,341

1.86

%

13,276,115

79,874

2.39

%

17,644,378

83,532

1.90

%

Total interest-bearing liabilities

118,967,688

131,696

0.44

%

95,649,886

214,791

0.89

%

113,477,611

156,012

0.55

%

Noninterest-bearing liabilities

2,082,793

2,037,177

2,067,585

Preferred equity

1,226,522

940,000

1,145,000

Common equity

9,578,173

8,392,939

9,330,452

Total Liabilities and Equity

$

131,855,176

$

107,020,002

$

126,020,648

Net interest spread (10)

2.68

%

2.74

%

2.67

%

Net interest income (fully taxable-equivalent basis) and net interest margin (11)

$

862,202

2.71

%

$

721,094

2.80

%

$

818,928

2.70

%

Reconciliation of tax-equivalent net interest income to reported net interest income:

Tax-equivalent adjustment

(31,922)

(26,109)

(31,516)

Net interest income, as reported

$

830,280

$

694,985

$

787,412

Nine Months Ended September 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

$

3,028,868

$

5,685

0.25

%

$

1,231,578

$

18,966

2.06

%

Investment securities:

U.S. Government-sponsored agency securities

241,343

4,760

2.63

%

938,081

20,827

2.96

%

Agency residential and commercial MBS

6,536,601

127,283

2.60

%

6,705,085

144,106

2.87

%

Other residential and commercial MBS

23,118

415

2.40

%

4,508

131

3.88

%

Municipal securities

11,874,265

379,182

4.26

%

8,624,534

293,060

4.53

%

Other investment securities (3)

44,125

939

2.83

%

21,121

403

2.54

%

Total investment securities

18,719,452

512,579

3.65

%

16,293,329

458,527

3.75

%

Loans: (4)

Residential real estate (5)

53,991,954

1,231,219

3.04

%

43,212,352

1,073,950

3.31

%

Multifamily (6)

12,923,436

364,360

3.70

%

10,980,052

320,977

3.85

%

Commercial real estate

7,698,522

234,655

4.00

%

6,978,946

223,602

4.22

%

Multifamily/commercial construction

2,641,375

90,361

4.49

%

2,286,710

85,971

4.96

%

Business (7)

12,665,609

349,205

3.62

%

11,216,470

382,143

4.49

%

PPP

1,240,568

18,484

1.96

%

%

Other (8)

6,703,449

131,423

2.58

%

5,382,125

139,274

3.41

%

Total loans

97,864,913

2,419,707

3.27

%

80,056,655

2,225,917

3.69

%

FHLB stock

452,260

18,135

5.36

%

310,758

15,768

6.78

%

Total interest-earning assets

120,065,493

2,956,106

3.26

%

97,892,320

2,719,178

3.69

%

Noninterest-earning cash

434,181

341,984

Goodwill and other intangibles

232,014

269,246

Other assets

4,901,072

4,306,791

Total noninterest-earning assets

5,567,267

4,918,021

Total Assets

$

125,632,760

$

102,810,341

Liabilities and Equity:

Deposits:

Checking

$

59,266,405

13,972

0.03

%

$

47,006,632

21,541

0.06

%

Money market checking and savings

24,283,378

73,769

0.41

%

19,714,378

146,900

1.00

%

CDs

12,742,008

157,939

1.66

%

12,457,649

203,411

2.18

%

Total deposits

96,291,791

245,680

0.34

%

79,178,659

371,852

0.63

%

Borrowings:

Short-term borrowings

411,712

4,700

1.52

%

2,016,744

36,832

2.44

%

Long-term FHLB advances

14,676,405

197,158

1.79

%

9,149,268

147,669

2.16

%

Senior notes (9)

918,809

16,839

2.44

%

741,731

14,818

2.66

%

Subordinated notes (9)

778,045

27,320

4.68

%

777,629

27,305

4.68

%

Total borrowings

16,784,971

246,017

1.96

%

12,685,372

226,624

2.39

%

Total interest-bearing liabilities

113,076,762

491,697

0.58

%

91,864,031

598,476

0.87

%

Noninterest-bearing liabilities

2,060,245

1,780,107

Preferred equity

1,172,372

940,000

Common equity

9,323,381

8,226,203

Total Liabilities and Equity

$

125,632,760

$

102,810,341

Net interest spread (10)

2.68

%

2.82

%

Net interest income (fully taxable-equivalent basis) and net interest margin (11)

$

2,464,409

2.72

%

$

2,120,702

2.87

%

Reconciliation of tax-equivalent net interest income to reported net interest income:

Tax-equivalent adjustment

(94,585)

(76,653)

Net interest income, as reported

$

2,369,824

$

2,044,049

__________

(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 and other business 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
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

Operating Information

2020

2019

2020

2020

2019

($ in thousands, except per share amounts)

Net income to average assets (1)

0.88

%

0.87

%

0.82

%

0.82

%

0.89

%

Net income available to common shareholders to

average common equity (1)

11.56

%

10.50

%

10.43

%

10.40

%

10.49

%

Net income available to common shareholders to

average tangible common equity (1)

11.84

%

10.84

%

10.70

%

10.67

%

10.85

%

Dividends per common share

$

0.20

$

0.19

$

0.20

$

0.59

$

0.56

Dividend payout ratio

12.4

%

14.5

%

14.3

%

14.0

%

14.7

%

Efficiency ratio (2), (3)

60.7

%

63.8

%

62.0

%

62.0

%

64.4

%

Net loan charge-offs

$

1,687

$

4,341

$

1,098

$

2,987

$

5,694

Net loan charge-offs to average total loans (1)

0.01

%

0.02

%

0.00

%

0.00

%

0.01

%

Allowance for loan credit losses to:

Total loans

0.58

%

0.56

%

0.58

%

0.58

%

0.56

%

Nonaccrual loans

368.2

%

354.5

%

354.1

%

368.2

%

354.5

%

__________

(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.

Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

Effective Tax Rate

2020

2019

2020

2020

2019

Effective tax rate, prior to excess tax benefits and tax refund from an amended tax return

21.1

%

21.4

%

22.5

%

21.6

%

21.4

%

Excess tax benefits—stock options

(0.1)

(3.3)

(1.0)

(0.8)

(3.6)

Excess tax benefits—other stock awards

(0.1)

(0.1)

(2.1)

(0.8)

(0.8)

Total excess tax benefits

(0.2)

(3.4)

(3.1)

(1.6)

(4.4)

Tax refund from an amended tax return

(1.3)

(0.5)

Effective tax rate

19.6

%

18.0

%

19.4

%

19.5

%

17.0

%

Provision for Credit Losses

Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

2020

2019

2020

2020

2019

($ in thousands)

Debt securities held-to-maturity

$

333

$

$

296

$

1,047

$

Loans

22,437

16,711

43,189

113,305

52,111

Unfunded loan commitments (1)

5,768

(12,368)

7,673

Total provision

$

28,538

$

16,711

$

31,117

$

122,025

$

52,111

__________

(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
September 30, 2020

Nine Months Ended
September 30, 2020

Allowance for Credit Losses

Debt Securities Held-to-Maturity

Loans

Unfunded Loan Commitments (1)

Total

Debt Securities Held-to-Maturity

Loans

Unfunded Loan Commitments (1)

Total

($ in thousands)

Balance at beginning of

period (2)

$

5,383

$

583,997

$

17,602

$

606,982

$

4,669

$

494,429

$

15,697

$

514,795

Provision for credit losses

333

22,437

5,768

28,538

1,047

113,305

7,673

122,025

Net charge-offs

(1,687)

(1,687)

(2,987)

(2,987)

Balance at end of period

$

5,716

$

604,747

$

23,370

$

633,833

$

5,716

$

604,747

$

23,370

$

633,833

__________

(1) The allowance for credit losses on unfunded loan commitments is included in other liabilities.

(2) For the nine months ended September 30, 2020, represents the balance after the cumulative effect adjustment from the adoption of CECL.

Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

Mortgage Loan Sales

2020

2019

2020

2020

2019

($ in thousands)

Loans sold:

Flow sales:

Agency

$

44,118

$

25,214

$

10,810

$

80,702

$

51,426

Non-agency

11,932

31,870

43,266

Total flow sales

44,118

37,146

10,810

112,572

94,692

Bulk sales:

Non-agency

235,732

673,401

152,119

Securitizations

300,116

300,116

Total loans sold

$

279,850

$

37,146

$

310,926

$

1,086,089

$

246,811

Gain (loss) on sale of loans:

Amount (1)

$

13,797

$

122

$

(1,147)

$

14,575

$

466

Gain (loss) as a percentage of loans sold (1)

4.93

%

0.33

%

(0.37)

%

1.34

%

0.19

%

__________

(1) The gain for the quarter and nine months ended September 30, 2020 included $10.3 million related to discounts on purchased loans. Excluding these discounts of $10.3 million, the gain as a percentage of loans sold was 1.24% and 0.39% for the quarter and nine months ended September 30, 2020, respectively.

Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,

Loan Originations

2020

2019 (1)

2020 (2)

2020

2019 (1)

($ in thousands)

Single family (1-4 units)

$

6,813,850

$

4,872,598

$

5,875,184

$

16,208,370

$

11,129,819

Home equity lines of credit

432,443

359,154

457,737

1,285,688

1,067,881

Single family construction

186,833

175,361

119,318

415,313

455,061

Multifamily (5+ units)

955,951

710,183

946,820

2,684,074

2,105,764

Commercial real estate

193,228

543,964

330,683

975,769

1,309,736

Multifamily/commercial construction

245,220

387,144

131,414

997,555

835,272

Capital call lines of credit

1,803,907

2,337,530

1,405,347

5,594,483

5,463,704

Tax-exempt

328,711

48,125

184,054

612,784

234,470

Other business

243,788

428,533

914,257

1,777,824

1,108,712

PPP

1,981,797

1,981,797

Stock secured

685,250

443,691

519,416

1,797,226

1,119,145

Other secured

189,386

218,831

358,730

961,940

841,001

Unsecured

159,379

438,278

203,270

685,537

1,068,959

Total loans originated

$

12,237,946

$

10,963,392

$

13,428,027

$

35,978,360

$

26,739,524

__________

(1) For comparability, the Bank has adjusted certain prior period amounts to conform to the current period presentation under CECL.

(2) Excluding PPP loan originations, total loan originations were $11.4 billion for the quarter ended June 30, 2020.

As of

Asset Quality Information

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

($ in thousands)

Nonperforming assets:

Nonaccrual loans

$

164,247

$

164,930

$

125,418

$

143,181

$

136,928

Other real estate owned

1,071

1,071

Total nonperforming assets

$

164,247

$

166,001

$

126,489

$

143,181

$

136,928

Nonperforming assets to total assets

0.12

%

0.13

%

0.10

%

0.12

%

0.12

%

Accruing loans 90 days or more past due

$

935

$

3,764

$

$

$

Restructured accruing loans

$

11,378

$

11,501

$

13,418

$

13,287

$

14,964

September 30, 2020

COVID-19 Loan Modifications (1), (2), (3), (4)

Unpaid Principal Balance

Deferred Interest (5)

LTV (6)

Average Loan Size

Number of Loans

($ in millions)

Single family (1-4 units)

$

1,780

$

25

60

%

$

1.0

1,788

Home equity lines of credit

71

1

57

%

$

0.4

174

Single family construction

10

55

%

$

1.4

7

Multifamily (5+ units)

548

7

52

%

$

3.1

179

Commercial real estate

1,004

13

48

%

$

3.7

275

Multifamily/commercial construction

68

2

41

%

$

6.8

10

Capital call lines of credit

n/a

$

Tax-exempt

72

1

n/a

$

17.9

4

Other business

176

2

n/a

$

1.3

138

Stock secured

n/a

$

Other secured

5

n/a

$

0.5

12

Unsecured (7)

131

n/a

$

0.1

985

Total

$

3,865

$

51

3,572

__________

(1) COVID-19 loan modifications are not classified as troubled debt restructurings.

(2) Includes 936 loans totaling $297 million that have completed their deferral period, but for which a normal payment is not yet due.

(3) Includes 10 loans totaling $46 million that were modified a second time.

(4) Excludes 395 loans totaling $330 million that have completed their deferral period and returned to a normal payment schedule or are no longer outstanding.

(5) Represents interest payments not made during the deferral period through September 30, 2020.

(6) Weighted average loan-to-value (“LTV”) ratios for real estate secured loans are based on appraised value at the time of origination.

(7) Includes $130 million of household debt refinance loans.

September 30, 2020

Loan Industry Information

Unpaid Principal Balance

LTV

Average Loan Size

Number of Loans

Personal Guarantee %

($ in millions)

Retail

$

1,774

49

%

$

2.7

682

76

%

Hotel

430

48

%

$

6.8

65

74

%

Restaurant (1)

231

51

%

$

1.1

215

94

%

Total (2)

$

2,435

962

__________

(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

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

($ in millions)

Loans serviced for investors

$

7,799

$

8,316

$

9,203

$

9,298

$

10,080

 

Common Shares, Book Value per Common Share and Tangible Book Value per Common Share

As of

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

(in thousands, except per share amounts)

Number of shares of common stock outstanding

172,188

172,094

171,395

168,621

168,450

Book value per common share

$

56.33

$

54.80

$

53.76

$

51.63

$

50.41

Tangible book value per common share

$

55.00

$

53.46

$

52.40

$

50.24

$

48.84

As of

Capital Ratios

September 30,
2020 (1), (2)

June 30,
2020 (2)

March 31,
2020 (2)

December 31,
2019

September 30,
2019

Tier 1 leverage ratio (Tier 1 capital to average assets)

8.38

%

8.15

%

8.46

%

8.39

%

8.50

%

Common Equity Tier 1 capital to risk-weighted assets

9.78

%

9.80

%

9.87

%

9.86

%

9.91

%

Tier 1 capital to risk-weighted assets

11.50

%

11.04

%

11.14

%

11.21

%

11.05

%

Total capital to risk-weighted assets

12.94

%

12.49

%

12.62

%

12.73

%

12.61

%

Regulatory Capital (3)

($ in thousands)

Common Equity Tier 1 capital

$

9,375,688

$

9,103,771

$

8,887,905

$

8,371,192

$

8,124,179

Tier 1 capital

$

11,020,688

$

10,248,771

$

10,032,905

$

9,516,192

$

9,064,179

Total capital

$

12,396,304

$

11,604,141

$

11,365,654

$

10,802,209

$

10,340,902

Assets (3)

($ in thousands)

Average assets

$

131,517,445

$

125,690,830

$

118,626,842

$

113,403,507

$

106,659,003

Risk-weighted assets

$

95,823,385

$

92,870,859

$

90,072,400

$

84,885,943

$

81,994,651

__________

(1) Ratios and amounts as of September 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

September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

($ in millions)

First Republic Investment Management

$

74,661

$

68,124

$

60,056

$

66,029

$

61,204

Brokerage and investment:

Brokerage

76,769

70,178

60,189

68,807

63,053

Money market mutual funds

4,416

5,933

6,893

4,268

4,402

Total brokerage and investment

81,185

76,111

67,082

73,075

67,455

Trust Company:

Trust

8,687

7,905

7,288

7,121

6,366

Custody

3,651

3,646

3,461

4,818

5,210

Total Trust Company

12,338

11,551

10,749

11,939

11,576

Total Wealth Management Assets

$

168,184

$

155,786

$

137,887

$

151,043

$

140,235

Contacts:

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

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.