First Republic Reports Strong Third Quarter 2018 Results

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First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended September 30, 2018.

“First Republic had a terrific quarter,” said Jim Herbert, Chairman and CEO. “Growth and new client acquisition across the franchise remain very strong. Credit quality remains excellent.”

Quarterly Highlights

Financial Results

  • Year-over-year:

    • Revenues were $768.8 million, up 14.7%.
    • Net income was $213.5 million, up 6.8%.
    • Diluted earnings per share of $1.19, up 4.4%.
    • Loan originations totaled $7.0 billion.
    • Tangible book value per share was $44.00, up 13.1%.
  • Net interest margin was 2.94%, compared to 2.95% last quarter.
  • Efficiency ratio was 63.0%, compared to 63.5% last quarter.

Continued Capital and Credit Strength

  • Common Equity Tier 1 ratio was 10.47%, compared to 10.58% a year ago.
  • Nonperforming assets remained very low at 4 basis points of total assets.
  • Net charge-offs were only $185,000, or less than 1 basis point of average loans.

Continued Franchise Development

  • Year-over-year:

    • Loans, excluding loans held for sale, totaled $72.3 billion, up 21.6%.
    • Deposits were $74.8 billion, up 14.2%.
    • Wealth management assets were $131.0 billion, up 29.2%.
    • Wealth management revenues were $109.7 million, up 24.0%.

“Total revenues and net interest income both increased 15% compared to a year ago,” said Mike Roffler, Chief Financial Officer. “We are pleased that the efficiency ratio remained stable, while we continue to invest in the franchise.”

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the third quarter of $0.18 per share of common stock, which is payable on November 8, 2018 to shareholders of record as of October 25, 2018.

Very Strong Asset Quality

Credit quality remains very strong. Nonperforming assets were only 4 basis points of total assets at September 30, 2018.

The Bank had net charge-offs for the quarter of $185,000, while adding $18.6 million to its allowance for loan losses due to continued loan growth.

Continued Capital Strength and Access to Capital Markets

The Bank’s Common Equity Tier 1 ratio was 10.47% at September 30, 2018, compared to 10.58% a year ago.

During the third quarter, the Bank issued and sold 2,000,000 new shares of common stock in an underwritten public offering, which added $200.6 million to common equity.

As previously indicated, the Bank currently expects to redeem its $200.0 million of 7.00% Noncumulative Perpetual Series E Preferred Stock when such stock becomes redeemable at the Bank’s option on or after December 28, 2018, subject to all applicable regulatory approvals.

Tangible Book Value Growth

Tangible book value per common share at September 30, 2018 was $44.00, up 13.1% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations were $7.0 billion for the quarter, down 3.0% from last year’s third quarter, largely due to a decline in single family refinance volume.

Loans, excluding loans held for sale, totaled $72.3 billion at September 30, 2018, up 21.6% compared to a year ago, primarily due to increases in single family, business and multifamily loans.

Deposit Growth

Total deposits increased to $74.8 billion, up 14.2% compared to a year ago.

At September 30, 2018, checking accounts totaled 60.0% of deposits.

Investments

Total investment securities at September 30, 2018 were $16.3 billion, down 1% for the quarter and down 6.9% compared to a year ago.

High-quality liquid assets totaled $15.0 billion at September 30, 2018, and represented 16.2% of average total assets. High-quality liquid assets now include $5.0 billion of municipal securities that qualify under the amended definition of high-quality liquid assets from a recent FDIC rule.

Mortgage Banking Activity

During the third quarter, the Bank sold $92.1 million of loans and recorded a gain on sale of $303,000, compared to loan sales of $822.4 million and a gain of $2.0 million during the third quarter of last year.

Loans serviced for investors at quarter-end totaled $11.7 billion, down 3.1% from a year ago.

Continued Expansion of Wealth Management

Wealth management revenues totaled $109.7 million for the quarter, up 24.0% compared to last year’s third quarter. Such revenues represented 14.3% of the Bank’s total revenues for the quarter.

Total wealth management assets were $131.0 billion at September 30, 2018, up 8.1% for the quarter and up 29.2% compared to a year ago. The growth in wealth management assets was primarily due to net new assets from both existing and new clients.

Wealth management assets included investment management assets of $62.5 billion, brokerage assets and money market mutual funds of $58.0 billion, and trust and custody assets of $10.5 billion.

Income Statement and Key Ratios

Strong Revenue Growth

Total revenues were $768.8 million for the quarter, up 14.7% compared to the third quarter a year ago.

Strong Net Interest Income Growth

Net interest income was $634.5 million for the quarter, up 15.2% compared to the third quarter a year ago. The increase in net interest income resulted primarily from growth in average earning assets.

Net Interest Margin

The net interest margin was 2.94% for the third quarter, compared to 2.95% for the prior quarter.

Noninterest Income

Noninterest income was $134.4 million for the quarter, up 12.6% compared to the third quarter a year ago. The increase was primarily from growth in wealth management revenues.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $484.0 million for the quarter, up 15.7% 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 expansion of the franchise.

The efficiency ratio was 63.0% for the quarter, compared to 62.4% for the third quarter a year ago.

Income Taxes

Beginning in 2018, federal tax reform legislation reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain tax deductions.

The Bank’s effective tax rate for the third quarter of 2018 was 19.8%, compared to 16.8% for the second quarter of 2018 and 17.3% for the third quarter of 2017. The increase compared to the prior quarter was primarily the result of lower tax benefits from the decreased vesting of stock awards. The increase compared to the third quarter of 2017 was primarily the result of lower tax benefits from a decrease in both stock option exercises and vesting of stock awards, partially offset by a decrease in the corporate federal tax rate.

Conference Call Details

First Republic Bank’s third quarter 2018 earnings conference call is scheduled for October 12, 2018 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (877) 407-0792 approximately 10 minutes prior to the start time (to allow time for registration). International callers should dial +1 (201) 689-8263.

The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of First Republic’s website at firstrepublic.com. To listen to the live webcast, please visit the site at least 10 minutes prior to the start time to register, download and install any necessary audio software.

For those unable to join the live presentation, a replay of the call will be available beginning October 12, 2018, at 10:00 a.m. PT / 1:00 p.m. ET, through October 17, 2018, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 and use conference ID #13683358. International callers should dial +1 (412) 317-6671 and enter the same conference ID number. A replay of the webcast also will be available for 90 days following, accessible in the Investor Relations section of First Republic Bank’s website at firstrepublic.com.

The Bank’s press releases are available after release in the Investor Relations section of First Republic Bank’s website at firstrepublic.com.

About First Republic Bank

Founded in 1985, First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services. First Republic specializes in delivering exceptional, relationship-based service, 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 and San Diego, California; Portland, Oregon; Boston, Massachusetts; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; and later in 2018, Jackson, Wyoming. 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 firstrepublic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimates,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.

Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: significant competition to attract and retain banking and wealth management customers, from both traditional and non-traditional financial services and technology companies; our ability to recruit and retain key managers, employees and board members; the possibility of earthquakes, fires and other natural disasters affecting the markets in which we operate; interest rate risk and credit risk; our ability to maintain and follow high underwriting standards; economic and market conditions affecting the valuation of our investment securities portfolio, which could result in other-than-temporary impairment if the general economy deteriorates, credit ratings decline, the financial condition of issuers deteriorates, interest rates increase or the liquidity for securities is limited; real estate prices generally and in our markets; our geographic and product concentrations; demand for our products and services; the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements; the impact of tax reform legislation; the phase-in of capital requirements under the Basel III framework, and any future changes to regulatory capital requirements; legislative and regulatory actions affecting us and the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), including increased compliance costs, limitations on activities and requirements to hold additional capital, as well as changes to the Dodd-Frank Act pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act; our ability to avoid litigation and its associated costs and liabilities; the impact of new accounting standards; future Federal Deposit Insurance Corporation (“FDIC”) special assessments or changes to regular assessments; fraud, cybersecurity and privacy risks; and custom technology preferences of our customers and our ability to successfully execute on initiatives relating to enhancements of our technology infrastructure, including client-facing systems and applications. For a discussion of these and other risks and uncertainties, see First Republic’s FDIC filings, including, but not limited to, the risk factors in First Republic’s Annual Report on Form 10-K and any subsequent reports filed by First Republic with the FDIC. These filings are available in the Investor Relations section of our website.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout our public filings. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

 

CONSOLIDATED STATEMENTS OF INCOME

 
 

Quarter Ended
September 30,

 

Quarter Ended
June 30,

 

Nine Months Ended
September 30,

(in thousands, except per share amounts) 2018   2017 2018 2018   2017
Interest income:
Loans $ 633,794 $ 497,162 $ 589,912 $ 1,765,019 $ 1,388,370
Investments 134,111 132,948 133,992 406,373 381,441
Other 5,237 3,864 4,850 15,065 10,019
Cash and cash equivalents 6,896   3,193   5,685   16,494   8,987  
Total interest income 780,038   637,167   734,439   2,202,951   1,788,817  
 
Interest expense:
Deposits 81,438 40,260 62,027 193,852 88,666
Borrowings 64,146   45,954   60,719   175,194   117,549  
Total interest expense 145,584   86,214   122,746   369,046   206,215  
 
Net interest income 634,454 550,953 611,693 1,833,905 1,582,602
Provision for loan losses 18,633   10,113   19,370   51,003   43,139  
Net interest income after provision for loan losses 615,821   540,840   592,323   1,782,902   1,539,463  
 
Noninterest income:
Investment management fees 88,560 70,796 82,925 249,602 200,510
Brokerage and investment fees 9,058 7,843 8,826 28,416 22,847
Trust fees 3,599 3,246 3,606 10,694 9,896
Foreign exchange fee income 8,439 6,551 9,547 25,383 19,493
Deposit fees 6,225 5,736 6,280 18,490 16,763
Loan and related fees 4,091 3,270 4,134 11,842 9,911
Loan servicing fees, net 3,151 3,520 3,186 9,856 9,868
Gain on sale of loans 303 1,963 4,045 5,037 6,168
Gain (loss) on investment securities, net (1,655 ) 1,204 (1,027 ) 6,515 (833 )
Income from investments in life insurance 11,608 8,865 9,612 30,697 28,038
Other income 996   6,339   1,287   3,366   7,503  
Total noninterest income 134,375   119,333   132,421   399,898   330,164  
 
Noninterest expense:
Salaries and employee benefits 279,248 236,996 271,935 828,207 680,832
Information systems 59,259 53,663 59,530 177,753 150,486
Occupancy 38,792 34,129 37,216 112,180 101,126
Professional fees 15,718 17,573 15,588 44,720 40,974
FDIC assessments 17,679 14,197 16,064 49,275 40,948
Advertising and marketing 13,527 10,639 15,120 40,575 31,225
Other expenses 59,776   51,162   57,104   165,427   148,407  
Total noninterest expense 483,999   418,359   472,557   1,418,137   1,193,998  
 
Income before provision for income taxes 266,197 241,814 252,187 764,663 675,629
Provision for income taxes 52,651   41,805   42,406   142,253   112,246  
Net income 213,546 200,009 209,781 622,410 563,383
Dividends on preferred stock 17,112   14,272   12,163   41,497   43,768  
Net income available to common shareholders $ 196,434   $ 185,737   $ 197,618   $ 580,913   $ 519,615  
 
Basic earnings per common share $ 1.20   $ 1.18   $ 1.22   $ 3.58   $ 3.32  
Diluted earnings per common share $ 1.19   $ 1.14   $ 1.20   $ 3.52   $ 3.21  
 
Weighted average shares—basic 163,048   157,752   162,152   162,322   156,699  
Weighted average shares—diluted 165,498   162,377   165,013   165,109   161,725  
 
 

CONSOLIDATED BALANCE SHEETS

 
  As of
($ in thousands)

September 30,
2018

 

June 30,
2018

 

December 31,
2017

 

September 30,
2017

ASSETS

 
Cash and cash equivalents $ 3,013,645 $ 3,993,226 $ 2,297,021 $ 2,681,599
Investment securities available-for-sale 2,000,271 2,163,773 2,418,088 2,312,218
Investment securities held-to-maturity 14,294,769 14,284,071 16,157,945 15,218,615
Equity securities (fair value) 19,121 19,997
 
Loans:
Single family (1-4 units) 36,213,714 34,276,540 31,508,468 29,799,762
Home equity lines of credit 2,543,652 2,613,639 2,735,612 2,668,604
Multifamily (5+ units) 9,779,693 9,707,084 8,640,233 8,060,467
Commercial real estate 6,459,654 6,321,195 6,083,152 5,879,437
Single family construction 654,643 650,181 591,066 549,978
Multifamily/commercial construction 1,422,746 1,285,072 1,116,855 1,053,708
Business 10,382,050 9,603,626 8,295,224 7,952,335
Stock secured 1,371,546 1,380,255 1,083,553 1,029,463
Other secured 1,101,721 1,039,448 1,015,039 974,933
Unsecured 2,399,078   2,269,854   1,771,013     1,504,263  
Total loans 72,328,497   69,146,894   62,840,215     59,472,950  
Allowance for loan losses (415,825 ) (397,377 ) (365,932 )   (347,765 )
Loans, net 71,912,672   68,749,517   62,474,283     59,125,185  
 
Loans held for sale 274,181 46,753 87,695 716,046
Investments in life insurance 1,361,473 1,349,823 1,330,652 1,320,775
Tax credit investments 1,074,834 1,054,536 1,107,546 1,126,647
Prepaid expenses and other assets 1,483,892 1,533,840 1,254,720 1,183,044
Premises, equipment and leasehold improvements, net 324,052 312,278 296,197 277,809
Goodwill and other intangible assets 277,625 281,550 290,221 294,967
Mortgage servicing rights 57,687   62,096   66,139     63,191  
Total Assets $ 96,094,222   $ 93,851,460   $ 87,780,507     $ 84,320,096  
 

LIABILITIES AND EQUITY

Liabilities:
Deposits:
Noninterest-bearing checking $ 29,317,754 $ 28,428,832 $ 26,355,331 $ 25,122,856
Interest-bearing checking 15,517,614 15,490,545 17,324,683 14,457,910
Money market checking 9,708,305 10,054,060 9,251,504 9,895,827
Money market savings and passbooks 8,961,311 8,599,957 8,752,396 8,843,432
Certificates of deposit 11,254,268   10,198,556   7,234,794     7,116,298  
Total Deposits 74,759,252   72,771,950   68,918,708     65,436,323  
 
Short-term borrowings 100,000 600,000 100,000 450,000
Long-term FHLB advances 9,600,000 9,650,000 8,300,000 8,300,000
Senior notes 896,001 895,572 894,723 894,304
Subordinated notes 777,376 777,278 777,084 776,989
Other liabilities 1,294,906   880,687   971,691     1,034,534  
Total Liabilities 87,427,535   85,575,487   79,962,206     76,892,150  
 
Shareholders’ Equity:
Preferred stock 1,140,000 1,140,000 990,000 990,000
Common stock 1,648 1,626 1,617 1,579
Additional paid-in capital 4,000,146 3,772,323 3,778,913 3,536,400
Retained earnings 3,546,298 3,379,725 3,051,611 2,899,417
Accumulated other comprehensive income (loss) (21,405 ) (17,701 ) (3,840 )   550  
Total Shareholders’ Equity 8,666,687   8,275,973   7,818,301     7,427,946  
Total Liabilities and Shareholders’ Equity $ 96,094,222   $ 93,851,460   $ 87,780,507     $ 84,320,096  
 
   
Quarter Ended September 30, Quarter Ended June 30,
2018   2017 2018
Average Balances, Yields
and Rates

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

Average
Balance

 

Interest
Income/
Expense (1)

 

Yields/
Rates (2)

($ in thousands)
Assets:
Cash and cash equivalents $ 1,490,468 $ 6,896 1.84 % $ 1,121,328 $ 3,193 1.13 % $ 1,404,683 $ 5,685 1.62 %
Investment securities:
U.S. Treasury and other

U.S. Government agency

securities

% 110,365 201 0.73 % %
U.S. Government-sponsored

agency securities

1,044,897 7,776 2.98 % 1,211,157 8,491 2.80 % 1,044,897 7,772 2.98 %
Mortgage-backed securities:
Agency residential and

commercial MBS

7,355,930 51,705 2.81 % 7,529,020 47,528 2.53 % 7,423,001 50,842 2.74 %
Other residential and

commercial MBS

4,690 37 3.16 % 7,956 57 2.84 % 4,753 38 3.21 %
Municipal securities (3) 7,989,269 93,425 4.68 % 8,303,878 118,189 5.70 % 8,044,313 94,478 4.69 %
Other investment securities (4) 19,669   115   2.34 % 10,308   49   1.89 % 19,863   127   2.55 %
Total investment securities 16,414,455   153,058   3.73 % 17,172,684   174,515   4.07 % 16,536,827   153,257   3.70 %
 
Loans:
Residential real estate 37,929,270 306,521 3.23 % 32,677,895 247,645 3.03 % 36,424,028 287,872 3.16 %
Multifamily 9,907,089 94,352 3.73 % 7,710,418 69,804 3.54 % 9,389,300 87,044 3.67 %
Commercial real estate 6,369,984 67,360 4.14 % 5,852,988 60,811 4.07 % 6,276,975 65,473 4.13 %
Construction 1,996,313 24,286 4.76 % 1,542,172 18,302 4.64 % 1,893,614 22,238 4.65 %
Business (3) 9,828,856 108,350 4.31 % 7,849,348 86,835 4.33 % 9,181,127 98,061 4.22 %
Other 4,744,162   39,593   3.27 % 3,332,893   25,825   3.03 % 4,414,474   35,746   3.20 %
Total loans 70,775,674   640,462   3.58 % 58,965,714   509,222   3.41 % 67,579,518   596,434   3.51 %
FHLB stock 298,880   5,237   6.95 % 274,424   3,864   5.59 % 300,068   4,850   6.48 %

Total interest-earning

assets

88,979,477   805,653   3.59 % 77,534,150   690,794   3.53 % 85,821,096   760,226   3.53 %
 
Noninterest-earning cash 353,753 315,592 344,451
Goodwill and other intangibles 279,523 301,823 283,575
Other assets 3,518,736   3,280,800   3,472,410  
Total noninterest-earning
assets
4,152,012   3,898,215   4,100,436  
Total Assets $ 93,131,489   $ 81,432,365   $ 89,921,532  
 
Liabilities and Equity:
Deposits:
Checking $ 44,102,853 5,186 0.05 % $ 39,109,681 3,585 0.04 % $ 43,377,084 5,478 0.05 %
Money market checking and
savings
18,095,858 31,313 0.69 % 17,641,318 16,156 0.36 % 16,885,281 21,787 0.52 %
CDs 9,770,083   44,939   1.82 % 6,327,378   20,519   1.29 % 8,710,862   34,762   1.60 %
Total deposits 71,968,794   81,438   0.45 % 63,078,377   40,260   0.25 % 68,973,227   62,027   0.36 %
 
Borrowings:
Short-term borrowings 423,383 2,248 2.11 % 653,263 1,968 1.20 % 1,419,945 6,652 1.88 %
Long-term FHLB advances 9,681,793 46,872 1.92 % 7,558,696 28,828 1.51 % 8,904,396 39,045 1.76 %
Senior notes (5) 895,791 5,928 2.65 % 894,086 5,918 2.65 % 895,364 5,925 2.65 %
Subordinated notes (5) 777,328 9,098 4.68 % 776,943 9,094 4.68 % 777,230 9,097 4.68 %
Other borrowings     % 20,123   146   2.90 %     %
Total borrowings 11,778,295   64,146   2.16 % 9,903,111   45,954   1.85 % 11,996,935   60,719   2.03 %
Total interest-bearing
liabilities
83,747,089   145,584   0.69 % 72,981,488   86,214   0.47 % 80,970,162   122,746   0.61 %
 
Noninterest-bearing liabilities 894,573 1,029,656 899,451
Preferred equity 1,140,000 990,000 900,989
Common equity 7,349,827   6,431,221   7,150,930  
Total Liabilities and
Equity
$ 93,131,489   $ 81,432,365   $ 89,921,532  
 
Net interest spread (6) 2.90 % 3.06 % 2.92 %
Net interest income (fully
taxable-equivalent basis) and
net interest margin (3), (7)
$ 660,069   2.94 % $ 604,580   3.09 % $ 637,480   2.95 %
 
Reconciliation of tax-equivalent net interest

income to reported net interest income:

Tax-equivalent adjustment (3) (25,615 ) (53,627 ) (25,787 )
Net interest income, as reported $ 634,454   $ 550,953   $ 611,693  
 
           
Nine Months Ended September 30,
2018 2017
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 $ 1,341,984 $ 16,494 1.64 % $ 1,296,152 $ 8,987 0.93 %
Investment securities:
U.S. Treasury and other U.S. Government
agency securities
6,277 87 1.85 % 110,642 602 0.73 %
U.S. Government-sponsored agency securities 1,081,651 23,989 2.96 % 1,133,976 23,302 2.74 %
Mortgage-backed securities:
Agency residential and commercial MBS 7,462,205 152,656 2.73 % 7,279,790 136,817 2.51 %
Other residential and commercial MBS 5,167 222 5.73 % 8,455 180 2.84 %
Municipal securities (3) 8,139,055 287,447 4.71 % 7,844,979 340,915 5.79 %
Other investment securities (4) 19,838   359   2.41 % 4,878   58   1.58 %
Total investment securities 16,714,193   464,760   3.71 % 16,382,720   501,874   4.08 %
 
Loans:
Residential real estate 36,374,722 859,923 3.15 % 31,189,436 698,749 2.99 %
Multifamily 9,386,554 260,084 3.65 % 7,216,408 193,024 3.53 %
Commercial real estate 6,264,665 195,345 4.11 % 5,701,200 175,546 4.06 %
Construction 1,889,493 67,149 4.69 % 1,486,799 52,118 4.62 %
Business (3) 9,204,049 295,925 4.24 % 7,310,072 236,264 4.26 %
Other 4,377,812   106,081   3.20 % 3,053,755   67,576   2.92 %
Total loans 67,497,295   1,784,507   3.51 % 55,957,670   1,423,277   3.37 %
FHLB stock 293,369   15,065   6.87 % 219,457   10,019   6.10 %
Total interest-earning assets 85,846,841   2,280,826   3.53 % 73,855,999   1,944,157   3.50 %
 
Noninterest-earning cash 348,613 318,898
Goodwill and other intangibles 283,651 307,202
Other assets 3,477,584   3,236,300  
Total noninterest-earning assets 4,109,848   3,862,400  
Total Assets $ 89,956,689   $ 77,718,399  
 
Liabilities and Equity:
Deposits:
Checking $ 43,312,861 16,173 0.05 % $ 38,165,057 6,146 0.02 %
Money market checking and savings 17,374,636 71,238 0.55 % 16,764,072 28,275 0.23 %
CDs 8,715,306   106,441   1.63 % 5,819,803   54,245   1.25 %
Total deposits 69,402,803   193,852   0.37 % 60,748,932   88,666   0.20 %
 
Borrowings:
Short-term borrowings 841,818 11,409 1.81 % 738,187 6,185 1.12 %
Long-term FHLB advances 8,985,073 118,716 1.77 % 6,635,165 73,882 1.49 %
Senior notes (5) 895,368 17,777 2.65 % 610,671 11,964 2.61 %
Subordinated notes (5) 777,231 27,292 4.68 % 715,510 25,102 4.68 %
Other borrowings     % 23,694   416   2.34 %
Total borrowings 11,499,490   175,194   2.04 % 8,723,227   117,549   1.80 %
Total interest-bearing liabilities 80,902,293   369,046   0.61 % 69,472,159   206,215   0.40 %
 
Noninterest-bearing liabilities 924,458 1,035,590
Preferred equity 961,978 986,836
Common equity 7,167,960   6,223,814  
Total Liabilities and Equity $ 89,956,689   $ 77,718,399  
 
Net interest spread (6) 2.92 % 3.10 %
Net interest income (fully taxable-equivalent basis)

and net interest margin (3), (7)

$ 1,911,780   2.95 % $ 1,737,942   3.12 %
 
Reconciliation of tax-equivalent net interest

income to reported net interest income:

Tax-equivalent adjustment (3) (77,875 ) (155,340 )
Net interest income, as reported $ 1,833,905   $ 1,582,602  

__________

(1) Interest income is presented on a fully taxable-equivalent basis.
(2) Yields/rates are annualized.
(3) Beginning in 2018, tax equivalent adjustments to interest income and yields reflect the corporate federal tax rate of 21%.
(4) Includes mutual funds and marketable equity securities.
(5) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs.
(6) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.
(7) 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 2018   2017 2018 2018   2017
($ in thousands, except per share amounts)
Net income to average assets (1) 0.91 % 0.97 % 0.94 % 0.93 % 0.97 %
Net income available to common shareholders to average common equity (1) 10.60 % 11.46 % 11.08 % 10.84 % 11.16 %
Net income available to common shareholders to average tangible common equity (1) 11.02 % 12.02 % 11.54 % 11.28 % 11.74 %
Net interest income to average interest-earning
assets (1)
2.83 % 2.82 % 2.86 % 2.86 % 2.86 %
Dividends per common share $ 0.18 $ 0.17 $ 0.18 $ 0.53 $ 0.50
Dividend payout ratio 15.2 % 14.9 % 15.0 % 15.1 % 15.6 %
Efficiency ratio (2) 63.0 % 62.4 % 63.5 % 63.5 % 62.4 %
 
Net loan charge-offs $ 185 $ 655 $ 771 $ 1,110 $ 1,772
Net loan charge-offs to average total loans (1) 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
 
Allowance for loan losses to:
Total loans 0.57 % 0.58 % 0.57 % 0.57 % 0.58 %
Nonaccrual loans 976.6 % 917.1 % 780.4 % 976.6 % 917.1 %
__________
(1) Ratios are annualized.
(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
 
     
Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,
Effective Tax Rate 2018   2017 2018 2018   2017
Effective tax rate, prior to excess tax benefits 20.8 % 23.1 % 21.5 % 21.1 % 23.1 %
 
Excess tax benefits—stock options (0.9 )% (3.9 )% (1.3 )% (1.3 )% (3.8 )%
Excess tax benefits—other stock awards (0.1 )% (1.9 )% (3.4 )% (1.2 )% (2.7 )%
Total excess tax benefits (1.0 )% (5.8 )% (4.7 )% (2.5 )% (6.5 )%
 
Effective tax rate 19.8 % 17.3 % 16.8 % 18.6 % 16.6 %
 
     
Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,
Mortgage Loan Sales 2018   2017 2018 2018   2017
($ in thousands)
Loans sold:
Flow sales:
Agency $ 15,365 $ 26,152 $ 7,724 $ 37,136 $ 110,145
Non-agency 76,772   88,534   32,865   165,292   217,565  
Total flow sales 92,137 114,686 40,589 202,428 327,710
 
Bulk sales:
Non-agency   707,669   681,332   773,041   1,580,225  
Total loans sold $ 92,137   $ 822,355   $ 721,921   $ 975,469   $ 1,907,935  
 
Gain on sale of loans:
Amount $ 303 $ 1,963 $ 4,045 $ 5,037 $ 6,168
Gain as a percentage of loans sold 0.33 % 0.24 % 0.56 % 0.52 % 0.32 %
 
     
Quarter Ended
September 30,

Quarter Ended
June 30,

Nine Months Ended
September 30,
Loan Originations 2018   2017 2018 2018   2017
($ in thousands)
Single family (1-4 units) $ 2,623,429 $ 2,987,278 $ 3,125,316 $ 8,075,457 $ 8,556,966
Home equity lines of credit 399,606 459,709 416,098 1,162,037 1,298,255
Multifamily (5+ units) 781,450 805,429 921,723 2,464,757 1,860,913
Commercial real estate 263,292 197,596 341,707 880,682 929,219
Construction 373,842 413,842 384,236 1,222,884 1,149,456
Business 1,978,596 1,879,393 3,097,056 7,133,106 4,486,005
Stock and other secured 321,020 320,952 748,450 1,736,016 1,255,148
Unsecured 287,748   179,686   318,227   1,034,317   647,444
Total loans originated $ 7,028,983   $ 7,243,885   $ 9,352,813   $ 23,709,256   $ 20,183,406
 
 
As of
Loan Servicing Portfolio

September 30,
2018

 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

($ in millions)
Loans serviced for investors $ 11,733   $ 12,374   $ 12,192   $ 12,495   $ 12,111
 
 
As of
Asset Quality Information September 30,
2018
 

June 30,
2018

  March 31,
2018
 

December 31,
2017

 

September 30,
2017

($ in thousands)
Nonperforming assets:
Nonaccrual loans $ 42,578 $ 50,920 $ 48,895 $ 37,656 $ 37,922
Other real estate owned          
Total nonperforming assets $ 42,578   $ 50,920   $ 48,895   $ 37,656   $ 37,922  
 
Nonperforming assets to total assets 0.04 % 0.05 % 0.05 % 0.04 % 0.04 %
 
Accruing loans 90 days or more past due $ $ $ $ $
 
Restructured accruing loans $ 11,830 $ 11,568 $ 11,853 $ 12,605 $ 18,242
 
 
As of
Book Value Ratios September 30,
2018
 

June 30,
2018

  March 31,
2018
 

December 31,
2017

 

September 30,
2017

(in thousands, except per share amounts)
Number of shares of common stock outstanding 164,761   162,638   161,863   161,696   157,930
Book value per common share $ 45.68   $ 43.88   $ 43.23   $ 42.23   $ 40.76
Tangible book value per common share $ 44.00   $ 42.15   $ 41.46   $ 40.43   $ 38.90
 
 
As of
2018   2017
Capital Ratios September 30 (1)   June 30   March 31 December 31   September 30
Tier 1 leverage ratio (Tier 1 capital to average

assets)

8.94 % 8.83 % 8.64 % 8.85 % 8.78 %
Common Equity Tier 1 capital to risk-weighted

assets

10.47 % 10.18 % 10.47 % 10.63 % 10.58 %
Tier 1 capital to risk-weighted assets 12.14 % 11.90 % 11.80 % 12.22 % 12.27 %
Total capital to risk-weighted assets 13.90 % 13.68 % 13.65 % 14.11 % 14.23 %
Regulatory Capital (2)
($ in thousands)
Common Equity Tier 1 capital $ 7,158,043 $ 6,766,573 $ 6,624,101 $ 6,488,618 $ 6,140,330
Tier 1 capital $ 8,298,043 $ 7,906,573 $ 7,464,101 $ 7,457,944 $ 7,121,330
Total capital $ 9,505,044 $ 9,095,028 $ 8,633,859 $ 8,615,389 $ 8,259,581
Assets (2)
($ in thousands)
Average assets $ 92,771,143 $ 89,560,555 $ 86,378,664 $ 84,238,404 $ 81,125,539
Risk-weighted assets $ 68,370,790 $ 66,461,529 $ 63,239,135 $ 61,054,077 $ 58,027,938
__________
(1) Ratios and amounts as of September 30, 2018 are preliminary.
(2) As defined by regulatory capital rules.
 
 
As of
Wealth Management Assets September 30,
2018
 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

 

September 30,
2017

($ in millions)
First Republic Investment Management $ 62,506 $ 59,329 $ 55,104 $ 52,712 $ 50,318
 
Brokerage and investment:
Brokerage 54,823 50,356 46,150 43,015 40,652
Money market mutual funds 3,149   1,575   2,104   1,671   1,201
Total brokerage and investment 57,972   51,931   48,254   44,686   41,853
 
Trust Company:
Trust 5,406 5,125 4,694 4,678 4,441
Custody 5,105   4,739   4,938   4,885   4,734
Total Trust Company 10,511   9,864   9,632   9,563   9,175
Total Wealth Management Assets $ 130,989   $ 121,124   $ 112,990   $ 106,961   $ 101,346
 

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