First Republic Reports Record Quarterly And Annual Results

SAN FRANCISCO, Jan. 14, 2016 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter and year ended December 31, 2015.

"First Republic reported record revenue and net income for both the quarter and the year," said CEO Jim Herbert.  "Our asset quality and capital continue to be very strong."

Full Year Highlights

Financial Results

• Core revenues were up 15.2%. ⁽¹⁾
• Net income was $522.1 million.
• Diluted earnings per share ("EPS") of $3.18.
• Core net income was $498.8 million, up 13.4%. ⁽¹⁾
• Core diluted EPS of $3.02, up 10.2%. ⁽¹⁾
• Loan originations totaled a record $19.7 billion for the year, up 16.0% over last year.
• Loans sold totaled $2.4 billion.
• Core net interest margin was 3.09%, compared to 3.14% for the prior year. ⁽¹⁾
• Core efficiency ratio was 60.5%. ⁽¹⁾

Continued Financial and Credit Strength

• Tier 1 leverage ratio was 9.21%.
• Common Equity Tier 1 ratio was 10.76%.
• Tangible book value per share was $30.16, up 13.6% from a year ago.
• Nonperforming assets were low at 12 basis points of total assets.
• Credit quality remains very strong, with net charge-offs of only $1.7 million for the year, less than 1 basis point.

Franchise Development

• Loans outstanding, excluding loans held for sale, totaled $44.1 billion, up 16.4% from a year ago.
• Deposits were $47.9 billion, up 29.0% from a year ago.
• Checking balances represented 63.2% of total deposits.
• Wealth management assets were $72.3 billion, up 35.4% from a year ago.
• Wealth management revenues were $231.7 million, up 20.5% from a year ago. ⁽²⁾

Quarterly Highlights

• Compared to last year's fourth quarter:
  • Core revenues were $484.9 million, up 20.8%. ⁽¹⁾
  • Core net income was $136.0 million, up 25.1%. ⁽¹⁾
  • Core diluted EPS of $0.82, up 22.4%. ⁽¹⁾
• Net income was $140.0 million.
• Diluted EPS of $0.84. 
• Loan originations totaled $4.7 billion.
• Loans sold totaled $367.6 million.
• Core net interest margin was 3.02%, compared to 3.09% for the prior quarter. ⁽¹⁾
• Core efficiency ratio was 61.4%. ⁽¹⁾
• Wealth management assets were $72.3 billion, up 22.9% from the prior quarter.

"Wealth management had a terrific quarter and year," said Vice Chair Katherine August-deWilde.  "For the year, wealth management revenues were up over 20% and now represent 13% of core revenues.  During the quarter, in addition to closing Constellation Wealth Advisors, we were pleased to welcome several wealth management teams to First Republic."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the fourth quarter of $0.15 per share of common stock, which is payable on February 11, 2016 to shareholders of record as of January 28, 2016. 

Strong Asset Quality

Credit quality remains very strong.  Nonperforming assets were 12 basis points of total assets at December 31, 2015. 

The Bank had net charge-offs for the quarter of $1.4 million, while adding $12.0 million to its allowance for loan losses due to continued loan growth.  Net charge-offs for the year were $1.7 million, less than 1 basis point of average loans.  A total of $55.4 million was added to the Bank's allowance for loan losses during the year.

Continued Capital Strength

During the fourth quarter, the Bank issued 3.5 million shares of common stock, which added approximately $226 million to common equity.

The Bank's Tier 1 leverage ratio was 9.21% and Common Equity Tier 1 ratio was 10.76% at December 31, 2015.

Tangible Book Value Growth

Tangible book value per common share was $30.16 at December 31, 2015, up 13.6% from a year ago.  Since repurchasing the Bank five and a half years ago, tangible book value per common share has grown 16% per year.   

Continued Franchise Development

Loan Originations

Loan originations totaled $4.7 billion for the quarter, compared to $4.3 billion for the fourth quarter a year ago.  For 2015, loan originations totaled $19.7 billion, compared to $17.0 billion for the prior year, up 16.0%.

Loans outstanding, excluding loans held for sale, totaled $44.1 billion at December 31, 2015, up 16.4% compared to a year ago.

Deposit Growth

Total deposits increased to $47.9 billion, up 8.0% for the quarter and up 29.0% compared to a year ago.  At December 31, 2015, checking accounts totaled 63.2% of deposits.  The Bank is almost entirely deposit-funded, with deposits representing 90% of total liabilities at December 31, 2015.

The average rate paid on all deposits was 0.14% for both the fourth quarter and the prior quarter.

Investments

Total investments at December 31, 2015 were $10.5 billion, up 28.1% for the quarter and 57.4% compared to a year ago. 

High-quality liquid assets, from a regulatory perspective, totaled $5.8 billion at December 31, 2015, up 22.6% from $4.7 billion at September 30, 2015.  Such assets were up 80.4% for the year.

Mortgage Banking Activity

During the fourth quarter, the Bank sold $367.6 million of loans and recorded a gain on sale of $1.5 million, compared to loan sales of $991.3 million and a gain on sale of $4.1 million during the fourth quarter of last year.

For the year ended December 31, 2015, the Bank sold $2.4 billion of loans, compared to $4.4 billion for the prior year.  Gain on sale of loans for the year ended December 31, 2015 was $9.7 million, compared to $35.5 million for the prior year.

Loans serviced for investors at year-end totaled $10.5 billion, up 9.8% from a year ago.  Net loan servicing fees for the year were $13.0 million, up 34.4% from $9.7 million for the prior year.

Continued Expansion of Wealth Management

Wealth management revenues totaled $67.1 million for the quarter, up 26.4% compared to last year's fourth quarter.  For the year ended December 31, 2015, wealth management revenues were $231.7 million, an increase of 20.5% compared to the prior year.

Total wealth management assets were $72.3 billion at December 31, 2015, up 22.9% for the quarter and up 35.4% compared to a year ago.  The increase in wealth management assets includes assets under management from the Constellation acquisition on October 1, 2015. 

In addition, the growth in wealth management assets was due to net new assets from both existing and new clients.  Wealth management assets include investment management assets of $35.2 billion, brokerage assets and money market mutual funds of $30.2 billion, and trust and custody assets of $6.8 billion.

Income Statement and Key Ratios

Highlights

Strong Core Revenue Growth

Total revenues were $494.9 million for the quarter and $1.8 billion for 2015.

Core revenues were $484.9 million for the fourth quarter and $1.8 billion for 2015, up 20.8% compared to last year's fourth quarter and up 15.2% compared to 2014. ⁽¹⁾   

Continued Core Net Interest Income Growth

Net interest income was $404.7 million for the quarter and $1.5 billion for 2015.   

Core net interest income was $394.7 million for the fourth quarter, a 21.3% increase from the fourth quarter of last year.  Core net interest income was $1.5 billion for all of 2015, a 16.2% increase from the prior year, resulting primarily from growth in average earning assets. ⁽¹⁾

Core Net Interest Margin

The Bank's net interest margin was 3.10% for the fourth quarter and 3.21% for 2015. 

For 2015, the core net interest margin was 3.09%, compared to 3.14% for the prior year.  For the fourth quarter, the core net interest margin was 3.02%, compared to 3.09% for the prior quarter.  The decrease from the prior quarter was entirely the result of higher average cash balances due to strong deposit activity during the fourth quarter. ⁽¹⁾

Noninterest Income

Noninterest income was $90.2 million for the quarter, an 18.9% increase compared to the fourth quarter a year ago.  Noninterest income was $325.1 million for 2015, up 2.1% compared to the prior year. 

Core noninterest income was $90.2 million for the quarter, up 18.9% compared to the fourth quarter a year ago, which was primarily from increased wealth management revenues.  Core noninterest income was $325.1 million for 2015, up 10.9% compared to the prior year. ⁽¹⁾

Core Efficiency Ratio

For 2015, noninterest expense was $1.1 billion, up 18.7% from the prior year.  Noninterest expense for the fourth quarter was $300.9 million, a 23.3% increase from the fourth quarter of last year. 

The Bank's GAAP efficiency ratio was 60.8% for the quarter.  For all of 2015, the GAAP efficiency ratio was 59.5%.   

The Bank's core efficiency ratio was 61.4% for the quarter, compared to 59.4% for the prior quarter and 59.9% for the fourth quarter a year ago.  The increase from the prior quarter was substantially driven by investments in the wealth management business. ⁽¹⁾

For all of 2015, the core efficiency ratio was 60.5%, compared to 58.5% for 2014. ⁽¹⁾

Income Tax Rate

The Bank's effective tax rate for 2015 was 24.4%, compared to 27.3% for 2014.  The decrease in the effective tax rate results from the steady increase in tax credit investments, tax-exempt securities, tax-advantaged loans and bank-owned life insurance.  The effective tax rate for the fourth quarter was 23.0%, compared to 24.3% for the prior quarter.  The decrease during the fourth quarter was due to an increase in tax benefits from tax credit investments.

_________

⁽¹⁾  "Core" measures are non-GAAP financial measures that exclude the positive impact of purchase accounting.  In addition, core measures also exclude other positive, but one-time, impacts from the special FHLB dividend in the second quarter of 2015, and the gain from repositioning of investment portfolio in the third quarter of 2014.  See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."
⁽²⁾  Wealth management revenues include investment advisory, brokerage and investment, trust, and foreign exchange fee income.

Conference Call Details

First Republic Bank's fourth quarter and full year 2015 earnings conference call is scheduled for January 14, 2016 at 7:00 a.m. PT / 10:00 a.m. ET.  To listen to the live call by telephone, please dial (855) 224-3902 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #15929141.  International callers should dial (734) 823-3244 and enter the same conference ID number.  The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of First Republic's website at www.firstrepublic.com.  To listen to the live webcast, please visit the site at least 10 minutes prior to the start of the call to register, download and install any necessary audio software.  A replay of the call will also be available for 90 days on the website.  For those unable to participate in the live presentation, a replay will be available beginning January 14, 2016, at 10:00 a.m. PT / 1:00 p.m. ET, through January 21, 2016, at 8:59 p.m. PT / 11:59 p.m. ET.  To access the replay, dial (855) 859-2056 (U.S.) and use conference ID #15929141.  International callers should dial (404) 537-3406 and enter the same conference ID number.  The Bank's press releases are available after release on the Bank's website at www.firstrepublic.com.

About First Republic Bank

Founded in 1985, First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services.  First Republic specializes in delivering exceptional, relationship-based service, with a solid commitment to responsiveness and action.  Services are offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Palm Beach, Greenwich and New York City.  First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans.  For more information, visit www.firstrepublic.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Statements in this press release that are not historical facts are hereby identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended.  Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimates," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases and include statements about economic performance in our markets, growth in our loan originations and wealth management assets, our progress in preparing for, and our compliance with, any enhanced regulatory requirements, and our projected tax rate.  Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.  Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to: our ability to deal with significant competition for banking and wealth management customers; our projections for certain financial items, expectations concerning the bank and wealth management industries; earthquakes and other natural disasters in our markets; interest rate or credit risk; our plans or objectives for future operations, products or services; our ability to maintain and follow high underwriting standards; economic conditions generally and in our markets; our geographic concentration; our opportunities for growth; our future provisions for loan losses; our regulatory compliance and future regulatory requirements, including any requirements that have become applicable to us as a bank with a four-quarter average of total consolidated assets of at least $50 billion; any increased compliance costs; the phase-in of the Basel III Capital Rules; and new accounting standards.  For a discussion of these and other risks and uncertainties, see First Republic's FDIC filings, including, but not limited to, the risk factors in First Republic's Annual Report on Form 10-K.  These filings are available in the Investor Relations section of our website.  All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements.  Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.