First Republic Reports Strong First Quarter Results

SAN FRANCISCO, April 16, 2015 /PRNewswire/ -- First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2015.

"First Republic had a strong first quarter, driven by revenue growth across the franchise," said CEO Jim Herbert.  "Loans, deposits and assets under management all increased nicely, while credit quality remained excellent.  Our client-centric business model continues to perform well."

Quarterly Highlights

Financial Results

• Core revenues were up 13.2% compared to last year's first quarter. ⁽¹⁾
• Net income was $115.9 million.
• Diluted earnings per share ("EPS") of $0.71.
• Core net income was $110.5 million. ⁽¹⁾
• Core diluted EPS of $0.68. ⁽¹⁾
• Loan originations totaled $4.2 billion, our largest first quarter volume ever.
• Loans sold totaled $574.7 million.
• Core net interest margin was 3.09%, compared to 3.06% for the prior quarter. ⁽¹⁾
• Core efficiency ratio was 61.5%. ⁽¹⁾

Continued Financial and Credit Strength

• Tier 1 leverage ratio was 9.78% and Common Equity Tier 1 ratio was 11.07%. ⁽²⁾
• Book value per share was $29.45, up 12.4% from a year ago.
• Nonperforming assets continued to be low at 10 basis points of total assets.
• Net charge-offs were $13,000 for the quarter.

Franchise Development

• Loans outstanding, excluding loans held for sale, totaled $39.1 billion, up 3.1% for the quarter.
• Deposits were $39.9 billion, up 7.6% for the quarter.
• Checking balances represented 59.6% of total deposits.
• Wealth management assets were $56.4 billion, up 5.6% for the quarter.
• Wealth management revenues were $47.3 million, up 22.1% from a year ago.

"Loan volume was the best first quarter ever, while wealth management and business banking continued to each make significant contributions," said President Katherine August-deWilde.  "We continue to deepen our relationships with clients and win new business in our well-performing urban, coastal markets."

Increased Quarterly Cash Dividend 7% to $0.15 per Share

The Bank today announced an increase in its quarterly cash dividend for the first quarter to $0.15 per share of common stock, which is payable on May 14, 2015 to shareholders of record as of April 30, 2015. 

Strong Asset Quality

The Bank's credit quality remains very strong.  Nonperforming assets were 10 basis points of total assets. 

Net charge-offs were only $13,000 for the quarter.

Continued Capital Strength

During the first quarter, the Bank sold 3.5 million shares of new common stock, which added approximately $203 million to common equity. 

New capital rules under the Basel III framework became effective for the Bank on January 1, 2015 ("Basel III Capital Rules").  The Basel III Capital Rules introduce new, more stringent requirements for what qualifies as "Common Equity Tier 1" ("CET1").  The Basel III Capital Rules also revise the definitions and components of required capital and establish a new approach for risk-weighting assets.

The Bank's Tier 1 leverage ratio was 9.78% and CET1 ratio was 11.07% at March 31, 2015.⁽²⁾

Growing Book Value

Book value per common share was $29.45 at March 31, 2015, up 12.4% from a year ago. 

Franchise Development

Loan Originations

Loan originations totaled $4.2 billion for the quarter, our highest first quarter ever.  Single family originations were $2.0 billion.  In addition, 50% of the quarter's single family originations were for purchases. 

Loans outstanding, excluding loans held for sale, totaled $39.1 billion, up 3.1% for the quarter and up 12.5% compared to a year ago.

Mortgage Banking Activity

The Bank sold $574.7 million of primarily longer-term, fixed-rate home loans during the quarter and recorded a gain on sale of $1.8 million, compared to loan sales of $346.2 million and a gain on sale of $2.8 million a year ago.  The margin on such loan sales was 0.32% for the quarter, compared to 0.82% a year ago.

The Bank utilizes loan sales in the ordinary course of business in order to provide a full range of lending options for its clients, while also managing asset growth and interest rate risk.

Loans serviced for investors at quarter-end totaled $9.8 billion, up 2.6% for the quarter and 58.8% from a year ago.  Loan servicing fees for the quarter were $3.2 million, up from $2.0 million a year ago.

Investments

Total investments at March 31, 2015 were $7.5 billion, up 12.9% for the quarter and 50.6% compared to a year ago. 

As of March 31, 2015, investments that are qualified as high-quality liquid assets from a regulatory perspective totaled $3.7 billion.

Expansion of Wealth Management

Wealth management revenues totaled $47.3 million for the quarter, up 22.1% compared to last year's first quarter. 

Total wealth management assets were $56.4 billion, up 5.6% for the quarter and up 24.9% 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 include investment management assets of $28.5 billion, brokerage assets and money market mutual funds of $21.1 billion, and trust and custody assets of $6.8 billion.

Deposit Results

Total deposits increased to $39.9 billion, up 7.6% for the quarter and up 19.0% compared to a year ago.  At March 31, 2015, 59.6% of deposits were checking accounts.

The average contractual rate paid on all deposits declined to 0.16% for the quarter, compared to 0.17% for the prior quarter.

Income Statement and Key Ratios

Quarterly Highlights

Strong Core Revenue Growth

Total revenues were $422.9 million for the quarter, a 10.8% increase from the first quarter of last year.

Core revenues were $410.1 million for the quarter, a 13.2% increase from the first quarter of last year. ⁽¹⁾

Continued Net Interest Income Growth

Net interest income was $348.0 million for the quarter, an 8.5% increase from the first quarter of last year.

Core net interest income was $335.2 million for the quarter, an 11.3% increase from the first quarter of last year. ⁽¹⁾

Stable Net Interest Margin

The Bank's net interest margin was 3.21% for both the current and prior quarter.

The core net interest margin was 3.09% for the quarter, compared to 3.06% for the prior quarter. ⁽¹⁾  The modest increase was primarily the result of a slight decrease in deposit and borrowing costs.

Strong Noninterest Income Growth

Noninterest income for the quarter was $74.9 million, up 22.8% from the first quarter of last year.  The increase was primarily due to increases in investment advisory fees, income from investments in life insurance, foreign exchange fees and loan servicing fees.

Noninterest income represented 18.3% of total core revenues for the quarter, up from 16.8% for the same period a year ago.

Noninterest Expense and Efficiency Ratio

Noninterest expense for the quarter was $255.7 million, a 17.6% increase from the first quarter of last year.  The increase was primarily due to increased salaries, professional fees and information systems costs.  The increase in these expenses was primarily attributable to the Bank's investments in infrastructure build-out to address enhanced regulatory standards.

The Bank's efficiency ratio was 60.5% for the quarter, compared to 58.6% for the prior quarter and 57.0% for the first quarter a year ago.   

The Bank's core efficiency ratio was 61.5% for the quarter, compared to 59.9% for the prior quarter and 58.9% for the first quarter a year ago. ⁽¹⁾  The increase in the efficiency ratio compared to the prior quarter was predominantly the result of a seasonal increase in payroll taxes.

Income Tax Rate

The Bank's effective tax rate for 2015 is expected to be 25.4%, compared to 27.3% for 2014.  The decrease in the effective tax rate results from the steady increase in tax-exempt securities, bank-owned life insurance, tax credit investments and tax-advantaged loans.

Adoption of New Accounting Guidance

During the quarter ended March 31, 2015, the Bank adopted new accounting guidance issued by the FASB that requires debt issuance costs to be presented within borrowings, rather than other assets, on the balance sheet.  This accounting change resulted in revisions to the December 31, 2014 balance sheet by reducing prepaid expenses and other assets and senior notes each by approximately $3 million.

_________
⁽¹⁾    "Core" measures are non-GAAP financial measures that exclude the impact of purchase accounting.  See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."
⁽²⁾   Represents the ratio under Basel III with all applicable requirements fully phased-in.  See "Capital Ratios" table for additional information.

Conference Call Details

First Republic Bank's first quarter 2015 earnings conference call is scheduled for April 16, 2015 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 #15124618.  International callers should dial (734) 823-3244.  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 15 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 April 16, 2015, at 10:30 a.m. PT / 1:30 p.m. ET, through April 23, 2015, 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 #15124618.  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.  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 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 from those discussed in the forward-looking statements include, but are not limited to: our ability to compete 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; changes in interest rates 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 become applicable as we become a U.S. bank with consolidated assets in excess of $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 and Quarterly Reports on Form 10-Q.  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.

Use of Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles in the United States ("GAAP") and the prevailing practices in the banking industry.  However, due to the application of purchase accounting from the Bank's re-establishment as an independent institution, management uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate our performance, including net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and the efficiency ratio. 

Our net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and efficiency ratio were significantly impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting from the Bank's re-establishment as an independent institution.  The accretion and amortization affect our net income, earnings per share and certain operating ratios as we accrete loan discounts to interest income; recognize discounts established in purchase accounting on the sale of loans, which increase gain on sale of loans; amortize premiums on CDs to interest expense; and amortize intangible assets to noninterest expense.

We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance.  Our management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing our operating results and related trends.  However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP.  In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated:

Logo - http://photos.prnewswire.com/prnh/20130906/MM75721LOGO

 

SOURCE First Republic Bank

Related Links

http://www.firstrepublic.com