First Republic Bank (NYSE: FRC) today announced financial results for
the second quarter and six months ended June 30, 2013.
“We had a very good second quarter. Year-over-year core earnings per
share increased 28%,” said Jim Herbert, Chairman and Chief Executive
Officer. “Deposit and loan growth for the quarter were up 5% and 7%,
respectively. Wealth management assets increased by 6% and our credit
quality remains strong.”
Quarterly Cash Dividend Declared
The Bank declared a cash dividend for the second quarter of $0.12 per
share of common stock, which is payable on August 15, 2013 to
shareholders of record as of August 1, 2013.
Quarterly Financial Highlights
-
Net income was $113.7 million for the second quarter of 2013, compared
to $97.9 million last year. Diluted earnings per share (“EPS”) were
$0.77, compared to $0.60 (which was reduced by a $0.10 per share
one-time charge upon redemption of REIT preferred stock).
-
Excluding the impact of purchase accounting, core net income was $97.1
million, up 37% from last year. On this non-GAAP basis, which also
excludes the one-time redemption charge in 2012, core diluted EPS for
the quarter were $0.64, up 28% year-over-year. (1)
-
The Bank issued $190 million of 5.50% Noncumulative Perpetual
Preferred Stock, which qualifies as Tier 1 capital.
-
Nonperforming assets were only 17 basis points of total assets.
-
Loans outstanding were $30.7 billion, up 7% for the quarter and 20%
compared to a year ago.
-
Deposits were $28.2 billion, up 5% and 17% compared to a year ago.
-
Wealth management assets were $37.4 billion, up 6% and 61% compared to
a year ago.
-
Wealth management fees were $33.1 million, up 12% and 69% compared to
the same period last year.
-
Loan originations were $5.3 billion, our highest quarter ever, and
were up 34% compared to last year’s second quarter.
-
Loans sold were $945.4 million and pre-tax gains on loan sales were
$8.8 million, or 0.93% of loans sold.
-
The core net interest margin was 3.37%, compared to 3.42% for the
prior quarter. (1)
-
The core efficiency ratio was 58.9%, compared to 57.3% for the prior
quarter. (1)
“Record loan originations and renewed deposit growth were the result of
healthy conditions in our markets and the continued execution of our
business model,” said Katherine August-deWilde, President and Chief
Operating Officer. “Wealth management assets grew substantially, rising
$5.7 billion through the first six months of the year.”
Asset Quality
The Bank’s credit quality remains very strong. Nonperforming assets were
17 basis points of total assets.
The Bank recorded a provision for loan losses of $12.7 million. This
provision is related primarily to the growth in loans outstanding that
have been originated since July 1, 2010. The allowance related to these
loans totaled $133.4 million, or 0.58%.
Net charge-offs were $446,000 and $713,000 for the three and six months
ended June 30, 2013, respectively (1 basis point, annualized, of average
loans for each period).
Capital Strength
The Bank’s Tier 1 leverage ratio was 9.83%, compared to 9.35% at
March 31, 2013. In April 2013, the Bank issued $190 million of 5.50%
Noncumulative Perpetual Preferred Stock, which qualifies as Tier 1
capital.
Book Value
Book value per share was $23.50, up 13% from a year ago.
Franchise Development
Increased Total Assets
Total assets were $37.3 billion, up 6% for the quarter. Loans increased
$5.2 billion, up 7% for the quarter and up 20% compared to a year ago.
Good Deposit Growth
Balances in checking accounts, money market accounts (including
passbooks) and certificates of deposit all increased during the quarter.
Total deposits were up 5% compared to the prior quarter and increased
17% compared to a year ago. The contractual rate paid on all deposits
averaged 0.24% for the quarter, compared to 0.22% for the prior quarter.
At June 30, 2013, 96% of deposits were core deposits. (2)
Significant Expansion of Wealth Management
Total wealth management assets were $37.4 billion, up $2.1 billion, or
6%, from the prior quarter and up $5.7 billion, or 18%, since year-end.
Such growth in assets under management was primarily due to net new
assets obtained from clients. Wealth management assets include
investment management assets of $19.0 billion, brokerage assets and
money market mutual funds of $11.7 billion, and trust and custody assets
of $6.6 billion.
Wealth management fees earned for the quarter totaled $33.1 million and
were up 12% compared to the prior quarter and 69% compared to last year.
The increased fees reflect both growth in assets under management along
with fees related to assets of Luminous Capital Holdings, LLC
(“Luminous”) purchased in December 2012.
Continued Mortgage Banking Activity
Mortgage banking volume and profitability were good this quarter,
although down from an unusually high level during the prior quarter. The
Bank sold $945.4 million of primarily longer-term, fixed-rate home loans
during the quarter and recorded gains of $8.8 million, or 0.93% of loans
sold. Gain on sale of loans contributed $0.04 to diluted EPS for the
quarter, compared to $0.11 for the prior quarter.
The carrying value of mortgage servicing rights (“MSRs”) was $28.9
million, or 48 basis points of such loans serviced. Loans serviced for
investors totaled $6.0 billion, up 58% from a year ago.
Income Statement and Key Ratio Summary
Revenue Growth
Total revenues were $365.3 million for the quarter, compared to $327.2
million last year, a 12% increase. Total revenues in the prior quarter
were $370.3 million, including an elevated level of gain on sale of
loans.
Core revenues, excluding the impact of purchase accounting, were $331.8
million for the quarter, compared to $275.1 million last year, a 21%
increase. Core revenues in the prior quarter were $336.0 million,
including an elevated level of gain on sale of loans. (1)
Net Interest Income Growth
Net interest income was $303.1 million for the quarter, compared to
$298.0 million for the prior quarter and $290.6 million last year.
Core net interest income, excluding the impact of purchase accounting,
was $269.6 million for the quarter, compared to $263.8 million for the
prior quarter and $238.4 million last year, up 2% and 13%, respectively. (1)
Net Interest Margin
The Bank’s net interest margin was 3.79% for the quarter, compared to
3.87% for the prior quarter and 4.27% for the second quarter a year ago.
Core net interest margin, excluding the impact of purchase accounting,
was 3.37% for the quarter, compared to 3.42% for the prior quarter and
3.48% for the second quarter a year ago. (1)
Noninterest Income
Noninterest income for the quarter was $62.3 million, up $25.6 million
from the second quarter a year ago.
Excluding the gain on sale of loans, noninterest income has increased
compared to the prior quarter and the same period last year by 16% and
68%, respectively, primarily due to increases in wealth
management fees, foreign exchange fees, deposit fees and net loan
servicing fees.
Noninterest Expense and Efficiency Ratio
Noninterest expense for the quarter was $200.1 million, compared to
$197.4 million for the prior quarter and $171.6 million for the second
quarter a year ago, a 1% increase over the prior quarter and a 17%
increase year-over-year.
The Bank’s efficiency ratio was 54.8% for the quarter, compared to 53.3%
for the prior quarter and 52.4% for the second quarter a year ago.
The Bank’s core efficiency ratio, excluding the impact of purchase
accounting, was 58.9% for the quarter, compared to 57.3% for the prior
quarter and 60.5% for the second quarter a year ago. (1)
While noninterest expense has grown due to increased personnel,
increased tax credit investments and the cost of growth initiatives, our
efficiency ratios have remained relatively stable.
Income Tax Rate
The Bank’s effective tax rate for the six months ended June 30, 2013 was
26.0%, and represents the current estimated tax rate for the full year
2013. By comparison, the effective tax rate was 30.4% for 2012. The
decline 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.
_________
(1) See non-GAAP reconciliation under section “Use of
Non-GAAP Financial Measures.”
(2) Core deposits exclude CDs greater than $250,000.
Conference Call Details
First Republic Bank’s second quarter 2013 earnings conference call is
scheduled for July 17, 2013 at 11:00 a.m. PT / 2:00 p.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 #99945597. 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 July 17, 2013, at
12:00 p.m. PT / 3:00 p.m. ET, through July 25, 2013, 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 #99945597. 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
First Republic Bank (“First Republic” or the “Bank”) and its
subsidiaries provide private banking, private business banking and
private wealth management. Founded in 1985, First Republic specializes
in exceptional, relationship-based service offered through preferred
banking or wealth management offices primarily in San Francisco, Palo
Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland,
Palm Beach, Boston, 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. First Republic is a component of the S&P Total Market
Index, the Wilshire 5000 Total Market IndexSM, the Russell
1000®, Russell 3000® and Russell Global indices
and six Dow Jones indices. More information is available on the Bank’s
website at 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, 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 for banking and
wealth management customers; earthquakes and other natural disasters in
our markets; changes in interest rates; our ability to maintain high
underwriting standards; economic conditions in our markets; conditions
in financial markets and economic conditions generally; regulatory
restrictions on our operations and current or future
legislative or regulatory changes affecting the banking and investment
management industries. 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.
|
CONSOLIDATED STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
(in thousands, except per share amounts)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
294,215
|
|
|
$
|
291,040
|
|
|
$
|
288,093
|
|
|
$
|
582,308
|
|
|
$
|
570,714
|
|
|
Investments
|
|
38,430
|
|
|
30,265
|
|
|
35,479
|
|
|
73,909
|
|
|
59,124
|
|
|
Cash equivalents
|
|
99
|
|
|
822
|
|
|
174
|
|
|
273
|
|
|
1,445
|
|
|
Total interest income
|
|
332,744
|
|
|
322,127
|
|
|
323,746
|
|
|
656,490
|
|
|
631,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
13,254
|
|
|
16,678
|
|
|
11,010
|
|
|
24,264
|
|
|
31,665
|
|
|
Borrowings
|
|
16,398
|
|
|
14,852
|
|
|
14,687
|
|
|
31,085
|
|
|
27,753
|
|
|
Total interest expense
|
|
29,652
|
|
|
31,530
|
|
|
25,697
|
|
|
55,349
|
|
|
59,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
303,092
|
|
|
290,597
|
|
|
298,049
|
|
|
601,141
|
|
|
571,865
|
|
|
Provision for loan losses
|
|
12,653
|
|
|
14,875
|
|
|
6,478
|
|
|
19,131
|
|
|
29,727
|
|
|
Net interest income after provision for loan losses
|
|
290,439
|
|
|
275,722
|
|
|
291,571
|
|
|
582,010
|
|
|
542,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
Investment advisory fees
|
|
27,525
|
|
|
14,674
|
|
|
25,099
|
|
|
52,624
|
|
|
27,373
|
|
|
Brokerage and investment fees
|
|
3,071
|
|
|
2,667
|
|
|
2,391
|
|
|
5,462
|
|
|
5,432
|
|
|
Trust fees
|
|
2,498
|
|
|
2,185
|
|
|
2,060
|
|
|
4,558
|
|
|
3,958
|
|
|
Foreign exchange fee income
|
|
4,639
|
|
|
2,639
|
|
|
3,087
|
|
|
7,726
|
|
|
5,060
|
|
|
Deposit fees
|
|
4,611
|
|
|
3,445
|
|
|
4,644
|
|
|
9,255
|
|
|
6,726
|
|
|
Gain on sale of loans
|
|
8,779
|
|
|
4,754
|
|
|
25,990
|
|
|
34,769
|
|
|
8,563
|
|
|
Loan servicing fees, net
|
|
1,299
|
|
|
(704
|
)
|
|
336
|
|
|
1,635
|
|
|
(2,608
|
)
|
|
Loan and related fees
|
|
2,109
|
|
|
1,465
|
|
|
1,912
|
|
|
4,021
|
|
|
2,948
|
|
|
Income from investments in life insurance
|
|
5,912
|
|
|
5,618
|
|
|
5,884
|
|
|
11,796
|
|
|
10,989
|
|
|
Other income (loss)
|
|
1,807
|
|
|
(104
|
)
|
|
865
|
|
|
2,672
|
|
|
843
|
|
|
Total noninterest income
|
|
62,250
|
|
|
36,639
|
|
|
72,268
|
|
|
134,518
|
|
|
69,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
98,157
|
|
|
81,533
|
|
|
101,884
|
|
|
200,041
|
|
|
164,040
|
|
|
Occupancy
|
|
22,904
|
|
|
20,690
|
|
|
22,088
|
|
|
44,992
|
|
|
40,585
|
|
|
Information systems
|
|
19,504
|
|
|
17,746
|
|
|
17,823
|
|
|
37,327
|
|
|
33,920
|
|
|
Tax credit investments
|
|
11,280
|
|
|
4,521
|
|
|
10,900
|
|
|
22,180
|
|
|
9,771
|
|
|
Amortization of intangibles
|
|
6,643
|
|
|
5,170
|
|
|
6,856
|
|
|
13,499
|
|
|
10,458
|
|
|
FDIC and other deposit assessments
|
|
6,800
|
|
|
5,902
|
|
|
6,827
|
|
|
13,627
|
|
|
11,302
|
|
|
Advertising and marketing
|
|
6,842
|
|
|
7,144
|
|
|
5,803
|
|
|
12,645
|
|
|
13,106
|
|
|
Professional fees
|
|
5,104
|
|
|
5,453
|
|
|
3,713
|
|
|
8,817
|
|
|
9,731
|
|
|
Other expenses
|
|
22,905
|
|
|
23,396
|
|
|
21,540
|
|
|
44,445
|
|
|
43,397
|
|
|
Total noninterest expense
|
|
200,139
|
|
|
171,555
|
|
|
197,434
|
|
|
397,573
|
|
|
336,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
152,550
|
|
|
140,806
|
|
|
166,405
|
|
|
318,955
|
|
|
275,112
|
|
|
Provision for income taxes
|
|
38,831
|
|
|
42,274
|
|
|
44,097
|
|
|
82,928
|
|
|
83,909
|
|
|
Net income before noncontrolling interests
|
|
113,719
|
|
|
98,532
|
|
|
122,308
|
|
|
236,027
|
|
|
191,203
|
|
|
Less: Net income from noncontrolling interests
|
|
—
|
|
|
625
|
|
|
—
|
|
|
—
|
|
|
1,538
|
|
|
First Republic Bank net income
|
|
113,719
|
|
|
97,907
|
|
|
122,308
|
|
|
236,027
|
|
|
189,665
|
|
|
Dividends on preferred stock
|
|
9,706
|
|
|
4,091
|
|
|
7,776
|
|
|
17,482
|
|
|
6,542
|
|
|
Redemption of preferred stock
|
|
—
|
|
|
13,200
|
|
|
—
|
|
|
—
|
|
|
13,200
|
|
|
Net income available to common shareholders
|
|
$
|
104,013
|
|
|
$
|
80,616
|
|
|
$
|
114,532
|
|
|
$
|
218,545
|
|
|
$
|
169,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.79
|
|
|
$
|
0.62
|
|
|
$
|
0.88
|
|
|
$
|
1.67
|
|
|
$
|
1.31
|
|
|
Diluted earnings per common share
|
|
$
|
0.77
|
|
|
$
|
0.60
|
|
|
$
|
0.85
|
|
|
$
|
1.61
|
|
|
$
|
1.27
|
|
|
Dividends per common share
|
|
$
|
0.12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.12
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic
|
|
131,102
|
|
|
129,890
|
|
|
130,846
|
|
|
130,975
|
|
|
129,694
|
|
|
Weighted average shares - diluted
|
|
135,595
|
|
|
134,002
|
|
|
135,252
|
|
|
135,428
|
|
|
133,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
As of
|
|
($ in thousands)
|
|
June 30,
2013
|
|
March 31,
2013
|
|
June 30,
2012
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
591,738
|
|
|
$
|
552,837
|
|
|
$
|
800,818
|
|
|
Securities purchased under agreements to resell
|
|
163
|
|
|
100
|
|
|
19,330
|
|
|
Investment securities available-for-sale
|
|
1,233,830
|
|
|
1,382,138
|
|
|
782,098
|
|
|
Investment securities held-to-maturity
|
|
2,793,705
|
|
|
2,624,120
|
|
|
2,323,241
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
Single family (1-4 units)
|
|
17,728,429
|
|
|
16,654,668
|
|
|
15,192,602
|
|
|
Home equity lines of credit
|
|
1,891,849
|
|
|
1,795,775
|
|
|
1,934,143
|
|
|
Multifamily (5+ units)
|
|
3,597,809
|
|
|
3,278,219
|
|
|
2,631,934
|
|
|
Commercial real estate
|
|
3,127,177
|
|
|
2,932,676
|
|
|
2,719,024
|
|
|
Single family construction
|
|
263,718
|
|
|
250,587
|
|
|
209,156
|
|
|
Multifamily/commercial construction
|
|
218,271
|
|
|
166,027
|
|
|
129,159
|
|
|
Commercial business
|
|
3,045,189
|
|
|
2,608,651
|
|
|
2,036,005
|
|
|
Other secured
|
|
424,060
|
|
|
356,688
|
|
|
345,117
|
|
|
Unsecured loans and lines of credit
|
|
283,013
|
|
|
246,198
|
|
|
163,942
|
|
|
Stock secured
|
|
114,567
|
|
|
151,156
|
|
|
99,346
|
|
|
Total unpaid principal balance
|
|
30,694,082
|
|
|
28,440,645
|
|
|
25,460,428
|
|
|
Net unaccreted discount
|
|
(271,028
|
)
|
|
(301,549
|
)
|
|
(410,197
|
)
|
|
Net deferred fees and costs
|
|
19,571
|
|
|
18,356
|
|
|
17,780
|
|
|
Allowance for loan losses
|
|
(148,307
|
)
|
|
(136,100
|
)
|
|
(97,049
|
)
|
|
Loans, net
|
|
30,294,318
|
|
|
28,021,352
|
|
|
24,970,962
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
53,284
|
|
|
230,578
|
|
|
63,957
|
|
|
Investments in life insurance
|
|
733,958
|
|
|
707,775
|
|
|
620,085
|
|
|
Prepaid expenses and other assets
|
|
639,921
|
|
|
650,296
|
|
|
686,096
|
|
|
Tax credit investments
|
|
534,554
|
|
|
478,616
|
|
|
419,968
|
|
|
Premises, equipment and leasehold improvements, net
|
|
156,446
|
|
|
153,365
|
|
|
128,481
|
|
|
Goodwill
|
|
106,549
|
|
|
106,549
|
|
|
24,604
|
|
|
Other intangible assets
|
|
145,393
|
|
|
152,036
|
|
|
126,456
|
|
|
Mortgage servicing rights
|
|
28,882
|
|
|
23,142
|
|
|
17,415
|
|
|
Other real estate owned
|
|
—
|
|
|
—
|
|
|
3,490
|
|
|
Total Assets
|
|
$
|
37,312,741
|
|
|
$
|
35,082,904
|
|
|
$
|
30,987,001
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Noninterest-bearing checking accounts
|
|
$
|
7,950,212
|
|
|
$
|
7,344,677
|
|
|
$
|
7,546,456
|
|
|
Interest-bearing checking accounts
|
|
6,000,214
|
|
|
6,297,551
|
|
|
3,765,848
|
|
|
Money Market (MM) checking accounts
|
|
4,441,635
|
|
|
4,145,038
|
|
|
3,645,809
|
|
|
MM savings and passbooks
|
|
6,378,112
|
|
|
6,242,098
|
|
|
5,876,837
|
|
|
Certificates of deposit
|
|
3,458,468
|
|
|
2,823,750
|
|
|
3,380,353
|
|
|
Total deposits
|
|
28,228,641
|
|
|
26,853,114
|
|
|
24,215,303
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
370,000
|
|
|
810,000
|
|
|
—
|
|
|
Long-term debt
|
|
4,350,000
|
|
|
3,450,000
|
|
|
3,214,346
|
|
|
Debt related to variable interest entity
|
|
49,126
|
|
|
53,143
|
|
|
53,581
|
|
|
Other liabilities
|
|
527,851
|
|
|
398,741
|
|
|
447,158
|
|
|
Total Liabilities
|
|
33,525,618
|
|
|
31,564,998
|
|
|
27,930,388
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
|
Preferred stock
|
|
689,525
|
|
|
499,525
|
|
|
349,525
|
|
|
Common stock
|
|
1,318
|
|
|
1,315
|
|
|
1,305
|
|
|
Additional paid-in capital
|
|
2,036,607
|
|
|
2,035,558
|
|
|
2,012,857
|
|
|
Retained earnings
|
|
1,041,417
|
|
|
953,284
|
|
|
677,573
|
|
|
Accumulated other comprehensive income
|
|
18,256
|
|
|
28,224
|
|
|
15,353
|
|
|
Total Shareholders’ Equity
|
|
3,787,123
|
|
|
3,517,906
|
|
|
3,056,613
|
|
|
Total Liabilities and Shareholders’ Equity
|
|
$
|
37,312,741
|
|
|
$
|
35,082,904
|
|
|
$
|
30,987,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Operating Information
|
|
|
|
|
|
|
|
|
|
|
|
Loans originated
|
|
$
|
5,310,194
|
|
|
$
|
3,963,579
|
|
|
$
|
3,545,858
|
|
|
$
|
8,856,052
|
|
|
$
|
7,120,105
|
|
|
Net income to average assets (3) |
|
1.26
|
%
|
|
1.29
|
%
|
|
1.42
|
%
|
|
1.34
|
%
|
|
1.29
|
%
|
|
Net income available to common shareholders to average common equity (3) |
|
13.53
|
%
|
|
12.07
|
%
|
|
15.59
|
%
|
|
14.54
|
%
|
|
12.95
|
%
|
|
Dividend payout ratio
|
|
15.6
|
%
|
|
—
|
%
|
|
—
|
%
|
(4)
|
7.4
|
%
|
|
—
|
%
|
|
Efficiency ratio (5) |
|
54.8
|
%
|
|
52.4
|
%
|
|
53.3
|
%
|
|
54.0
|
%
|
|
52.5
|
%
|
|
Efficiency ratio (non-GAAP) (5), (6) |
|
58.9
|
%
|
|
60.5
|
%
|
|
57.3
|
%
|
|
58.1
|
%
|
|
60.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields/Rates (3)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
0.22
|
%
|
|
0.26
|
%
|
|
0.23
|
%
|
|
0.23
|
%
|
|
0.27
|
%
|
|
Investment securities (7), (8) |
|
5.08
|
%
|
|
5.54
|
%
|
|
5.07
|
%
|
|
5.08
|
%
|
|
5.58
|
%
|
|
Loans (7), (9) |
|
4.02
|
%
|
|
4.83
|
%
|
|
4.11
|
%
|
|
4.07
|
%
|
|
4.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
4.14
|
%
|
|
4.71
|
%
|
|
4.19
|
%
|
|
4.16
|
%
|
|
4.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
|
0.01
|
%
|
|
0.02
|
%
|
|
0.01
|
%
|
|
0.01
|
%
|
|
0.02
|
%
|
|
Money market checking and savings
|
|
0.19
|
%
|
|
0.29
|
%
|
|
0.11
|
%
|
|
0.15
|
%
|
|
0.25
|
%
|
|
CDs (9) |
|
1.06
|
%
|
|
1.09
|
%
|
|
1.09
|
%
|
|
1.07
|
%
|
|
1.07
|
%
|
|
Total deposits
|
|
0.20
|
%
|
|
0.28
|
%
|
|
0.17
|
%
|
|
0.18
|
%
|
|
0.27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
0.17
|
%
|
|
—
|
%
|
|
0.21
|
%
|
|
0.19
|
%
|
|
0.00
|
%
|
|
Long-term FHLB advances
|
|
1.65
|
%
|
|
1.80
|
%
|
|
1.79
|
%
|
|
1.72
|
%
|
|
1.85
|
%
|
|
Other long-term debt (9) |
|
1.79
|
%
|
|
2.58
|
%
|
|
1.73
|
%
|
|
1.76
|
%
|
|
2.60
|
%
|
|
Total borrowings
|
|
1.40
|
%
|
|
1.83
|
%
|
|
1.47
|
%
|
|
1.43
|
%
|
|
1.88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
0.37
|
%
|
|
0.47
|
%
|
|
0.34
|
%
|
|
0.36
|
%
|
|
0.46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
3.77
|
%
|
|
4.24
|
%
|
|
3.85
|
%
|
|
3.80
|
%
|
|
4.30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
3.79
|
%
|
|
4.27
|
%
|
|
3.87
|
%
|
|
3.83
|
%
|
|
4.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core net interest margin (non-GAAP) (6) |
|
3.37
|
%
|
|
3.48
|
%
|
|
3.42
|
%
|
|
3.39
|
%
|
|
3.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Ratios are annualized.
|
|
(4)
|
The fourth quarter of 2012 dividend of $0.10 per share was
declared and paid in December 2012, which resulted in no dividend
payment during the first quarter of 2013.
|
|
(5)
|
Efficiency ratio is the ratio of noninterest expense to the sum of
net interest income and noninterest income.
|
|
(6)
|
For a reconciliation of these ratios to the equivalent GAAP
ratios, see “Use of Non-GAAP Financial Measures.”
|
|
(7)
|
Yield is calculated on a tax-equivalent basis.
|
|
(8)
|
Includes FHLB stock and securities purchased under agreements to
resell.
|
|
(9)
|
Yield includes accretion/amortization of purchase accounting
discounts/premiums.
|
|
|
|
The following table presents loans sold and gain on sale of loans for
the periods indicated:
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Mortgage Loan Sales
|
|
|
|
|
|
|
|
|
|
|
|
Loans sold:
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
$
|
199,963
|
|
|
$
|
191,878
|
|
|
$
|
165,281
|
|
|
$
|
365,244
|
|
|
$
|
308,118
|
|
|
Non-agency
|
|
745,442
|
|
|
243,908
|
|
|
1,052,859
|
|
|
1,798,301
|
|
|
679,718
|
|
|
Total loans sold
|
|
$
|
945,405
|
|
|
$
|
435,786
|
|
|
$
|
1,218,140
|
|
|
$
|
2,163,545
|
|
|
$
|
987,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of loans:
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
$
|
8,779
|
|
|
$
|
4,754
|
|
|
$
|
25,990
|
|
|
$
|
34,769
|
|
|
$
|
8,563
|
|
|
Gain as a percentage of loans sold
|
|
0.93
|
%
|
|
1.09
|
%
|
|
2.13
|
%
|
|
1.61
|
%
|
|
0.87
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents loan originations, by product type, for the
periods indicated:
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Single family (1-4 units)
|
|
$
|
2,845,928
|
|
|
$
|
2,318,492
|
|
|
$
|
2,061,908
|
|
|
$
|
4,907,836
|
|
|
$
|
3,933,739
|
|
Home equity lines of credit
|
|
353,087
|
|
|
290,988
|
|
|
259,789
|
|
|
612,876
|
|
|
538,411
|
|
Multifamily/commercial real estate
|
|
857,160
|
|
|
493,119
|
|
|
586,549
|
|
|
1,443,709
|
|
|
938,748
|
|
Commercial business
|
|
804,288
|
|
|
451,958
|
|
|
372,345
|
|
|
1,176,633
|
|
|
977,992
|
|
Construction
|
|
268,871
|
|
|
162,713
|
|
|
105,236
|
|
|
374,107
|
|
|
232,450
|
|
Other loans
|
|
180,860
|
|
|
246,309
|
|
|
160,031
|
|
|
340,891
|
|
|
498,765
|
|
Total loans originated
|
|
$
|
5,310,194
|
|
|
$
|
3,963,579
|
|
|
$
|
3,545,858
|
|
|
$
|
8,856,052
|
|
|
$
|
7,120,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table separates our loan portfolio as of June 30, 2013
between loans acquired on July 1, 2010 and loans originated since July
1, 2010:
|
|
|
Composition of Loan Portfolio
|
|
($ in thousands)
|
|
Loans acquired
on July 1,
2010
|
|
Loans originated
since July 1,
2010
|
|
Total loans at
June 30,
2013
|
|
Single family (1-4 units)
|
|
$
|
4,427,853
|
|
|
$
|
13,300,576
|
|
|
$
|
17,728,429
|
|
|
Home equity lines of credit
|
|
879,722
|
|
|
1,012,127
|
|
|
1,891,849
|
|
|
Multifamily (5+ units)
|
|
659,308
|
|
|
2,938,501
|
|
|
3,597,809
|
|
|
Commercial real estate
|
|
1,028,410
|
|
|
2,098,767
|
|
|
3,127,177
|
|
|
Single family construction
|
|
7,106
|
|
|
256,612
|
|
|
263,718
|
|
|
Multifamily/commercial construction
|
|
1,140
|
|
|
217,131
|
|
|
218,271
|
|
|
Commercial business
|
|
444,549
|
|
|
2,600,640
|
|
|
3,045,189
|
|
|
Other secured
|
|
44,683
|
|
|
379,377
|
|
|
424,060
|
|
|
Unsecured loans and lines of credit
|
|
43,055
|
|
|
239,958
|
|
|
283,013
|
|
|
Stock secured
|
|
9,255
|
|
|
105,312
|
|
|
114,567
|
|
|
Total unpaid principal balance
|
|
7,545,081
|
|
|
23,149,001
|
|
|
30,694,082
|
|
|
Net unaccreted discount
|
|
(270,395
|
)
|
|
(633
|
)
|
|
(271,028
|
)
|
|
Net deferred fees and costs
|
|
(7,530
|
)
|
|
27,101
|
|
|
19,571
|
|
|
Allowance for loan losses
|
|
(14,867
|
)
|
|
(133,440
|
)
|
|
(148,307
|
)
|
|
Loans, net
|
|
$
|
7,252,289
|
|
|
$
|
23,042,029
|
|
|
$
|
30,294,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(in thousands, except per share amounts)
|
|
June 30,
2013
|
|
March 31,
2013
|
|
December 31,
2012
|
|
June 30,
2012
|
|
Book Value
|
|
|
|
|
|
|
|
|
|
Number of shares of common stock outstanding
|
|
131,822
|
|
|
131,481
|
|
|
131,273
|
|
|
130,532
|
|
|
Book value per common share
|
|
$
|
23.50
|
|
|
$
|
22.96
|
|
|
$
|
22.08
|
|
|
$
|
20.74
|
|
|
Tangible book value per common share
|
|
$
|
21.59
|
|
|
$
|
20.99
|
|
|
$
|
20.06
|
|
|
$
|
19.58
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
9.83
|
%
|
|
9.35
|
%
|
|
9.32
|
%
|
|
9.55
|
%
|
|
Tier 1 common equity ratio (10) |
|
10.87
|
%
|
|
11.43
|
%
|
|
11.13
|
%
|
|
12.03
|
%
|
|
Tier 1 risk-based capital ratio
|
|
13.52
|
%
|
|
13.52
|
%
|
|
13.27
|
%
|
|
13.68
|
%
|
|
Total risk-based capital ratio
|
|
14.12
|
%
|
|
14.13
|
%
|
|
13.86
|
%
|
|
14.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(10)
|
Tier 1 common equity ratio represents common equity less goodwill
and intangible assets divided by risk-weighted assets.
|
|
|
|
|
|
|
As of
|
|
($ in millions)
|
|
June 30,
2013
|
|
March 31,
2013
|
|
December 31,
2012
|
|
June 30,
2012
|
|
Assets Under Management
|
|
|
|
|
|
|
|
|
|
First Republic Investment Management
|
|
$
|
19,045
|
|
|
$
|
18,573
|
|
|
$
|
17,000
|
|
|
$
|
9,918
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage and Investment:
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
10,784
|
|
|
10,357
|
|
|
8,810
|
|
|
7,663
|
|
Money Market Mutual Funds
|
|
929
|
|
|
870
|
|
|
852
|
|
|
779
|
|
Total Brokerage and Investment
|
|
11,713
|
|
|
11,227
|
|
|
9,662
|
|
|
8,442
|
|
|
|
|
|
|
|
|
|
|
|
Trust Company:
|
|
|
|
|
|
|
|
|
|
Trust
|
|
2,822
|
|
|
2,326
|
|
|
2,157
|
|
|
2,196
|
|
Custody
|
|
3,803
|
|
|
3,148
|
|
|
2,863
|
|
|
2,734
|
|
Total Trust Company
|
|
6,625
|
|
|
5,474
|
|
|
5,020
|
|
|
4,930
|
|
Total Wealth Management Assets
|
|
37,383
|
|
|
35,274
|
|
|
31,682
|
|
|
23,290
|
|
|
|
|
|
|
|
|
|
|
|
Loans serviced for investors
|
|
6,036
|
|
|
5,433
|
|
|
4,581
|
|
|
3,827
|
|
Total fee-based assets
|
|
$
|
43,419
|
|
|
$
|
40,707
|
|
|
$
|
36,263
|
|
|
$
|
27,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Information
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
($ in thousands)
|
|
June 30,
2013
|
|
March 31,
2013
|
|
December 31,
2012
|
|
June 30,
2012
|
|
Nonperforming assets:
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
62,824
|
|
|
$
|
49,873
|
|
|
$
|
49,153
|
|
|
$
|
28,595
|
|
|
Other real estate owned
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,490
|
|
|
Total nonperforming assets
|
|
$
|
62,824
|
|
|
$
|
49,873
|
|
|
$
|
49,153
|
|
|
$
|
32,085
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to total assets
|
|
0.17
|
%
|
|
0.14
|
%
|
|
0.14
|
%
|
|
0.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans 90 days or more past due
|
|
$
|
—
|
|
|
$
|
5,959
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructured accruing loans
|
|
$
|
18,766
|
|
|
$
|
18,223
|
|
|
$
|
12,398
|
|
|
$
|
7,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Net loan charge-offs to allowance for loan losses
|
|
$
|
446
|
|
|
$
|
244
|
|
|
$
|
267
|
|
|
$
|
713
|
|
|
$
|
791
|
|
|
Net loan charge-offs to average total loans (annualized)
|
|
0.01
|
%
|
|
0.00
|
%
|
|
0.00
|
%
|
|
0.01
|
%
|
|
0.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance Sheet
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
178,482
|
|
|
$
|
1,251,267
|
|
|
$
|
307,562
|
|
|
$
|
242,666
|
|
|
$
|
1,081,671
|
|
Investment securities (11) |
|
4,225,274
|
|
|
3,160,349
|
|
|
4,011,375
|
|
|
4,118,915
|
|
|
3,070,089
|
|
Loans (12) |
|
29,541,707
|
|
|
24,182,518
|
|
|
28,439,583
|
|
|
28,993,689
|
|
|
23,589,409
|
|
Total interest-earning assets
|
|
33,945,463
|
|
|
28,594,134
|
|
|
32,758,520
|
|
|
33,355,270
|
|
|
27,741,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning cash
|
|
240,514
|
|
|
205,898
|
|
|
242,241
|
|
|
241,373
|
|
|
203,679
|
|
Goodwill and other intangibles
|
|
255,162
|
|
|
151,908
|
|
|
261,921
|
|
|
258,523
|
|
|
154,181
|
|
Other assets
|
|
1,643,333
|
|
|
1,479,776
|
|
|
1,591,525
|
|
|
1,617,572
|
|
|
1,427,548
|
|
Total noninterest-earning assets
|
|
2,139,009
|
|
|
1,837,582
|
|
|
2,095,687
|
|
|
2,117,468
|
|
|
1,785,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
36,084,472
|
|
|
$
|
30,431,716
|
|
|
$
|
34,854,207
|
|
|
$
|
35,472,738
|
|
|
$
|
29,526,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity:
|
|
|
|
|
|
|
|
|
|
|
|
Checking
|
|
$
|
13,769,665
|
|
|
$
|
10,792,468
|
|
|
$
|
13,237,987
|
|
|
$
|
13,505,295
|
|
|
$
|
10,271,026
|
|
Money market checking and savings
|
|
10,415,283
|
|
|
9,480,389
|
|
|
10,629,230
|
|
|
10,521,665
|
|
|
9,367,574
|
|
CDs (12) |
|
3,022,355
|
|
|
3,467,158
|
|
|
2,894,059
|
|
|
2,958,561
|
|
|
3,613,322
|
|
Total deposits
|
|
27,207,303
|
|
|
23,740,015
|
|
|
26,761,276
|
|
|
26,985,521
|
|
|
23,251,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
787,637
|
|
|
—
|
|
|
832,200
|
|
|
809,795
|
|
|
1,099
|
|
Long-term FHLB advances
|
|
3,847,802
|
|
|
3,139,011
|
|
|
3,165,556
|
|
|
3,508,564
|
|
|
2,833,791
|
|
Other long term-debt (12) |
|
52,443
|
|
|
124,530
|
|
|
55,406
|
|
|
53,917
|
|
|
126,160
|
|
Total borrowings
|
|
4,687,882
|
|
|
3,263,541
|
|
|
4,053,162
|
|
|
4,372,276
|
|
|
2,961,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
31,895,185
|
|
|
27,003,556
|
|
|
30,814,438
|
|
|
31,357,797
|
|
|
26,212,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
462,694
|
|
|
447,526
|
|
|
561,572
|
|
|
511,860
|
|
|
420,172
|
|
Preferred equity
|
|
642,437
|
|
|
247,657
|
|
|
499,525
|
|
|
571,376
|
|
|
197,772
|
|
Common equity
|
|
3,084,156
|
|
|
2,686,401
|
|
|
2,978,672
|
|
|
3,031,705
|
|
|
2,639,103
|
|
Noncontrolling interests
|
|
—
|
|
|
46,576
|
|
|
—
|
|
|
—
|
|
|
56,558
|
|
Total Liabilities and Equity
|
|
$
|
36,084,472
|
|
|
$
|
30,431,716
|
|
|
$
|
34,854,207
|
|
|
$
|
35,472,738
|
|
|
$
|
29,526,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) Includes FHLB stock and securities purchased under
agreements to resell.
|
|
(12) Average balances are presented net of purchase
accounting discounts or premiums.
|
|
|
Purchase Accounting Accretion and Amortization
The following table presents the impact of purchase accounting from the
Bank’s re-establishment as an independent institution for the periods
indicated:
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Accretion/amortization to net interest income:
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
30,484
|
|
|
$
|
45,768
|
|
|
$
|
30,834
|
|
|
$
|
61,318
|
|
|
$
|
83,921
|
|
Deposits
|
|
3,036
|
|
|
5,715
|
|
|
3,440
|
|
|
6,476
|
|
|
13,173
|
|
Borrowings
|
|
—
|
|
|
686
|
|
|
—
|
|
|
—
|
|
|
1,366
|
|
Total
|
|
$
|
33,520
|
|
|
$
|
52,169
|
|
|
$
|
34,274
|
|
|
$
|
67,794
|
|
|
$
|
98,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
Loan commitments
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization to noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
4,608
|
|
|
$
|
5,170
|
|
|
$
|
4,769
|
|
|
$
|
9,377
|
|
|
$
|
10,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, net interest margin and the efficiency
ratio.
Our net income, earnings per share, 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;
accrete discounts on loan commitments to noninterest income; amortize
premiums on liabilities such as CDs and subordinated notes to interest
expense; and amortize intangible assets to noninterest expense. In
addition, earnings per share for the three and six months ended June 30,
2012 were impacted following the redemption of the First Republic
Preferred Capital Corporation (“FRPCC”) Series D preferred stock in the
second quarter of 2012 due to the $13.2 million difference between the
liquidation preference and the carrying value established in purchase
accounting.
In December 2012, First Republic completed the purchase of substantially
all of the assets of Luminous. The amortization of intangible assets
from this transaction is not an adjustment in the calculation of the
Bank’s non-GAAP measures in 2013.
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 and when planning and forecasting future periods. 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:
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
(in thousands, except per share amounts)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Non-GAAP earnings
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
113,719
|
|
|
$
|
97,907
|
|
|
$
|
122,308
|
|
|
$
|
236,027
|
|
|
$
|
189,665
|
|
|
Accretion / amortization added to net interest income
|
|
(33,520
|
)
|
|
(52,169
|
)
|
|
(34,274
|
)
|
|
(67,794
|
)
|
|
(98,460
|
)
|
|
Accretion added to noninterest income
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
|
Amortization of intangible assets
|
|
4,608
|
|
|
5,170
|
|
|
4,769
|
|
|
9,377
|
|
|
10,458
|
|
|
Add back tax impact of the above items
|
|
12,287
|
|
|
19,981
|
|
|
12,540
|
|
|
24,827
|
|
|
37,437
|
|
|
Non-GAAP net income
|
|
97,094
|
|
|
70,874
|
|
|
105,343
|
|
|
202,437
|
|
|
139,016
|
|
|
Dividends on preferred stock
|
|
(9,706
|
)
|
|
(4,091
|
)
|
|
(7,776
|
)
|
|
(17,482
|
)
|
|
(6,542
|
)
|
|
Redemption of FRPCC preferred stock
|
|
—
|
|
|
(13,200
|
)
|
|
—
|
|
|
—
|
|
|
(13,200
|
)
|
|
Impact of FRPCC preferred stock redemption
|
|
—
|
|
|
13,200
|
|
|
—
|
|
|
—
|
|
|
13,200
|
|
|
Non-GAAP net income available to common shareholders
|
|
$
|
87,388
|
|
|
$
|
66,783
|
|
|
$
|
97,567
|
|
|
$
|
184,955
|
|
|
$
|
132,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings per common share-diluted
|
|
$
|
0.77
|
|
|
$
|
0.60
|
|
|
$
|
0.85
|
|
|
$
|
1.61
|
|
|
$
|
1.27
|
|
|
Impact of purchase accounting, net of tax
|
|
(0.13
|
)
|
|
(0.20
|
)
|
|
(0.13
|
)
|
|
(0.24
|
)
|
|
(0.38
|
)
|
|
Impact of FRPCC preferred stock redemption
|
|
—
|
|
|
0.10
|
|
|
—
|
|
|
—
|
|
|
0.10
|
|
|
Non-GAAP earnings per common share-diluted
|
|
$
|
0.64
|
|
|
$
|
0.50
|
|
|
$
|
0.72
|
|
|
$
|
1.37
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding
|
|
135,595
|
|
|
134,002
|
|
|
135,252
|
|
|
135,428
|
|
|
133,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
303,092
|
|
|
$
|
290,597
|
|
|
$
|
298,049
|
|
|
$
|
601,141
|
|
|
$
|
571,865
|
|
|
Add: Tax-equivalent adjustment
|
|
19,629
|
|
|
15,943
|
|
|
19,327
|
|
|
38,956
|
|
|
30,986
|
|
|
Net interest income (tax-equivalent basis)
|
|
322,721
|
|
|
306,540
|
|
|
317,376
|
|
|
640,097
|
|
|
602,851
|
|
|
Less: Accretion / amortization
|
|
(33,520
|
)
|
|
(52,169
|
)
|
|
(34,274
|
)
|
|
(67,794
|
)
|
|
(98,460
|
)
|
|
Non-GAAP net interest income (tax-equivalent basis)
|
|
$
|
289,201
|
|
|
$
|
254,371
|
|
|
$
|
283,102
|
|
|
$
|
572,303
|
|
|
$
|
504,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
33,945,463
|
|
|
$
|
28,594,134
|
|
|
$
|
32,758,520
|
|
|
$
|
33,355,270
|
|
|
$
|
27,741,169
|
|
|
Add: Average unamortized loan discounts
|
|
291,302
|
|
|
439,947
|
|
|
323,068
|
|
|
307,098
|
|
|
460,481
|
|
|
Average interest-earning assets (non-GAAP)
|
|
$
|
34,236,765
|
|
|
$
|
29,034,081
|
|
|
$
|
33,081,588
|
|
|
$
|
33,662,368
|
|
|
$
|
28,201,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin–reported
|
|
3.79
|
%
|
|
4.27
|
%
|
|
3.87
|
%
|
|
3.83
|
%
|
|
4.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (non-GAAP)
|
|
3.37
|
%
|
|
3.48
|
%
|
|
3.42
|
%
|
|
3.39
|
%
|
|
3.56
|
%
|
|
|
Three Months
Ended
June 30,
|
|
Three Months
Ended
March 31,
|
|
Six Months
Ended
June 30,
|
|
($ in thousands)
|
2013
|
|
2012
|
|
2013
|
|
2013
|
|
2012
|
|
Efficiency ratio
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
$
|
303,092
|
|
|
$
|
290,597
|
|
|
$
|
298,049
|
|
|
$
|
601,141
|
|
|
$
|
571,865
|
|
|
Less: Accretion / amortization
|
(33,520
|
)
|
|
(52,169
|
)
|
|
(34,274
|
)
|
|
(67,794
|
)
|
|
(98,460
|
)
|
|
Net interest income (non-GAAP)
|
$
|
269,572
|
|
|
$
|
238,428
|
|
|
$
|
263,775
|
|
|
$
|
533,347
|
|
|
$
|
473,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income
|
$
|
62,250
|
|
|
$
|
36,639
|
|
|
$
|
72,268
|
|
|
$
|
134,518
|
|
|
$
|
69,284
|
|
|
Less: Accretion of discounts on loan commitments
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
|
Noninterest income (non-GAAP)
|
$
|
62,250
|
|
|
$
|
36,624
|
|
|
$
|
72,268
|
|
|
$
|
134,518
|
|
|
$
|
69,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
365,342
|
|
|
$
|
327,236
|
|
|
$
|
370,317
|
|
|
$
|
735,659
|
|
|
$
|
641,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (non-GAAP)
|
$
|
331,822
|
|
|
$
|
275,052
|
|
|
$
|
336,043
|
|
|
$
|
667,865
|
|
|
$
|
542,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense
|
$
|
200,139
|
|
|
$
|
171,555
|
|
|
$
|
197,434
|
|
|
$
|
397,573
|
|
|
$
|
336,310
|
|
|
Less: Intangible amortization
|
(4,608
|
)
|
|
(5,170
|
)
|
|
(4,769
|
)
|
|
(9,377
|
)
|
|
(10,458
|
)
|
|
Noninterest expense (non-GAAP)
|
$
|
195,531
|
|
|
$
|
166,385
|
|
|
$
|
192,665
|
|
|
$
|
388,196
|
|
|
$
|
325,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio
|
54.8
|
%
|
|
52.4
|
%
|
|
53.3
|
%
|
|
54.0
|
%
|
|
52.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio (non-GAAP)
|
58.9
|
%
|
|
60.5
|
%
|
|
57.3
|
%
|
|
58.1
|
%
|
|
60.1
|
%
|
Copyright Business Wire 2013