SAN FRANCISCO--(BUSINESS WIRE)--First Republic Bank (“First Republic”) (NYSE:FRC) today announced financial results for the quarter and year ended December 31, 2011.
“We are very pleased with First Republic’s strong performance in the fourth quarter and for all of 2011,” said Jim Herbert, Chairman and Chief Executive Officer. “First Republic is successfully executing a very focused business model providing a single point-of-contact for banking and wealth management. Exceptional client service continues to be our hallmark.”
Net income was $90.7 million for the fourth quarter of 2011, up 19% compared with the fourth quarter a year ago. Diluted EPS were $0.68 for the fourth quarter of 2011, up 13% compared with the fourth quarter a year ago.
Excluding the impact of purchase accounting and one-time costs in 2010, net income was $59.1 million for the fourth quarter of 2011, up 30% compared with the fourth quarter a year ago. On this basis, diluted EPS were $0.44 for the fourth quarter of 2011, up 26% compared with the fourth quarter a year ago. (1)
For the year ended December 31, 2011, net income was $352.1 million and diluted EPS were $2.65.
For the year ended December 31, 2011, excluding the positive effect of purchase accounting items, net income was $222.9 million and diluted EPS were $1.68. (1)
“First Republic achieved very solid performance in 2011, including significant growth in loans, deposits and wealth management assets,” said Katherine August-deWilde, President and Chief Operating Officer. “Core earnings continue to grow nicely while asset quality remains very strong.”
Asset Quality Remains Strong
The Bank’s credit quality remains strong. At December 31, 2011, nonperforming assets were 11 basis points of total assets.
During the fourth quarter, the Bank recorded a provision for loan losses of $16.2 million. The Bank’s provision for loan losses is related primarily to loans outstanding that have been originated since July 1, 2010. At December 31, 2011, the allowance related to these loans totaled $61.6 million, or 0.59% of such loans.
Capital Strength
The Bank’s Tier 1 leverage and total risk-based capital ratios at December 31, 2011 were 8.81% and 13.65%, respectively. The Bank continues to exceed all regulatory guidelines for well-capitalized institutions.
Book Value Growth
Book value per share was $19.46 at December 31, 2011, a 17% increase during 2011.
Tangible book value per share was $18.23 at December 31, 2011, a 20% increase during 2011.
Continued Franchise Development
Asset growth continues
Total assets at December 31, 2011 were $27.8 billion. During the last year, loans increased $3.8 billion and investment securities increased $1.7 billion. These increases were funded primarily by deposit growth of $3.2 billion and a $1.5 billion increase in term, fixed-rate Federal Home Loan Bank (“FHLB”) advances.
Loans outstanding were $23.1 billion at December 31, 2011, a 20% increase for the year.
Deposit growth strong - mix improves
Total deposits were $22.5 billion at December 31, 2011, a 17% increase for the year.
At December 31, 2011, total checking and savings accounts were 82% of total deposits, compared to 70% a year ago. Such accounts increased 38% during the year. At the same time, certificates of deposit (“CDs”) represented 18% of total deposits at December 31, 2011, a decrease from 30% a year ago.
The contractual rate paid on all deposits averaged 0.50% during the fourth quarter, compared to 0.64% for the third quarter and 0.86% during the fourth quarter a year ago, with the improvement coming both from a better deposit mix and lower market rates of interest.
At December 31, 2011, core deposits were 95% of total deposits.
Wealth management expands
Wealth management assets, excluding sweep account balances, were $20.4 billion at December 31, 2011, an increase of 21% for the year. Fees earned on wealth management assets, including investment advisory, trust and brokerage fees, were up 13% in the fourth quarter of 2011 compared to last year.
The Bank offers investment management services for individuals, endowments, businesses and 401(k) plans through First Republic Investment Management. At December 31, 2011, clients had $7.9 billion of assets under management, a 22% increase for the year.
Client assets at First Republic Securities Company and our client’s money market mutual fund balances were $7.8 billion at December 31, 2011, a 21% increase for the year.
The Bank also offers personal trust and custody services through First Republic Trust Company. At December 31, 2011, First Republic Trust Company administered $4.6 billion of trust and custody assets, of which approximately half were custody assets. This represents a 20% increase for the year.
Earnings Summary
Strong revenue growth
Total revenues were $314.9 million for the fourth quarter, compared to $299.2 million for the third quarter and $284.0 million for the fourth quarter a year ago.
Excluding the impact of purchase accounting, revenues were $254.5 million for the fourth quarter, compared to $236.7 million for the third quarter and $215.6 million for the fourth quarter of 2010, an 18% increase from a year ago. (1)
Net interest income grows
Net interest income was $285.5 million for the fourth quarter, compared to $268.9 million for the third quarter and $256.6 million for the fourth quarter a year ago. The increase was primarily due to increases in the average balances of loans and investment securities and an improved mix of deposits.
Excluding the impact of purchase accounting, contractual net interest income was $225.2 million for the fourth quarter, compared to $206.6 million for the third quarter and $188.2 million for the fourth quarter of 2010, a 20% increase from a year ago. (1)
Net interest margin
The Bank’s net interest margin was 4.53% for the fourth quarter, compared to 4.48% for the third quarter and 4.90% for the fourth quarter a year ago. For the year ended December 31, 2011, the net interest margin was 4.63%.
Excluding the impact of purchase accounting, the net interest margin was 3.55% for the fourth quarter, compared to 3.41% for the third quarter. For the year ended December 31, 2011, the net interest margin was 3.53%. (1)
The increase in the net interest margin from the third quarter is due to the investing of excess cash balances in loans and investment securities, lower deposit costs due to market rates and an improvement in the deposit mix.
Noninterest income
Noninterest income for the fourth quarter was $29.4 million, compared to $30.3 million for the third quarter and $27.4 million for the fourth quarter a year ago. The 7% increase compared to last year was primarily due to increases in investment advisory fees, foreign exchange fee income, loan related fees and income from investments in life insurance.
Noninterest expense
Noninterest expense for the fourth quarter was $158.0 million, compared to $144.8 million for the third quarter and $143.0 million for the fourth quarter a year ago, an 18% increase year over year (excluding $9.0 million of one-time 2010 stock option costs). Noninterest expense has grown over the past year primarily due to an increase in personnel to support loan, deposit and wealth management growth, increased occupancy costs as the Bank continues to add offices and higher technology costs to invest in efficiency and client service.
Efficiency ratio steady
The Bank’s efficiency ratio, or noninterest expense as a percentage of net interest income and noninterest income, was 50.2% for the fourth quarter, compared to 48.4% for the third quarter and 50.4% for the fourth quarter a year ago. For the year ended December 31, 2011, the efficiency ratio was 48.7%.
Excluding the impact of purchase accounting, the Bank’s efficiency ratio was 59.2% for all of 2011 and 59.9% for the fourth quarter, compared to 58.8% for the prior quarter. (1)
Income tax rate declines
The Bank’s effective tax rate for 2011 was 35.7%. The decline in the tax rate in 2011 was a result of a higher level of tax-exempt securities, bank-owned life insurance and tax credit investments.
_________
(1) See non-GAAP reconciliation under section “Use of Non-GAAP Financial Measures.”
Conference Call Details
First Republic Bank’s fourth quarter 2011 earnings conference call is scheduled for January 17, 2012 at 11:00 a.m. PST / 2:00 p.m. EST. To listen to the live call by telephone, please dial (877) 941-2068 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #4501640. International callers should dial (480) 629-9712. 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 January 17, 2012, at 2:00 p.m. PST / 5:00 p.m. EST, through January 24, 2012, at 8:59 p.m. PST / 11:59 p.m. EST. To access the replay, dial (877) 870-5176 (U.S.), and use conference ID #4501640. International callers should dial (858) 384-5517 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 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, 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; and 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 |
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|
Three Months |
Three Months |
Twelve Months |
||||||||||||||
|
(in thousands, except per share amounts) |
2011 | 2010 | 2011 | 2011 | ||||||||||||
| Interest income: | ||||||||||||||||
| Interest on loans | $ | 288,226 | $ | 275,069 | $ | 278,770 | $ | 1,104,504 | ||||||||
| Interest on investments | 25,338 | 6,372 | 19,962 | 73,178 | ||||||||||||
| Interest on cash equivalents | 1,197 | 1,538 | 1,609 | 5,275 | ||||||||||||
| Total interest income | 314,761 | 282,979 | 300,341 | 1,182,957 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Interest on customer deposits | 17,628 | 21,730 | 21,573 | 83,268 | ||||||||||||
| Interest on FHLB advances and other borrowings | 11,035 | 4,035 | 9,295 | 31,671 | ||||||||||||
| Interest on subordinated notes | 561 | 584 | 567 | 2,279 | ||||||||||||
| Total interest expense | 29,224 | 26,349 | 31,435 | 117,218 | ||||||||||||
| Net interest income | 285,537 | 256,630 | 268,906 | 1,065,739 | ||||||||||||
| Provision for loan losses | 16,159 | 14,309 | 15,531 | 52,329 | ||||||||||||
| Net interest income after provision for loan losses | 269,378 | 242,321 | 253,375 | 1,013,410 | ||||||||||||
| Noninterest income: | ||||||||||||||||
| Investment advisory fees | 11,897 | 9,270 | 12,663 | 47,030 | ||||||||||||
| Brokerage and investment fees | 2,219 | 2,977 | 2,776 | 9,496 | ||||||||||||
| Trust fees | 1,729 | 1,750 | 1,588 | 6,737 | ||||||||||||
| Foreign exchange fee income | 3,298 | 1,820 | 2,689 | 10,235 | ||||||||||||
| Deposit customer fees | 3,169 | 3,636 | 3,786 | 14,368 | ||||||||||||
| Loan servicing fees, net | (341 | ) | (823 | ) | (400 | ) | (168 | ) | ||||||||
| Loan and related fees | 1,801 | 849 | 1,501 | 4,951 | ||||||||||||
| Gain on sale of loans | 335 | 3,800 | 1,301 | 6,417 | ||||||||||||
| Income from investments in life insurance | 4,785 | 3,233 | 3,536 | 16,143 | ||||||||||||
| Other income | 510 | 900 | 825 | 2,721 | ||||||||||||
| Total noninterest income | 29,402 | 27,412 | 30,265 | 117,930 | ||||||||||||
| Noninterest expense: | ||||||||||||||||
| Salaries and related benefits | 74,352 | 71,734 | 67,780 | 275,086 | ||||||||||||
| Occupancy | 18,595 | 15,383 | 17,088 | 67,609 | ||||||||||||
| Information systems | 16,065 | 11,568 | 14,905 | 57,695 | ||||||||||||
| Advertising and marketing | 8,567 | 5,716 | 6,883 | 28,812 | ||||||||||||
| FDIC and other deposit assessments | 5,552 | 8,439 | 5,161 | 23,910 | ||||||||||||
| Professional fees | 4,711 | 5,493 | 4,205 | 16,359 | ||||||||||||
| Amortization of intangibles | 5,444 | 6,073 | 5,602 | 22,723 | ||||||||||||
| Other expenses | 24,715 | 18,627 | 23,165 | 84,414 | ||||||||||||
| Total noninterest expense | 158,001 | 143,033 | 144,789 | 576,608 | ||||||||||||
| Income before provision for income taxes | 140,779 | 126,700 | 138,851 | 554,732 | ||||||||||||
| Provision for income taxes | 49,016 | 49,535 | 49,986 | 198,039 | ||||||||||||
| Net income before noncontrolling interests | 91,763 | 77,165 | 88,865 | 356,693 | ||||||||||||
| Less: Net income from noncontrolling interests | 1,072 | 1,198 | 1,072 | 4,605 | ||||||||||||
| First Republic Bank Net Income | $ | 90,691 | $ | 75,967 | $ | 87,793 | $ | 352,088 | ||||||||
| Basic earnings per common share | $ | 0.70 | $ | 0.61 | $ | 0.68 | $ | 2.73 | ||||||||
| Diluted earnings per common share | $ | 0.68 | $ | 0.60 | $ | 0.66 | $ | 2.65 | ||||||||
| Weighted average shares - basic | 129,313 | 125,109 | 129,207 | 129,061 | ||||||||||||
| Weighted average shares - diluted | 132,939 | 127,546 | 132,437 | 132,724 | ||||||||||||
|
CONSOLIDATED BALANCE SHEET |
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|
As of |
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| ($ in thousands) |
December 31, |
September 30, |
December 31, |
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|
ASSETS |
||||||||||||
| Cash and cash equivalents | $ | 630,780 | $ | 2,064,245 | $ | 1,528,075 | ||||||
| Securities purchased under agreements to resell | 4,890 | 4,890 | - | |||||||||
| Investment securities available-for-sale | 722,280 | 558,832 | 75,602 | |||||||||
| Investment securities held-to-maturity | 2,097,198 | 1,709,782 | 1,017,402 | |||||||||
| Loans: | ||||||||||||
| Single family (1-4 units) | 13,538,218 | 12,759,861 | 11,493,879 | |||||||||
| Home equity lines of credit | 1,878,969 | 1,829,992 | 1,755,556 | |||||||||
| Commercial real estate | 2,504,791 | 2,429,259 | 2,175,256 | |||||||||
| Multifamily (5+ units) | 2,437,169 | 2,272,048 | 1,993,317 | |||||||||
| Single family construction | 183,863 | 185,652 | 168,336 | |||||||||
| Multifamily/commercial construction | 122,885 | 98,568 | 115,169 | |||||||||
| Commercial business loans | 1,656,795 | 1,439,357 | 1,220,863 | |||||||||
| Other secured | 169,502 | 152,393 | 167,354 | |||||||||
| Unsecured loans and lines of credit | 224,069 | 157,838 | 113,773 | |||||||||
| Stock secured | 103,208 | 92,403 | 24,612 | |||||||||
| Total unpaid principal balance | 22,819,469 | 21,417,371 | 19,228,115 | |||||||||
| Net unaccreted discount | (493,895 | ) | (542,319 | ) | (679,050 | ) | ||||||
| Net deferred fees and costs | 10,020 | 8,894 | 1,435 | |||||||||
| Allowance for loan losses | (68,113 | ) | (53,304 | ) | (18,809 | ) | ||||||
| Loans, net | 22,267,481 | 20,830,642 | 18,531,691 | |||||||||
| Loans held for sale | 305,881 | 59,374 | 51,126 | |||||||||
| Investments in life insurance | 585,956 | 486,101 | 391,750 | |||||||||
| Prepaid expenses and other assets | 878,842 | 763,695 | 480,770 | |||||||||
| Premises, equipment and leasehold improvements, net | 118,365 | 112,562 | 97,051 | |||||||||
| Goodwill | 24,604 | 24,604 | 24,604 | |||||||||
| Other intangible assets | 134,574 | 140,018 | 157,297 | |||||||||
| Mortgage servicing rights | 17,269 | 20,089 | 21,640 | |||||||||
| Other real estate owned | 3,681 | 3,533 | 625 | |||||||||
| Total Assets | $ | 27,791,801 | $ | 26,778,367 | $ | 22,377,633 | ||||||
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LIABILITIES AND EQUITY |
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| Liabilities: | ||||||||||||
| Customer deposits: | ||||||||||||
| Noninterest-bearing accounts | $ | 6,115,571 | $ | 5,242,610 | $ | 3,056,515 | ||||||
| Interest-bearing checking accounts | 3,675,813 | 2,794,413 | 2,757,319 | |||||||||
| Money Market (MM) checking accounts | 3,139,448 | 3,454,128 | 2,767,826 | |||||||||
| MM savings and passbooks | 5,520,558 | 5,424,025 | 4,821,262 | |||||||||
| Certificates of deposit | 4,007,869 | 4,854,864 | 5,832,827 | |||||||||
| Total customer deposits | 22,459,259 | 21,770,040 | 19,235,749 | |||||||||
| FHLB advances | 2,200,000 | 2,100,000 | 600,000 | |||||||||
| Subordinated notes | 65,711 | 66,386 | 68,374 | |||||||||
| Debt related to variable interest entity | 63,259 | 21,891 | 25,471 | |||||||||
| Other liabilities | 408,550 | 330,931 | 223,283 | |||||||||
| Total Liabilities | 25,196,779 | 24,289,248 | 20,152,877 | |||||||||
| Equity: | ||||||||||||
| First Republic Bank stockholders' equity | ||||||||||||
| Common stock | 1,294 | 1,293 | 1,289 | |||||||||
| Additional paid-in capital | 2,020,832 | 2,014,020 | 1,994,457 | |||||||||
| Retained earnings | 494,450 | 403,759 | 142,362 | |||||||||
| Accumulated other comprehensive income (loss), net | 1,186 | (7,213 | ) | 78 | ||||||||
| Total First Republic Bank stockholders' equity | 2,517,762 | 2,411,859 | 2,138,186 | |||||||||
| Noncontrolling interests | 77,260 | 77,260 | 86,570 | |||||||||
| Total Equity | 2,595,022 | 2,489,119 | 2,224,756 | |||||||||
| Total Liabilities and Equity | $ | 27,791,801 | $ | 26,778,367 | $ | 22,377,633 | ||||||
|
Three Months |
Three Months |
Twelve Months |
||||||||||||||
| ($ in thousands) | 2011 | 2010 | 2011 | 2011 | ||||||||||||
|
Operating Information |
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| Loans originated | $ | 3,312,813 | $ | 2,282,762 | $ | 2,628,081 | $ | 10,239,273 | ||||||||
| Loans sold | $ | 52,137 | $ | 405,159 | $ | 171,493 | $ | 728,669 | ||||||||
| Net income to average assets (2) | 1.30 | % | 1.35 | % | 1.33 | % | 1.39 | % | ||||||||
| Net income to average common equity (2) | 14.49 | % | 14.99 | % | 14.61 | % | 15.04 | % | ||||||||
| Efficiency ratio | 50.2 | % | 50.4 | % | 48.4 | % | 48.7 | % | ||||||||
| Efficiency ratio (non-GAAP) (3) | 59.9 | % | 59.4 | % | 58.8 | % | 59.2 | % | ||||||||
|
Yields/Rates (2) |
||||||||||||||||
| Cash and cash equivalents | 0.26 | % | 0.28 | % | 0.26 | % | 0.26 | % | ||||||||
| Securities purchased under agreements to resell | 0.08 | % | - | 0.00 | % | 0.05 | % | |||||||||
| Investment securities (4) | 5.52 | % | 5.29 | % | 5.50 | % | 5.67 | % | ||||||||
| Loans (4) | 5.31 | % | 6.03 | % | 5.50 | % | 5.57 | % | ||||||||
| Total interest-earning assets | 4.98 | % | 5.40 | % | 4.99 | % | 5.12 | % | ||||||||
| Customer deposits | 0.31 | % | 0.45 | % | 0.40 | % | 0.40 | % | ||||||||
| Borrowings | 2.06 | % | 2.64 | % | 1.83 | % | 2.12 | % | ||||||||
| Total interest-bearing liabilities | 0.47 | % | 0.53 | % | 0.53 | % | 0.52 | % | ||||||||
| Net interest spread | 4.51 | % | 4.87 | % | 4.46 | % | 4.60 | % | ||||||||
| Net interest margin | 4.53 | % | 4.90 | % | 4.48 | % | 4.63 | % | ||||||||
| Net interest margin (non-GAAP) (3) | 3.55 | % | 3.50 | % | 3.41 | % | 3.53 | % | ||||||||
| Net interest income (tax-equivalent basis) | $ | 298,768 | $ | 260,287 | $ | 279,518 | $ | 1,105,703 | ||||||||
| (2) For the periods less than a year, ratios are annualized. | ||||||||||||||||
| (3) For a reconciliation of these ratios to the equivalent GAAP ratios, see "Use of Non-GAAP Financial Measures." | ||||||||||||||||
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(4) Yield is calculated on a tax-equivalent basis. |
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The following table separates our loan portfolio as of December 31, 2011 between loans acquired on July 1, 2010 and loans originated since July 1, 2010:
| Composition of Loan Portfolio | ||||||||||||
| Loans acquired | Loans originated | Total loans at | ||||||||||
| on July 1, | since July 1, | December 31, | ||||||||||
|
($ in thousands) |
2010 | 2010 | 2011 | |||||||||
| Single family (1-4 units) | $ | 7,268,879 | $ | 6,269,339 | $ | 13,538,218 | ||||||
| Home equity lines of credit | 1,331,972 | 546,997 | 1,878,969 | |||||||||
| Commercial real estate | 1,679,972 | 824,819 | 2,504,791 | |||||||||
| Multifamily (5+ units) | 1,239,103 | 1,198,066 | 2,437,169 | |||||||||
| Single family construction | 59,910 | 123,953 | 183,863 | |||||||||
| Multifamily/commercial construction | 35,299 | 87,586 | 122,885 | |||||||||
| Commercial business loans | 553,707 | 1,103,088 | 1,656,795 | |||||||||
| Other secured | 100,873 | 68,629 | 169,502 | |||||||||
| Unsecured loans and lines of credit | 64,429 | 159,640 | 224,069 | |||||||||
| Stock secured | 12,756 | 90,452 | 103,208 | |||||||||
| Total unpaid principal balance | 12,346,900 | 10,472,569 | 22,819,469 | |||||||||
| Net unaccreted discount | (492,947 | ) | (948 | ) | (493,895 | ) | ||||||
| Net deferred fees and costs | (6,644 | ) | 16,664 | 10,020 | ||||||||
| Allowance for loan losses | (6,483 | ) | (61,630 | ) | (68,113 | ) | ||||||
| Loans, net | $ | 11,840,826 | $ | 10,426,655 | $ | 22,267,481 | ||||||
| As of | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| (in thousands, except per share amounts) | 2011 | 2011 | 2010 | |||||||||
|
Book Value |
||||||||||||
| Number of shares of stock outstanding | 129,372 | 129,259 | 128,858 | |||||||||
| Book value per share | $ | 19.46 | $ | 18.66 | $ | 16.59 | ||||||
| Tangible book value per share | $ | 18.23 | $ | 17.39 | $ | 15.18 | ||||||
|
Capital Ratios |
||||||||||||
| Tier 1 leverage ratio | 8.81 | % | 8.95 | % | 9.24 | % | ||||||
| Tier 1 common equity ratio (5) | 12.84 | % | 13.36 | % | 13.77 | % | ||||||
| Tier 1 risk-based capital ratio | 13.25 | % | 13.81 | % | 14.38 | % | ||||||
| Total risk-based capital ratio | 13.65 | % | 14.15 | % | 14.61 | % | ||||||
| (5) Tier 1 common equity ratio represents common equity less goodwill and intangible assets divided by risk-based assets. | ||||||||||||
| As of | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| ($ in millions) | 2011 | 2011 | 2010 | |||||||||
|
Assets Under Management (6) |
||||||||||||
| First Republic Investment Management | $ | 7,940 | $ | 7,390 | $ | 6,516 | ||||||
| Brokerage and Investment: | ||||||||||||
| Brokerage | 6,806 | 6,529 | 5,573 | |||||||||
| Money Market Mutual Funds | 1,037 | 580 | 904 | |||||||||
| Total Brokerage and Investment | 7,843 | 7,109 | 6,477 | |||||||||
| Trust Company: | ||||||||||||
| Trust | 1,963 | 1,868 | 1,504 | |||||||||
| Custody | 2,641 | 2,100 | 2,333 | |||||||||
| Total Trust Company | 4,604 | 3,968 | 3,837 | |||||||||
| Total Wealth Management Assets | 20,387 | 18,467 | 16,830 | |||||||||
| Loans serviced for investors | 3,381 | 3,751 | 3,781 | |||||||||
| Total fee-based assets | $ | 23,768 | $ | 22,218 | $ | 20,611 | ||||||
| (6) Assets under management are presented excluding sweep deposits. | ||||||||||||
| As of | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| ($ in thousands) | 2011 | 2011 | 2010 | |||||||||
|
Asset Quality Information |
||||||||||||
| Nonperforming assets: | ||||||||||||
| Nonaccrual loans | $ | 26,373 | $ | 27,843 | $ | 18,343 | ||||||
| Other real estate owned | 3,681 | 3,533 | 625 | |||||||||
| Total nonperforming assets | $ | 30,054 | $ | 31,376 | $ | 18,968 | ||||||
| Nonperforming assets to total assets | 0.11 | % | 0.12 | % | 0.08 | % | ||||||
| Accruing loans 90 days or more past due | $ | - | $ | - | $ | - | ||||||
| Restructured performing loans | $ | 6,674 | $ | 5,169 | $ | 1,669 | ||||||
| Average Balance Sheet | ||||||||||||
|
Three Months |
Three Months |
Twelve Months |
||||||||||
| ($ in thousands) | 2011 | 2010 | 2011 | 2011 | ||||||||
| Assets: | ||||||||||||
| Cash equivalents | $ | 1,820,229 | $ | 2,212,101 | $ | 2,424,963 | $ | 2,038,407 | ||||
| Securities purchased under agreements to resell | 4,912 | - | 5,979 | 6,425 | ||||||||
| Investment securities | 2,671,429 | 757,700 | 2,133,224 | 1,909,515 | ||||||||
| Loans | 21,656,992 | 18,079,552 | 20,165,475 | 19,930,099 | ||||||||
| Total interest-earning assets | 26,153,562 | 21,049,353 | 24,729,641 | 23,884,446 | ||||||||
| Noninterest-earning assets | 1,621,175 | 1,231,614 | 1,471,588 | 1,429,815 | ||||||||
| Total Assets | $ | 27,774,737 | $ | 22,280,967 | $ | 26,201,229 | $ | 25,314,261 | ||||
| Liabilities and Equity: | ||||||||||||
| Checking | $ | 9,198,227 | $ | 5,365,900 | $ | 7,406,764 | $ | 7,313,369 | ||||
| Other liquid deposits | 8,881,723 | 7,819,659 | 8,947,218 | 8,610,827 | ||||||||
| CDs | 4,502,482 | 6,028,134 | 4,955,129 | 5,087,128 | ||||||||
| Total deposits | 22,582,432 | 19,213,693 | 21,309,111 | 21,011,324 | ||||||||
| FHLB advances | 2,102,174 | 600,000 | 2,053,261 | 1,500,274 | ||||||||
| Subordinated notes | 66,039 | 68,691 | 66,713 | 67,036 | ||||||||
| Debt related to variable interest entity | 71,105 | 25,498 | 22,173 | 35,397 | ||||||||
| Total borrowings | 2,239,318 | 694,189 | 2,142,147 | 1,602,707 | ||||||||
| Total interest-bearing liabilities | 24,821,750 | 19,907,882 | 23,451,258 | 22,614,031 | ||||||||
| Noninterest-bearing liabilities | 392,236 | 276,029 | 288,943 | 277,929 | ||||||||
| Equity before noncontrolling interests | 2,483,491 | 2,010,486 | 2,383,768 | 2,341,751 | ||||||||
| Noncontrolling interests | 77,260 | 86,570 | 77,260 | 80,550 | ||||||||
| Total Liabilities and Equity | $ | 27,774,737 | $ | 22,280,967 | $ | 26,201,229 | $ | 25,314,261 | ||||
Purchase Accounting Accretion and Amortization
The following table presents the impacts of purchase accounting for the periods indicated, including the amount of purchase accounting loan discount accretion and liability premium amortization, which increased net interest income, accretion of loan commitments and recognition of discounts established in purchase accounting on loans sold, which increased noninterest income. The table also includes the amortization of intangible assets, which increased noninterest expense.
|
Three Months |
Three Months |
Twelve Months |
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| ($ in thousands) | 2011 | 2010 | 2011 | 2011 | |||||||
| Accretion/amortization to net interest income: | |||||||||||
| Loans | $ | 48,936 | $ | 48,233 | $ | 48,903 | $ | 184,921 | |||
| Deposits | 10,744 | 19,540 | 12,755 | 54,572 | |||||||
| Borrowings | 675 | 652 | 668 | 2,663 | |||||||
| Total | $ | 60,355 | $ | 68,425 | $ | 62,326 | $ | 242,156 | |||
| Noninterest income: | |||||||||||
| Gain on sale of loans | $ | - | $ | - | $ | - | $ | 3,827 | |||
| Loan commitments | 109 | - | 143 | 1,472 | |||||||
| Total | $ | 109 | $ | - | $ | 143 | $ | 5,299 | |||
| Amortization to noninterest expense: | |||||||||||
| Intangible assets | $ | 5,444 | $ | 6,073 | $ | 5,602 | $ | 22,723 | |||
Use of Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, due to the application of purchase accounting, and costs associated with the Bank’s initial public offering (“IPO”), management uses certain non-GAAP measures and ratios which exclude 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 are significantly impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting. The subsequent accretion and amortization affect our net income, earnings per share and certain operating ratios as we accrete loan discounts to interest income; loan commitments to noninterest income; recognize discounts established in purchase accounting on the sale of loans, which increase gain on sale of loans; amortize premiums on liabilities such as CDs and subordinated debt to interest expense; and amortize intangible assets to noninterest expense. In addition, in connection with the Bank’s IPO in December 2010, we recorded one-time stock option costs of $9.0 million.
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 current 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, not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the financial 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 used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure.
|
Three Months |
Three Months |
Twelve Months |
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| (in thousands, except per share amounts) | 2011 | 2010 | 2011 | 2011 | ||||||||||||
| Non-GAAP earnings | ||||||||||||||||
| Net income | $ | 90,691 | $ | 75,967 | $ | 87,793 | $ | 352,088 | ||||||||
| Accretion / amortization added to net interest income | (60,355 | ) | (68,425 | ) | (62,326 | ) | (242,156 | ) | ||||||||
| Discounts recognized in gain on sale of loans | - | - | - | (3,827 | ) | |||||||||||
| Accretion added to noninterest income | (109 | ) | - | (143 | ) | (1,472 | ) | |||||||||
| Amortization of intangible assets | 5,444 | 6,073 | 5,602 | 22,723 | ||||||||||||
| Stock option costs related to IPO | - | 8,950 | - | - | ||||||||||||
| Add back tax impact of the above items | 23,384 | 22,696 | 24,169 | 95,512 | ||||||||||||
| Non-GAAP net income | $ | 59,055 | $ | 45,261 | $ | 55,095 | $ | 222,868 | ||||||||
| GAAP earnings per share-diluted | $ | 0.68 | $ | 0.60 | $ | 0.66 | $ | 2.65 | ||||||||
| Impact of purchase accounting, net of tax | (0.24 | ) | (0.29 | ) | (0.24 | ) | (0.97 | ) | ||||||||
| Impact of stock option costs related to IPO, net of tax | - | 0.04 | - | - | ||||||||||||
| Non-GAAP earnings per share-diluted | $ | 0.44 | $ | 0.35 | $ | 0.42 | $ | 1.68 | ||||||||
| Weighted average diluted common shares outstanding | 132,939 | 127,546 | 132,437 | 132,724 | ||||||||||||
|
Three Months |
Three Months |
Twelve Months |
||||||||||||||
| ($ in thousands) | 2011 | 2010 | 2011 | 2011 | ||||||||||||
| Net interest margin | ||||||||||||||||
| Net interest income | $ | 285,537 | $ | 256,630 | $ | 268,906 | $ | 1,065,739 | ||||||||
| Less: Accretion / amortization | (60,355 | ) | (68,425 | ) | (62,326 | ) | (242,156 | ) | ||||||||
| Adjusted net interest income (non-GAAP) | $ | 225,182 | $ | 188,205 | $ | 206,580 | $ | 823,583 | ||||||||
| Average interest earning assets | $ | 26,153,562 | $ | 21,049,353 | $ | 24,729,641 | $ | 23,884,446 | ||||||||
| Add: Average unamortized loan discounts | 528,104 | 713,593 | 574,706 | 595,378 | ||||||||||||
| Adjusted average earning assets | $ | 26,681,666 | $ | 21,762,946 | $ | 25,304,347 | $ | 24,479,824 | ||||||||
| Net interest margin – reported | 4.53 | % | 4.90 | % | 4.48 | % | 4.63 | % | ||||||||
| Adjusted net interest margin (non-GAAP) | 3.55 | % | 3.50 | % | 3.41 | % | 3.53 | % | ||||||||
|
Three Months |
Three Months |
Twelve Months |
||||||||||||||
| ($ in thousands) | 2011 | 2010 | 2011 | 2011 | ||||||||||||
| Efficiency ratio | ||||||||||||||||
| Net interest income | $ | 285,537 | $ | 256,630 | $ | 268,906 | $ | 1,065,739 | ||||||||
| Less: Accretion / amortization | (60,355 | ) | (68,425 | ) | (62,326 | ) | (242,156 | ) | ||||||||
| Adjusted net interest income (non-GAAP) | $ | 225,182 | $ | 188,205 | $ | 206,580 | $ | 823,583 | ||||||||
| Noninterest income | $ | 29,402 | $ | 27,412 | $ | 30,265 | $ | 117,930 | ||||||||
| Less: Accretion of loan commitments | (109 | ) | - | (143 | ) | (1,472 | ) | |||||||||
| Discounts recognized in gain on sale of loans | - | - | - | (3,827 | ) | |||||||||||
| Adjusted noninterest income (non-GAAP) | $ | 29,293 | $ | 27,412 | $ | 30,122 | $ | 112,631 | ||||||||
| Total revenue | $ | 314,939 | $ | 284,042 | $ | 299,171 | $ | 1,183,669 | ||||||||
| Total revenue (non-GAAP) | $ | 254,475 | $ | 215,617 | $ | 236,702 | $ | 936,214 | ||||||||
| Noninterest expense | $ | 158,001 | $ | 143,033 | $ | 144,789 | $ | 576,608 | ||||||||
| Less: Intangible amortization | (5,444 | ) | (6,073 | ) | (5,602 | ) | (22,723 | ) | ||||||||
| Stock option costs related to IPO | - | (8,950 | ) | - | - | |||||||||||
| Adjusted noninterest expense (non-GAAP) | $ | 152,557 | $ | 128,010 | $ | 139,187 | $ | 553,885 | ||||||||
| Efficiency ratio | 50.2 | % | 50.4 | % | 48.4 | % | 48.7 | % | ||||||||
| Efficiency ratio (non-GAAP) | 59.9 | % | 59.4 | % | 58.8 | % | 59.2 | % | ||||||||