SAN FRANCISCO--(BUSINESS WIRE)--First Republic Bank (NYSE: FRC) today announced financial results for the quarter and year ended December 31, 2017.
“2017 was another strong year for growth in deposits, loans and wealth management assets,” said Jim Herbert, Chairman and CEO. “Our stable, client-centric business model continues to perform well across the franchise.”
Full Year Highlights
Financial Results
– Revenues were $2.6 billion, up 18.1%.
– Net income was $757.7 million, up 12.5%.
– Diluted earnings per share of $4.31, up 9.7%.
– Loan originations totaled $27.6 billion, our strongest year ever.
– Efficiency ratio was 62.8%.
– Tangible book value per share was $40.43, up 14.4%.
Continued Capital and Credit Strength
– Total regulatory capital has grown 15.4% (1) from a year ago.
– Common Equity Tier 1 ratio was 10.63%, compared to 10.83% a year ago.
– Nonperforming assets remained very low at 4 basis points of total assets.
– Net charge-offs were only $647,000, or less than 1 basis point of average loans.
Continued Franchise Development
– Loans, excluding loans held for sale, totaled $62.8 billion, up 20.8%.
– Deposits were $68.9 billion, up 17.6%.
– Wealth management assets were $107.0 billion, up 28.0%.
– Wealth management revenues were $356.4 million, up 22.4%.
Quarterly Highlights
– Compared to last year’s fourth quarter:
– Revenues were $699.2 million, up 16.6%.
– Net interest income was $568.9 million, up 15.9%.
– Net income was $194.3 million, up 8.5%.
– Diluted EPS of $1.10, up 6.8%.
– Loan originations were $7.4 billion, our second best quarter ever.
– Loans sold totaled $969.2 million for the quarter.
– Net credit recoveries were $1.1 million.
– Net interest margin was 3.08%, compared to 3.09% for the prior quarter.
– Efficiency ratio was 63.7%, compared to 62.4% for the prior quarter.
– Wealth management assets were $107.0 billion, up 5.5% from the prior quarter.
“We are very pleased that both revenue and net interest income grew 18% for the year,” said Mike Roffler, Chief Financial Officer. “Asset quality remains excellent and capital is strong.”
Quarterly Cash Dividend Declared
The Bank declared a cash dividend for the fourth quarter of $0.17 per share of common stock, which is payable on February 8, 2018 to shareholders of record as of January 25, 2018.
Very Strong Asset Quality
Credit quality remains very strong. Nonperforming assets were only 4 basis points of total assets at December 31, 2017.
The Bank had net recoveries for the quarter of $1.1 million, while adding $17.0 million to its allowance for loan losses due to continued loan growth. For 2017, the Bank had net charge-offs of only $647,000, while adding $60.2 million to its allowance for loan losses.
Continued Capital Strength
Total regulatory capital has grown 15.4% (1) from a year ago.
The Bank’s Common Equity Tier 1 ratio was 10.63% at December 31, 2017, compared to 10.83% a year ago.
During the fourth quarter, the Bank issued and sold 2,875,000 new shares of common stock in an underwritten public offering, which added approximately $275.2 million to common equity.
Tangible Book Value Growth
Tangible book value per common share at December 31, 2017 was $40.43, up 14.4% from a year ago.
Continued Franchise Development
Strong Loan Originations
Loan originations were $7.4 billion for the quarter, compared to a record $7.9 billion for the same quarter a year ago. For 2017, loan originations totaled $27.6 billion, up 7.4% compared to the prior year primarily due to increases in single family, multifamily and business lending.
Loans, excluding loans held for sale, totaled $62.8 billion at December 31, 2017, up 20.8% compared to a year ago. The increase was primarily due to growth in single family, multifamily and business loans.
Deposit Growth
Total deposits increased to $68.9 billion, up 17.6% compared to a year ago.
At December 31, 2017, checking accounts totaled 63.4% of deposits.
The average rate paid on deposits was 0.28% during the quarter, compared to 0.25% for the prior quarter.
Investments
Total investment securities at December 31, 2017 were $18.6 billion, up 6.0% for the quarter and up 22.6% compared to a year ago.
High-quality liquid assets, including eligible cash, totaled $10.5 billion at December 31, 2017, and represented 12.4% of average total assets.
Mortgage Banking Activity
During the fourth quarter, the Bank sold $969.2 million of loans and recorded a gain on sale of $3.1 million, compared to loan sales of $801.0 million and a gain of $818,000 during the fourth quarter of last year. For 2017, the Bank sold $2.9 billion of loans and recorded a gain on sale of $9.2 million.
Loans serviced for investors at year-end totaled $12.5 billion, up 7.2% from a year ago. Net loan servicing fees for the quarter were $3.9 million and were $13.8 million for the year.
Continued Expansion of Wealth Management
Wealth management revenues totaled $103.7 million for the quarter, up 30.0% compared to last year’s fourth quarter. For 2017, wealth management revenues were $356.4 million, an increase of 22.4% compared to the prior year. Such revenues represented 14.8% of the Bank’s total revenues for the quarter and 13.6% of the Bank’s total revenues for the year.
Total wealth management assets were $107.0 billion at December 31, 2017, up 5.5% for the quarter and up 28.0% compared to a year ago. The growth in wealth management assets was due to both net new assets from existing and new clients and market appreciation.
Wealth management assets included investment management assets of $52.7 billion, brokerage assets and money market mutual funds of $44.7 billion, and trust and custody assets of $9.6 billion.
Income Statement and Key Ratios
Highlights
Strong Revenue Growth
Total revenues were $699.2 million for the quarter, up 16.6% compared to the fourth quarter a year ago and were $2.6 billion for 2017, up 18.1% compared to the prior year.
Strong Net Interest Income Growth
Net interest income was $568.9 million for the quarter, up 15.9% compared to the fourth quarter a year ago, and was $2.2 billion for 2017, up 18.4% compared to the prior year. The increases in net interest income resulted primarily from growth in average earning assets.
Net Interest Margin
The net interest margin was 3.08% for the fourth quarter, compared to 3.09% for the prior quarter, and 3.16% for the fourth quarter of 2016. For 2017, the Bank’s net interest margin was 3.13%, compared to 3.20% for the prior year.
Noninterest Income
Noninterest income was $130.3 million for the quarter, up 19.7% compared to the fourth quarter a year ago, and was $460.5 million for 2017, up 16.6% compared to the prior year. The increases were primarily from growth in wealth management revenues.
Noninterest Expense and Efficiency Ratio
Noninterest expense was $445.5 million for the quarter, up 23.7% compared to the fourth quarter a year ago. For 2017, noninterest expense was $1.6 billion, up 22.6% from the prior year. The increases were primarily due to increased salaries and benefits, information systems and other costs from the continued investments in the expansion of the franchise, including investments in Gradifi.
The efficiency ratio was 63.7% for the quarter, compared to 62.4% for the prior quarter and 60.1% for the fourth quarter a year ago. For all of 2017, the efficiency ratio was 62.8%, compared to 60.5% for 2016.
Income Taxes
On December 22, 2017, H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Reform Act”), was enacted into law. Beginning in 2018, the Tax Reform Act reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain tax deductions. As a result of the lower corporate tax rate, during the fourth quarter of 2017, the Bank recorded a one-time revaluation adjustment of $39.7 million to reduce its deferred tax assets, which increased the provision for income taxes.
In addition, during the fourth quarter of 2017, the volume of stock option exercises by Bank employees and directors increased considerably in response to tax reform legislation. This activity resulted in $50.0 million of excess tax benefits, which decreased the Bank’s provision for income taxes.
The Bank’s effective tax rate for the fourth quarter of 2017 was 17.9%, compared to 17.3% for the prior quarter. The increase in the effective tax rate during the quarter resulted from the one-time revaluation of deferred tax assets, partially offset by the increase in the volume of stock option exercises by Bank employees and directors.
The effective tax rate for 2017 was 16.9%, compared to 18.6% in 2016. The decrease in 2017 resulted primarily from the continued growth in tax-advantaged investments during the year. In addition, the decrease in the effective tax rate was the result of the increase in the volume of stock option exercises by Bank employees and directors, partially offset by the one-time revaluation of deferred tax assets.
For 2018, the Bank expects its effective tax rate to be approximately 19%.
__________
(1) Regulatory capital growth after the redemption of our 5.625% Series C Preferred Stock on January 2, 2018 at an aggregate amount of $150.0 million.
Conference Call Details
First Republic Bank’s fourth quarter and full year 2017 earnings conference call is scheduled for January 16, 2018 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (877) 407-0792 approximately 10 minutes prior to the start time (to allow time for registration). International callers should dial +1 (201) 689-8263.
The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of First Republic’s website at firstrepublic.com. To listen to the live webcast, please visit the site at least 10 minutes prior to the start time to register, download and install any necessary audio software.
For those unable to join the live presentation, a replay of the call will be available beginning January 16, 2018, at 10:00 a.m. PT / 1:00 p.m. ET, through January 23, 2018, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (844) 512-2921 and use conference ID #13674822. International callers should dial +1 (412) 317-6671 and enter the same conference ID number. A replay of the webcast also will be available for 90 days following, accessible in the Investor Relations section of First Republic Bank’s website at firstrepublic.com.
The Bank’s press releases are available after release in the Investor Relations section of First Republic Bank’s website at firstrepublic.com.
About First Republic Bank
Founded in 1985, First Republic and its subsidiaries offer private banking, private business banking and private wealth management, including investment, trust and brokerage services. First Republic specializes in delivering exceptional, relationship-based service, with a solid commitment to responsiveness and action. Services are offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach and San Diego, California; Portland, Oregon; Boston, Massachusetts; Palm Beach, Florida; Greenwich, Connecticut; New York, New York; and later in 2018, Jackson, Wyoming. First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans. For more information, visit firstrepublic.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this press release that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimates,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases and include statements about economic performance in our markets, growth in our loan originations and wealth management assets, our progress in preparing for, and our compliance with, any enhanced regulatory requirements, and our projected tax rate. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.
Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: significant competition to attract and retain banking and wealth management customers, from both traditional and nontraditional financial services and technology companies; our ability to recruit and retain key managers, employees and board members; the possibility of earthquakes, fires and other natural disasters affecting the markets in which we operate; interest rate risk and credit risk; our ability to maintain and follow high underwriting standards; economic and market conditions affecting the valuation of our investment securities portfolio, which could result in other-than-temporary impairment if the general economy deteriorates, credit ratings decline, the financial condition of issuers deteriorates, interest rates increase or the liquidity for securities is limited; real estate prices generally and in our markets; our geographic and product concentrations; demand for our products and services; the regulatory environment in which we operate, our regulatory compliance and future regulatory requirements; the impact of tax reform legislation; the phase-in of the final capital rules regarding the Basel III framework, changes to the definitions and components of regulatory capital and a new approach for risk-weighted assets; legislative and regulatory actions affecting us and the financial services industry, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, including increased compliance costs, limitations on activities and requirements to hold additional capital; our ability to avoid litigation and its associated costs and liabilities; the impact of new accounting standards; future FDIC special assessments or changes to regular assessments; fraud, cybersecurity and privacy risks; and custom technology preferences of our customers and our ability to successfully execute on initiatives relating to enhancements of our technology infrastructure, including client-facing systems and applications. For a discussion of these and other risks and uncertainties, see First Republic’s FDIC filings, including, but not limited to, the risk factors in First Republic’s Annual Report on Form 10-K. These filings are available in the Investor Relations section of our website.
All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in our Annual Report on Form 10-K and any subsequent reports filed by First Republic with the FDIC. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
CONSOLIDATED STATEMENTS OF INCOME
|
Quarter Ended December 31, |
Quarter Ended September 30, |
Year Ended December 31, |
||||||||||||||||||||||
| (in thousands, except per share amounts) |
2017 |
2016 | 2017 | 2017 | 2016 | |||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||
| Loans | $ | 514,700 | $ | 418,423 | $ | 497,162 | $ | 1,903,070 | $ | 1,573,403 | ||||||||||||||
| Investments | 140,396 | 106,994 | 132,948 | 521,837 | 378,719 | |||||||||||||||||||
| Other | 4,842 | 9,819 | 3,864 | 14,861 | 19,266 | |||||||||||||||||||
| Cash and cash equivalents | 2,863 | 2,358 | 3,193 | 11,850 | 9,485 | |||||||||||||||||||
| Total interest income | 662,801 | 537,594 | 637,167 | 2,451,618 | 1,980,873 | |||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||
| Deposits | 46,120 | 21,206 | 40,260 | 134,786 | 73,765 | |||||||||||||||||||
| Borrowings | 47,820 | 25,763 |
45,954 |
165,369 | 89,946 | |||||||||||||||||||
| Total interest expense | 93,940 | 46,969 | 86,214 | 300,155 | 163,711 | |||||||||||||||||||
| Net interest income | 568,861 | 490,625 | 550,953 | 2,151,463 | 1,817,162 | |||||||||||||||||||
| Provision for loan losses | 17,042 | 10,500 | 10,113 | 60,181 | 47,192 | |||||||||||||||||||
| Net interest income after provision for loan losses | 551,819 | 480,125 | 540,840 | 2,091,282 | 1,769,970 | |||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||
| Investment management fees | 82,358 | 59,855 | 70,796 | 282,868 | 224,626 | |||||||||||||||||||
| Brokerage and investment fees | 9,374 | 10,151 | 7,843 | 32,221 | 31,868 | |||||||||||||||||||
| Trust fees | 3,762 | 3,374 | 3,246 | 13,658 | 12,365 | |||||||||||||||||||
| Foreign exchange fee income | 8,198 | 6,384 | 6,551 | 27,691 | 22,406 | |||||||||||||||||||
| Deposit fees | 5,870 | 5,341 | 5,736 | 22,633 | 20,699 | |||||||||||||||||||
| Loan and related fees | 3,101 | 3,650 | 3,270 | 13,012 | 14,097 | |||||||||||||||||||
| Loan servicing fees, net | 3,932 | 3,022 | 3,520 | 13,800 | 13,465 | |||||||||||||||||||
| Gain on sale of loans | 3,065 | 818 | 1,963 | 9,233 | 4,828 | |||||||||||||||||||
| Gain (loss) on investment securities, net | — | (1,363 | ) | 1,204 | (833 | ) | 1,055 | |||||||||||||||||
| Income from investments in life insurance | 9,836 | 17,515 | 8,865 | 37,874 | 48,119 | |||||||||||||||||||
| Other income | 801 | 87 | 6,339 | 8,304 | 1,284 | |||||||||||||||||||
| Total noninterest income | 130,297 | 108,834 | 119,333 | 460,461 | 394,812 | |||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||
| Salaries and employee benefits | 250,076 | 201,087 | 236,996 | 930,908 | 763,625 | |||||||||||||||||||
| Information systems | 58,139 | 43,083 | 53,663 | 208,625 | 153,207 | |||||||||||||||||||
| Occupancy | 35,620 | 32,277 | 34,129 | 136,746 | 119,139 | |||||||||||||||||||
| Professional fees | 15,976 | 14,798 | 17,573 | 56,950 | 52,740 | |||||||||||||||||||
| FDIC assessments | 14,844 | 13,000 | 14,197 | 55,792 | 44,200 | |||||||||||||||||||
| Advertising and marketing | 17,173 | 10,167 | 10,639 | 48,398 | 32,783 | |||||||||||||||||||
| Amortization of intangibles | 4,746 | 5,839 | 5,019 | 20,625 | 25,002 | |||||||||||||||||||
| Other expenses | 48,969 | 39,923 | 46,143 | 181,497 | 146,490 | |||||||||||||||||||
| Total noninterest expense | 445,543 | 360,174 | 418,359 | 1,639,541 | 1,337,186 | |||||||||||||||||||
| Income before provision for income taxes | 236,573 | 228,785 | 241,814 | 912,202 | 827,596 | |||||||||||||||||||
| Provision for income taxes | 42,296 | 49,667 | 41,805 | 154,542 | 154,168 | |||||||||||||||||||
| Net income | 194,277 | 179,118 | 200,009 | 757,660 | 673,428 | |||||||||||||||||||
| Dividends on preferred stock | 14,272 | 17,376 | 14,272 | 58,040 | 68,589 | |||||||||||||||||||
| Net income available to common shareholders | $ | 180,005 | $ | 161,742 | $ | 185,737 | $ | 699,620 | $ | 604,839 | ||||||||||||||
| Basic earnings per common share | $ | 1.12 | $ | 1.06 | $ | 1.18 | $ | 4.44 | $ | 4.07 | ||||||||||||||
| Diluted earnings per common share | $ | 1.10 | $ | 1.03 | $ | 1.14 | $ | 4.31 | $ | 3.93 | ||||||||||||||
| Dividends per common share | $ | 0.17 | $ | 0.16 | $ | 0.17 | $ | 0.67 | $ | 0.63 | ||||||||||||||
| Weighted average shares—basic | 160,371 | 151,990 | 157,752 | 157,624 | 148,752 | |||||||||||||||||||
| Weighted average shares—diluted | 164,197 | 157,217 | 162,377 | 162,340 | 154,095 | |||||||||||||||||||
CONSOLIDATED BALANCE SHEETS
| As of | |||||||||||||||
| ($ in thousands) |
December 31, 2017 |
September 30, 2017 |
December 31, 2016 |
||||||||||||
|
ASSETS |
|||||||||||||||
| Cash and cash equivalents | $ | 2,297,021 | $ | 2,681,599 | $ | 2,107,722 | |||||||||
| Investment securities available-for-sale | 2,418,088 | 2,312,218 | 2,007,258 | ||||||||||||
| Investment securities held-to-maturity | 16,157,945 | 15,218,615 | 13,150,157 | ||||||||||||
| Loans: | |||||||||||||||
| Single family (1-4 units) | 31,508,468 | 29,799,762 | 26,266,866 | ||||||||||||
| Home equity lines of credit | 2,735,612 | 2,668,604 | 2,634,944 | ||||||||||||
| Multifamily (5+ units) | 8,640,233 | 8,060,467 | 6,676,642 | ||||||||||||
| Commercial real estate | 6,083,152 | 5,879,437 | 5,464,870 | ||||||||||||
| Single family construction | 591,066 | 549,978 | 494,616 | ||||||||||||
| Multifamily/commercial construction | 1,116,855 | 1,053,708 | 919,541 | ||||||||||||
| Business | 8,295,224 | 7,952,335 | 6,872,327 | ||||||||||||
| Stock secured | 1,083,553 | 1,029,463 | 822,908 | ||||||||||||
| Other secured | 1,015,039 | 974,933 | 723,648 | ||||||||||||
| Unsecured | 1,771,013 | 1,504,263 | 1,131,955 | ||||||||||||
| Total loans | 62,840,215 | 59,472,950 | 52,008,317 | ||||||||||||
| Allowance for loan losses | (365,932 | ) | (347,765 | ) | (306,398 | ) | |||||||||
| Loans, net | 62,474,283 | 59,125,185 | 51,701,919 | ||||||||||||
| Loans held for sale | 87,695 | 716,046 | 407,226 | ||||||||||||
| Investments in life insurance | 1,330,652 | 1,320,775 | 1,273,172 | ||||||||||||
| Tax credit investments | 1,107,546 | 1,126,647 | 1,121,416 | ||||||||||||
| Prepaid expenses and other assets | 1,254,720 | 1,183,044 | 923,324 | ||||||||||||
| Premises, equipment and leasehold improvements, net | 296,197 | 277,809 | 207,592 | ||||||||||||
| Goodwill | 198,447 | 198,447 | 203,177 | ||||||||||||
| Other intangible assets | 91,774 | 96,520 | 112,399 | ||||||||||||
| Mortgage servicing rights | 66,139 | 63,191 | 62,410 | ||||||||||||
| Total Assets | $ | 87,780,507 | $ | 84,320,096 | $ | 73,277,772 | |||||||||
|
LIABILITIES AND EQUITY |
|||||||||||||||
| Liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Noninterest-bearing checking | $ | 26,355,331 | $ | 25,122,856 | $ | 22,740,303 | |||||||||
| Interest-bearing checking | 17,324,683 | 14,457,910 | 14,575,890 | ||||||||||||
| Money market checking | 9,251,504 | 9,895,827 | 7,969,787 | ||||||||||||
| Money market savings and passbooks | 8,752,396 | 8,843,432 | 8,203,340 | ||||||||||||
| Certificates of deposit | 7,234,794 | 7,116,298 | 5,113,061 | ||||||||||||
| Total Deposits | 68,918,708 | 65,436,323 | 58,602,381 | ||||||||||||
| Short-term borrowings | 100,000 | 450,000 | 100,000 | ||||||||||||
| Long-term FHLB advances | 8,300,000 | 8,300,000 | 5,900,000 | ||||||||||||
| Senior notes | 894,723 | 894,304 | 397,955 | ||||||||||||
| Subordinated notes | 777,084 | 776,989 | 387,380 | ||||||||||||
| Debt related to variable interest entities | — | — | 25,973 | ||||||||||||
| Other liabilities | 971,691 | 1,034,534 | 955,431 | ||||||||||||
| Total Liabilities | 79,962,206 | 76,892,150 | 66,369,120 | ||||||||||||
| Shareholders’ Equity: | |||||||||||||||
| Preferred stock | 990,000 | 990,000 | 1,139,525 | ||||||||||||
| Common stock | 1,617 | 1,579 | 1,543 | ||||||||||||
| Additional paid-in capital | 3,778,913 | 3,536,400 | 3,301,705 | ||||||||||||
| Retained earnings | 3,051,611 | 2,899,417 | 2,459,540 | ||||||||||||
| Accumulated other comprehensive income (loss) | (3,840 | ) | 550 | 6,339 | |||||||||||
| Total Shareholders’ Equity | 7,818,301 | 7,427,946 | 6,908,652 | ||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 87,780,507 | $ | 84,320,096 | $ | 73,277,772 | |||||||||
| Quarter Ended December 31, | Quarter Ended September 30, | |||||||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | ||||||||||||||||||||||||||||||||||||||||
|
Average Balances, Yields and Rates |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
|||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 983,289 | $ | 2,863 | 1.16 | % | $ | 1,773,312 | $ | 2,358 | 0.53 | % | $ | 1,121,328 | $ | 3,193 | 1.13 | % | ||||||||||||||||||||||||
| Investment securities | 18,150,468 | 184,827 | 4.07 | % | 14,343,171 | 142,284 | 3.97 | % | 17,172,684 | 174,515 | 4.07 | % | ||||||||||||||||||||||||||||||
| Loans | 61,163,482 | 527,227 | 3.41 | % | 51,107,467 | 429,826 | 3.33 | % | 58,965,714 | 509,222 | 3.41 | % | ||||||||||||||||||||||||||||||
| FHLB stock | 282,150 | 4,842 | 6.81 | % | 147,697 | 9,819 | 26.45 | % | 274,424 | 3,864 | 5.59 | % | ||||||||||||||||||||||||||||||
|
Total interest-earning assets |
80,579,389 | 719,759 | 3.54 | % | 67,371,647 | 584,287 | 3.44 | % | 77,534,150 | 690,794 | 3.53 | % | ||||||||||||||||||||||||||||||
| Noninterest-earning cash | 341,903 | 312,323 | 315,592 | |||||||||||||||||||||||||||||||||||||||
|
Goodwill and other intangibles |
292,505 | 294,699 | 301,823 | |||||||||||||||||||||||||||||||||||||||
| Other assets | 3,380,998 | 3,091,686 | 3,280,800 | |||||||||||||||||||||||||||||||||||||||
|
Total noninterest-earning assets |
4,015,406 | 3,698,708 | 3,898,215 | |||||||||||||||||||||||||||||||||||||||
| Total Assets | $ | 84,594,795 | $ | 71,070.355 | $ | 81,432,365 | ||||||||||||||||||||||||||||||||||||
| Liabilities and Equity: | ||||||||||||||||||||||||||||||||||||||||||
| Checking | $ | 40,653,195 | 4,672 | 0.05 | % | $ | 35,547,235 | 1,204 | 0.01 | % | $ | 39,109,681 | 3,585 | 0.04 | % | |||||||||||||||||||||||||||
|
Money market checking and savings |
17,699,117 | 17,577 | 0.39 | % | 16,751,447 | 5,567 | 0.13 | % | 17,641,318 | 16,156 | 0.36 | % | ||||||||||||||||||||||||||||||
| CDs | 7,062,947 | 23,871 | 1.34 | % | 4,911,972 | 14,435 | 1.17 | % | 6,327,378 | 20,519 | 1.29 | % | ||||||||||||||||||||||||||||||
| Total deposits | 65,415,259 | 46,120 | 0.28 | % | 57,210,654 | 21,206 | 0.15 | % | 63,078,377 | 40,260 | 0.25 | % | ||||||||||||||||||||||||||||||
| Short-term borrowings | 471,304 | 1,416 | 1.19 | % | 103,261 | 467 | 1.80 | % | 653,263 | 1,968 | 1.20 | % | ||||||||||||||||||||||||||||||
| Long-term FHLB advances | 8,159,783 | 31,390 | 1.53 | % | 4,953,261 | 18,173 | 1.46 | % | 7,558,696 | 28,828 | 1.51 | % | ||||||||||||||||||||||||||||||
| Senior notes (3) | 894,519 | 5,919 | 2.65 | % | 397,857 | 2,575 | 2.59 | % | 894,086 | 5,918 | 2.65 | % | ||||||||||||||||||||||||||||||
| Subordinated notes (3) | 777,038 | 9,095 | 4.68 | % | 387,356 | 4,426 | 4.57 | % | 776,943 | 9,094 | 4.68 | % | ||||||||||||||||||||||||||||||
| Other borrowings | — | — | — | % | 26,700 | 122 | 1.83 | % | 20,123 | 146 | 2.90 | % | ||||||||||||||||||||||||||||||
| Total borrowings | 10,302,644 | 47,820 | 1.85 | % | 5,868,435 | 25,763 | 1.75 | % | 9,903,111 | 45,954 | 1.85 | % | ||||||||||||||||||||||||||||||
|
Total interest-bearing liabilities |
75,717,903 | 93,940 | 0.49 | % | 63,079,089 | 46,969 | 0.30 | % | 72,981,488 | 86,214 | 0.47 | % | ||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | 1,103,473 | 1,262,604 | 1,029,656 | |||||||||||||||||||||||||||||||||||||||
| Preferred equity | 990,000 | 1,139,525 | 990,000 | |||||||||||||||||||||||||||||||||||||||
|
Common equity |
6,783,419 | 5,589,137 | 6,431,221 | |||||||||||||||||||||||||||||||||||||||
|
Total Liabilities and Equity |
$ | 84,594,795 | $ | 71,070,355 | $ | 81,432,365 | ||||||||||||||||||||||||||||||||||||
| Net interest spread (4) | 3.05 | % | 3.14 | % | 3.06 | % | ||||||||||||||||||||||||||||||||||||
|
Net interest income (fully taxable-equivalent basis) and net interest margin (5) |
$ | 625,819 | 3.08 | % | $ | 537,318 | 3.16 | % | $ | 604,580 | 3.09 | % | ||||||||||||||||||||||||||||||
|
Reconciliation of tax-equivalent net interest income to reported net interest income:
|
||||||||||||||||||||||||||||||||||||||||||
| Tax-equivalent adjustment | (56,958 | ) | (46,693 | ) | (53,627 | ) | ||||||||||||||||||||||||||||||||||||
|
Net interest income, as reported |
$ | 568,861 | $ | 490,625 | $ | 550,953 | ||||||||||||||||||||||||||||||||||||
| __________ | ||||||||||||||||||||||||||||||||||||||||||
| (1) Interest income is presented on a fully taxable-equivalent basis. | ||||||||||||||||||||||||||||||||||||||||||
| (2) Yields/rates are annualized. | ||||||||||||||||||||||||||||||||||||||||||
| (3) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs. | ||||||||||||||||||||||||||||||||||||||||||
| (4) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities. | ||||||||||||||||||||||||||||||||||||||||||
| (5) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets. | ||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||||||
| Average Balances, Yields and Rates |
Average |
Interest |
Yields/ |
Average |
Interest |
Yields/ |
||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,217,293 | $ | 11,850 | 0.97 | % | $ | 1,913,466 | $ | 9,485 | 0.50 | % | ||||||||||||||||
| Investment securities | 16,828,290 | 686,701 | 4.08 | % | 12,172,626 | 506,608 | 4.16 | % | ||||||||||||||||||||
| Loans | 57,269,820 | 1,950,504 | 3.41 | % | 47,912,320 | 1,617,938 | 3.38 | % | ||||||||||||||||||||
| FHLB stock | 235,259 | 14,861 | 6.32 | % | 154,036 | 19,266 | 12.51 | % | ||||||||||||||||||||
| Total interest-earning assets | 75,550,662 | 2,663,916 | 3.53 | % | 62,152,448 | 2,153,297 | 3.46 | % | ||||||||||||||||||||
| Noninterest-earning cash | 324,696 | 283,292 | ||||||||||||||||||||||||||
| Goodwill and other intangibles | 303,498 | 298,014 | ||||||||||||||||||||||||||
| Other assets | 3,272,772 | 3,001,916 | ||||||||||||||||||||||||||
| Total noninterest-earning assets | 3,900,966 | 3,583,222 | ||||||||||||||||||||||||||
| Total Assets | $ | 79,451,628 | $ | 65,735,670 | ||||||||||||||||||||||||
|
Liabilities and Equity: |
||||||||||||||||||||||||||||
| Checking | $ | 38,792,204 | 10,818 | 0.03 | % | $ | 33,150,987 | 3,703 | 0.01 | % | ||||||||||||||||||
| Money market checking and savings | 16,999,755 | 45,852 | 0.27 | % | 14,979,993 | 15,305 | 0.10 | % | ||||||||||||||||||||
| CDs | 6,133,143 | 78,116 | 1.27 | % | 4,642,625 | 54,757 | 1.18 | % | ||||||||||||||||||||
| Total deposits | 61,925,102 | 134,786 | 0.22 | % | 52,773,605 | 73,765 | 0.14 | % | ||||||||||||||||||||
| Short-term borrowings | 670,919 | 7,601 | 1.13 | % | 499,253 | 3,311 | 0.66 | % | ||||||||||||||||||||
| Long-term FHLB advances | 7,019,452 | 105,272 | 1.50 | % | 4,459,836 | 68,487 | 1.54 | % | ||||||||||||||||||||
| Senior notes (2) | 682,216 | 17,883 | 2.62 | % | 397,559 | 10,295 | 2.59 | % | ||||||||||||||||||||
| Subordinated notes (2) | 731,018 | 34,197 | 4.68 | % | 161,920 | 7,377 | 4.56 | % | ||||||||||||||||||||
| Other borrowings | 17,722 | 416 | 2.35 | % | 28,076 | 476 | 1.69 | % | ||||||||||||||||||||
| Total borrowings | 9,121,327 | 165,369 | 1.81 | % | 5,546,644 | 89,946 | 1.62 | % | ||||||||||||||||||||
| Total interest-bearing liabilities | 71,046,429 | 300,155 | 0.42 | % | 58,320,249 | 163,711 | 0.28 | % | ||||||||||||||||||||
| Noninterest-bearing liabilities | 1,052,700 | 1,109,027 | ||||||||||||||||||||||||||
| Preferred equity | 987,633 | 1,123,132 | ||||||||||||||||||||||||||
| Common equity | 6,364,866 | 5,183,262 | ||||||||||||||||||||||||||
| Total Liabilities and Equity | $ | 79,451,628 | $ | 65,735,670 | ||||||||||||||||||||||||
| Net interest spread (3) | 3.11 | % | 3.18 | % | ||||||||||||||||||||||||
|
Net interest income (fully taxable-equivalent basis) and net interest margin (4)
|
$ | 2,363,761 | 3.13 | % | $ | 1,989,586 | 3.20 | % | ||||||||||||||||||||
|
Reconciliation of tax-equivalent net interest income to reported net interest income:
|
||||||||||||||||||||||||||||
| Tax-equivalent adjustment | (212,298 | ) | (172,424 | ) | ||||||||||||||||||||||||
| Net interest income, as reported | $ | 2,151,463 | $ | 1,817,162 | ||||||||||||||||||||||||
| __________ | ||||||||||||||||||||||||||||
| (1) Interest income is presented on a fully taxable-equivalent basis. | ||||||||||||||||||||||||||||
| (2) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs. | ||||||||||||||||||||||||||||
| (3) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities. | ||||||||||||||||||||||||||||
| (4) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets. | ||||||||||||||||||||||||||||
|
Quarter Ended December 31, |
Quarter Ended September 30, |
Year Ended December 31, |
|||||||||||||||||||||||
|
Operating Information |
2017 |
2016 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||
| Net income to average assets (1) | 0.91 | % | 1.00 | % | 0.97 | % | 0.95 | % | 1.02 | % | |||||||||||||||
| Net income available to common shareholders to average common equity (1) | 10.53 | % | 11.51 | % | 11.46 | % | 10.99 | % | 11.67 | % | |||||||||||||||
| Net income available to common shareholders to average tangible common equity (1) | 11.00 | % | 12.15 | % | 12.02 | % | 11.54 | % | 12.38 | % | |||||||||||||||
|
Net interest income to average interest-earning assets (1) |
2.80 | % | 2.90 | % | 2.82 | % | 2.85 | % | 2.92 | % | |||||||||||||||
| Dividend payout ratio | 15.5 | % | 15.6 | % | 14.9 | % | 15.5 | % | 16.1 | % | |||||||||||||||
| Efficiency ratio (2) | 63.7 | % | 60.1 | % | 62.4 | % | 62.8 | % | 60.5 | % | |||||||||||||||
| Net loan charge-offs (recoveries) | $ | (1,125 | ) | $ | 207 | $ | 655 | $ | 647 | $ | 1,852 | ||||||||||||||
|
Net loan charge-offs (recoveries) to average total loans (1) |
(0.01 | %) | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||||||
| Allowance for loan losses to: | |||||||||||||||||||||||||
| Total loans | 0.58 | % | 0.59 | % | 0.58 | % | 0.58 | % | 0.59 | % | |||||||||||||||
| Nonaccrual loans | 971.8 | % | 625.0 | % | 917.1 | % | 971.8 | % | 625.0 | % | |||||||||||||||
| __________ | |||||||||||||||||||||||||
| (1) For periods less than a year, ratios are annualized. | |||||||||||||||||||||||||
| (2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income. | |||||||||||||||||||||||||
|
Quarter Ended December 31, |
Quarter Ended |
Year Ended December 31, |
||||||||||||||||||
| Effective Tax Rate | 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||
| Effective tax rate, prior to excess tax benefits and deferred tax assets valuation adjustment | 22.4 | % | 24.4 | % | 23.1 | % | 22.9 | % | 23.9 | % | ||||||||||
| Excess tax benefits—stock options | (21.1 | )% | (2.3 | )% | (3.9 | )% | (8.3 | )% | (4.2 | )% | ||||||||||
| Excess tax benefits—other stock awards | (0.2 | )% | (0.4 | )% | (1.9 | )% | (2.1 | )% | (1.1 | )% | ||||||||||
| Total excess tax benefits | (21.3 | )% | (2.7 | )% | (5.8 | )% | (10.4 | )% | (5.3 | )% | ||||||||||
| Deferred tax assets valuation adjustment (1) | 16.8 | % | — | % | — | % | 4.4 | % | — | % | ||||||||||
| Effective tax rate | 17.9 | % | 21.7 | % | 17.3 | % | 16.9 | % | 18.6 | % | ||||||||||
| (1) For the quarter and year ended December 31, 2017, as a result of the Tax Reform Act, the Bank recorded a one-time revaluation adjustment of $39.7 million to reduce its deferred tax assets, which increased the provision for income taxes. See “Income Taxes” for additional information. | ||||||||||||||||||||
|
Quarter Ended December 31, |
Quarter Ended September 30, |
Year Ended December 31, |
|||||||||||||||||||||||
| Mortgage Loan Sales | 2017 | 2016 |
2017 |
2017 | 2016 | ||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||
| Loans sold: | |||||||||||||||||||||||||
| Flow sales: | |||||||||||||||||||||||||
| Agency | $ | 20,967 | $ | 180,188 | $ | 26,152 | $ | 131,111 | $ | 434,094 | |||||||||||||||
| Non-agency | 91,916 | 133,015 | 88,534 | 309,482 | 323,454 | ||||||||||||||||||||
| Total flow sales | 112,883 | 313,203 | 114,686 | 440,593 | 757,548 | ||||||||||||||||||||
| Bulk sales: | |||||||||||||||||||||||||
| Non-agency | 856,359 | 487,804 | 707,669 | 2,436,584 | 2,389,879 | ||||||||||||||||||||
| Total loans sold | $ | 969,242 | $ | 801,007 | $ | 822,355 | $ | 2,877,177 | $ | 3,147,427 | |||||||||||||||
| Gain on sale of loans: | |||||||||||||||||||||||||
| Amount | $ | 3,065 | $ | 818 | $ | 1,963 | $ | 9,233 | $ | 4,828 | |||||||||||||||
| Gain as a percentage of loans sold | 0.32 | % | 0.10 | % | 0.24 | % | 0.32 | % | 0.15 | % | |||||||||||||||
|
Quarter Ended December 31, |
Quarter Ended September 30, |
Year Ended December 31, |
||||||||||||||||||||||
| Loan Originations | 2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Single family (1-4 units) | $ | 3,011,145 | $ | 3,064,315 | $ | 2,987,278 | $ | 11,568,111 | $ | 10,615,621 | ||||||||||||||
| Home equity lines of credit | 433,733 | 452,445 | 459,709 | 1,731,988 | 1,815,252 | |||||||||||||||||||
| Multifamily (5+ units) | 842,329 | 742,991 | 805,429 | 2,703,242 | 2,542,551 | |||||||||||||||||||
| Commercial real estate | 334,557 | 446,677 | 197,596 | 1,263,776 | 1,354,527 | |||||||||||||||||||
| Construction | 331,501 | 480,480 | 413,842 | 1,480,957 | 1,342,404 | |||||||||||||||||||
| Business | 1,766,978 | 2,137,549 | 1,879,393 | 6,252,983 | 5,572,410 | |||||||||||||||||||
| Stock and other secured | 332,245 | 328,105 | 320,952 | 1,587,393 | 1,401,559 | |||||||||||||||||||
| Unsecured | 397,325 | 281,740 | 179,686 | 1,044,769 | 1,076,550 | |||||||||||||||||||
| Total loans originated | $ | 7,449,813 | $ | 7,934,302 | $ | 7,243,885 | $ | 27,633,219 | $ | 25,720,874 | ||||||||||||||
| As of | ||||||||||||||||||||||||
|
Loan Servicing Portfolio |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||
| Loans serviced for investors | $ | 12,495 | $ | 12,111 | $ | 11,791 | $ | 11,838 | $ | 11,655 | ||||||||||||||
| As of | |||||||||||||||||||||||||
| Asset Quality Information |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||
| Nonperforming assets: | |||||||||||||||||||||||||
| Nonaccrual loans | $ | 37,656 | $ | 37,922 | $ | 43,384 | $ | 51,694 | $ | 49,020 | |||||||||||||||
| Other real estate owned | — | — | 1,930 | — | — | ||||||||||||||||||||
| Total nonperforming assets | $ | 37,656 | $ | 37,922 | $ | 45,314 | $ | 51,694 | $ | 49,020 | |||||||||||||||
| Nonperforming assets to total assets | 0.04 | % | 0.04 | % | 0.06 | % | 0.07 | % | 0.07 | % | |||||||||||||||
| Accruing loans 90 days or more past due | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Restructured accruing loans | $ | 12,605 | $ | 18,242 | $ | 13,001 | $ | 14,224 | $ | 14,278 | |||||||||||||||
| As of | ||||||||||||||||||||||||
| Book Value Ratios |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|||||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||||||
| Number of shares of common stock outstanding | 161,696 | 157,930 | 157,686 | 157,122 | 154,292 | |||||||||||||||||||
| Book value per common share | $ | 42.23 | $ | 40.76 | $ | 39.76 | $ | 39.13 | $ | 37.39 | ||||||||||||||
| Tangible book value per common share | $ | 40.43 | $ | 38.90 | $ | 37.83 | $ | 37.16 | $ | 35.35 | ||||||||||||||
| As of | ||||||||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||||||||
| December 31 (1) | September 30 | June 30 | March 31 | December 31 | ||||||||||||||||||||||||||
| Capital Ratios | Actual |
Fully Phased-in (2) |
Actual | |||||||||||||||||||||||||||
|
Tier 1 leverage ratio (Tier 1 capital to average assets) |
8.85 | % | 8.83 | % | 8.78 | % | 8.99 | % | 9.22 | % | 9.37 | % | ||||||||||||||||||
|
Common Equity Tier 1 capital to risk-weighted assets |
10.63 | % | 10.57 | % | 10.58 | % | 10.72 | % | 11.15 | % | 10.83 | % | ||||||||||||||||||
|
Tier 1 capital to risk-weighted assets |
12.22 | % | 12.19 | % | 12.27 | % | 12.49 | % | 12.94 | % | 13.07 | % | ||||||||||||||||||
|
Total capital to risk-weighted assets |
14.11 | % | 14.09 | % | 14.23 | % | 14.51 | % | 15.04 | % | 14.46 | % | ||||||||||||||||||
|
Regulatory Capital (3) |
||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||
| Common Equity Tier 1 capital | $ | 6,488,618 | $ | 6,449,589 | $ | 6,140,330 | $ | 5,975,457 | $ | 5,852,885 | $ | 5,496,582 | ||||||||||||||||||
| Tier 1 capital | $ | 7,457,944 | $ | 7,439,589 | $ | 7,121,330 | $ | 6,960,057 | $ | 6,788,885 | $ | 6,631,383 | ||||||||||||||||||
| Total capital | $ | 8,615,389 | $ | 8,597,034 | $ | 8,259,581 | $ | 8,087,714 | $ | 7,892,528 | $ | 7,337,725 | ||||||||||||||||||
| Assets (3) | ||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||
| Average assets | $ | 84,238,404 | $ | 84,220,049 | $ | 81,125,539 | $ | 77,419,255 | $ | 73,624,461 | $ | 70,779,188 | ||||||||||||||||||
| Risk-weighted assets | $ | 61,054,083 | $ | 61,035,729 | $ | 58,027,938 | $ | 55,730,798 | $ | 52,476,984 | $ | 50,744,017 | ||||||||||||||||||
| __________ | ||||||||||||||||||||||||||||||
| (1) Ratios and amounts as of December 31, 2017 are preliminary. | ||||||||||||||||||||||||||||||
| (2) Certain adjustments required under the Basel III Capital Rules will be phased in through the end of 2018. The ratios and amounts shown in this column are calculated assuming a fully phased-in basis of all such adjustments as if they were effective as of December 31, 2017. | ||||||||||||||||||||||||||||||
| (3) As defined by regulatory capital rules. | ||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||
| Wealth Management Assets |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||
| First Republic Investment Management | $ | 52,712 | $ | 50,318 | $ | 47,530 | $ | 44,573 | $ | 41,154 | ||||||||||||||
| Brokerage and investment: | ||||||||||||||||||||||||
| Brokerage | 43,015 | 40,652 | 37,658 | 35,397 | 32,218 | |||||||||||||||||||
| Money market mutual funds | 1,671 | 1,201 | 1,402 | 1,795 | 2,048 | |||||||||||||||||||
| Total brokerage and investment | 44,686 | 41,853 | 39,060 | 37,192 | 34,266 | |||||||||||||||||||
| Trust Company: | ||||||||||||||||||||||||
| Trust | 4,678 | 4,441 | 4,276 | 3,929 | 3,754 | |||||||||||||||||||
| Custody | 4,885 | 4,734 | 4,559 | 4,438 | 4,406 | |||||||||||||||||||
| Total Trust Company | 9,563 | 9,175 | 8,835 | 8,367 | 8,160 | |||||||||||||||||||
| Total Wealth Management Assets | $ | 106,961 | $ | 101,346 | $ | 95,425 | $ | 90,132 | $ | 83,580 | ||||||||||||||
