Net Interest Income Increased 26.7%
Year-Over-Year
First Republic Bank (NYSE: FRC) today announced financial
results for the quarter ended September 30, 2021.
“First Republic had another strong quarter of growth in loans,
deposits and wealth management assets,” said Jim Herbert, Founder,
Chairman and Co-CEO. “Our client-centric business model continues
to perform very well across all our segments and markets.”
“This was another successful quarter for First Republic,” said
Hafize Gaye Erkan, Co-CEO and President. “Credit quality remains
excellent, further reflecting the safety and stability of First
Republic.”
Quarterly Highlights
Financial Results
– Year-over-year:
– Revenues were $1.3 billion, up 30.1%.
– Net interest income was $1.1 billion, up
26.7%.
– Net income was $369.7 million, up
26.1%.
– Diluted earnings per share of $1.91, up
18.6%.
– Tangible book value per share was $65.19,
up 18.5%.
– Loan originations totaled $15.5 billion, our strongest third
quarter ever.
– Net interest margin was 2.65%, compared to 2.68% for the prior
quarter.
– Efficiency ratio was 61.3%, compared to 62.0% for the prior
quarter.
Continued Capital and Credit Strength
– Tier 1 leverage ratio was 8.55%.
– Nonperforming assets were at a very low 7 basis points of
total assets.
– Net charge-offs were only $292,000, or less than 1 basis point
of average loans.
Continued Franchise Growth
– Year-over-year:
– Loans totaled $128.4 billion, up 22.5%.
– Deposits were $145.3 billion, up 39.2%.
– Wealth management assets were $251.7
billion, up 49.7%.
– Wealth management revenues were $209.3
million, up 65.1%.
“Revenue and net interest income growth were very strong during
the third quarter,” said Mike Roffler, Chief Financial Officer.
“We’re also pleased to have accessed the capital markets twice
during the quarter, raising $1.2 billion.”
Quarterly Cash Dividend of $0.22 per
Share
The Bank declared a cash dividend for the third quarter of $0.22
per share of common stock, which is payable on November 12, 2021 to
shareholders of record as of October 28, 2021.
Strong Asset Quality
Credit quality remains strong. Nonperforming assets were at a
very low 7 basis points of total assets at September 30, 2021. The
Bank had modest net loan charge-offs of only $292,000 for the
quarter.
During the third quarter, the Bank recorded a provision for
credit losses of $34.0 million, which was primarily driven by loan
growth.
Continued Book Value Growth and Capital
Strength
Book value per common share at September 30, 2021 was $66.44, up
17.9% from a year ago. Tangible book value per common share at
September 30, 2021 was $65.19, up 18.5% from a year ago.
The Bank’s Tier 1 leverage ratio was 8.55% at September 30,
2021, compared to 8.05% at June 30, 2021.
During the third quarter, the Bank issued $750.0 million of
4.000% Noncumulative Perpetual Series M Preferred Stock, which
qualifies as Tier 1 capital.
In addition, the Bank sold 2,300,000 new shares of common stock
in an underwritten public offering, which added approximately
$443.9 million to common equity.
Total common stock sold and preferred stock issued, net of
preferred stock redeemed, added approximately $1.2 billion and $2.1
billion of Tier 1 capital in the third quarter and first nine
months of 2021, respectively, and contributed to the 30.5% increase
in total equity year-over-year.
Continued Franchise
Growth
Loan Originations
Loan originations were $15.5 billion for the quarter, up 26.3%
from the same quarter a year ago. This was primarily due to
increases in capital call lines of credit and commercial real
estate lending.
Single family loan originations were 45% of the total volume for
the quarter and had a weighted average loan-to-value ratio of 60%.
Multifamily and commercial real estate loans originated were 12% of
total originations for the quarter and had a weighted average
loan-to-value ratio of 47%.
Loans totaled $128.4 billion at September 30, 2021, up 22.5%
compared to a year ago, primarily due to increases in single
family, capital call lines of credit and multifamily loans,
partially offset by a decrease in loans under the Small Business
Administration’s Paycheck Protection Program (“PPP”).
Deposit Growth
Total deposits increased to $145.3 billion, up 39.2% compared to
a year ago, and had an average rate paid of 6 basis points during
the quarter.
At September 30, 2021, checking deposit balances were 68.8% of
total deposits.
Investments
Total investment securities at September 30, 2021 were $24.2
billion, a 5.6% increase compared to the prior quarter and a 29.6%
increase compared to a year ago.
High-quality liquid assets, including eligible cash, totaled
$28.6 billion at September 30, 2021, and represented 16.7% of
quarterly average total assets.
Wealth Management
Total wealth management assets were $251.7 billion at September
30, 2021, up 4.5% compared to the prior quarter and up 49.7%
compared to a year ago. The increases in wealth management assets
were due to net client inflow and market appreciation.
Wealth management revenues totaled $209.3 million for the
quarter, up 65.1% compared to last year’s third quarter. Such
revenues represented 16.1% of the Bank’s total revenues for the
quarter.
Wealth management assets at September 30, 2021 included
investment management assets of $101.1 billion, brokerage assets
and money market mutual funds of $133.9 billion, and trust and
custody assets of $16.8 billion.
Income Statement and Key
Ratios
Revenue Growth
Total revenues were $1.3 billion for the quarter, up 30.1%
compared to the third quarter a year ago.
Net Interest Income Growth
Net interest income was $1.1 billion for the quarter, up 26.7%
compared to the third quarter a year ago. The increase in net
interest income resulted primarily from growth in average
interest-earning assets, modestly offset by a decrease in net
interest margin.
Net Interest Margin
The net interest margin declined to 2.65% in the third quarter,
from 2.68% in the prior quarter. The modest decline was primarily
due to higher average cash balances during the quarter.
Noninterest Income
Noninterest income was $250.4 million for the quarter, up 46.4%
compared to the third quarter a year ago. The increase was
primarily driven by higher wealth management fees, partially offset
by lower gain on sale of loans. Such gain was elevated in the third
quarter a year ago due to realized discounts on previously
purchased loans when these loans were sold.
Noninterest Expense and Efficiency
Ratio
Noninterest expense was $798.5 million for the quarter, up 31.3%
compared to the third quarter a year ago. The increase was
primarily due to increased salaries, incentive compensation and
benefits, information systems and occupancy costs from the
continued investments in the expansion of the franchise, and higher
professional fees.
The efficiency ratio was 61.3% for the quarter, compared to
60.7% for the third quarter a year ago. For the first nine months
of 2021, the efficiency ratio was 62.2%, compared to 62.0% for the
first nine months of 2020.
Income Taxes
The Bank’s effective tax rate for the third quarter of 2021 was
21.4%, compared to 19.6% for the third quarter a year ago. The
increase was primarily due to the prior year including a tax refund
from an amended tax return.
Conference Call Details
First Republic Bank’s third quarter 2021 earnings conference
call is scheduled for October 13, 2021 at 7:00 a.m. PT / 10:00 a.m.
ET. To access the event by telephone, please dial (888) 394-8218
and provide confirmation code 9610366 approximately 15 minutes
prior to the start time (to allow time for registration).
International callers should dial +1 (856) 344-9221 and provide the
same confirmation code.
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 ir.firstrepublic.com/events-calendar. To listen to the
live webcast, please visit the site at least 15 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 October 13, 2021 at 11:00 a.m. PT
/ 2:00 p.m. ET through October 20, 2021 at 8:59 p.m. PT / 11:59
p.m. ET. To access the replay, dial (888) 203-1112 and use
confirmation code 9610366#. International callers should dial +1
(719) 457-0820 and enter the same confirmation code. 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 ir.firstrepublic.com/events-calendar.
The Bank’s press releases are available after release in the
Newsroom and 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 and offers a complete line of products,
including residential, commercial and personal loans, deposit
services, and wealth management. 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 Jackson, Wyoming. First Republic is a constituent of the
S&P 500 Index and KBW Nasdaq Bank Index. 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 (the “Exchange Act”).
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. 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.
Forward-looking statements involving such risks and
uncertainties include, but are not limited to, statements
regarding: projections of loans, assets, deposits, liabilities,
revenues, expenses, tax liabilities, net income, capital
expenditures, liquidity, dividends, capital structure, investments
or other financial items; expectations regarding the banking and
wealth management industries; descriptions of plans or objectives
of management for future operations, products or services;
forecasts of future economic conditions generally and in our market
areas in particular, which may affect the ability of borrowers to
repay their loans and the value of real property or other property
held as collateral for such loans; our opportunities for growth and
our plans for expansion (including opening new offices);
expectations about the performance of any new offices; projections
about the amount and the value of intangible assets, as well as
amortization of recorded amounts; future provisions for credit
losses on loans and debt securities, as well as for unfunded loan
commitments; changes in nonperforming assets; expectations
regarding the impact and duration of COVID-19; projections about
future levels of loan originations or loan repayments; projections
regarding costs, including the impact on our efficiency ratio; and
descriptions of assumptions underlying or relating to any of the
foregoing.
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
non-traditional financial services and technology companies; our
ability to recruit and retain key managers, employees and board
members; natural or other disasters, including earthquakes,
wildfires, pandemics or acts of terrorism affecting the markets in
which we operate; the negative impacts and disruptions resulting
from COVID-19 on our colleagues and clients, the communities we
serve and the domestic and global economy, which may have an
adverse effect on our business, financial position and results of
operations; interest rate risk and credit risk; our ability to
maintain and follow high underwriting standards; economic and
market conditions, including those affecting the valuation of our
investment securities portfolio and credit losses on our loans and
debt securities; real estate prices generally and in our markets;
our geographic and product concentrations; demand for our products
and services; developments and uncertainty related to the future
use and availability of some reference rates, such as the London
Interbank Offered Rate and the 11th District Monthly Weighted
Average Cost of Funds Index, as well as other alternative reference
rates; the regulatory environment in which we operate, our
regulatory compliance and future regulatory requirements; any
future changes to regulatory capital requirements; legislative and
regulatory actions affecting us and the financial services
industry, such as the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the “Dodd-Frank Act”), including increased
compliance costs, limitations on activities and requirements to
hold additional capital, as well as changes to the Dodd-Frank Act
pursuant to the Economic Growth, Regulatory Relief, and Consumer
Protection Act; our ability to avoid litigation and its associated
costs and liabilities; future Federal Deposit Insurance Corporation
(“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 and any
subsequent reports filed by First Republic with the FDIC. 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 throughout our public filings
under the Exchange Act. 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.
Non-GAAP Financial
Measures
Our management uses and believes that investors benefit from
using certain non-GAAP measures of our financial performance, which
include tangible book value per common share, return on average
tangible common shareholders’ equity, and net interest income on a
fully taxable-equivalent basis. Management believes that tangible
book value per common share and return on average tangible common
shareholders’ equity are useful additional measures to evaluate our
performance and capital position without the impact of goodwill and
other intangible assets and preferred stock. In addition, to
facilitate relevant comparisons of net interest income from taxable
and tax-exempt interest-earning assets, when calculating yields and
net interest margin, we adjust interest income on tax-exempt
securities and tax-advantaged loans so such amounts are fully
equivalent to interest income on taxable sources. We believe that
these non-GAAP financial measures, when taken together with the
corresponding GAAP financial measures, provide meaningful
supplemental information that is not otherwise required by GAAP or
other applicable requirements. These non-GAAP financial measures
should be considered in addition to, not as a substitute for,
financial measures prepared in accordance with GAAP. A
reconciliation of the non-GAAP calculation of the financial measure
to the most comparable GAAP financial measure is presented in
relevant tables in this document.
CONSOLIDATED STATEMENTS OF INCOME
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
(in thousands, except per share
amounts)
2021
2020
2021
2021
2020
Interest income:
Loans
$
946,846
$
811,708
$
912,885
$
2,732,901
$
2,399,646
Investments
161,017
142,971
156,947
458,675
438,055
Other
4,677
6,116
5,103
14,969
18,135
Cash and cash equivalents
5,131
1,181
3,070
11,095
5,685
Total interest income
1,117,671
961,976
1,078,005
3,217,640
2,861,521
Interest expense:
Deposits
22,410
54,355
24,096
74,077
245,680
Borrowings
42,977
77,341
50,044
148,632
246,017
Total interest expense
65,387
131,696
74,140
222,709
491,697
Net interest income
1,052,284
830,280
1,003,865
2,994,931
2,369,824
Provision for credit losses
34,025
28,538
16,143
35,560
122,025
Net interest income after provision for
credit
losses
1,018,259
801,742
987,722
2,959,371
2,247,799
Noninterest income:
Investment management fees
148,491
96,638
136,516
404,049
281,017
Brokerage and investment fees
22,644
10,796
17,574
54,782
39,028
Insurance fees
5,918
2,216
2,668
11,660
6,086
Trust fees
6,231
4,543
6,245
18,207
14,118
Foreign exchange fee income
26,032
12,575
20,612
63,811
34,864
Deposit fees
6,849
5,753
6,618
19,636
17,598
Loan and related fees
8,336
7,171
8,877
24,698
20,741
Loan servicing fees, net
548
144
1,057
3,093
(2,649
)
Gain on sale of loans
140
13,797
58
507
14,575
Gain (loss) on investment securities
2,139
(405
)
1,329
4,123
3,752
Income from investments in life
insurance
20,328
20,546
21,457
58,334
36,506
Other income (loss)
2,702
(2,791
)
3,597
9,917
960
Total noninterest income
250,358
170,983
226,608
672,817
466,596
Noninterest expense:
Salaries and employee benefits
514,499
373,225
481,503
1,459,406
1,078,633
Information systems
90,941
74,549
88,980
263,437
219,301
Occupancy
66,953
55,543
63,526
188,028
164,125
Professional fees
27,911
19,845
25,475
74,640
48,479
Advertising and marketing
13,620
8,909
16,560
42,813
29,373
FDIC assessments
13,368
11,003
13,254
38,522
32,463
Other expenses
71,239
65,136
73,467
214,846
187,311
Total noninterest expense
798,531
608,210
762,765
2,281,692
1,759,685
Income before provision for income
taxes
470,086
364,515
451,565
1,350,496
954,710
Provision for income taxes
100,399
71,378
78,459
272,870
186,119
Net income
369,687
293,137
373,106
1,077,626
768,591
Dividends on preferred stock
24,427
14,816
23,655
66,607
42,653
Net income available to common
shareholders
$
345,260
$
278,321
$
349,451
$
1,011,019
$
725,938
Basic earnings per common share
$
1.94
$
1.62
$
1.98
$
5.73
$
4.23
Diluted earnings per common share
$
1.91
$
1.61
$
1.95
$
5.66
$
4.21
Weighted average shares—basic
178,065
172,142
176,419
176,446
171,537
Weighted average shares—diluted
180,420
172,932
178,864
178,757
172,514
CONSOLIDATED BALANCE SHEETS
As of
($ in thousands)
September 30,
2021
June 30, 2021
December 31,
2020
September 30,
2020
ASSETS
Cash and cash equivalents
$
12,279,447
$
7,876,952
$
5,094,754
$
3,691,149
Debt securities available-for-sale
2,960,571
2,634,983
1,906,315
1,711,202
Debt securities held-to-maturity, net
21,192,537
20,236,298
16,603,310
16,923,706
Equity securities (fair value)
31,682
29,550
20,566
20,478
Loans:
Single family
73,490,788
69,908,787
61,370,246
56,628,359
Home equity lines of credit
2,429,152
2,441,034
2,449,533
2,431,991
Single family construction
984,835
877,548
787,854
739,091
Multifamily
15,416,780
14,803,219
13,768,957
13,392,531
Commercial real estate
8,486,124
8,234,934
8,018,158
7,781,797
Multifamily/commercial construction
2,064,107
2,060,980
2,024,420
2,038,949
Capital call lines of credit
9,088,424
8,127,473
8,149,946
6,203,877
Tax-exempt
3,577,586
3,566,385
3,365,572
3,276,705
Other business
3,553,875
3,656,598
3,340,048
2,982,532
PPP
876,487
1,374,765
1,841,376
2,091,102
Stock secured
3,120,176
2,965,857
2,518,338
2,311,754
Other secured
2,261,224
2,051,617
1,818,550
1,780,652
Unsecured
3,025,536
3,047,981
3,113,267
3,102,311
Total loans
128,375,094
123,117,178
112,566,265
104,761,651
Allowance for credit losses
(668,186
)
(636,910
)
(635,019
)
(604,747
)
Loans, net
127,706,908
122,480,268
111,931,246
104,156,904
Loans held for sale
3,782
3,169
20,679
33,655
Investments in life insurance
2,627,940
2,597,637
2,061,362
1,949,360
Tax credit investments
1,180,690
1,224,114
1,131,905
1,099,713
Premises, equipment and leasehold
improvements, net
430,675
418,725
403,482
390,241
Goodwill and other intangible assets
223,183
224,497
227,512
229,185
Other assets
3,933,088
3,920,541
3,101,003
3,020,178
Total Assets
$
172,570,503
$
161,646,734
$
142,502,134
$
133,225,771
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking
$
65,833,005
$
59,449,158
$
46,281,112
$
41,538,676
Interest-bearing checking
34,089,265
32,165,327
30,603,221
26,081,189
Money market checking
21,860,807
20,373,535
16,778,884
15,868,769
Money market savings and passbooks
15,946,902
14,747,597
12,584,522
11,419,289
Certificates of deposit
7,596,366
7,921,218
8,681,061
9,495,453
Total Deposits
145,326,345
134,656,835
114,928,800
104,403,376
Short-term borrowings
—
—
—
5,000
Long-term FHLB advances
7,700,000
9,000,000
11,755,000
13,505,000
Senior notes
997,722
997,193
996,145
995,626
Subordinated notes
778,648
778,535
778,313
778,204
Other liabilities
2,965,994
2,939,444
2,293,230
2,193,956
Total Liabilities
157,768,709
148,372,007
130,751,488
121,881,162
Shareholders’ Equity:
Preferred stock
2,892,500
2,142,500
1,545,000
1,645,000
Common stock
1,793
1,767
1,741
1,722
Additional paid-in capital
5,685,384
5,204,166
4,834,172
4,571,499
Retained earnings
6,241,963
5,936,669
5,346,355
5,102,229
Accumulated other comprehensive income
(loss)
(19,846
)
(10,375
)
23,378
24,159
Total Shareholders’ Equity
14,801,794
13,274,727
11,750,646
11,344,609
Total Liabilities and Shareholders’
Equity
$
172,570,503
$
161,646,734
$
142,502,134
$
133,225,771
Quarter Ended September
30,
Quarter Ended June 30,
2021
2020
2021
Average Balances, Yields and
Rates
Average Balance
Interest Income/Expense
(1)
Yield/ Rates (2)
Average Balance
Interest Income/Expense
(1)
Yield/ Rates (2)
Average Balance
Interest Income/Expense
(1)
Yield/ Rates (2)
($ in millions)
Assets:
Interest-bearing deposits with banks
$
13,384
$
5
0.15
%
$
4,428
$
1
0.11
%
$
11,281
$
3
0.11
%
Investment securities:
U.S. Government-sponsored agency
securities
100
0
1.59
%
202
1
2.35
%
100
0
1.59
%
Agency residential and commercial MBS
6,200
28
1.84
%
6,251
37
2.40
%
5,647
29
2.05
%
Other residential and commercial MBS
28
0
2.25
%
38
0
2.13
%
30
0
2.04
%
Tax-exempt municipal securities
14,174
141
3.97
%
11,551
123
4.26
%
13,470
135
4.02
%
Taxable municipal securities
1,670
12
2.98
%
758
6
3.26
%
1,612
12
3.00
%
Other investment securities
1,405
10
2.86
%
45
0
2.76
%
1,376
10
2.85
%
Total investment securities
23,576
192
3.26
%
18,845
168
3.57
%
22,234
187
3.36
%
Loans:
Residential real estate
74,233
520
2.80
%
56,907
422
2.96
%
69,854
491
2.81
%
Multifamily
15,126
135
3.49
%
13,313
125
3.67
%
14,392
127
3.49
%
Commercial real estate
8,357
82
3.82
%
7,802
78
3.93
%
8,117
78
3.82
%
Multifamily/commercial construction
2,963
34
4.54
%
2,740
31
4.37
%
2,969
38
5.00
%
Business
15,928
129
3.17
%
12,538
110
3.45
%
15,894
129
3.21
%
PPP
1,123
12
4.01
%
2,092
11
2.03
%
1,843
15
3.32
%
Other
8,158
43
2.06
%
6,996
42
2.33
%
7,653
42
2.15
%
Total loans
125,887
954
3.00
%
102,386
818
3.16
%
120,722
920
3.03
%
FHLB stock
266
5
6.99
%
458
6
5.31
%
313
5
6.55
%
Total interest-earning assets
163,113
1,156
2.81
%
126,117
994
3.12
%
154,550
1,115
2.87
%
Noninterest-earning cash
392
434
386
Goodwill and other intangibles
224
230
225
Other assets
6,891
5,075
6,724
Total noninterest-earning assets
7,506
5,738
7,335
Total Assets
$
170,619
$
131,855
$
161,885
Liabilities and Shareholders’
Equity:
Deposits:
Interest-bearing checking
$
33,642
1
0.01
%
$
25,539
2
0.04
%
$
33,329
2
0.02
%
Money market checking
21,861
6
0.11
%
15,432
8
0.21
%
19,928
6
0.12
%
Money market savings and passbooks
15,831
6
0.16
%
10,788
5
0.20
%
14,783
6
0.17
%
CDs
7,779
9
0.46
%
11,334
38
1.34
%
8,040
10
0.51
%
Total interest-bearing deposits (3)
79,114
22
0.11
%
63,093
54
0.34
%
76,080
24
0.13
%
Borrowings:
Short-term borrowings
0
0
0.09
%
5
0
0.00
%
—
—
—
%
Long-term FHLB advances
8,545
28
1.29
%
14,739
62
1.68
%
10,062
35
1.39
%
Senior notes
997
6
2.42
%
995
6
2.42
%
997
6
2.42
%
Subordinated notes
779
9
4.68
%
778
9
4.68
%
778
9
4.68
%
Total borrowings
10,321
43
1.66
%
16,518
77
1.86
%
11,838
50
1.69
%
Total interest-bearing liabilities (4)
89,434
65
0.29
%
79,611
132
0.66
%
87,918
74
0.34
%
Noninterest-bearing checking
64,008
39,357
58,051
Other noninterest-bearing liabilities
2,904
2,083
2,796
Total noninterest-bearing liabilities
66,912
41,440
60,847
Preferred shareholders’ equity
2,729
1,227
2,143
Common shareholders’ equity
11,543
9,578
10,978
Total Liabilities and Shareholders’
Equity
$
170,619
$
131,855
$
161,885
Net interest spread (5)
2.52
%
2.47
%
2.54
%
Net interest income (fully
taxable-equivalent
basis) and net interest margin (6)
$
1,090
2.65
%
$
862
2.71
%
$
1,041
2.68
%
Reconciliation of tax-equivalent
net
interest income to net interest income:
(7)
Municipal securities tax-equivalent
adjustment
(31
)
(25
)
(30
)
Business loans tax-equivalent
adjustment
(7
)
(7
)
(7
)
Net interest income
$
1,052
$
830
$
1,004
Supplemental information:
Total deposits (interest-bearing and
noninterest-bearing)
$
143,122
$
22
0.06
%
$
102,450
$
54
0.21
%
$
134,131
$
24
0.07
%
Total deposits (interest-bearing and
noninterest-bearing) and borrowings
$
153,442
$
65
0.17
%
$
118,968
$
132
0.44
%
$
145,968
$
74
0.20
%
Nine Months Ended September
30,
2021
2020
Average Balances, Yields and
Rates
Average Balance
Interest Income/Expense
(1)
Yields/ Rates (2)
Average Balance
Interest Income/Expense
(1)
Yields/ Rates (2)
($ in millions)
Assets:
Interest-bearing deposits with banks
$
12,045
$
11
0.12
%
$
3,029
$
6
0.25
%
Investment securities:
U.S. Government-sponsored agency
securities
98
1
1.54
%
241
5
2.63
%
Agency residential and commercial MBS
5,826
88
2.01
%
6,537
127
2.60
%
Other residential and commercial MBS
30
0
2.04
%
23
0
2.40
%
Tax-exempt municipal securities
13,312
403
4.04
%
11,165
361
4.32
%
Taxable municipal securities
1,456
32
2.98
%
709
18
3.34
%
Other investment securities
1,074
22
2.78
%
44
1
2.83
%
Total investment securities
21,795
548
3.35
%
18,719
513
3.65
%
Loans:
Residential real estate
69,880
1,480
2.82
%
53,992
1,231
3.04
%
Multifamily
14,484
385
3.50
%
12,923
364
3.70
%
Commercial real estate
8,170
238
3.84
%
7,699
235
4.00
%
Multifamily/commercial construction
2,933
103
4.63
%
2,641
90
4.49
%
Business
15,636
382
3.22
%
12,666
349
3.62
%
PPP
1,649
43
3.42
%
1,241
18
1.96
%
Other
7,722
124
2.12
%
6,703
131
2.58
%
Total loans
120,476
2,754
3.03
%
97,865
2,420
3.27
%
FHLB stock
307
15
6.51
%
452
18
5.36
%
Total interest-earning assets
154,623
3,328
2.86
%
120,065
2,956
3.26
%
Noninterest-earning cash
397
434
Goodwill and other intangibles
225
232
Other assets
6,572
4,901
Total noninterest-earning assets
7,194
5,567
Total Assets
$
161,817
$
125,633
Liabilities and Shareholders’
Equity:
Deposits:
Interest-bearing checking
$
32,993
5
0.02
%
$
22,736
14
0.08
%
Money market checking
20,237
20
0.13
%
14,162
47
0.45
%
Money market savings and passbooks
14,760
19
0.17
%
10,122
26
0.35
%
CDs
8,075
31
0.51
%
12,742
158
1.66
%
Total interest-bearing deposits (3)
76,065
74
0.13
%
59,762
246
0.55
%
Borrowings:
Short-term borrowings
0
0
0.09
%
412
5
1.52
%
Long-term FHLB advances
9,966
103
1.38
%
14,676
197
1.79
%
Senior notes
997
18
2.42
%
919
17
2.44
%
Subordinated notes
778
27
4.68
%
778
27
4.68
%
Total borrowings
11,741
149
1.69
%
16,785
246
1.96
%
Total interest-bearing liabilities (4)
87,806
223
0.34
%
76,547
492
0.86
%
Noninterest-bearing checking
57,961
36,530
Other noninterest-bearing liabilities
2,780
2,060
Total noninterest-bearing liabilities
60,741
38,590
Preferred shareholders' equity
2,281
1,172
Common shareholders' equity
10,989
9,323
Total Liabilities and Shareholders’
Equity
$
161,817
$
125,633
Net interest spread (5)
2.52
%
2.41
%
Net interest income (fully
taxable-equivalent basis) and
net interest margin (6)
$
3,105
2.67
%
$
2,464
2.72
%
Reconciliation of tax-equivalent net
interest income
to net interest income: (7)
Municipal securities tax-equivalent
adjustment
(89
)
(75
)
Business loans tax-equivalent
adjustment
(21
)
(20
)
Net interest income
$
2,995
$
2,370
Supplemental information:
Total deposits (interest-bearing and
noninterest-bearing)
$
134,026
$
74
0.07
%
$
96,292
$
246
0.34
%
Total deposits (interest-bearing and
noninterest-bearing) and
borrowings
$
145,767
$
223
0.20
%
$
113,077
$
492
0.58
%
____________________
Note:
Amounts presented in the tables above may
not add due to rounding. Certain prior period amounts have been
reclassified to conform to the current period presentation.
(1)
Interest income on tax-exempt securities
and loans has been adjusted to the fully taxable-equivalent basis
using the statutory federal income tax rate in effect for each
respective period presented.
(2)
Yields/rates are annualized.
(3)
Refer to supplemental information in this
table for average balances, interest expense and rates for total
deposits (interest-bearing and noninterest-bearing).
(4)
Refer to supplemental information in this
table for average balances, interest expense and rates for total
deposits (interest-bearing and noninterest-bearing) and
borrowings.
(5)
Net interest spread represents the average
yield on interest-earning assets less the average rate on
interest-bearing liabilities.
(6)
Net interest margin represents net
interest income on a fully taxable-equivalent basis divided by
total average interest-earning assets.
(7)
Fully taxable-equivalent net interest
income is considered a non-GAAP financial measure, and is
reconciled to GAAP net interest income in this table.
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
Selected Financial Data and
Ratios
2021
2020
2021
2021
2020
($ in thousands, except per share
amounts)
Return on average assets (1), (2)
0.86
%
0.88
%
0.92
%
0.89
%
0.82
%
Return on average common shareholders’
equity (1)
11.87
%
11.56
%
12.77
%
12.30
%
10.40
%
Return on average tangible common
shareholders’
equity (1), (3)
12.10
%
11.84
%
13.04
%
12.56
%
10.67
%
Average equity to average assets
8.37
%
8.19
%
8.10
%
8.20
%
8.35
%
Dividends per common share
$
0.22
$
0.20
$
0.22
$
0.64
$
0.59
Dividend payout ratio
11.5
%
12.4
%
11.3
%
11.3
%
14.0
%
Book value per common share
$
66.44
$
56.33
$
62.99
$
66.44
$
56.33
Tangible book value per common share
(4)
$
65.19
$
55.00
$
61.72
$
65.19
$
55.00
Efficiency ratio (5)
61.3
%
60.7
%
62.0
%
62.2
%
62.0
%
Net loan charge-offs
$
292
$
1,687
$
1,219
$
1,998
$
2,987
Net loan charge-offs to average total
loans (1)
0.00
%
0.01
%
0.00
%
0.00
%
0.00
%
Allowance for loan credit losses to:
Total loans
0.52
%
0.58
%
0.52
%
0.52
%
0.58
%
Nonaccrual loans
524.4
%
368.2
%
479.3
%
524.4
%
368.2
%
____________________
(1)
Ratios are annualized.
(2)
Return on average assets is the ratio of
net income to average assets.
(3)
Refer to “Return on Average Common
Shareholders’ Equity and Return on Average Tangible Common
Shareholders’ Equity” table in this document for a reconciliation
of this non-GAAP financial measure to the most comparable GAAP
measure.
(4)
Refer to “Book Value per Common Share and
Tangible Book Value per Common Share” table in this document for a
reconciliation of this non-GAAP financial measure to the most
comparable GAAP measure.
(5)
Efficiency ratio is the ratio of
noninterest expense to the sum of net interest income and
noninterest income.
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
Effective Tax Rate
2021
2020
2021
2021
2020
Effective tax rate, prior to excess tax
benefits—stock
awards and tax refund from an amended tax
return
23.2
%
21.1
%
21.7
%
22.5
%
21.6
%
Excess tax benefits—stock awards
(1.8
)
(0.2
)
(4.3
)
(2.3
)
(1.6
)
Tax refund from an amended tax return
—
(1.3
)
—
—
(0.5
)
Effective tax rate
21.4
%
19.6
%
17.4
%
20.2
%
19.5
%
Provision (Reversal of Provision) for
Credit Losses
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
2021
2020
2021
2021
2020
($ in thousands)
Debt securities held-to-maturity
$
296
$
333
$
383
$
1,801
$
1,047
Loans
31,568
22,437
17,304
35,165
113,305
Unfunded loan commitments
2,161
5,768
(1,544
)
(1,406
)
7,673
Total provision
$
34,025
$
28,538
$
16,143
$
35,560
$
122,025
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
Mortgage Loan Sales
2021
2020
2021
2021
2020
($ in thousands)
Loans sold:
Flow sales:
Agency
$
17,544
$
44,118
$
4,315
$
64,261
$
80,702
Non-agency
—
—
—
1,073
31,870
Total flow sales
17,544
44,118
4,315
65,334
112,572
Bulk sales:
Non-agency
—
235,732
—
—
673,401
Securitizations
—
—
—
—
300,116
Total loans sold
$
17,544
$
279,850
$
4,315
$
65,334
$
1,086,089
Gain on sale of loans:
Amount (1)
$
140
$
13,797
$
58
$
507
$
14,575
Gain as a percentage of loans sold
0.80
%
4.93
%
1.34
%
0.78
%
1.34
%
____________________
(1)
The gain for the quarter and nine months
ended September 30, 2020 included $10.3 million related to realized
discounts on previously purchased loans when these loans were
sold.
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
Loan Originations
2021
2020
2021
2021
2020
($ in thousands)
Single family
$
6,998,315
$
6,813,850
$
8,661,680
$
22,562,187
$
16,208,370
Home equity lines of credit
588,488
432,443
610,658
1,822,807
1,285,688
Single family construction
283,278
186,833
215,014
722,796
415,313
Multifamily
1,199,660
955,951
1,101,450
3,092,180
2,684,074
Commercial real estate
724,777
193,228
458,196
1,496,964
975,769
Multifamily/commercial construction
355,981
245,220
272,145
938,950
997,555
Capital call lines of credit
3,128,180
1,803,907
2,921,192
9,180,689
5,594,483
Tax-exempt
38,100
328,711
208,327
460,394
612,784
Other business
533,709
243,788
520,394
2,079,257
1,777,824
PPP
—
—
35,586
724,534
1,981,797
Stock secured
753,409
685,250
775,795
2,239,242
1,797,226
Other secured
546,286
189,386
598,630
1,583,905
961,940
Unsecured
303,916
159,379
372,192
1,021,956
685,537
Total loans originated
$
15,454,099
$
12,237,946
$
16,751,259
$
47,925,861
$
35,978,360
As of
Asset Quality Information
September 30,
2021
June 30, 2021
March 31, 2021
December 31,
2020
September 30,
2020
($ in thousands)
Nonperforming assets:
Nonaccrual loans
$
127,430
$
132,880
$
172,794
$
184,132
$
164,247
Other real estate owned
—
—
1,334
—
—
Total nonperforming assets
$
127,430
$
132,880
$
174,128
$
184,132
$
164,247
Nonperforming assets to total assets
0.07
%
0.08
%
0.11
%
0.13
%
0.12
%
Accruing loans 90 days or more past
due
$
—
$
—
$
851
$
—
$
935
Restructured accruing loans
$
10,197
$
11,407
$
11,658
$
11,253
$
11,378
September 30, 2021
COVID-19 Loan Modifications (1), (2),
(3), (4)
Unpaid Principal
Balance
LTV (5)
Average Loan Size
Number of Loans
($ in millions)
Single family
$
64
61
%
$
1.2
54
Home equity lines of credit
0
60
%
$
0.2
1
Single family construction
3
75
%
$
2.6
1
Multifamily
30
63
%
$
30.4
1
Commercial real estate
91
48
%
$
4.6
20
Multifamily/commercial construction
—
n/a
$
—
—
Capital call lines of credit
—
n/a
$
—
—
Tax-exempt
7
n/a
$
3.3
2
Other business
6
n/a
$
1.6
4
Stock secured
—
n/a
$
—
—
Other secured
2
n/a
$
0.3
6
Unsecured (6)
3
n/a
$
0.1
26
Total
$
206
115
____________________
(1)
COVID-19 loan modifications are not
classified as troubled debt restructurings.
(2)
Includes 23 loans totaling $23
million that have completed their deferral period, but for which a
regular payment is not yet due.
(3)
Includes 83 loans totaling $177 million
that received additional relief beyond their initial modification
period.
(4)
Excludes loans that have completed their
deferral period and returned to a regular payment schedule or are
no longer outstanding. As of September 30, 2021, $3.6 billion of
loans have completed their deferral period or are no longer
outstanding, and 99% of the outstanding loans were current.
(5)
Weighted average loan-to-value (“LTV”)
ratios for real estate secured loans are based on appraised value
at the time of origination.
(6)
Consists of household debt refinance
loans.
September 30, 2021
Loan Industry Information
Unpaid Principal
Balance
LTV
Average Loan Size
Number of Loans
Personal Guarantee %
($ in millions)
Retail
$
1,903
49
%
$
2.6
744
80
%
Hotel
523
46
%
$
7.9
68
78
%
Restaurant (1)
174
48
%
$
0.9
205
94
%
Total (2)
$
2,600
1,017
____________________
(1)
Approximately 78% of loans to
restaurants are real estate secured.
(2)
Amounts in the table above
exclude $36 million of loans to hotels and $170 million of loans to
restaurants under the PPP.
As of
Loan Servicing Portfolio
September 30,
2021
June 30, 2021
March 31, 2021
December 31,
2020
September 30,
2020
($ in millions)
Loans serviced for investors
$
5,117
$
5,640
$
6,314
$
7,094
$
7,799
Return on Average Common Shareholders’
Equity
and Return on Average Tangible
Common
Shareholders’ Equity (1), (2)
Quarter Ended September
30,
Quarter Ended June 30,
Nine Months Ended September
30,
2021
2020
2021
2021
2020
($ in thousands)
Average common shareholders’ equity
(a)
$
11,543,395
$
9,578,173
$
10,977,612
$
10,988,556
$
9,323,381
Less: Average goodwill and other
intangible assets
223,816
230,051
225,183
225,217
232,014
Average tangible common shareholders’
equity (b)
$
11,319,579
$
9,348,122
$
10,752,429
$
10,763,339
$
9,091,367
Net income available to common
shareholders (c)
$
345,260
$
278,321
$
349,451
$
1,011,019
$
725,938
Return on average common shareholders’
equity (c) / (a)
11.87
%
11.56
%
12.77
%
12.30
%
10.40
%
Return on average tangible common
shareholders’
equity (c) / (b)
12.10
%
11.84
%
13.04
%
12.56
%
10.67
%
____________________
(1)
Return on average tangible common
shareholders’ equity is considered a non-GAAP financial measure,
and is reconciled to GAAP return on average common shareholders’
equity in this table.
(2)
Ratios are annualized.
As of
Book Value per Common Share and
Tangible
Book Value per Common Share (1)
September 30,
2021
June 30, 2021
March 31, 2021
December 31,
2020
September 30,
2020
(in thousands, except per share
amounts)
Total shareholders’ equity
$
14,801,794
$
13,274,727
$
12,941,730
$
11,750,646
$
11,344,609
Less: Preferred stock
2,892,500
2,142,500
2,142,500
1,545,000
1,645,000
Total common shareholders’ equity (a)
11,909,294
11,132,227
10,799,230
10,205,646
9,699,609
Less: Goodwill and other intangible
assets
223,183
224,497
225,925
227,512
229,185
Total tangible common shareholders’ equity
(b)
$
11,686,111
$
10,907,730
$
10,573,305
$
9,978,134
$
9,470,424
Number of shares of common stock
outstanding (c)
179,261
176,742
176,287
174,124
172,188
Book value per common share (a) / (c)
$
66.44
$
62.99
$
61.26
$
58.61
$
56.33
Tangible book value per common share (b) /
(c)
$
65.19
$
61.72
$
59.98
$
57.30
$
55.00
____________________
(1)
Tangible book value per common share is
considered a non-GAAP financial measure, and is reconciled to GAAP
book value per common share in this table.
As of
Regulatory Capital Ratios and
Components (1), (2)
September 30, 2021 (3)
June 30, 2021
March 31, 2021
December 31,
2020
September 30,
2020
($ in thousands)
Capital Ratios:
Tier 1 leverage ratio (Tier 1 capital to
average
assets)
8.55
%
8.05
%
8.32
%
8.14
%
8.38
%
Common Equity Tier 1 capital to
risk-weighted
assets
9.61
%
9.51
%
9.64
%
9.67
%
9.78
%
Tier 1 capital to risk-weighted assets
11.99
%
11.38
%
11.60
%
11.18
%
11.50
%
Total capital to risk-weighted assets
13.16
%
12.60
%
12.87
%
12.55
%
12.94
%
Regulatory Capital:
Common Equity Tier 1 capital
$
11,673,889
$
10,875,436
$
10,548,615
$
9,894,870
$
9,375,688
Tier 1 capital
$
14,566,389
$
13,017,936
$
12,691,115
$
11,439,870
$
11,020,688
Total capital
$
15,994,370
$
14,420,504
$
14,082,378
$
12,842,344
$
12,396,304
Assets:
Average assets
$
170,373,171
$
161,636,891
$
152,465,399
$
140,493,283
$
131,517,445
Risk-weighted assets
$
121,515,782
$
114,405,537
$
109,413,168
$
102,321,489
$
95,823,385
____________________
(1)
As defined by regulatory capital
rules.
(2)
Beginning in 2020, ratios and amounts
reflect the Bank's election to delay the estimated impact of the
Current Expected Credit Losses (“CECL”) allowance methodology on
its regulatory capital, average assets and risk-weighted assets
over a five-year transition period ending December 31, 2024.
(3)
Ratios and amounts as of September 30,
2021 are preliminary.
As of
Wealth Management Assets
September 30,
2021
June 30, 2021
March 31, 2021
December 31,
2020
September 30,
2020
($ in millions)
First Republic Investment Management
$
101,105
$
99,459
$
90,819
$
83,596
$
74,661
Brokerage and investment:
Brokerage
115,793
112,359
101,478
88,059
76,769
Money market mutual funds
18,074
13,109
11,435
9,003
4,416
Total brokerage and investment
133,867
125,468
112,913
97,062
81,185
Trust Company:
Trust
12,220
11,496
10,986
9,910
8,687
Custody
4,533
4,439
4,216
3,889
3,651
Total Trust Company
16,753
15,935
15,202
13,799
12,338
Total Wealth Management Assets
$
251,725
$
240,862
$
218,934
$
194,457
$
168,184
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211013005361/en/
Investors: Andrew Greenebaum / Lasse Glassen Addo
Investor Relations agreenebaum@addo.com lglassen@addo.com (310)
829-5400
Media: Greg Berardi Blue Marlin Partners
gberardi@firstrepublic.com (415) 239-7826
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