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First Republic Reports First Quarter 2020 Results

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·21 min read
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Revenues Increased 13% Year-Over-Year

Tangible Book Value Per Share Increased 12% Year-Over-Year

First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2020.

"Results for the first quarter were strong," said Jim Herbert, Founder, Chairman and CEO of First Republic. "In these very unusual times, our strength and durability, coupled with a time-tested culture of service, enable us to take great care of our colleagues, communities, and clients."

Quarterly Highlights

Financial Results

– Year-over year:

– Revenues were $916.2 million, up 13.5%.

– Net interest income was $752.1 million, up 11.4%.

– Provision for credit losses and unfunded loan commitments was $62.4 million, compared to $14.0 million for the first quarter of 2019.

– Net income was $218.7 million, down 3.5%.

– Diluted earnings per share of $1.20, down 4.8%.

– Tangible book value per share was $52.40, up 11.9%.

– Loan originations totaled $10.3 billion.

– Net interest margin was 2.74%, compared to 2.73% for the prior quarter.

– Efficiency ratio was 65.1%, compared to 65.0% for the first quarter of 2019.

Continued Capital and Credit Strength

– Tier 1 leverage ratio was 8.46%, compared to 8.39% for the prior quarter.

– Increased quarterly dividend to $0.20 per share in April 2020.

– Nonperforming assets remained at a low 10 basis points of total assets.

– Net charge-offs were only $202,000, or less than 1 basis point of average loans.

Continued Franchise Development

– Year-over-year:

– Loans, excluding loans held for sale, totaled $95.3 billion, up 23.3%.

– Deposits were $93.7 billion, up 14.8%.

– Wealth management assets were $137.9 billion, down 1.4%.

– Wealth management revenues were $134.4 million, up 25.4%.

"Credit quality, capital strength and liquidity remained strong," said Mike Roffler, Chief Financial Officer. "Loans and deposits grew nicely and we’re pleased with 11.4% growth in net interest income and a stable net interest margin."

Recent Developments

The COVID-19 pandemic has caused substantial disruptions to the global economy and the communities we serve. In response to the pandemic, we have implemented our contingency plans, which include company-wide remote working arrangements, modified hours in our preferred banking offices, and promoting social distancing. In addition, we are focused on supporting our clients who may be experiencing a financial hardship due to COVID-19, including deferrals as needed and participation in the Small Business Administration’s Paycheck Protection Program.

We are closely monitoring the rapid developments and uncertainties regarding the pandemic. We remain confident in our long-term underlying strength and stability, and our ability to navigate these challenging conditions.

Quarterly Cash Dividend of $0.20 per Share

The Bank announced an increase of $0.01 in its quarterly cash dividend to $0.20 per share of common stock. This first quarter dividend is payable on May 14, 2020 to shareholders of record as of April 30, 2020.

Strong Asset Quality

Credit quality remains strong. Nonperforming assets were only 10 basis points of total assets at March 31, 2020. The Bank had net loan charge-offs of $202,000 for the quarter.

Beginning in the first quarter, the Bank fully adopted the Current Expected Credit Losses ("CECL") methodology under Accounting Standards Codification ("ASC") 326, in which the allowance for credit losses reflects expected credit losses over the life of loans and held-to-maturity debt securities, and incorporates macroeconomic forecasts as well as historical loss rates. The allowance for expected credit losses at the end of the first quarter incorporates a change in the economic forecast late in the first quarter of 2020, to reflect the pandemic conditions, as compared to our initial adoption of CECL.

During the first quarter, the Bank recorded a total provision for credit losses and unfunded loan commitments of $62.4 million, which included a provision for credit losses of $48.1 million for loans and held-to-maturity debt securities, and an additional provision of $14.3 million included in noninterest expense for unfunded loan commitments. In the first quarter of 2019, the total provision for loans and unfunded loan commitments was $14.0 million.

Continued Capital Strength and Access to Capital Markets

The Bank’s Tier 1 leverage ratio was 8.46% at March 31, 2020, compared to 8.39% at December 31, 2019.

During the first quarter, the Bank sold 2,500,000 new shares of common stock in an underwritten public offering, which added approximately $290.6 million to common equity. This common stock and the Tier 1 qualified preferred stock issued in the fourth quarter of 2019, net of preferred stock redeemed in the fourth quarter of 2019, added $483.1 million of Tier 1 capital in the last six months.

The Bank has not and does not engage in common stock buybacks.

Tangible Book Value Growth

Tangible book value per common share at March 31, 2020 was $52.40, up 11.9% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations were $10.3 billion for the quarter, up 59.2% from the same quarter a year ago primarily due to increases in single family, business, multifamily/commercial construction and stock secured lending. Single family loan originations were 34% of the total for the quarter, and had a weighted average loan-to-value ratio of 57%. Multifamily and commercial real estate loans originated during the quarter, 12% of the total, had a weighted average loan-to-value ratio of 52%.

Loans, excluding loans held for sale, totaled $95.3 billion at March 31, 2020, up 23.3% compared to a year ago primarily due to increases in single family, multifamily and commercial real estate loans, along with an increase in capital call lines of credit outstanding.

Deposit Growth

Total deposits increased to $93.7 billion, up 14.8% compared to a year ago.

At March 31, 2020, checking deposit balances were 61.8% of total deposits.

Investments

Total investment securities at March 31, 2020 were $18.8 billion, a 16.9% increase compared to a year ago.

High-quality liquid assets, including eligible cash, totaled $17.6 billion at March 31, 2020, and represented 14.8% of average total assets.

Wealth Management

Wealth management revenues totaled $134.4 million for the quarter, up 25.4% compared to last year’s first quarter. Such revenues represented 14.7% of the Bank’s total revenues for the quarter.

Total wealth management assets were $137.9 billion at March 31, 2020, down 8.7% for the quarter and down 1.4% compared to a year ago. The decrease in wealth management assets for the quarter was primarily due to market decline, partially offset by net new assets from existing and new clients.

Wealth management assets included investment management assets of $60.1 billion, brokerage assets and money market mutual funds of $67.1 billion, and trust and custody assets of $10.7 billion.

Income Statement and Key Ratios

Revenue Growth

Total revenues were $916.2 million for the quarter, up 13.5% compared to the first quarter a year ago.

Net Interest Income Growth

Net interest income was $752.1 million for the quarter, up 11.4% compared to the first quarter a year ago. The increase in net interest income resulted primarily from growth in average interest-earning assets.

Net Interest Margin

The net interest margin was 2.74% for the first quarter, compared to 2.73% for the prior quarter.

Noninterest Income

Noninterest income was $164.0 million for the quarter, up 24.0% compared to the first quarter a year ago. The increase was primarily from growth in wealth management fees and a gain on investment securities for the quarter.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $596.3 million for the quarter, up 13.6% compared to the first quarter a year ago. The increase was primarily due to increased salaries and benefits and occupancy expenses from the continued investments in the expansion of the franchise, along with an increase in the provision for unfunded loan commitments.

The efficiency ratio was 65.1% for the quarter, compared to 65.0% for the first quarter a year ago.

Income Taxes

The Bank’s effective tax rate for the first quarter of 2020 was 19.5%, compared to 20.3% for the prior quarter, and 15.6% for the first quarter a year ago. The increase from a year ago was primarily the result of lower tax benefits due to a decrease in stock options exercised by employees.

Conference Call Details

First Republic Bank’s first quarter 2020 earnings conference call is scheduled for April 14, 2020 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (800) 458-4148 and use confirmation code 1291711# approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (720) 543-0206 and enter 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 firstrepublic.com. 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 April 14, 2020, at 11:00 a.m. PT / 2:00 p.m. ET, through April 21, 2020, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (888) 203-1112 and use confirmation code 1291711#. 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 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 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; changes in nonperforming assets; expectations regarding the impact 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; the possibility of earthquakes, fires and other natural disasters affecting the markets in which we operate; the negative impacts and disruptions resulting from the COVID-19 pandemic on our colleagues, 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.

CONSOLIDATED STATEMENTS OF INCOME

Quarter Ended
March 31,

Quarter Ended
December 31,

(in thousands, except per share amounts)

2020

2019

2019

Interest income:

Loans

$

796,652

$

700,088

$

780,326

Investments

148,569

133,765

146,080

Other

6,960

5,175

5,679

Cash and cash equivalents

3,940

7,989

4,869

Total interest income

956,121

847,017

936,954

Interest expense:

Deposits

118,845

107,747

128,705

Borrowings

85,144

64,232

88,131

Total interest expense

203,989

171,979

216,836

Net interest income

752,132

675,038

720,118

Provision for credit losses

48,097

14,200

9,579

Net interest income after provision for credit losses

704,035

660,838

710,539

Noninterest income:

Investment management fees

99,296

84,924

97,106

Brokerage and investment fees

15,826

7,659

12,416

Insurance fees

2,157

2,114

4,186

Trust fees

4,976

3,889

4,328

Foreign exchange fee income

12,184

8,631

10,365

Deposit fees

6,597

6,320

6,609

Loan and related fees

6,114

4,007

6,175

Loan servicing fees, net

1,652

3,788

1,788

Gain on sale of loans

1,925

359

69

Gain (loss) on investment securities

2,628

(149)

(1,541)

Income from investments in life insurance

8,160

9,335

14,034

Other income

2,529

1,441

1,810

Total noninterest income

164,044

132,318

157,345

Noninterest expense:

Salaries and employee benefits

361,204

313,253

325,094

Information systems

70,715

67,170

69,278

Occupancy

53,641

43,895

50,474

Professional fees

13,117

11,681

22,476

Advertising and marketing

11,843

15,734

17,615

FDIC assessments

10,185

8,903

10,912

Other expenses

75,585

64,176

62,996

Total noninterest expense

596,290

524,812

558,845

Income before provision for income taxes

271,789

268,344

309,039

Provision for income taxes

53,103

41,753

62,709

Net income

218,686

226,591

246,330

Dividends on preferred stock

13,020

12,787

10,708

Net income available to common shareholders

$

205,666

$

213,804

$

235,622

Basic earnings per common share

$

1.20

$

1.28

$

1.40

Diluted earnings per common share

$

1.20

$

1.26

$

1.39

Weighted average shares—basic

170,835

167,112

168,544

Weighted average shares—diluted

172,039

169,410

169,776

CONSOLIDATED BALANCE SHEETS

As of

($ in thousands)

March 31,
2020

December 31,
2019 (1)

March 31,
2019 (1)

ASSETS

Cash and cash equivalents

$

3,949,378

$

1,699,557

$

3,693,396

Debt securities available-for-sale

1,243,798

1,282,169

1,624,970

Debt securities held-to-maturity

17,534,920

17,147,633

14,442,876

Less: Allowance for credit losses

(5,087)

Debt securities held-to-maturity, net

17,529,833

17,147,633

14,442,876

Equity securities (fair value)

19,575

19,586

19,386

Loans: (1)

Single family (1-4 units)

49,063,193

47,985,651

39,134,534

Home equity lines of credit

2,703,919

2,501,432

2,502,837

Single family construction

779,239

761,589

690,370

Multifamily (5+ units)

12,823,392

12,353,359

10,755,210

Commercial real estate

7,715,266

7,449,058

6,763,664

Multifamily/commercial construction

1,839,445

1,695,954

1,604,996

Capital call lines of credit

7,512,231

5,570,322

4,524,749

Tax-exempt

3,087,751

3,042,193

3,046,352

Other business

3,094,922

3,034,301

3,044,943

Stock secured

1,919,971

1,897,511

1,375,454

Other secured

1,531,705

1,433,399

1,135,170

Student loan refinance

2,659,674

2,570,356

2,328,751

Other unsecured

554,354

501,706

358,067

Total loans

95,285,062

90,796,831

77,265,097

Allowance for credit losses

(541,906)

(496,104)

(453,121)

Loans, net

94,743,156

90,300,727

76,811,976

Loans held for sale

354,873

23,304

9,878

Investments in life insurance

1,460,909

1,434,642

1,404,083

Tax credit investments

1,106,693

1,100,509

1,040,924

Premises, equipment and leasehold improvements, net

392,953

386,841

339,745

Goodwill and other intangible assets

232,985

235,269

270,594

Other real estate owned

1,071

Other assets

2,879,705

2,633,397

2,189,400

Total Assets

$

123,914,929

$

116,263,634

$

101,847,228

LIABILITIES AND EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking

$

36,920,635

$

33,124,265

$

31,362,112

Interest-bearing checking

20,941,790

19,696,859

16,912,529

Money market checking

12,636,674

12,790,707

10,559,521

Money market savings and passbooks

9,052,690

10,586,355

9,858,736

Certificates of deposit

14,140,550

13,935,060

12,919,219

Total Deposits

93,692,339

90,133,246

81,612,117

Short-term borrowings

800,000

Long-term FHLB advances

16,250,000

12,200,000

8,000,000

Senior notes

994,742

497,719

896,866

Subordinated notes

777,990

777,885

777,576

Other liabilities

1,840,093

2,003,677

1,514,685

Total Liabilities

113,555,164

106,412,527

92,801,244

Shareholders’ Equity:

Preferred stock

1,145,000

1,145,000

940,000

Common stock

1,714

1,686

1,674

Additional paid-in capital

4,543,650

4,214,915

4,203,473

Retained earnings

4,652,089

4,484,375

3,914,294

Accumulated other comprehensive income (loss)

17,312

5,131

(13,457)

Total Shareholders’ Equity

10,359,765

9,851,107

9,045,984

Total Liabilities and Shareholders’ Equity

$

123,914,929

$

116,263,634

$

101,847,228

____________

(1) For comparability, the Bank has adjusted certain prior period loan amounts to conform to the current period presentation under CECL.

Quarter Ended March 31,

Quarter Ended December 31,

2020

2019 (4)

2019 (4)

Average Balances, Yields and Rates

Average Balance

Interest Income/
Expense (1)

Yields/
Rates (2)

Average Balance

Interest Income/
Expense (1)

Yields/
Rates (2)

Average Balance

Interest Income/
Expense (1)

Yields/
Rates (2)

($ in thousands)

Assets:

Cash and cash equivalents

$

1,853,579

$

3,940

0.85

%

$

1,445,058

$

7,989

2.24

%

$

1,377,686

$

4,869

1.40

%

Investment securities:

U.S. Government-sponsored agency securities

307,449

2,207

2.87

%

1,044,894

7,776

2.98

%

461,671

3,239

2.81

%

Mortgage-backed securities:

Agency residential and commercial MBS

6,746,664

47,186

2.80

%

6,854,838

49,620

2.90

%

6,826,144

47,764

2.80

%

Other residential and commercial MBS

3,834

32

3.33

%

4,528

46

4.03

%

4,276

39

3.66

%

Municipal securities

11,358,749

122,542

4.32

%

8,180,654

94,501

4.62

%

10,981,068

116,245

4.23

%

Other investment

securities (3)

43,783

320

2.92

%

18,989

120

2.52

%

43,840

322

2.94

%

Total investment securities

18,460,479

172,287

3.73

%

16,103,903

152,063

3.78

%

18,316,999

167,609

3.66

%

Loans: (4)

Residential real estate (5)

51,300,013

404,982

3.16

%

40,973,253

341,784

3.34

%

48,938,892

391,415

3.20

%

Multifamily (6)

12,565,723

118,944

3.74

%

10,534,919

99,701

3.79

%

12,043,858

118,431

3.85

%

Commercial real estate

7,574,573

78,609

4.11

%

6,702,263

71,947

4.29

%

7,414,885

78,229

4.13

%

Multifamily/commercial construction

2,550,647

30,285

4.70

%

2,278,294

28,244

4.96

%

2,415,923

28,931

4.69

%

Business (7)

12,390,386

122,971

3.93

%

10,678,134

121,044

4.53

%

11,556,437

121,665

4.12

%

Other (8)

6,453,056

47,572

2.92

%

5,088,348

43,946

3.45

%

6,085,084

48,261

3.10

%

Total loans

92,834,398

803,363

3.44

%

76,255,211

706,666

3.71

%

88,455,079

786,932

3.52

%

FHLB stock

406,974

6,960

6.88

%

278,805

5,175

7.53

%

394,487

5,678

5.71

%

Total interest-earning assets

113,555,430

986,550

3.46

%

94,082,977

871,893

3.71

%

108,544,251

965,088

3.52

%

Noninterest-earning cash

443,255

345,237

362,139

Goodwill and other intangibles

234,078

272,371

256,614

Other assets

4,721,313

4,196,071

4,581,436

Total noninterest-earning assets

5,398,646

4,813,679

5,200,189

Total Assets

$

118,954,076

$

98,896,656

$

113,744,440

Liabilities and Equity:

Deposits:

Checking

$

53,863,519

8,432

0.06

%

$

46,516,109

6,094

0.05

%

$

51,333,186

8,777

0.07

%

Money market checking and savings

22,475,109

44,869

0.80

%

19,268,808

42,317

0.89

%

21,298,741

49,682

0.93

%

CDs

14,185,945

65,544

1.86

%

11,384,085

59,336

2.11

%

13,694,721

70,246

2.04

%

Total deposits

90,524,573

118,845

0.53

%

77,169,002

107,747

0.57

%

86,326,648

128,705

0.59

%

Borrowings:

Short-term borrowings

1,231,827

4,700

1.53

%

956,670

6,030

2.56

%

3,056,545

13,530

1.76

%

Long-term FHLB advances

13,420,604

66,566

1.99

%

8,503,889

43,167

2.06

%

11,488,043

62,146

2.15

%

Senior notes (9)

765,308

4,773

2.49

%

896,654

5,934

2.65

%

497,610

3,351

2.69

%

Subordinated notes (9)

777,938

9,105

4.68

%

777,526

9,101

4.68

%

777,834

9,104

4.68

%

Total borrowings

16,195,677

85,144

2.11

%

11,134,739

64,232

2.33

%

15,820,032

88,131

2.21

%

Total interest-bearing liabilities

106,720,250

203,989

0.77

%

88,303,741

171,979

0.79

%

102,146,680

216,836

0.84

%

Noninterest-bearing liabilities

2,030,107

1,564,278

2,093,561

Preferred equity

1,145,000

940,000

899,728

Common equity

9,058,719

8,088,637

8,604,471

Total Liabilities and Equity

$

118,954,076

$

98,896,656

$

113,744,440

Net interest spread (10)

2.69

%

2.92

%

2.68

%

Net interest income (fully

taxable-equivalent basis) and

net interest margin (11)

$

782,561

2.74

%

$

699,914

2.97

%

$

748,252

2.73

%

Reconciliation of tax-equivalent net interest income to reported net interest income:

Tax-equivalent adjustment

(30,429)

(24,876)

(28,134)

Net interest income, as reported

$

752,132

$

675,038

$

720,118

____________________

(1) Interest income is presented on a fully taxable-equivalent basis.

(2) Yields/rates are annualized.

(3) Includes corporate debt securities, mutual funds and marketable equity securities.

(4) For comparability, the Bank has adjusted certain prior period loan amounts to conform to the current period presentation under CECL.

(5) Includes single family, home equity lines of credit, and single family construction loans. Also includes single family loans held for sale.

(6) Includes multifamily loans held for sale.

(7) Includes capital call lines of credit, tax-exempt loans and other business loans.

(8) Includes stock secured, other secured, student loan refinance and other unsecured loans.

(9) Average balances include unamortized issuance discounts and costs. Interest expense includes amortization of issuance discounts and costs.

(10) Net interest spread represents the average yield on interest-earning assets less the average rate on interest-bearing liabilities.

(11) Net interest margin represents net interest income on a fully taxable-equivalent basis divided by total average interest-earning assets.

Quarter Ended
March 31,

Quarter Ended
December 31,

Operating Information

2020

2019

2019

($ in thousands, except per share amounts)

Net income to average assets (1)

0.74

%

0.93

%

0.86

%

Net income available to common shareholders to average common equity (1)

9.13

%

10.72

%

10.86

%

Net income available to common shareholders to average tangible common equity (1)

9.37

%

11.09

%

11.20

%

Dividends per common share

$

0.19

$

0.18

$

0.19

Dividend payout ratio

15.9

%

14.3

%

13.7

%

Efficiency ratio (2)

65.1

%

65.0

%

63.7

%

Net loan charge-offs (recoveries)

$

202

$

127

$

(1,060)

Net loan charge-offs (recoveries) to average total loans (1)

0.00

%

0.00

%

(0.00)

%

Allowance for loan credit losses to:

Total loans

0.57

%

0.59

%

0.55

%

Nonaccrual loans

432.1

%

887.1

%

346.5

%

__________

(1) Ratios are annualized.

(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.

Quarter Ended
March 31,

Quarter Ended
December 31,

Effective Tax Rate

2020

2019

2019

Effective tax rate, prior to excess tax benefits

21.3

%

21.9

%

21.6

%

Excess tax benefits—stock options

(1.5)

(6.2)

(1.2)

Excess tax benefits—other stock awards

(0.3)

(0.1)

(0.1)

Total excess tax benefits

(1.8)

(6.3)

(1.3)

Effective tax rate

19.5

%

15.6

%

20.3

%

Quarter Ended
March 31,

Quarter Ended
December 31,

Provision for Credit Losses and Unfunded Loan Commitments

2020

2019

2019

($ in thousands)

Debt securities held-to-maturity

$

418

$

$

Loans

47,679

14,200

9,579

Provision for credit losses

48,097

14,200

9,579

Provision (reversal of provision) for unfunded loan commitments (1)

14,273

(217)

(1,449)

Total provision

$

62,370

$

13,983

$

8,130

Allowance for Credit Losses

Debt Securities
Held-to-Maturity

Loans

Unfunded Loan
Commitments

Total

($ in thousands)

Balance at 12/31/2019 (pre-CECL)

$

$

496,104

$

12,029

$

508,133

Cumulative adjustment (2)

4,669

(1,675)

3,668

6,662

Balance at 1/1/2020 (CECL)

4,669

494,429

15,697

514,795

Provision for credit losses

418

47,679

48,097

Provision for unfunded loan commitments

14,273

(1)

14,273

Total provision

418

47,679

14,273

62,370

Net charge-offs

(202)

(202)

Balance at 3/31/2020 (CECL)

$

5,087

$

541,906

$

29,970

(3)

$

576,963

__________

(1) Included in other noninterest expense.

(2) Cumulative effect adjustment recorded on January 1, 2020.

(3) Included in other liabilities.

Quarter Ended
March 31,

Quarter Ended
December 31,

Mortgage Loan Sales

2020

2019

2019

($ in thousands)

Loans sold:

Flow sales:

Agency

$

25,774

$

11,679

$

34,519

Non-agency

31,870

16,831

7,717

Total flow sales

57,644

28,510

42,236

Bulk sales:

Non-agency

437,669

152,119

Total loans sold

$

495,313

$

180,629

$

42,236

Gain on sale of loans:

Amount

$

1,925

$

359

$

69

Gain as a percentage of loans sold

0.39

%

0.20

%

0.16

%

Quarter Ended
March 31,

Quarter Ended
December 31,

Loan Originations

2020

2019 (1)

2019 (1)

($ in thousands)

Single family (1-4 units)

$

3,519,336

$

2,189,895

$

5,275,965

Home equity lines of credit

395,508

352,138

456,150

Single family construction

109,162

124,269

133,368

Multifamily (5+ units)

781,303

582,943

1,214,394

Commercial real estate

451,858

246,528

401,084

Multifamily/commercial construction

620,921

130,113

340,650

Capital call lines of credit (2)

2,385,229

1,702,723

1,708,006

Tax-exempt

100,019

84,425

52,550

Other business

619,779

255,999

512,954

Stock secured

592,560

206,713

650,240

Other secured

413,824

266,749

170,231

Student loan refinance

236,882

271,268

218,596

Other unsecured

86,006

63,040

89,764

Total loans originated

$

10,312,387

$

6,476,803

$

11,223,952

__________

(1) For comparability, the Bank has adjusted certain prior period amounts to conform to the current period presentation under CECL.

(2) Origination amounts for certain business lines of credit (i.e., capital call lines of credit) reflect the Bank's contractual obligations in effect during the reporting period, and exclude amounts that are contingent upon future credit approvals.

As of

Loan Servicing Portfolio

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in millions)

Loans serviced for investors

$

9,203

$

9,298

$

10,080

$

10,746

$

11,326

As of

Asset Quality Information

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in thousands)

Nonperforming assets:

Nonaccrual loans

$

125,418

$

143,181

$

136,928

$

144,993

$

51,081

Other real estate owned

1,071

Total nonperforming assets

$

126,489

$

143,181

$

136,928

$

144,993

$

51,081

Nonperforming assets to total assets

0.10

%

0.12

%

0.12

%

0.14

%

0.05

%

Accruing loans 90 days or more past due

$

$

$

$

$

Restructured accruing loans

$

13,418

$

13,287

$

14,964

$

12,176

$

10,208

As of

Book Value and Capital Ratios

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

(in thousands, except per share amounts)

Number of shares of common stock outstanding

171,395

168,621

168,450

168,176

167,393

Book value per common share

$

53.76

$

51.63

$

50.41

$

49.23

$

48.42

Tangible book value per common share

$

52.40

$

50.24

$

48.84

$

47.64

$

46.81

As of

Capital Ratios

March 31,
2020 (1),(2)

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

Tier 1 leverage ratio (Tier 1 capital to average assets)

8.46

%

8.39

%

8.50

%

8.69

%

8.84

%

Common Equity Tier 1 capital to risk-weighted assets

9.87

%

9.86

%

9.91

%

10.19

%

10.54

%

Tier 1 capital to risk-weighted assets

11.14

%

11.21

%

11.05

%

11.39

%

11.82

%

Total capital to risk-weighted assets

12.62

%

12.73

%

12.61

%

13.02

%

13.50

%

Regulatory Capital (3)

($ in thousands)

Common Equity Tier 1 capital

$

8,887,905

$

8,371,192

$

8,124,179

$

7,934,602

$

7,776,620

Tier 1 capital

$

10,032,905

$

9,516,192

$

9,064,179

$

8,874,602

$

8,716,620

Total capital

$

11,365,654

$

10,802,209

$

10,340,902

$

10,138,375

$

9,960,317

Assets (3)

($ in thousands)

Average assets

$

118,626,842

$

113,403,507

$

106,659,003

$

102,097,363

$

98,582,697

Risk-weighted assets

$

90,072,911

$

84,885,943

$

81,994,651

$

77,889,111

$

73,753,991

__________

(1) Ratios and amounts as of March 31, 2020 are preliminary.

(2) In accordance with regulatory capital rules, the Bank elected an option to delay the estimated impact of CECL on its regulatory capital over a five-year transition

period ending December 31, 2024. As a result, capital ratios and amounts as of March 31, 2020 exclude the impact of the increased allowance for credit losses

on loans, held-to-maturity debt securities and unfunded loan commitments attributed to the adoption of CECL.

(3) As defined by regulatory capital rules.

As of

Wealth Management Assets

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

March 31,
2019

($ in millions)

First Republic Investment Management

$

60,056

$

66,029

$

61,204

$

61,192

$

66,675

Brokerage and investment:

Brokerage

60,189

68,807

63,053

61,583

59,391

Money market mutual funds

6,893

4,268

4,402

3,312

2,818

Total brokerage and investment

67,082

73,075

67,455

64,895

62,209

Trust Company:

Trust

7,288

7,121

6,366

6,319

5,955

Custody

3,461

4,818

5,210

5,225

5,060

Total Trust Company

10,749

11,939

11,576

11,544

11,015

Total Wealth Management Assets

$

137,887

$

151,043

$

140,235

$

137,631

$

139,899

View source version on businesswire.com: https://www.businesswire.com/news/home/20200414005323/en/

Contacts

Investors:
Andrew Greenebaum / Lasse Glassen
Addo Investor Relations
agreenebaum@addoir.com
lglassen@addoir.com
(310) 829-5400

Media:
Greg Berardi
Blue Marlin Partners
greg@bluemarlinpartners.com
(415) 239-7826