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First Republic Reports First Quarter 2022 Results

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Revenues Increased 23% Year-Over-Year

Tangible Book Value Per Share Rose 14% Year-Over-Year

Dividend Raised for 11th Consecutive Year

SAN FRANCISCO, April 13, 2022--(BUSINESS WIRE)--First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2022.

"The entire business continued to perform very well in the first quarter," said Mike Roffler, Chief Executive Officer and President. "Loan originations were our best ever, client satisfaction reached an all-time high, and we successfully completed our core system conversion. It was a terrific quarter."

Quarterly Highlights

Financial Results

– Year-over-year:

– Revenues were $1.4 billion, up 23.0%.

– Net interest income was $1.1 billion, up 22.0%.

– Net income was $401 million, up 19.9%.

– Diluted earnings per share of $2.00, up 11.7%.

– Tangible book value per share was $68.47, up 14.2%.

– Loan originations totaled $17.8 billion, our best quarter ever.

– Net interest margin was 2.68%, consistent with the prior quarter.

– Efficiency ratio was 62.0%, compared to 63.5% for the first quarter of 2021.

– Increased quarterly dividend to $0.27 per share.

Continued Capital and Credit Strength

– Tier 1 leverage ratio was 8.70%.

– Nonperforming assets remained at a low 8 basis points of total assets.

– Credit quality remained strong, with net recoveries of $0.3 million for the quarter.

Continued Business Growth

– Year-over-year:

– Loans totaled $141.3 billion, up 19.7%.

– Deposits were $162.1 billion, up 26.7%.

– Wealth management assets were $274.2 billion, up 25.2%.

– Wealth management revenues were $221 million, up 38.7%.

"Loans and deposits grew nicely during the first quarter, while credit quality, liquidity and capital all remained very strong," said Olga Tsokova, Chief Financial Officer (Acting) and Chief Accounting Officer. "Total revenues rose 23% and tangible book value per share was up 14% compared to a year ago. We’re also pleased to have increased our dividend for the 11th consecutive year."

Quarterly Cash Dividend of $0.27 per Share

The Bank announced an increase of $0.05 in its quarterly cash dividend to $0.27 per share of common stock, our 11th consecutive year of dividend increases. The first quarter dividend is payable on May 12, 2022 to shareholders of record as of April 28, 2022.

Strong Asset Quality

Credit quality remains strong. Nonperforming assets were at a low 8 basis points of total assets at March 31, 2022. The Bank had net loan recoveries of $0.3 million for the quarter.

During the first quarter, the Bank recorded a provision for credit losses of $10 million, which was primarily driven by loan growth.

Continued Book Value Growth

Book value per common share at March 31, 2022 was $69.70, up 13.8% from a year ago. Tangible book value per common share at March 31, 2022 was $68.47, up 14.2% from a year ago.

Capital Strength

The Bank’s Tier 1 leverage ratio was 8.70% at March 31, 2022, compared to 8.76% at December 31, 2021.

Since the beginning of 2021, the Bank has raised $2.8 billion in net additional Tier 1 capital to support our growth.

Continued Business Growth

Loan Originations

Loan originations were $17.8 billion for the quarter, our best quarter ever. This was up 13.3% from the same quarter a year ago, primarily due to increases in single family and multifamily lending.

Single family loan originations were 47% of the total loan origination volume for the quarter and had a weighted average loan-to-value ratio of 58%. In addition, multifamily and commercial real estate loans originated were 13% of total originations, and had a weighted average loan-to-value ratio of 53%.

Loans totaled $141.3 billion at March 31, 2022, up 19.7% compared to a year ago. Our loan growth was primarily due to increases in single family, multifamily, stock secured loans and capital call lines of credit, partially offset by a decrease in loans under the Small Business Administration’s Paycheck Protection Program ("PPP").

Deposit Growth

Total deposits increased to $162.1 billion, up 26.7% compared to a year ago, and had an average rate paid of 5 basis points during the quarter.

At March 31, 2022, checking deposit balances were 70.4% of total deposits.

Investments

Total investment securities at March 31, 2022 were $30.3 billion, a 17.9% increase compared to year-end and a 39.7% increase compared to a year ago.

High-quality liquid assets, including eligible cash, totaled $29.9 billion at March 31, 2022, and represented 16.2% of quarterly average total assets.

Wealth Management

Total wealth management assets were $274.2 billion at March 31, 2022, down slightly compared to the prior quarter but up 25.2% compared to a year ago. The modest decline in wealth management assets for the quarter was due to market depreciation, significantly offset by net client inflow. The increase in wealth management assets for the year was due to net client inflow and market appreciation.

Wealth management revenues totaled $221 million for the quarter, up 38.7% compared to the first quarter a year ago. Such revenues represented 15.9% of the Bank’s total revenues for the quarter.

Wealth management assets at March 31, 2022 included investment management assets of $108.8 billion, brokerage assets and money market mutual funds of $146.7 billion, and trust and custody assets of $18.8 billion.

Income Statement and Key Ratios

Revenue Growth

Total revenues were $1.4 billion for the quarter, up 23.0% compared to the first quarter a year ago.

Net Interest Income Growth

Net interest income was $1.1 billion for the quarter, up 22.0% 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 2.68% in the first quarter, consistent with the prior quarter.

Noninterest Income

Noninterest income was $251 million for the quarter, up 28.0% compared to the first quarter a year ago. The increase was primarily driven by higher wealth management fees.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $866 million for the quarter, up 20.2% compared to the first quarter a year ago, primarily due to continued investments in our business expansion, including hiring additional colleagues to support our growth, information systems initiatives and occupancy costs.

The efficiency ratio was 62.0% for the quarter, compared to 63.5% for the first quarter a year ago.

Income Taxes

The Bank’s effective tax rate for the first quarter of 2022 was 22.9%, compared to 21.9% for the first quarter a year ago.

Conference Call Details

First Republic Bank’s first quarter 2022 earnings conference call is scheduled for April 13, 2022 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (888) 256-1007 and provide confirmation code 2134053 approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (856) 344-9299 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 for the live presentation, a replay of the call will be available beginning April 13, 2022 at 11:00 a.m. PT / 2:00 p.m. ET through April 20, 2022 at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (888) 203-1112 and use confirmation code 2134053#. International callers should dial +1 (719) 457-0820 and enter the same confirmation code. A replay of the webcast will also 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. First Republic specializes in delivering exceptional, relationship-based service and provides a complete line of products, including residential, commercial and personal loans, deposit services, and private wealth management, including investment, brokerage, insurance, trust and foreign exchange services. 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; expectations regarding our executive transitions; 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 adverse effects of climate change on our business, clients and counterparties; 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; 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.

Explanatory Note

Some amounts presented within this document may not recalculate due to rounding.

CONSOLIDATED STATEMENTS OF INCOME

Quarter Ended

March 31,

Quarter Ended

December 31,

(in millions, except per share amounts)

2022

2021

2021

Interest income:

Loans

$ 1,002

$ 873

$ 992

Investments

180

141

165

Other

2

5

4

Cash and cash equivalents

5

3

6

Total interest income

1,189

1,022

1,167

Interest expense:

Deposits

20

28

20

Borrowings

24

55

27

Total interest expense

44

83

47

Net interest income

1,145

939

1,120

Provision (reversal of provision) for credit losses

10

(15

)

24

Net interest income after provision (reversal of provision) for credit losses

1,135

954

1,096

Noninterest income:

Investment management fees

165

119

150

Brokerage and investment fees

22

15

19

Insurance fees

4

3

7

Trust fees

7

6

7

Foreign exchange fee income

23

17

24

Deposit fees

6

6

7

Loan and related fees

9

7

9

Income from investments in life insurance

14

17

27

Other income, net

1

6

(3

)

Total noninterest income

251

196

247

Noninterest expense:

Salaries and employee benefits

560

463

544

Information systems

107

84

99

Occupancy

69

58

66

Professional fees

23

21

27

Advertising and marketing

13

13

21

FDIC assessments

15

12

13

Other expenses

79

70

96

Total noninterest expense

866

721

866

Income before provision for income taxes

520

429

477

Provision for income taxes

119

94

77

Net income

401

335

400

Dividends on preferred stock

37

19

32

Net income available to common shareholders

$ 364

$ 316

$ 368

Basic earnings per common share

$ 2.03

$ 1.81

$ 2.05

Diluted earnings per common share

$ 2.00

$ 1.79

$ 2.02

Weighted average shares—basic

180

175

179

Weighted average shares—diluted

182

177

182

CONSOLIDATED BALANCE SHEETS

As of

($ in millions)

March 31,
2022

December 31,
2021

March 31,
2021

ASSETS

Cash and cash equivalents

$ 7,756

$ 12,947

$ 8,889

Debt securities available-for-sale

3,446

3,381

2,429

Debt securities held-to-maturity, net

26,831

22,292

19,232

Equity securities (fair value)

25

28

21

Loans:

Single family

81,833

76,793

65,179

Home equity lines of credit

2,597

2,584

2,392

Single family construction

1,041

993

842

Multifamily

16,953

15,966

14,141

Commercial real estate

8,753

8,531

8,065

Multifamily/commercial construction

1,955

1,927

2,101

Capital call lines of credit

10,970

10,999

8,654

Tax-exempt

3,656

3,680

3,455

Other business

4,081

3,961

3,679

PPP

232

545

2,142

Stock secured

3,651

3,435

2,520

Other secured

2,623

2,457

1,863

Unsecured

2,968

3,085

3,051

Total loans

141,313

134,956

118,084

Allowance for credit losses

(701

)

(694

)

(621

)

Loans, net

140,612

134,262

117,463

Investments in life insurance

2,682

2,650

2,329

Tax credit investments

1,231

1,220

1,127

Premises, equipment and leasehold improvements, net

467

454

412

Goodwill and other intangible assets

221

222

226

Other assets

3,850

3,631

3,670

Total Assets

$ 187,121

$ 181,087

$ 155,798

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:

Deposits:

Noninterest-bearing checking

$ 72,424

$ 70,840

$ 53,807

Interest-bearing checking

41,589

41,248

32,543

Money market checking

21,846

20,303

19,210

Money market savings and passbooks

19,159

16,573

14,097

Certificates of deposit

7,042

7,357

8,250

Total Deposits

162,060

156,321

127,907

Long-term FHLB advances

3,700

3,700

10,505

Senior notes

999

998

997

Subordinated notes

779

779

778

Other liabilities

3,429

3,391

2,669

Total Liabilities

170,967

165,189

142,856

Shareholders’ Equity:

Preferred stock

3,633

3,633

2,143

Common stock

2

2

2

Additional paid-in capital

5,763

5,725

5,191

Retained earnings

6,893

6,569

5,627

Accumulated other comprehensive loss

(137

)

(31

)

(21

)

Total Shareholders’ Equity

16,154

15,898

12,942

Total Liabilities and Shareholders’ Equity

$ 187,121

$ 181,087

$ 155,798

Quarter Ended March 31,

Quarter Ended December 31,

2022

2021

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

$ 11,342

$ 5

0.18

%

$ 11,449

$ 3

0.10

%

$ 15,342

$ 6

0.15

%

Investment securities:

U.S. Government-sponsored agency

securities

117

0

1.37

%

94

0

1.45

%

100

0

1.59

%

Agency residential and commercial MBS

9,142

39

1.70

%

5,626

31

2.17

%

7,011

29

1.65

%

Other residential and commercial MBS

24

0

2.04

%

33

0

1.87

%

25

0

1.82

%

Tax-exempt municipal securities

15,595

151

3.87

%

12,270

127

4.14

%

14,869

146

3.93

%

Taxable municipal securities

1,715

13

2.97

%

1,079

8

2.95

%

1,670

12

2.99

%

Other investment securities

1,416

10

2.85

%

429

3

2.39

%

1,405

10

2.86

%

Total investment securities

28,009

213

3.04

%

19,531

169

3.45

%

25,080

197

3.15

%

Loans:

Residential real estate

82,416

567

2.75

%

65,459

469

2.87

%

78,436

545

2.78

%

Multifamily

16,281

140

3.45

%

13,922

123

3.53

%

15,479

154

3.90

%

Commercial real estate

8,633

82

3.77

%

8,033

78

3.88

%

8,525

83

3.82

%

Multifamily/commercial construction

1,929

22

4.62

%

2,867

31

4.34

%

2,044

24

4.70

%

Business

18,590

145

3.12

%

15,076

124

3.28

%

17,210

139

3.15

%

PPP

381

7

7.59

%

1,990

16

3.17

%

732

9

4.65

%

Other

9,058

47

2.06

%

7,348

39

2.16

%

8,578

45

2.03

%

Total loans

137,288

1,010

2.94

%

114,695

880

3.07

%

131,004

999

3.02

%

FHLB stock

115

2

7.60

%

345

5

6.10

%

143

4

11.17

%

Total interest-earning assets

176,754

1,230

2.78

%

146,020

1,057

2.90

%

171,569

1,206

2.79

%

Noninterest-earning cash

449

414

426

Goodwill and other intangibles

221

227

223

Other assets

7,142

6,091

6,967

Total noninterest-earning assets

7,812

6,732

7,616

Total Assets

$ 184,566

$ 152,752

$ 179,185

Liabilities and Shareholders’ Equity:

Deposits:

Interest-bearing checking

$ 40,400

1

0.01

%

$ 31,991

2

0.03

%

$ 36,896

1

0.01

%

Money market checking

21,659

5

0.09

%

18,889

8

0.16

%

21,925

5

0.10

%

Money market savings and passbooks

17,925

7

0.15

%

13,640

6

0.19

%

16,935

6

0.15

%

CDs

7,217

7

0.40

%

8,413

12

0.56

%

7,482

8

0.42

%

Total interest-bearing deposits (3)

87,201

20

0.09

%

72,933

28

0.15

%

83,238

20

0.10

%

...