First Republic Bank : Reports Third Quarter 2020 Results

Revenues Increased 20% Year-Over-Year Net Interest Income Increased 19% Year-Over-Year

First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended September 30, 2020.

“First Republic’s client-centric business model delivered another quarter of safe, consistent growth,” said Jim Herbert, Founder, Chairman and CEO of First Republic. “Lending, deposits and wealth management all continued to grow strongly due to our focus on exceptional, differentiated client service.”

Quarterly Highlights

Financial Results

• Year-over-year:
  • Revenues were $1.0 billion, up 19.6%.
  • Net interest income was $830.3 million, up 19.5%.
  • Net income was $293.1 million, up 24.8%.
  • Diluted earnings per share of $1.61, up 22.9% (included $0.09 positive impact from discounts on loans sold, insurance proceeds and an amended tax return refund).
  • Tangible book value per share was $55.00, up 12.6%.
• Loan originations totaled $12.2 billion, our best quarter ever.
• Net interest margin was 2.71%, compared to 2.70% for the prior quarter.
• Efficiency ratio was 60.7%, compared to 62.0% for the prior quarter.

Continued Capital and Credit Strength

• Tier 1 leverage ratio was 8.38%. 
• Nonperforming assets remained at a low 12 basis points of total assets.
• Net charge-offs were only $1.7 million, or less than 1 basis point of average loans.

Continued Franchise Development

• Year-over-year:
  • Loans totaled $102.7 billion, up 19.0% (excluding SBA Paycheck Protection Program (“PPP”) and for sale loans).
  • Deposits were $104.4 billion, up 21.8%.
  • Wealth management assets were $168.2 billion, up 19.9%.
  • Wealth management revenues were $126.8 million, up 10.5%.

“We’re very pleased with the double-digit growth of revenue, net interest income and earnings per share, both this quarter and year to date,” said Mike Roffler, Chief Financial Officer. “Credit quality, capital and liquidity remain strong. We’re pleased to have raised $500 million of Tier 1 fixed-for-life perpetual, preferred stock during the quarter at the lowest dividend rate ever for a bank.”

Quarterly Cash Dividend of $0.20 per Share

The Bank declared a cash dividend for the third quarter of $0.20 per share of common stock, which is payable on November 12, 2020 to shareholders of record as of October 29, 2020. The current quarterly dividend is an increase over last year, our ninth consecutive year of dividend increases.

Strong Asset Quality

Credit quality remains strong. Nonperforming assets were only 12 basis points of total assets at September 30, 2020.

The provision for credit losses for the quarter was $28.5 million, which was driven by loan growth and an economic outlook reflecting the impact of COVID-19. For the first nine months of 2020, the provision for credit losses was $122.0 million, with net loan charge-offs of only $3.0 million.

Continued Capital Strength

The Bank’s Tier 1 leverage ratio was 8.38% at September 30, 2020, up from 8.15% at June 30, 2020.

During the third quarter, the Bank issued $500.0 million of 4.125% Noncumulative Perpetual Series K Preferred Stock, which qualifies as Tier 1 capital. In addition, on October 9, 2020, the Bank redeemed the $100.0 million of outstanding shares of its 5.70% Noncumulative Perpetual Series F Preferred Stock.

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

Tangible Book Value Growth

Tangible book value per common share at September 30, 2020 was $55.00, up 12.6% from a year ago.

Continued Franchise Development

Loan Originations

Loan originations were $12.2 billion for the quarter, up 11.6% from the same quarter a year ago primarily due to an increase in single family lending.

Single family loan originations were 56% of the total for the quarter and had a weighted average loan-to-value ratio of 58%. In addition, multifamily and commercial real estate loans originated were 9% of total originations, and had a weighted average loan-to-value ratio of 50%.

Loans, excluding PPP loans and loans held for sale, totaled $102.7 billion at September 30, 2020, up 19.0% compared to a year ago primarily due to increases in single family and multifamily loans.

COVID-19 Loan Modifications

Loan modifications to those borrowers experiencing financial challenges as a result of COVID-19 (not classified as troubled debt restructurings) totaled $3.9 billion, and were 3.7% of total loans.

The Bank has limited exposure to several of the areas most directly impacted by COVID-19, such as the retail, hotel and restaurant industries, which totaled $2.4 billion as of September 30, 2020, only 2.3% of total loans. As of September 30, 2020, the Bank had modifications of these portfolios for $640 million, or 26%.

Deposit Growth

Total deposits increased to $104.4 billion, up 21.8% compared to a year ago, and had an average rate paid of 21 basis points during the quarter.

At September 30, 2020, checking deposit balances were 64.8% of total deposits.

Investments

Total investment securities at September 30, 2020 were $18.7 billion, a 7.1% increase compared to a year ago.

High-quality liquid assets, including eligible cash, totaled $17.1 billion at September 30, 2020, and represented 12.9% of quarterly average total assets.

Wealth Management

Total wealth management assets were $168.2 billion at September 30, 2020, up 8.0% for the quarter and up 19.9% compared to a year ago. The increases in wealth management assets were due to market appreciation and net client inflow.

Wealth management revenues totaled $126.8 million for the quarter, up 10.5% compared to last year’s third quarter. Such revenues represented 12.7% of the Bank’s total revenues for the quarter.

Wealth management assets at September 30, 2020 included investment management assets of $74.7 billion, brokerage assets and money market mutual funds of $81.2 billion, and trust and custody assets of $12.3 billion.

Income Statement and Key Ratios

Revenue Growth

Total revenues were $1.0 billion for the quarter, up 19.6% compared to the third quarter a year ago.

Net Interest Income Growth

Net interest income was $830.3 million for the quarter, up 19.5% compared to the third quarter a year ago. The increase in net interest income resulted primarily from growth in average interest-earning assets, partially offset by a decrease in net interest margin.

Net Interest Margin

The net interest margin increased to 2.71% in the third quarter, from 2.70% in the prior quarter.

Noninterest Income

Noninterest income was $171.0 million for the quarter, up 20.2% compared to the third quarter a year ago. The increase was primarily driven by the elevated gain on sale of loans, which included $10.3 million related to discounts on loans purchased, higher investment management fees, and income from investments in life insurance, which included a $5.3 million gain from life insurance proceeds.

Noninterest Expense and Efficiency Ratio

Noninterest expense was $608.2 million for the quarter, up 13.9% compared to the third quarter a year ago. The increase was primarily due to increased salaries and benefits and information systems costs from the continued investments in the quality and expansion of the franchise, partially offset by lower travel and entertainment, as well as advertising and marketing expenses.

The efficiency ratio was 60.7% for the quarter, compared to 63.8% for the third quarter a year ago. For the first nine months of 2020, the efficiency ratio was 62.0%.

Income Taxes

The Bank’s effective tax rate for the third quarter of 2020 was 19.6%, compared to 19.4% for the prior quarter, and 18.0% for the third quarter a year ago. For the first nine months of 2020, the Bank’s effective tax rate was 19.5%, compared to 17.0% a year ago. The increases were primarily the result of lower excess tax benefits from a decrease in stock option exercises by employees, partially offset by a tax refund from an amended tax return.

Conference Call Details

First Republic Bank’s third quarter 2020 earnings conference call is scheduled for October 13, 2020 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial [phone] and use confirmation code 2953562# approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial [phone] 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 October 13, 2020, at 11:00 a.m. PT / 2:00 p.m. ET, through October 20, 2020, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial [phone] and use confirmation code 2953562#. International callers should dial [phone] 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, as well as for unfunded loan commitments; changes in nonperforming assets; expectations regarding the impact and duration of the COVID-19 pandemic (collectively referred to as “COVID-19” herein); 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 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, Quarterly Reports on Form 10-Q 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 September 30,								Quarter Ended June 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)		2020				2019				2020				2020				2019
Interest income:
Loans		$	811,708			$	764,468			$	791,286			$	2,399,646			$	2,205,884
Investments		142,971				134,099				146,515				438,055				401,908
Other		6,116				5,779				5,059				18,135				15,767
Cash and cash equivalents		1,181				5,430				564				5,685				18,966
Total interest income		961,976				909,776				943,424				2,861,521				2,642,525
Interest expense:
Deposits		54,355				134,917				72,480				245,680				371,852
Borrowings		77,341				79,874				83,532				246,017				226,624
Total interest expense		131,696				214,791				156,012				491,697				598,476
Net interest income		830,280				694,985				787,412				2,369,824				2,044,049
Provision for credit losses		28,538				16,711				31,117				122,025				52,111
Net interest income after provision for credit losses		801,742				678,274				756,295				2,247,799				1,991,938
Noninterest income:
Investment management fees		96,638				83,582				85,083				281,017				262,226
Brokerage and investment fees		10,796				12,673				12,406				39,028				28,619
Insurance fees		2,216				2,712				1,713				6,086				8,522
Trust fees		4,543				4,105				4,599				14,118				12,221
Foreign exchange fee income		12,575				11,685				10,105				34,864				30,661
Deposit fees		5,753				6,563				5,248				17,598				19,462
Loan and related fees		7,171				5,341				7,456				20,741				13,644
Loan servicing fees, net		144				2,347				(4,445)				(2,649)				9,560
Gain (loss) on sale of loans		13,797				122				(1,147)				14,575				466
Gain (loss) on investment securities		(405)				(683)				1,529				3,752				(1,895)
Income from investments in life insurance		20,546				12,152				7,800				36,506				31,536
Other income (loss)		(2,791)				1,608				1,222				960				4,853
Total noninterest income		170,983				142,207				131,569				466,596				419,875
Noninterest expense:
Salaries and employee benefits		373,225				309,655				344,204				1,078,633				920,432
Information systems		74,549				66,612				74,037				219,301				204,059
Occupancy		55,543				50,722				54,941				164,125				142,204
Professional fees		19,845				17,507				15,517				48,479				45,623
Advertising and marketing		8,909				15,912				8,621				29,373				48,346
FDIC assessments		11,003				9,748				11,275				32,463				27,847
Other expenses		65,136				63,794				60,863				187,311				199,105
Total noninterest expense		608,210				533,950				569,458				1,759,685				1,587,616
Income before provision for income taxes		364,515				286,531				318,406				954,710				824,197
Provision for income taxes		71,378				51,687				61,638				186,119				140,198
Net income		293,137				234,844				256,768				768,591				683,999
Dividends on preferred stock		14,816				12,787				14,817				42,653				38,362
Net income available to common shareholders		$	278,321			$	222,057			$	241,951			$	725,938			$	645,637
Basic earnings per common share		$	1.62			$	1.32			$	1.41			$	4.23			$	3.85
Diluted earnings per common share		$	1.61			$	1.31			$	1.40			$	4.21			$	3.81
Weighted average shares—basic		172,142				168,272				171,627				171,537				167,694
Weighted average shares—diluted		172,932				169,346				172,659				172,514				169,449

CONSOLIDATED BALANCE SHEETS
		As of
($ in thousands)		September 30, 2020				June 30, 2020				December 31, 2019 (1)				September 30, 2019 (1)
ASSETS
Cash and cash equivalents		$	3,691,149			$	3,099,170			$	1,699,557			$	2,181,600
Debt securities available-for-sale		1,711,202				1,576,956				1,282,169				1,401,105
Debt securities held-to-maturity		16,929,422				17,513,211				17,147,633				16,002,722
Less: Allowance for credit losses		(5,716)				(5,383)				—				—
Debt securities held-to-maturity, net		16,923,706				17,507,828				17,147,633				16,002,722
Equity securities (fair value)		20,478				21,104				19,586				19,736
Loans: (1)
Single family (1-4 units)		56,628,359				52,435,246				47,985,651				44,882,363
Home equity lines of credit		2,431,991				2,419,359				2,501,432				2,530,740
Single family construction		739,091				733,909				761,589				743,699
Multifamily (5+ units)		13,392,531				13,187,857				12,353,359				11,672,916
Commercial real estate		7,781,797				7,793,137				7,449,058				7,415,677
Multifamily/commercial construction		2,038,949				1,966,292				1,695,954				1,583,968
Capital call lines of credit		6,203,877				6,173,992				5,570,322				5,568,342
Tax-exempt		3,276,705				3,186,066				3,042,193				3,042,765
Other business		2,982,532				3,179,023				3,034,301				2,953,756
PPP		2,091,102				2,092,307				—				—
Stock secured		2,311,754				1,924,107				1,897,511				1,610,914
Other secured		1,780,652				1,702,535				1,433,399				1,293,084
Unsecured		3,102,311				3,221,405				3,072,062				3,006,586
Total loans		104,761,651				100,015,235				90,796,831				86,304,810
Allowance for credit losses		(604,747)				(583,997)				(496,104)				(485,465)
Loans, net		104,156,904				99,431,238				90,300,727				85,819,345
Loans held for sale		33,655				313,655				23,304				31,693
Investments in life insurance		1,949,360				1,468,712				1,434,642				1,425,057
Tax credit investments		1,099,713				1,105,853				1,100,509				1,039,061
Premises, equipment and leasehold improvements, net		390,241				388,256				386,841				373,693
Goodwill and other intangible assets		229,185				230,975				235,269				264,658
Other real estate owned		—				1,071				—				—
Other assets		3,020,178				3,159,069				2,633,397				2,470,065
Total Assets		$	133,225,771			$	128,303,887			$	116,263,634			$	111,028,735
LIABILITIES AND EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking		$	41,538,676			$	37,586,940			$	33,124,265			$	32,720,317
Interest-bearing checking		26,081,189				23,833,458				19,696,859				17,438,402
Money market checking		15,868,769				14,639,069				12,790,707				11,242,205
Money market savings and passbooks		11,419,289				10,236,015				10,586,355				10,277,249
Certificates of deposit		9,495,453				12,238,479				13,935,060				14,042,346
Total Deposits		104,403,376				98,533,961				90,133,246				85,720,519
Short-term borrowings		5,000				5,000				800,000				775,000
Long-term FHLB advances		13,505,000				15,405,000				12,200,000				10,900,000
Senior notes		995,626				995,109				497,719				497,494
Subordinated notes		778,204				778,096				777,885				777,781
Other liabilities		2,193,956				2,010,793				2,003,677				2,926,735
Total Liabilities		121,881,162				117,727,959				106,412,527				101,597,529
Shareholders’ Equity:
Preferred stock		1,645,000				1,145,000				1,145,000				940,000
Common stock		1,722				1,721				1,686				1,685
Additional paid-in capital		4,571,499				4,543,051				4,214,915				4,198,442
Retained earnings		5,102,229				4,858,965				4,484,375				4,281,249
Accumulated other comprehensive income		24,159				27,191				5,131				9,830
Total Shareholders’ Equity		11,344,609				10,575,928				9,851,107				9,431,206
Total Liabilities and Shareholders’ Equity		$	133,225,771			$	128,303,887			$	116,263,634			$	111,028,735
____________
(1) For comparability, the Bank has adjusted certain prior period loan amounts to conform to the current period presentation under the Current Expected Credit Losses (“CECL”) methodology.

		Quarter Ended September 30,																						Quarter Ended June 30,
		2020											2019 (4)											2020
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		$	4,427,985			$	1,181			0.11	%		$	1,161,441			$	5,430			1.86	%		$	2,789,666			$	564			0.08	%
Investment securities:
U.S. Government-sponsored agency securities		202,174				1,186				2.35	%		740,893				5,375				2.90	%		214,835				1,367				2.55	%
Agency residential and commercial MBS		6,250,577				37,437				2.40	%		6,593,422				46,762				2.84	%		6,615,707				42,661				2.58	%
Other residential and commercial MBS		37,860				201				2.13	%		4,473				43				3.84	%		27,499				182				2.65	%
Municipal securities		12,309,647				129,097				4.19	%		9,184,274				101,154				4.41	%		11,949,615				126,906				4.25	%
Other investment securities (3)		44,782				309				2.76	%		24,977				156				2.49	%		43,800				309				2.83	%
Total investment securities		18,845,040				168,230				3.57	%		16,548,039				153,490				3.71	%		18,851,456				171,425				3.64	%
Loans: (4)
Residential real estate (5)		56,906,612				421,545				2.96	%		45,754,902				374,690				3.27	%		53,737,207				404,691				3.01	%
Multifamily (6)		13,312,631				124,759				3.67	%		11,391,573				111,727				3.84	%		12,887,676				120,657				3.70	%
Commercial real estate		7,801,603				78,412				3.93	%		7,280,053				77,654				4.17	%		7,718,257				77,635				3.98	%
Multifamily/commercial construction		2,739,717				30,608				4.37	%		2,294,560				29,055				4.95	%		2,632,682				29,468				4.43	%
Business (7)		12,538,201				110,487				3.45	%		11,551,439				129,314				4.38	%		13,069,640				115,666				3.50	%
PPP		2,091,580				10,825				2.03	%		—				—				—	%		1,620,772				7,659				1.87	%
Other (8)		6,995,592				41,735				2.33	%		5,704,872				48,746				3.34	%		6,658,487				42,116				2.50	%
Total loans		102,385,936				818,371				3.16	%		83,977,399				771,186				3.63	%		98,324,721				797,892				3.23	%
FHLB stock		457,808				6,116				5.31	%		321,778				5,779				7.13	%		491,938				5,059				4.14	%
Total interest-earning assets		126,116,769				993,898				3.12	%		102,008,657				935,885				3.63	%		120,457,781				974,940				3.22	%
Noninterest-earning cash		433,852											335,648											425,440
Goodwill and other intangibles		230,051											266,032											231,934
Other assets		5,074,504											4,409,665											4,905,493
Total noninterest-earning assets		5,738,407											5,011,345											5,562,867
Total Assets		$	131,855,176										$	107,020,002										$	126,020,648
Liabilities and Equity:
Deposits:
Checking		$	64,895,753			2,413				0.01	%		$	48,666,948			8,501				0.07	%		$	58,978,081			3,127				0.02	%
Money market checking and savings		26,220,043				13,675				0.21	%		20,536,777				53,046				1.02	%		24,133,700				15,224				0.25	%
CDs		11,334,100				38,267				1.34	%		13,170,046				73,370				2.21	%		12,721,452				54,129				1.71	%
Total deposits		102,449,896				54,355				0.21	%		82,373,771				134,917				0.65	%		95,833,233				72,480				0.30	%
Borrowings:
Short-term borrowings		5,030				0				0.00	%		2,204,262				12,520				2.25	%		2,747				0				0.04	%
Long-term FHLB advances		14,739,238				62,201				1.68	%		9,796,739				54,901				2.22	%		15,868,682				68,391				1.73	%
Senior notes (9)		995,373				6,032				2.42	%		497,384				3,350				2.69	%		994,905				6,034				2.43	%
Subordinated notes (9)		778,151				9,108				4.68	%		777,730				9,103				4.68	%		778,044				9,107				4.68	%
Total borrowings		16,517,792				77,341				1.86	%		13,276,115				79,874				2.39	%		17,644,378				83,532				1.90	%
Total interest-bearing liabilities		118,967,688				131,696				0.44	%		95,649,886				214,791				0.89	%		113,477,611				156,012				0.55	%
Noninterest-bearing liabilities		2,082,793											2,037,177											2,067,585
Preferred equity		1,226,522											940,000											1,145,000
Common equity		9,578,173											8,392,939											9,330,452
Total Liabilities and Equity		$	131,855,176										$	107,020,002										$	126,020,648
Net interest spread (10)										2.68	%										2.74	%										2.67	%
Net interest income (fully taxable-equivalent basis) and net interest margin (11)						$	862,202			2.71	%						$	721,094			2.80	%						$	818,928			2.70	%
Reconciliation of tax-equivalent net interest income to reported net interest income:
Tax-equivalent adjustment						(31,922)											(26,109)											(31,516)
Net interest income, as reported						$	830,280										$	694,985										$	787,412

		Nine Months Ended September 30,
		2020											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)
($ in thousands)
Assets:
Cash and cash equivalents		$	3,028,868			$	5,685			0.25	%		$	1,231,578			$	18,966			2.06	%
Investment securities:
U.S. Government-sponsored agency securities		241,343				4,760				2.63	%		938,081				20,827				2.96	%
Agency residential and commercial MBS		6,536,601				127,283				2.60	%		6,705,085				144,106				2.87	%
Other residential and commercial MBS		23,118				415				2.40	%		4,508				131				3.88	%
Municipal securities		11,874,265				379,182				4.26	%		8,624,534				293,060				4.53	%
Other investment securities (3)		44,125				939				2.83	%		21,121				403				2.54	%
Total investment securities		18,719,452				512,579				3.65	%		16,293,329				458,527				3.75	%
Loans: (4)
Residential real estate (5)		53,991,954				1,231,219				3.04	%		43,212,352				1,073,950				3.31	%
Multifamily (6)		12,923,436				364,360				3.70	%		10,980,052				320,977				3.85	%
Commercial real estate		7,698,522				234,655				4.00	%		6,978,946				223,602				4.22	%
Multifamily/commercial construction		2,641,375				90,361				4.49	%		2,286,710				85,971				4.96	%
Business (7)		12,665,609				349,205				3.62	%		11,216,470				382,143				4.49	%
PPP		1,240,568				18,484				1.96	%		—				—				—	%
Other (8)		6,703,449				131,423				2.58	%		5,382,125				139,274				3.41	%
Total loans		97,864,913				2,419,707				3.27	%		80,056,655				2,225,917				3.69	%
FHLB stock		452,260				18,135				5.36	%		310,758				15,768				6.78	%
Total interest-earning assets		120,065,493				2,956,106				3.26	%		97,892,320				2,719,178				3.69	%
Noninterest-earning cash		434,181											341,984
Goodwill and other intangibles		232,014											269,246
Other assets		4,901,072											4,306,791
Total noninterest-earning assets		5,567,267											4,918,021
Total Assets		$	125,632,760										$	102,810,341
Liabilities and Equity:
Deposits:
Checking		$	59,266,405			13,972				0.03	%		$	47,006,632			21,541				0.06	%
Money market checking and savings		24,283,378				73,769				0.41	%		19,714,378				146,900				1.00	%
CDs		12,742,008				157,939				1.66	%		12,457,649				203,411				2.18	%
Total deposits		96,291,791				245,680				0.34	%		79,178,659				371,852				0.63	%
Borrowings:
Short-term borrowings		411,712				4,700				1.52	%		2,016,744				36,832				2.44	%
Long-term FHLB advances		14,676,405				197,158				1.79	%		9,149,268				147,669				2.16	%
Senior notes (9)		918,809				16,839				2.44	%		741,731				14,818				2.66	%
Subordinated notes (9)		778,045				27,320				4.68	%		777,629				27,305				4.68	%
Total borrowings		16,784,971				246,017				1.96	%		12,685,372				226,624				2.39	%
Total interest-bearing liabilities		113,076,762				491,697				0.58	%		91,864,031				598,476				0.87	%
Noninterest-bearing liabilities		2,060,245											1,780,107
Preferred equity		1,172,372											940,000
Common equity		9,323,381											8,226,203
Total Liabilities and Equity		$	125,632,760										$	102,810,341
Net interest spread (10)										2.68	%										2.82	%
Net interest income (fully taxable-equivalent basis) and net interest margin (11)						$	2,464,409			2.72	%						$	2,120,702			2.87	%
Reconciliation of tax-equivalent net interest income to reported net interest income:
Tax-equivalent adjustment						(94,585)											(76,653)
Net interest income, as reported						$	2,369,824										$	2,044,049

__________

(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 and other business loans.

(8) Includes stock secured, other secured and 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 September 30,								Quarter Ended June 30,				Nine Months Ended September 30,
Operating Information		2020				2019				2020				2020				2019
($ in thousands, except per share amounts)
Net income to average assets (1)		0.88		%		0.87		%		0.82		%		0.82		%		0.89		%
Net income available to common shareholders to average common equity (1)		11.56		%		10.50		%		10.43		%		10.40		%		10.49		%
Net income available to common shareholders to average tangible common equity (1)		11.84		%		10.84		%		10.70		%		10.67		%		10.85		%
Dividends per common share		$	0.20			$	0.19			$	0.20			$	0.59			$	0.56
Dividend payout ratio		12.4		%		14.5		%		14.3		%		14.0		%		14.7		%
Efficiency ratio (2), (3)		60.7		%		63.8		%		62.0		%		62.0		%		64.4		%
Net loan charge-offs		$	1,687			$	4,341			$	1,098			$	2,987			$	5,694
Net loan charge-offs to average total loans (1)		0.01		%		0.02		%		0.00		%		0.00		%		0.01		%
Allowance for loan credit losses to:
Total loans		0.58		%		0.56		%		0.58		%		0.58		%		0.56		%
Nonaccrual loans		368.2		%		354.5		%		354.1		%		368.2		%		354.5		%
__________
(1) Ratios are annualized.
(2) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(3) The provision for unfunded loan commitments is included in the provision for credit losses for 2020 periods. For 2019 periods, the provision for unfunded loan commitments is included in other noninterest expense.

		Quarter Ended September 30,						Quarter Ended June 30,			Nine Months Ended September 30,
Effective Tax Rate		2020			2019			2020			2020			2019
Effective tax rate, prior to excess tax benefits and tax refund from an amended tax return		21.1	%		21.4	%		22.5	%		21.6	%		21.4	%
Excess tax benefits—stock options		(0.1)			(3.3)			(1.0)			(0.8)			(3.6)
Excess tax benefits—other stock awards		(0.1)			(0.1)			(2.1)			(0.8)			(0.8)
Total excess tax benefits		(0.2)			(3.4)			(3.1)			(1.6)			(4.4)
Tax refund from an amended tax return		(1.3)			—			—			(0.5)			—
Effective tax rate		19.6	%		18.0	%		19.4	%		19.5	%		17.0	%

Provision for Credit Losses		Quarter Ended September 30,								Quarter Ended June 30,				Nine Months Ended September 30,
		2020				2019				2020				2020				2019
($ in thousands)
Debt securities held-to-maturity		$	333			$	—			$	296			$	1,047			$	—
Loans		22,437				16,711				43,189				113,305				52,111
Unfunded loan commitments (1)		5,768				—				(12,368)				7,673				—
Total provision		$	28,538			$	16,711			$	31,117			$	122,025			$	52,111
__________
(1) The provision for unfunded loan commitments is included in the provision for credit losses for 2020 periods. For 2019 periods, the provision for unfunded loan commitments is included in other noninterest expense, which is not presented in this table.

		Quarter Ended September 30, 2020																Nine Months Ended September 30, 2020
Allowance for Credit Losses		Debt Securities Held-to-Maturity				Loans				Unfunded Loan Commitments (1)				Total				Debt Securities Held-to-Maturity				Loans				Unfunded Loan Commitments (1)				Total
($ in thousands)
Balance at beginning of period (2)		$	5,383			$	583,997			$	17,602			$	606,982			$	4,669			$	494,429			$	15,697			$	514,795
Provision for credit losses		333				22,437				5,768				28,538				1,047				113,305				7,673				122,025
Net charge-offs		—				(1,687)				—				(1,687)				—				(2,987)				—				(2,987)
Balance at end of period		$	5,716			$	604,747			$	23,370			$	633,833			$	5,716			$	604,747			$	23,370			$	633,833
__________
(1) The allowance for credit losses on unfunded loan commitments is included in other liabilities.
(2) For the nine months ended September 30, 2020, represents the balance after the cumulative effect adjustment from the adoption of CECL.

		Quarter Ended September 30,								Quarter Ended June 30,				Nine Months Ended September 30,
Mortgage Loan Sales		2020				2019				2020				2020				2019
($ in thousands)
Loans sold:
Flow sales:
Agency		$	44,118			$	25,214			$	10,810			$	80,702			$	51,426
Non-agency		—				11,932				—				31,870				43,266
Total flow sales		44,118				37,146				10,810				112,572				94,692
Bulk sales:
Non-agency		235,732				—				—				673,401				152,119
Securitizations		—				—				300,116				300,116				—
Total loans sold		$	279,850			$	37,146			$	310,926			$	1,086,089			$	246,811
Gain (loss) on sale of loans:
Amount (1)		$	13,797			$	122			$	(1,147)			$	14,575			$	466
Gain (loss) as a percentage of loans sold (1)		4.93		%		0.33		%		(0.37)		%		1.34		%		0.19		%
__________
(1) The gain for the quarter and nine months ended September 30, 2020 included $10.3 million related to discounts on purchased loans. Excluding these discounts of $10.3 million, the gain as a percentage of loans sold was 1.24% and 0.39% for the quarter and nine months ended September 30, 2020, respectively.

		Quarter Ended September 30,								Quarter Ended June 30,				Nine Months Ended September 30,
Loan Originations		2020				2019 (1)				2020 (2)				2020				2019 (1)
($ in thousands)
Single family (1-4 units)		$	6,813,850			$	4,872,598			$	5,875,184			$	16,208,370			$	11,129,819
Home equity lines of credit		432,443				359,154				457,737				1,285,688				1,067,881
Single family construction		186,833				175,361				119,318				415,313				455,061
Multifamily (5+ units)		955,951				710,183				946,820				2,684,074				2,105,764
Commercial real estate		193,228				543,964				330,683				975,769				1,309,736
Multifamily/commercial construction		245,220				387,144				131,414				997,555				835,272
Capital call lines of credit		1,803,907				2,337,530				1,405,347				5,594,483				5,463,704
Tax-exempt		328,711				48,125				184,054				612,784				234,470
Other business		243,788				428,533				914,257				1,777,824				1,108,712
PPP		—				—				1,981,797				1,981,797				—
Stock secured		685,250				443,691				519,416				1,797,226				1,119,145
Other secured		189,386				218,831				358,730				961,940				841,001
Unsecured		159,379				438,278				203,270				685,537				1,068,959
Total loans originated		$	12,237,946			$	10,963,392			$	13,428,027			$	35,978,360			$	26,739,524
__________
(1) For comparability, the Bank has adjusted certain prior period amounts to conform to the current period presentation under CECL.
(2) Excluding PPP loan originations, total loan originations were $11.4 billion for the quarter ended June 30, 2020.

		As of
Asset Quality Information		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
($ in thousands)
Nonperforming assets:
Nonaccrual loans		$	164,247			$	164,930			$	125,418			$	143,181			$	136,928
Other real estate owned		—				1,071				1,071				—				—
Total nonperforming assets		$	164,247			$	166,001			$	126,489			$	143,181			$	136,928
Nonperforming assets to total assets		0.12		%		0.13		%		0.10		%		0.12		%		0.12		%
Accruing loans 90 days or more past due		$	935			$	3,764			$	—			$	—			$	—
Restructured accruing loans		$	11,378			$	11,501			$	13,418			$	13,287			$	14,964

		September 30, 2020
COVID-19 Loan Modifications (1), (2), (3), (4)		Unpaid Principal Balance				Deferred Interest (5)				LTV (6)			Average Loan Size				Number of Loans
($ in millions)
Single family (1-4 units)		$	1,780			$	25			60	%		$	1.0			1,788
Home equity lines of credit		71				1				57	%		$	0.4			174
Single family construction		10				—				55	%		$	1.4			7
Multifamily (5+ units)		548				7				52	%		$	3.1			179
Commercial real estate		1,004				13				48	%		$	3.7			275
Multifamily/commercial construction		68				2				41	%		$	6.8			10
Capital call lines of credit		—				—				n/a			$	—			—
Tax-exempt		72				1				n/a			$	17.9			4
Other business		176				2				n/a			$	1.3			138
Stock secured		—				—				n/a			$	—			—
Other secured		5				—				n/a			$	0.5			12
Unsecured (7)		131				—				n/a			$	0.1			985
Total		$	3,865			$	51										3,572
__________
(1) COVID-19 loan modifications are not classified as troubled debt restructurings.
(2) Includes 936 loans totaling $297 million that have completed their deferral period, but for which a normal payment is not yet due.
(3) Includes 10 loans totaling $46 million that were modified a second time.
(4) Excludes 395 loans totaling $330 million that have completed their deferral period and returned to a normal payment schedule or are no longer outstanding.
(5) Represents interest payments not made during the deferral period through September 30, 2020.
(6) Weighted average loan-to-value (“LTV”) ratios for real estate secured loans are based on appraised value at the time of origination.
(7) Includes $130 million of household debt refinance loans.

		September 30, 2020
Loan Industry Information		Unpaid Principal Balance				LTV			Average Loan Size				Number of Loans			Personal Guarantee %
($ in millions)
Retail		$	1,774			49	%		$	2.7			682			76	%
Hotel		430				48	%		$	6.8			65			74	%
Restaurant (1)		231				51	%		$	1.1			215			94	%
Total (2)		$	2,435										962
__________
(1) Approximately 70% of loans to restaurants are real estate secured.
(2) Amounts in the table above exclude $43 million of loans for hotels and $135 million of loans for restaurants under the PPP.

		As of
Loan Servicing Portfolio		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
($ in millions)
Loans serviced for investors		$	7,799			$	8,316			$	9,203			$	9,298			$	10,080

Common Shares, Book Value per Common Share and Tangible Book Value per Common Share		As of
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
(in thousands, except per share amounts)
Number of shares of common stock outstanding		172,188				172,094				171,395				168,621				168,450
Book value per common share		$	56.33			$	54.80			$	53.76			$	51.63			$	50.41
Tangible book value per common share		$	55.00			$	53.46			$	52.40			$	50.24			$	48.84

		As of
Capital Ratios		September 30, 2020 (1), (2)				June 30, 2020 (2)				March 31, 2020 (2)				December 31, 2019				September 30, 2019
Tier 1 leverage ratio (Tier 1 capital to average assets)		8.38		%		8.15		%		8.46		%		8.39		%		8.50		%
Common Equity Tier 1 capital to risk-weighted assets		9.78		%		9.80		%		9.87		%		9.86		%		9.91		%
Tier 1 capital to risk-weighted assets		11.50		%		11.04		%		11.14		%		11.21		%		11.05		%
Total capital to risk-weighted assets		12.94		%		12.49		%		12.62		%		12.73		%		12.61		%
Regulatory Capital (3)
($ in thousands)
Common Equity Tier 1 capital		$	9,375,688			$	9,103,771			$	8,887,905			$	8,371,192			$	8,124,179
Tier 1 capital		$	11,020,688			$	10,248,771			$	10,032,905			$	9,516,192			$	9,064,179
Total capital		$	12,396,304			$	11,604,141			$	11,365,654			$	10,802,209			$	10,340,902
Assets (3)
($ in thousands)
Average assets		$	131,517,445			$	125,690,830			$	118,626,842			$	113,403,507			$	106,659,003
Risk-weighted assets		$	95,823,385			$	92,870,859			$	90,072,400			$	84,885,943			$	81,994,651
__________
(1) Ratios and amounts as of September 30, 2020 are preliminary.
(2) In accordance with the CECL Interim Final Rule, the Bank elected to delay the estimated impact of CECL on its regulatory capital and risk-weighted assets over a five-year transition period ending December 31, 2024. Ratios and amounts for 2020 periods have been adjusted to exclude the following impacts attributed to the adoption of CECL: decreases in retained earnings, increases in allowance for credit losses on loans, held-to-maturity debt securities and unfunded loan commitments, decreases in average assets, and increases in risk-weighted assets.
(3) As defined by regulatory capital rules.

		As of
Wealth Management Assets		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
($ in millions)
First Republic Investment Management		$	74,661			$	68,124			$	60,056			$	66,029			$	61,204
Brokerage and investment:
Brokerage		76,769				70,178				60,189				68,807				63,053
Money market mutual funds		4,416				5,933				6,893				4,268				4,402
Total brokerage and investment		81,185				76,111				67,082				73,075				67,455
Trust Company:
Trust		8,687				7,905				7,288				7,121				6,366
Custody		3,651				3,646				3,461				4,818				5,210
Total Trust Company		12,338				11,551				10,749				11,939				11,576
Total Wealth Management Assets		$	168,184			$	155,786			$	137,887			$	151,043			$	140,235

 

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