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First Republic Bank's CEO Discusses Q2 2012 Results - Earnings Call Transcripts

On the capital front, our Tier 1Leverage Ratio was 9.55% including the issuance of our new noncumulative perpetual Series B preferred. We raised, net of all redemptions, $85 million of Tier 1 capital in the quarter and through the first half of 2012 we have raised, net of redemptions, $250 million of new Tier 1 capital through two preferred stock offerings. This increase in capital is intended to support the further development of our business and its franchise.

The current low interest rate environment and flatter yield curve present both challenges and opportunities for us. The average yield on our loan portfolio does continue to decline while the average cost of funds cannot decline much further, however, the low interest rates have resulted in a significant amount of home loan refinance and home purchase activity in all of our markets.

This activity level has led to a meaningful increase in new client opportunities for First Republic. We are and we intend to continue to take advantage of this opportunity aggressively.

Now let me turn the call over to Kathy.

Katherine August-deWilde

Thank you, Jim. As Jim indicated, growth was strong across all areas of our business—deposits, loans and wealth management. Quarterly loan originations and wealth management revenues were the highest ever. Home loans were 66% of total loan originations. Of these, 42% were for home purchases. On average, loan balances were 5% higher in the second quarter than in the first quarter of the year.

I’d like to note that First Republic has not altered its credit standards. We continue to lend very conservatively. Each loan is fully documented and fully underwritten. In the second quarter our weighted average loan to value on home originations was 60%.

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