First Republic Bank Reports Record Earnings

Efficiency ratio

The Bank’s efficiency ratio was 52.1% for the third quarter of 2012, compared to 52.4% for the second quarter of 2012 and 48.4% for the third quarter a year ago. For the nine months ended September 30, 2012 and 2011, the efficiency ratio was 52.3% and 48.2%, respectively.

Excluding the impact of purchase accounting, the Bank’s efficiency ratio was 58.6% for the third quarter of 2012, compared to 60.5% for the second quarter of 2012 and 58.8% for the third quarter a year ago. For the nine months ended September 30, 2012 and 2011, the efficiency ratio was 59.5% and 58.9%, respectively. ⁽¹⁾

Income tax rate

The Bank provides for income taxes based on an estimate of earnings and tax preference items for each calendar year. The Bank’s effective tax rate for the three and nine months ended September 30, 2012 was 30.5% and represents the current estimated tax rate for the full year 2012.

_________

⁽¹⁾ See non-GAAP reconciliation under section “Use of Non-GAAP Financial Measures.”

⁽²⁾ Core deposits exclude CDs greater than $250,000.

Conference Call Details

First Republic Bank’s third quarter 2012 earnings conference call is scheduled for October 17, 2012 at 11:00 a.m. PDT / 2:00 p.m. EDT. To listen to the live call by telephone, please dial [phone] approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #37414610. International callers should dial [phone]. 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 www.firstrepublic.com. To listen to the live webcast, please visit the site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. A replay of the call will also be available for 90 days on the website. For those unable to participate in the live presentation, a replay will be available beginning October 17, 2012, at 2:00 p.m. PDT / 5:00 p.m. EDT, through October 24, 2012, at 8:59 p.m. PDT / 11:59 p.m. EDT. To access the replay, dial [phone] (U.S.) and use conference ID #37414610. International callers should dial [phone] and enter the same conference ID number. The Bank’s press releases are available after release on the Bank’s website at www.firstrepublic.com.

About First Republic Bank

First Republic Bank (“First Republic” or the “Bank”) and its subsidiaries provide private banking, private business banking and private wealth management. Founded in 1985, First Republic specializes in exceptional, relationship-based service offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Greenwich and New York City. First Republic offers a complete line of banking products for individuals and businesses, including deposit services, as well as residential, commercial and personal loans. First Republic is a component of the S&P Total Market Index, the Wilshire 5000 Total Market Index ^SM, the Russell 1000 ^®, Russell 3000 ^® and Russell Global indices and six Dow Jones indices. More information is available on the Bank’s website at www.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. 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 and include statements about economic performance in our markets, growth in our loan originations and wealth management assets, and our projected tax rate. 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. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: our ability to compete for banking and wealth management customers; earthquakes and other natural disasters in our markets; changes in interest rates; our ability to maintain high underwriting standards; economic conditions in our markets; and conditions in financial markets and economic conditions generally; regulatory restrictions on our operations and current or future legislative or regulatory changes affecting the banking and investment management industries. 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 Quarterly Reports on Form 10-Q. 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. 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 STATEMENT OF INCOME
		Three Months								Three Months				Nine Months
		Ended								Ended				Ended
		September 30,								June 30,				September 30,
(in thousands, except per share amounts)		2012				2011				2012				2012				2011
Interest income:
Interest on loans		$	295,045			$	278,770			$	291,040			$	865,759			$	816,278
Interest on investments		31,638				19,962				30,265				90,762				47,840
Interest on cash equivalents		653				1,609				822				2,098				4,078
Total interest income		327,336				300,341				322,127				958,619				868,196
Interest expense:
Interest on customer deposits		13,584				21,573				16,678				45,249				65,640
Interest on FHLB advances and other borrowings		14,492				9,295				14,302				41,139				20,636
Interest on subordinated notes		439				567				550				1,545				1,718
Total interest expense		28,515				31,435				31,530				87,933				87,994
Net interest income		298,821				268,906				290,597				870,686				780,202
Provision for loan losses		16,505				15,531				14,875				46,232				36,170
Net interest income after provision for loan losses		282,316				253,375				275,722				824,454				744,032
Noninterest income:
Investment advisory fees		15,376				12,663				14,674				42,749				35,133
Brokerage and investment fees		2,346				2,776				2,667				7,778				7,277
Trust fees		2,376				1,588				2,185				6,334				5,008
Foreign exchange fee income		3,297				2,690				2,639				8,357				6,937
Deposit customer fees		3,522				3,786				3,445				10,248				11,199
Loan servicing fees, net		(2,916		)		(400		)		(704		)		(5,524		)		173
Loan and related fees		1,514				1,501				1,465				4,462				3,150
Gain on sale of loans		12,547				1,301				4,754				21,110				6,082
Income from investments in life insurance		4,985				3,536				5,618				15,974				11,358
Other income (loss)		792				824				(104		)		1,635				2,211
Total noninterest income		43,839				30,265				36,639				113,123				88,528
Noninterest expense:
Salaries and related benefits		87,204				67,780				81,533				251,244				200,734
Occupancy		21,229				17,088				20,690				61,814				49,014
Information systems		18,843				14,905				17,746				52,763				41,630
Advertising and marketing		5,953				6,883				7,144				19,059				20,245
FDIC and other deposit assessments		6,400				5,161				5,902				17,702				18,358
Professional fees		5,263				4,205				5,453				14,994				11,648
Amortization of intangibles		5,087				5,602				5,170				15,545				17,279
Tax credit investments		5,348				3,162				4,521				15,119				6,240
Other expenses		23,063				20,003				23,396				66,460				53,459
Total noninterest expense		178,390				144,789				171,555				514,700				418,607
Income before provision for income taxes		147,765				138,851				140,806				422,877				413,953
Provision for income taxes		45,069				49,986				42,274				128,978				149,023
Net income before noncontrolling interests		102,696				88,865				98,532				293,899				264,930
Less: Net income from noncontrolling interests		—				1,072				625				1,538				3,533
First Republic Bank net income		102,696				87,793				97,907				292,361				261,397
Dividends on preferred stock		5,667				—				4,091				12,209				—
Redemption of preferred stock		—				—				13,200				13,200				—
Net income available to common stockholders		$	97,029			$	87,793			$	80,616			$	266,952			$	261,397
Basic earnings per common share		$	0.75			$	0.68			$	0.62			$	2.06			$	2.03
Diluted earnings per common share		$	0.72			$	0.66			$	0.60			$	1.99			$	1.97
Dividends per common share		$	0.10			$	—			$	—			$	0.10			$	—
Weighted average shares - basic		130,194				129,207				129,890				129,862				128,976
Weighted average shares - diluted		134,374				132,437				134,002				134,004				132,683

CONSOLIDATED BALANCE SHEET
		As of
		September 30,								December 31,				September 30,
($ in thousands)		2012				June 30, 2012				2011				2011
ASSETS
Cash and cash equivalents		$	877,758			$	800,818			$	630,780			$	2,064,245
Securities purchased under agreements to resell		23,348				19,330				4,890				4,890
Investment securities available-for-sale		798,874				782,098				722,280				558,832
Investment securities held-to-maturity		2,448,888				2,323,241				2,097,198				1,709,782
Loans:
Single family (1-4 units)		16,018,135				15,192,602				13,538,218				12,759,861
Home equity lines of credit		1,887,444				1,934,143				1,878,969				1,829,992
Commercial real estate		2,813,805				2,719,024				2,504,791				2,429,259
Multifamily (5+ units)		2,767,405				2,631,934				2,437,169				2,272,048
Single family construction		234,399				209,156				183,863				185,652
Multifamily/commercial construction		151,632				129,159				122,885				98,568
Commercial business loans		2,236,039				2,036,005				1,656,795				1,439,357
Other secured		374,820				345,117				260,598				187,664
Unsecured loans and lines of credit		216,380				163,942				132,973				122,567
Stock secured		122,543				99,346				103,208				92,403
Total unpaid principal balance		26,822,602				25,460,428				22,819,469				21,417,371
Net unaccreted discount		(368,893		)		(410,197		)		(493,895		)		(542,319		)
Net deferred fees and costs		19,723				17,780				10,020				8,894
Allowance for loan losses		(113,000		)		(97,049		)		(68,113		)		(53,304		)
Loans, net		26,360,432				24,970,962				22,267,481				20,830,642
Loans held for sale		63,469				63,957				305,881				59,374
Investments in life insurance		695,240				620,085				585,956				486,101
Tax credit investments		475,352				419,968				330,447				233,427
Prepaid expenses and other assets		534,463				686,096				548,395				530,268
Premises, equipment and leasehold improvements, net		133,344				128,481				118,365				112,562
Goodwill		24,604				24,604				24,604				24,604
Other intangible assets		121,369				126,456				134,574				140,018
Mortgage servicing rights		16,387				17,415				17,269				20,089
Other real estate owned		2,642				3,490				3,681				3,533
Total Assets		$	32,576,170			$	30,987,001			$	27,791,801			$	26,778,367
LIABILITIES AND EQUITY
Liabilities:
Customer deposits:
Noninterest-bearing accounts		$	8,371,083			$	7,546,456			$	6,115,571			$	5,242,610
Interest-bearing checking accounts		4,151,311				3,765,848				3,675,813				2,794,413
Money Market (MM) checking accounts		3,948,693				3,645,809				3,139,448				3,454,128
MM savings and passbooks		6,031,228				5,876,837				5,520,558				5,424,025
Certificates of deposit		3,201,763				3,380,353				4,007,869				4,854,864
Total customer deposits		25,704,078				24,215,303				22,459,259				21,770,040
FHLB advances		3,150,000				3,150,000				2,200,000				2,100,000
Subordinated notes		—				64,346				65,711				66,386
Debt related to variable interest entity		61,221				53,581				63,259				21,891
Other liabilities		498,469				447,158				408,550				330,931
Total Liabilities		29,413,768				27,930,388				25,196,779				24,289,248
Equity:
First Republic Bank stockholders’ equity:
Preferred stock		349,525				349,525				—				—
Common stock		1,309				1,305				1,294				1,293
Additional paid-in capital		2,023,338				2,012,857				2,020,832				2,014,020
Retained earnings		761,498				677,573				494,450				403,759
Accumulated other comprehensive income (loss)		26,732				15,353				1,186				(7,213		)
Total First Republic Bank stockholders’ equity		3,162,402				3,056,613				2,517,762				2,411,859
Noncontrolling interests		—				—				77,260				77,260
Total Equity		3,162,402				3,056,613				2,595,022				2,489,119
Total Liabilities and Equity		$	32,576,170			$	30,987,001			$	27,791,801			$	26,778,367

		Three Months								Three Months				Nine Months
		Ended								Ended				Ended
		September 30,								June 30,				September 30,
($ in thousands)		2012				2011				2012				2012				2011
Operating Information
Loans originated		$	4,040,844			$	2,628,081			$	3,963,579			$	11,160,949			$	6,926,460
Loans sold		$	774,230			$	171,493			$	435,786			$	1,762,066			$	676,532
Net income to average assets (3)		1.27		%		1.33		%		1.29		%		1.28		%		1.43		%
Net income available to common stockholders to average common equity (3)		13.89		%		14.61		%		12.07		%		13.28		%		15.23		%
Dividend payout ratio		13.8		%		—				—				—				—
Efficiency ratio (4)		52.1		%		48.4		%		52.4		%		52.3		%		48.2		%
Efficiency ratio (non-GAAP) (4), (5)		58.6		%		58.8		%		60.5		%		59.5		%		58.9		%
Yields/Rates (3)
Cash and cash equivalents		0.25		%		0.26		%		0.26		%		0.26		%		0.26		%
Securities purchased under agreements to resell		0.13		%		0.00		%		0.13		%		0.12		%		0.04		%
Investment securities (6)		5.54		%		5.50		%		5.57		%		5.59		%		5.77		%
Loans (6)		4.54		%		5.50		%		4.83		%		4.75		%		5.62		%
Total interest-earning assets		4.50		%		4.99		%		4.71		%		4.67		%		5.14		%
Checking		0.01		%		0.04		%		0.02		%		0.02		%		0.04		%
Money market checking and savings		0.17		%		0.38		%		0.29		%		0.22		%		0.43		%
CDs		1.09		%		0.97		%		1.09		%		1.07		%		0.91		%
Total deposits		0.21		%		0.40		%		0.28		%		0.25		%		0.43		%
FHLB advances		1.80		%		1.78		%		1.80		%		1.83		%		2.10		%
Other borrowings		2.49		%		3.03		%		2.58		%		2.57		%		2.89		%
Total borrowings		1.82		%		1.83		%		1.83		%		1.86		%		2.15		%
Total interest-bearing liabilities		0.40		%		0.53		%		0.47		%		0.43		%		0.54		%
Net interest spread		4.10		%		4.46		%		4.24		%		4.24		%		4.60		%
Net interest margin		4.13		%		4.48		%		4.27		%		4.26		%		4.63		%
Net interest margin (non-GAAP) (5)		3.47		%		3.41		%		3.48		%		3.53		%		3.49		%
(3) Ratios are annualized.
(4) Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.
(5) For a reconciliation of these ratios to the equivalent GAAP ratios, see “Use of Non-GAAP Financial Measures.”
(6) Yield is calculated on a tax-equivalent basis.

The following table separates our loan portfolio as of September 30, 2012 between loans acquired on July 1, 2010 and loans originated since July 1, 2010:

		Composition of Loan Portfolio
		Loans acquired				Loans originated				Total loans at
		on July 1,				since July 1,				September 30,
($ in thousands)		2010				2010				2012
Single family (1-4 units)		$	5,662,354			$	10,355,781			$	16,018,135
Home equity lines of credit		1,096,467				790,977				1,887,444
Commercial real estate		1,378,047				1,435,758				2,813,805
Multifamily (5+ units)		897,549				1,869,856				2,767,405
Single family construction		16,868				217,531				234,399
Multifamily/commercial construction		12,811				138,821				151,632
Commercial business loans		491,866				1,744,173				2,236,039
Other secured		63,864				310,956				374,820
Unsecured loans and lines of credit		44,783				171,597				216,380
Stock secured		13,145				109,398				122,543
Total unpaid principal balance		9,677,754				17,144,848				26,822,602
Net unaccreted discount		(368,175		)		(718		)		(368,893		)
Net deferred fees and costs		(7,999		)		27,722				19,723
Allowance for loan losses		(16,415		)		(96,585		)		(113,000		)
Loans, net		$	9,285,165			$	17,075,267			$	26,360,432

		As of
		September 30,								December 31,				September 30,
(in thousands, except per share amounts)		2012				June 30, 2012				2011				2011
Book Value
Number of shares of common stock outstanding		130,950				130,532				129,372				129,259
Book value per common share		$	21.48			$	20.74			$	19.46			$	18.66
Tangible book value per common share		$	20.37			$	19.58			$	18.23			$	17.39
Capital Ratios
Tier 1 leverage ratio		9.33		%		9.55		%		8.81		%		8.95		%
Tier 1 common equity ratio (7)		11.98		%		12.03		%		12.84		%		13.36		%
Tier 1 risk-based capital ratio		13.57		%		13.68		%		13.25		%		13.81		%
Total risk-based capital ratio		14.12		%		14.17		%		13.65		%		14.15		%
(7) Tier 1 common equity ratio represents common equity less goodwill and intangible assets divided by risk-weighted assets.

		As of
		September 30,								December 31,				September 30,
($ in millions)		2012				June 30, 2012				2011				2011
Assets Under Management
First Republic Investment Management		$	10,782			$	9,918			$	7,940			$	7,390
Brokerage and Investment:
Brokerage		8,499				7,663				6,806				6,529
Money Market Mutual Funds		658				779				1,037				580
Total Brokerage and Investment		9,157				8,442				7,843				7,109
Trust Company:
Trust		2,053				2,196				1,963				1,868
Custody		2,841				2,734				2,641				2,100
Total Trust Company		4,894				4,930				4,604				3,968
Total Wealth Management Assets		24,833				23,290				20,387				18,467
Loans serviced for investors		4,276				3,827				3,381				3,751
Total fee-based assets		$	29,109			$	27,117			$	23,768			$	22,218

Asset Quality Information
		As of
		September 30,								December 31,				September 30,
($ in thousands)		2012				June 30, 2012				2011				2011
Nonperforming assets:
Nonaccrual loans		$	38,892			$	28,595			$	26,373			$	27,843
Other real estate owned		2,642				3,490				3,681				3,533
Total nonperforming assets		$	41,534			$	32,085			$	30,054			$	31,376
Nonperforming assets to total assets		0.13		%		0.10		%		0.11		%		0.12		%
Accruing loans 90 days or more past due		$	970			$	—			$	—			$	—
Restructured performing loans		$	7,984			$	7,978			$	6,674			$	5,169

		Three Months								Three Months				Nine Months
		Ended								Ended				Ended
		September 30,								June 30,				September 30,
($ in thousands)		2012				2011				2012				2012				2011
Net loan charge-offs to allowance for loan losses		$	554			$	427			$	244			$	1,345			$	1,675
Net loan charge-offs to average total loans (annualized)		0.01		%		0.01		%		0.00		%		0.01		%		0.01		%

		Average Balance Sheet
		Three Months								Three Months				Nine Months
		Ended								Ended				Ended
		September 30,								June 30,				September 30,
($ in thousands)		2012				2011				2012				2012				2011
Assets:
Cash equivalents		$	1,049,210			$	2,424,963			$	1,251,267			$	1,070,772			$	2,111,933
Securities purchased under agreements to resell		13,139				5,979				17,810				17,307				6,935
Investment securities (8)		3,302,354				2,133,224				3,142,539				3,135,180				1,652,753
Loans (9)		25,980,676				20,165,475				24,182,518				24,392,316				19,348,142
Total interest-earning assets		30,345,379				24,729,641				28,594,134				28,615,575				23,119,763
Noninterest-earning assets		1,877,610				1,471,588				1,837,582				1,816,367				1,365,327
Total Assets		$	32,222,989			$	26,201,229			$	30,431,716			$	30,431,942			$	24,485,090
Liabilities and Equity:
Checking		$	12,140,060			$	7,406,764			$	10,792,468			$	10,898,585			$	6,678,178
Money market checking and savings		9,928,506				8,947,218				9,480,389				9,555,916				8,519,536
CDs (9)		3,281,567				4,955,129				3,467,158				3,501,930				5,284,152
Total deposits		25,350,133				21,309,111				23,740,015				23,956,431				20,481,866
FHLB advances		3,150,000				2,053,261				3,139,011				2,940,693				1,297,436
Subordinated notes (9)		54,309				66,713				64,680				61,425				67,371
Debt related to variable interest entity		56,701				22,173				59,850				59,648				23,364
Total borrowings		3,261,010				2,142,147				3,263,541				3,061,766				1,388,171
Total interest-bearing liabilities		28,611,143				23,451,258				27,003,556				27,018,197				21,870,037
Noninterest-bearing liabilities		483,522				288,943				447,526				441,444				239,409
Common equity		2,778,799				2,383,768				2,686,401				2,685,169				2,293,985
Preferred equity		349,525				—				247,657				249,565				—
Noncontrolling interests		—				77,260				46,576				37,567				81,659
Total Liabilities and Equity		$	32,222,989			$	26,201,229			$	30,431,716			$	30,431,942			$	24,485,090
(8) Includes FHLB stock.
(9) Average balances are presented net of purchase accounting discounts or premiums.

Purchase Accounting Accretion and Amortization

The following table presents the impact of purchase accounting for the periods indicated:

		Three Months								Three Months				Nine Months
		Ended								Ended				Ended
		September 30,								June 30,				September 30,
($ in thousands)		2012				2011				2012				2012				2011
Accretion/amortization to net interest income:
Loans		$	41,351			$	48,903			$	45,768			$	125,272			$	135,985
Deposits		4,724				12,755				5,715				17,897				43,828
Borrowings		576				668				686				1,942				1,988
Total		$	46,651			$	62,326			$	52,169			$	145,111			$	181,801
Noninterest income:
Gain on sale of loans		$	—			$	—			$	—			$	—			$	3,827
Loan commitments		171				143				15				255				1,363
Total		$	171			$	143			$	15			$	255			$	5,190
Amortization to noninterest expense:
Intangible assets		$	5,087			$	5,602			$	5,170			$	15,545			$	17,279

Use of Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles in the United States (“GAAP”) and the prevailing practices in the banking industry. However, due to the application of purchase accounting, management uses certain non-GAAP measures and ratios that exclude the impact of these items to evaluate our performance, including net income, earnings per share, net interest margin and the efficiency ratio.

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