First Republic Bank Reports Record Annual And Quarterly Earnings

_________

⁽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 fourth quarter 2012 earnings conference call is scheduled for January 16, 2013 at 11:00 a.m. PST / 2:00 p.m. EST. 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 #85719936. 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 January 16, 2013, at 2:00 p.m. PST / 5:00 p.m. EST, through January 23, 2013, at 8:59 p.m. PST / 11:59 p.m. EST. To access the replay, dial [phone] (U.S.) and use conference ID #85719936. 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 Ended December 31,								Three Months Ended September 30,				Twelve Months Ended December 31,
(in thousands, except per share amounts)		2012				2011				2012				2012				2011
Interest income:
Interest on loans		$	294,763			$	288,226			$	295,045			$	1,160,522			$	1,104,504
Interest on investments		33,278				25,338				31,638				124,040				73,178
Interest on cash equivalents		546				1,197				653				2,644				5,275
Total interest income		328,587				314,761				327,336				1,287,206				1,182,957
Interest expense:
Interest on customer deposits		11,732				17,628				13,584				56,981				83,268
Interest on FHLB advances and other borrowings		14,521				11,035				14,492				55,660				31,671
Interest on subordinated notes		—				561				439				1,545				2,279
Total interest expense		26,253				29,224				28,515				114,186				117,218
Net interest income		302,334				285,537				298,821				1,173,020				1,065,739
Provision for loan losses		17,204				16,159				16,505				63,436				52,329
Net interest income after provision for loan losses		285,130				269,378				282,316				1,109,584				1,013,410
Noninterest income:
Investment advisory fees		16,305				11,897				15,376				59,054				47,030
Brokerage and investment fees		2,904				2,219				2,346				10,682				9,496
Trust fees		2,381				1,729				2,376				8,715				6,737
Foreign exchange fee income		3,147				3,298				3,297				11,504				10,235
Deposit customer fees		3,746				3,169				3,522				13,994				14,368
Loan servicing fees, net		217				(341		)		(2,916		)		(5,307		)		(168		)
Loan and related fees		1,829				1,801				1,514				6,291				4,951
Gain on sale of loans		17,721				335				12,547				38,831				6,417
Income from investments in life insurance		6,212				4,785				4,985				22,186				16,143
Other income		1,149				510				792				2,784				2,721
Total noninterest income		55,611				29,402				43,839				168,734				117,930
Noninterest expense:
Salaries and related benefits		88,412				74,352				87,204				339,656				275,086
Occupancy		21,834				18,595				21,229				83,648				67,609
Information systems		19,745				16,065				18,843				72,508				57,695
Advertising and marketing		6,061				8,567				5,953				25,120				28,812
FDIC and other deposit assessments		6,684				5,552				6,400				24,386				23,910
Professional fees		4,854				4,711				5,263				19,848				16,359
Amortization of intangibles		4,927				5,444				5,087				20,472				22,723
Tax credit investments		5,754				3,680				5,348				20,873				9,920
Other expenses		24,873				21,035				23,063				91,333				74,494
Total noninterest expense		183,144				158,001				178,390				697,844				576,608
Income before provision for income taxes		157,597				140,779				147,765				580,474				554,732
Provision for income taxes		47,486				49,016				45,069				176,464				198,039
Net income before noncontrolling interests		110,111				91,763				102,696				404,010				356,693
Less: Net income from noncontrolling interests		—				1,072				—				1,538				4,605
First Republic Bank net income		110,111				90,691				102,696				402,472				352,088
Dividends on preferred stock		6,534				—				5,667				18,743				—
Redemption of preferred stock		—				—				—				13,200				—
Net income available to common shareholders		$	103,577			$	90,691			$	97,029			$	370,529			$	352,088
Basic earnings per common share		$	0.79			$	0.70			$	0.75			$	2.85			$	2.73
Diluted earnings per common share		$	0.77			$	0.68			$	0.72			$	2.76			$	2.65
Dividends per common share		$	0.20			$	—			$	0.10			$	0.30			$	—
Weighted average shares - basic		130,614				129,313				130,194				130,051				129,061
Weighted average shares - diluted		134,731				132,939				134,374				134,189				132,724

CONSOLIDATED BALANCE SHEET
		As of
($ in thousands)		December 31, 2012				September 30, 2012				December 31, 2011
ASSETS
Cash and cash equivalents		$	602,264			$	877,758			$	630,780
Securities purchased under agreements to resell		30,901				23,348				4,890
Investment securities available-for-sale		960,433				798,874				722,280
Investment securities held-to-maturity		2,545,189				2,448,888				2,097,198
Loans:
Single family (1-4 units)		16,672,924				16,018,135				13,538,218
Home equity lines of credit		1,887,604				1,887,444				1,878,969
Commercial real estate		2,909,201				2,813,805				2,504,791
Multifamily (5+ units)		3,006,946				2,767,405				2,437,169
Single family construction		234,213				234,399				183,863
Multifamily/commercial construction		171,268				151,632				122,885
Commercial business loans		2,600,151				2,236,039				1,656,795
Other secured		391,833				374,820				260,598
Unsecured loans and lines of credit		279,515				216,380				132,973
Stock secured		145,460				122,543				103,208
Total unpaid principal balance		28,299,115				26,822,602				22,819,469
Net unaccreted discount		(332,404		)		(368,893		)		(493,895		)
Net deferred fees and costs		20,048				19,723				10,020
Allowance for loan losses		(129,889		)		(113,000		)		(68,113		)
Loans, net		27,856,870				26,360,432				22,267,481
Loans held for sale		204,631				63,469				305,881
Investments in life insurance		701,672				695,240				585,956
Tax credit investments		484,548				475,352				330,447
Prepaid expenses and other assets		575,741				534,463				548,395
Premises, equipment and leasehold improvements, net		142,201				133,344				118,365
Goodwill and other intangible assets		265,441				145,973				159,178
Mortgage servicing rights		17,786				16,387				17,269
Other real estate owned		—				2,642				3,681
Total Assets		$	34,387,677			$	32,576,170			$	27,791,801
LIABILITIES AND EQUITY
Liabilities:
Customer deposits:
Noninterest-bearing accounts		$	8,544,472			$	8,371,083			$	6,115,571
Interest-bearing checking accounts		5,408,325				4,151,311				3,675,813
Money Market (MM) checking accounts		4,104,791				3,948,693				3,139,448
MM savings and passbooks		6,064,629				6,031,228				5,520,558
Certificates of deposit		2,966,030				3,201,763				4,007,869
Total customer deposits		27,088,247				25,704,078				22,459,259
FHLB advances		3,225,000				3,150,000				2,200,000
Subordinated notes		—				—				65,711
Debt related to variable interest entity		56,450				61,221				63,259
Other liabilities		619,436				498,469				408,550
Total Liabilities		30,989,133				29,413,768				25,196,779
Equity:
First Republic Bank shareholders’ equity:
Preferred stock		499,525				349,525				—
Common stock		1,313				1,309				1,294
Additional paid-in capital		2,027,578				2,023,338				2,020,832
Retained earnings		838,752				761,498				494,450
Accumulated other comprehensive income		31,376				26,732				1,186
Total First Republic Bank shareholders’ equity		3,398,544				3,162,402				2,517,762
Noncontrolling interests		—				—				77,260
Total Equity		3,398,544				3,162,402				2,595,022
Total Liabilities and Equity		$	34,387,677			$	32,576,170			$	27,791,801

		Three Months Ended December 31,								Three Months Ended September 30,				Twelve Months Ended December 31,
($ in thousands)		2012				2011				2012				2012				2011
Operating Information
Loans originated		$	4,301,992			$	3,312,813			$	4,040,844			$	15,462,941			$	10,239,273
Net income to average assets (3)		1.30		%		1.30		%		1.27		%		1.29		%		1.39		%
Net income available to common shareholders
to average common equity (3)		14.27		%		14.49		%		13.89		%		13.54		%		15.04		%
Dividend payout ratio		26.0		%		—				13.8		%		10.9		%		—
Efficiency ratio (4)		51.2		%		50.2		%		52.1		%		52.0		%		48.7		%
Efficiency ratio (non-GAAP) (4), (5)		56.2		%		59.9		%		58.6		%		58.6		%		59.2		%
Yields/Rates (3)
Cash and cash equivalents		0.25		%		0.26		%		0.25		%		0.26		%		0.26		%
Securities purchased under agreements to resell		0.15		%		0.08		%		0.13		%		0.13		%		0.05		%
Investment securities (6)		5.50		%		5.52		%		5.54		%		5.56		%		5.67		%
Loans (6)		4.34		%		5.31		%		4.54		%		4.66		%		5.57		%
Total interest-earning assets		4.35		%		4.98		%		4.50		%		4.61		%		5.12		%
Checking		0.01		%		0.03		%		0.01		%		0.01		%		0.04		%
Money market checking and savings		0.12		%		0.25		%		0.17		%		0.20		%		0.38		%
CDs		1.08		%		1.00		%		1.09		%		1.07		%		0.93		%
Total deposits		0.18		%		0.31		%		0.21		%		0.23		%		0.40		%
FHLB advances		1.79		%		2.03		%		1.80		%		1.82		%		2.08		%
Other borrowings		1.85		%		2.47		%		2.49		%		2.47		%		2.74		%
Total borrowings		1.79		%		2.06		%		1.82		%		1.84		%		2.12		%
Total interest-bearing liabilities		0.35		%		0.47		%		0.40		%		0.41		%		0.52		%
Net interest spread		4.00		%		4.51		%		4.10		%		4.20		%		4.60		%
Net interest margin		4.02		%		4.53		%		4.13		%		4.22		%		4.63		%
Net interest margin (non-GAAP) (5)		3.46		%		3.55		%		3.47		%		3.53		%		3.53		%
(3) For the periods less than a year, 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 presents loans sold and gain on sale of loans for the periods indicated:

		Three Months Ended December 31,								Three Months Ended September 30,				Twelve Months Ended December 31,
($ in thousands)		2012				2011				2012				2012				2011
Mortgage Loan Sales
Loans sold:
Agency		$	242,073			$	48,540			$	372,284			$	922,475			$	248,215
Non-agency		429,241				3,597				401,946				1,510,905				480,454
Total loans sold		$	671,314			$	52,137			$	774,230			$	2,433,380			$	728,669
Gain on sale of loans:
Amount		$	17,721			$	335			$	12,547			$	38,831			$	6,417
Gain as a percentage of loans sold		2.64		%		0.64		%		1.62		%		1.60		%		0.88		%

The following table separates our loan portfolio as of December 31, 2012 between loans acquired on July 1, 2010 and loans originated since July 1, 2010:

		Composition of Loan Portfolio
($ in thousands)		Loans acquired on July 1, 2010				Loans originated since July 1, 2010				Total loans at December 31, 2012
Single family (1-4 units)		$	5,228,937			$	11,443,987			$	16,672,924
Home equity lines of credit		1,027,786				859,818				1,887,604
Commercial real estate		1,225,796				1,683,405				2,909,201
Multifamily (5+ units)		800,231				2,206,715				3,006,946
Single family construction		15,722				218,491				234,213
Multifamily/commercial construction		12,810				158,458				171,268
Commercial business loans		495,859				2,104,292				2,600,151
Other secured		59,790				332,043				391,833
Unsecured loans and lines of credit		49,551				229,964				279,515
Stock secured		11,719				133,741				145,460
Total unpaid principal balance		8,928,201				19,370,914				28,299,115
Net unaccreted discount		(331,709		)		(695		)		(332,404		)
Net deferred fees and costs		(7,799		)		27,847				20,048
Allowance for loan losses		(15,570		)		(114,319		)		(129,889		)
Loans, net		$	8,573,123			$	19,283,747			$	27,856,870

		As of
(in thousands, except per share amounts)		December 31, 2012				September 30, 2012				December 31, 2011
Book Value
Number of shares of common stock outstanding		131,273				130,950				129,372
Book value per common share		$	22.08			$	21.48			$	19.46
Tangible book value per common share		$	20.06			$	20.37			$	18.23
Capital Ratios
Tier 1 leverage ratio		9.32		%		9.33		%		8.81		%
Tier 1 common equity ratio (7)		11.13		%		11.98		%		12.84		%
Tier 1 risk-based capital ratio		13.27		%		13.57		%		13.25		%
Total risk-based capital ratio		13.86		%		14.12		%		13.65		%
(7) Tier 1 common equity ratio represents common equity less goodwill and intangible assets divided by risk-weighted assets.

		As of
($ in millions)		December 31, 2012			September 30, 2012			December 31, 2011
Assets Under Management
First Republic Investment Management		$	17,000		$	10,782		$	7,940
Brokerage and Investment:
Brokerage		8,810			8,499			6,806
Money Market Mutual Funds		852			658			1,037
Total Brokerage and Investment		9,662			9,157			7,843
Trust Company:
Trust		2,157			2,053			1,963
Custody		2,863			2,841			2,641
Total Trust Company		5,020			4,894			4,604
Total Wealth Management Assets		31,682			24,833			20,387
Loans serviced for investors		4,581			4,276			3,381
Total fee-based assets		$	36,263		$	29,109		$	23,768

Asset Quality Information
		As of
($ in thousands)		December 31, 2012				September 30, 2012				December 31, 2011
Nonperforming assets:
Nonaccrual loans		$	49,153			$	38,892			$	26,373
Other real estate owned		—				2,642				3,681
Total nonperforming assets		$	49,153			$	41,534			$	30,054
Nonperforming assets to total assets		0.14		%		0.13		%		0.11		%
Accruing loans 90 days or more past due		$	—			$	970			$	—
Restructured accruing loans		$	12,398			$	12,277			$	6,674

		Three Months Ended December 31,								Three Months Ended September 30,				Twelve Months Ended December 31,
($ in thousands)		2012				2011				2012				2012				2011
Net loan charge-offs to allowance for loan losses		$	315			$	1,350			$	554			$	1,660			$	3,025
Net loan charge-offs to average total loans (3)		0.01		%		0.03		%		0.01		%		0.01		%		0.02		%

		Average Balance Sheet
		Three Months Ended December 31,								Three Months Ended September 30,				Twelve Months Ended December 31,
($ in thousands)		2012				2011				2012				2012				2011
Assets:
Cash equivalents		$	880,708			$	1,820,229			$	1,049,210			$	1,022,996			$	2,038,407
Securities purchased under agreements to resell		26,047				4,912				13,139				19,504				6,425
Investment securities (8)		3,487,204				2,671,429				3,302,354				3,223,667				1,909,515
Loans (9)		27,232,372				21,656,992				25,980,676				25,106,210				19,930,099
Total interest-earning assets		31,626,331				26,153,562				30,345,379				29,372,377				23,884,446
Noninterest-earning assets		1,967,146				1,621,175				1,877,610				1,854,268				1,429,815
Total Assets		$	33,593,477			$	27,774,737			$	32,222,989			$	31,226,645			$	25,314,261
Liabilities and Equity:
Checking		$	13,351,861			$	9,198,227			$	12,140,060			$	11,515,255			$	7,313,369
Money market checking and savings		10,095,930				8,881,723				9,928,506				9,691,658				8,610,827
CDs (9)		3,090,586				4,502,482				3,281,567				3,398,532				5,087,128
Total deposits		26,538,377				22,582,432				25,350,133				24,605,445				21,011,324
FHLB advances		3,160,696				2,102,174				3,150,000				2,995,995				1,500,274
Subordinated notes (9)		—				66,039				54,309				45,985				67,036
Debt related to variable interest entity		59,365				71,105				56,701				59,577				35,397
Total borrowings		3,220,061				2,239,318				3,261,010				3,101,557				1,602,707
Total interest-bearing liabilities		29,758,438				24,821,750				28,611,143				27,707,002				22,614,031
Noninterest-bearing liabilities		533,589				392,236				483,522				464,605				277,929
Common equity		2,888,338				2,483,491				2,778,799				2,736,239				2,341,751
Preferred equity		413,112				—				349,525				290,675				—
Noncontrolling interests		—				77,260				—				28,124				80,550
Total Liabilities and Equity		$	33,593,477			$	27,774,737			$	32,222,989			$	31,226,645			$	25,314,261
(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 Ended December 31,						Three Months Ended September 30,			Twelve Months Ended December 31,
($ in thousands)		2012			2011			2012			2012			2011
Accretion/amortization to net interest income:
Loans		$	36,746		$	48,936		$	41,351		$	162,018		$	184,921
Deposits		4,342			10,744			4,724			22,239			54,572
Borrowings		—			675			576			1,942			2,663
Total		$	41,088		$	60,355		$	46,651		$	186,199		$	242,156
Noninterest income:
Gain on sale of loans		$	—		$	—		$	—		$	—		$	3,827
Loan commitments		—			109			171			255			1,472
Total		$	—		$	109		$	171		$	255		$	5,299
Amortization to noninterest expense:
Intangible assets		$	4,927		$	5,444		$	5,087		$	20,472		$	22,723

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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