First Republic Reports First Quarter 2021 Results
First Republic Bank (NYSE: FRC) reported robust financial performance for Q1 2021, with revenues reaching $1.1 billion, a 23.8% increase year-over-year. Key highlights include a net interest income of $938.8 million (up 24.8%) and a net income of $334.8 million (up 53.1%). Diluted earnings per share surged 49.2% to $1.79. Loan originations were a record $15.7 billion, while total deposits rose 36.5% to $127.9 billion. The bank raised its quarterly dividend by 10% to $0.22 per share. Strong asset quality is maintained, with nonperforming assets at only 11 basis points.
- Revenues increased by 23.8% to $1.1 billion.
- Net income rose by 53.1% to $334.8 million.
- Diluted EPS increased by 49.2% to $1.79.
- Loan originations hit a record $15.7 billion, up 52.4% year-over-year.
- Total deposits reached $127.9 billion, a 36.5% increase.
- Tangible book value per share up 14.5% to $59.98.
- Increased quarterly dividend by 10% to $0.22 per share.
- Net interest margin declined to 2.67% from 2.73% in the prior quarter.
- Noninterest expense rose 23.8% to $720.4 million.
First Republic Bank (NYSE: FRC) today announced financial results for the quarter ended March 31, 2021.
“First Republic is off to a very strong start in 2021, driven by strong growth in loans, deposits and wealth management assets,” said Jim Herbert, Founder, Chairman and CEO. “Our client-centric business model continues to perform very well.”
Quarterly Highlights
Financial Results
– Year-over-year:
– Revenues were
– Net interest income was
– Net income was
– Diluted earnings per share of
– Tangible book value per share was
– Loan originations totaled
– Net interest margin was
– Efficiency ratio was
– Increased quarterly dividend by
Continued Capital and Credit Strength
– Tier 1 leverage ratio was
– Nonperforming assets were at a low 11 basis points of total assets.
– Net charge-offs were only
Continued Franchise Development
– Year-over-year:
– Loans totaled
– Deposits were
– Wealth management assets were
– Wealth management revenues were
“We’re pleased with the very strong growth of revenue and earnings per share during the first quarter,” said Mike Roffler, Chief Financial Officer. “We also increased the quarterly dividend for the 10th consecutive year and accessed the capital markets twice during the quarter, which contributed to the
Quarterly Cash Dividend of
The Bank announced an increase of
Strong Asset Quality
Credit quality remains strong. Nonperforming assets were only 11 basis points of total assets at March 31, 2021. The Bank had modest net loan charge-offs of only
During the first quarter, the Bank recorded a reversal of provision for credit losses of
Continued Capital Strength and Book Value Growth
The Bank’s Tier 1 leverage ratio was
During the first quarter, the Bank issued
In addition, the Bank sold 2,012,500 new shares of common stock in an underwritten public offering, which added approximately
Total common stock sold and preferred stock issued, net of preferred stock redeemed, added approximately
The Bank has not and does not engage in common stock buybacks.
Book value per common share at March 31, 2021 was
Continued Franchise Development
Loan Originations
Loan originations were
Single family loan originations were
Loans totaled
COVID-19 Loan Modifications Continue to Decline
Remaining loan modifications to those borrowers experiencing financial challenges as a result of COVID-19 (not classified as troubled debt restructurings) totaled
The Bank has limited loan exposure to several of the areas most directly impacted by COVID-19, such as the retail, hotel and restaurant industries, which totaled
Deposit Growth
Total deposits increased to
At March 31, 2021, checking deposit balances were
Investments
Total investment securities at March 31, 2021 were
High-quality liquid assets, including eligible cash, totaled
Wealth Management
Total wealth management assets were
Wealth management revenues totaled
Wealth management assets at March 31, 2021 included investment management assets of
Income Statement and Key Ratios
Revenue Growth
Total revenues were
Net Interest Income Growth
Net interest income was
Net Interest Margin
The net interest margin declined to
Noninterest Income
Noninterest income was
Noninterest Expense and Efficiency Ratio
Noninterest expense was
The efficiency ratio was
Income Taxes
The Bank’s effective tax rate for the first quarter of 2021 was
Conference Call Details
First Republic Bank’s first quarter 2021 earnings conference call is scheduled for April 14, 2021 at 7:00 a.m. PT / 10:00 a.m. ET. To access the event by telephone, please dial (800) 458-4121 and provide confirmation code 8396045 approximately 15 minutes prior to the start time (to allow time for registration). International callers should dial +1 (856) 344-9290 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 the live presentation, a replay of the call will be available beginning April 14, 2021, at 11:00 a.m. PT / 2:00 p.m. ET, through April 21, 2021, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (888) 203-1112 and use confirmation code 8396045#. International callers should dial +1 (719) 457-0820 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 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, 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 COVID-19; 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 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 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
|
|
Quarter Ended
|
|||||||||
(in thousands, except per share amounts) |
|
2021 |
|
2020 |
|
2020 |
|||||||
Interest income: |
|
|
|
|
|
|
|||||||
Loans |
|
$ |
873,170 |
|
|
|
$ |
796,652 |
|
|
$ |
845,150 |
|
Investments |
|
140,711 |
|
|
|
148,569 |
|
|
138,429 |
|
|||
Other |
|
5,189 |
|
|
|
6,960 |
|
|
5,754 |
|
|||
Cash and cash equivalents |
|
2,894 |
|
|
|
3,940 |
|
|
1,819 |
|
|||
Total interest income |
|
1,021,964 |
|
|
|
956,121 |
|
|
991,152 |
|
|||
|
|
|
|
|
|
|
|||||||
Interest expense: |
|
|
|
|
|
|
|||||||
Deposits |
|
27,571 |
|
|
|
118,845 |
|
|
30,405 |
|
|||
Borrowings |
|
55,611 |
|
|
|
85,144 |
|
|
68,019 |
|
|||
Total interest expense |
|
83,182 |
|
|
|
203,989 |
|
|
98,424 |
|
|||
|
|
|
|
|
|
|
|||||||
Net interest income |
|
938,782 |
|
|
|
752,132 |
|
|
892,728 |
|
|||
Provision (reversal of provision) for credit losses |
|
(14,608 |
) |
|
|
62,370 |
|
|
35,066 |
|
|||
Net interest income after provision (reversal of provision) for credit losses |
|
953,390 |
|
|
|
689,762 |
|
|
857,662 |
|
|||
|
|
|
|
|
|
|
|||||||
Noninterest income: |
|
|
|
|
|
|
|||||||
Investment management fees |
|
119,042 |
|
|
|
99,296 |
|
|
114,287 |
|
|||
Brokerage and investment fees |
|
14,564 |
|
|
|
15,826 |
|
|
11,489 |
|
|||
Insurance fees |
|
3,074 |
|
|
|
2,157 |
|
|
5,569 |
|
|||
Trust fees |
|
5,731 |
|
|
|
4,976 |
|
|
5,366 |
|
|||
Foreign exchange fee income |
|
17,167 |
|
|
|
12,184 |
|
|
14,688 |
|
|||
Deposit fees |
|
6,169 |
|
|
|
6,597 |
|
|
6,115 |
|
|||
Loan and related fees |
|
7,485 |
|
|
|
6,114 |
|
|
7,167 |
|
|||
Loan servicing fees, net |
|
1,488 |
|
|
|
1,652 |
|
|
1,248 |
|
|||
Gain on sale of loans |
|
309 |
|
|
|
1,925 |
|
|
2,412 |
|
|||
Gain on investment securities |
|
655 |
|
|
|
2,628 |
|
|
88 |
|
|||
Income from investments in life insurance |
|
16,549 |
|
|
|
8,160 |
|
|
16,997 |
|
|||
Other income |
|
3,618 |
|
|
|
2,529 |
|
|
2,211 |
|
|||
Total noninterest income |
|
195,851 |
|
|
|
164,044 |
|
|
187,637 |
|
|||
|
|
|
|
|
|
|
|||||||
Noninterest expense: |
|
|
|
|
|
|
|||||||
Salaries and employee benefits |
|
463,404 |
|
|
|
361,204 |
|
|
415,767 |
|
|||
Information systems |
|
83,516 |
|
|
|
70,715 |
|
|
79,331 |
|
|||
Occupancy |
|
57,549 |
|
|
|
53,641 |
|
|
56,627 |
|
|||
Professional fees |
|
21,254 |
|
|
|
13,117 |
|
|
18,015 |
|
|||
Advertising and marketing |
|
12,633 |
|
|
|
11,843 |
|
|
13,762 |
|
|||
FDIC assessments |
|
11,900 |
|
|
|
10,185 |
|
|
11,650 |
|
|||
Other expenses |
|
70,140 |
|
|
|
61,312 |
|
|
70,892 |
|
|||
Total noninterest expense |
|
720,396 |
|
|
|
582,017 |
|
|
666,044 |
|
|||
|
|
|
|
|
|
|
|||||||
Income before provision for income taxes |
|
428,845 |
|
|
|
271,789 |
|
|
379,255 |
|
|||
Provision for income taxes |
|
94,012 |
|
|
|
53,103 |
|
|
83,695 |
|
|||
Net income |
|
334,833 |
|
|
|
218,686 |
|
|
295,560 |
|
|||
Dividends on preferred stock |
|
18,525 |
|
|
|
13,020 |
|
|
16,072 |
|
|||
Net income available to common shareholders |
|
$ |
316,308 |
|
|
|
$ |
205,666 |
|
|
$ |
279,488 |
|
|
|
|
|
|
|
|
|||||||
Basic earnings per common share |
|
$ |
1.81 |
|
|
|
$ |
1.20 |
|
|
$ |
1.61 |
|
Diluted earnings per common share |
|
$ |
1.79 |
|
|
|
$ |
1.20 |
|
|
$ |
1.60 |
|
|
|
|
|
|
|
|
|||||||
Weighted average shares—basic |
|
174,820 |
|
|
|
170,835 |
|
|
173,111 |
|
|||
Weighted average shares—diluted |
|
176,951 |
|
|
|
172,039 |
|
|
174,708 |
|
|||
CONSOLIDATED BALANCE SHEETS |
|||||||||||||||
|
|
As of |
|||||||||||||
($ in thousands) |
|
March 31,
|
|
December 31,
|
|
March 31,
|
|||||||||
ASSETS |
|
|
|
|
|
|
|||||||||
Cash and cash equivalents |
|
$ |
8,889,492 |
|
|
|
$ |
5,094,754 |
|
|
|
$ |
3,949,378 |
|
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