First Republic Reports Strong Quarter And Record Annual Net Income

Core Revenues up 17%; Wealth Management Revenues up 29% for the Year

SAN FRANCISCO, Jan. 15, 2015 /PRNewswire/ -- First Republic Bank FRC today announced financial results for the quarter and year ended December 31, 2014.

"First Republic reported record net income in 2014 due to strong performance across all areas of the enterprise," said Chairman and CEO Jim Herbert. "Driven by robust revenue growth, core EPS was $0.67 for the quarter and a record $2.83 for the year. Asset quality remains excellent."

Full Year Highlights

Financial Results

Core revenues were up 17.1%. ⁽¹⁾
Net income was $487.0 million.
Diluted earnings per share ("EPS") of $3.07.
Core net income was $453.6 million, a record. ⁽¹⁾
Core diluted EPS of $2.83, a record. ⁽¹⁾
Loan originations totaled $17.0 billion, second highest year ever.
Loans sold totaled $4.4 billion, highest ever.
Core net interest margin was 3.14%, compared to 3.26% for the prior year. ⁽¹⁾
Core efficiency ratio was 57.6%. ⁽¹⁾

Continued Financial and Credit Strength

Tier 1 leverage ratio was 9.43%.
Book value per share was $28.13, up 14.2% from a year ago.
Nonperforming assets continued to be extremely low at 10 basis points of total assets.
Net charge-offs for the year were only 1 basis point of average loans.

Franchise Development

Loans outstanding, excluding loans held for sale, totaled $37.9 billion, up 10.9% from a year ago.
Deposits were $37.1 billion, up 15.7%.
Wealth management assets were $53.4 billion, up 28.4%.
Wealth management revenues were $172.7 million, up 29.3%.

Quarterly Highlights

Financial Results

Core revenues were $401.3 million. ⁽¹⁾
Net income was $115.5 million.
Diluted EPS of $0.72.
Core net income was $108.7 million. ⁽¹⁾
Core diluted EPS of $0.67. ⁽¹⁾
Loan originations totaled $4.3 billion.
Loans sold totaled $991.3 million.
Core net interest margin was 3.06%, compared to 3.09% for the prior quarter. ⁽¹⁾
Core efficiency ratio was 59.9%. ⁽¹⁾
Wealth management assets were $53.4 billion, up 3.9%.
Total deposits were up $1.5 billion; average checking balances represented 56% of average total deposits.

"Wealth management and business banking performed very well in the fourth quarter and for the full year," said President Katherine August-deWilde. "We continued to make significant investments for an enhanced regulatory environment, while deepening relationships with existing clients and winning many new clients."

Quarterly Cash Dividend Declared

The Bank declared a cash dividend for the fourth quarter of $0.14 per share of common stock, which is payable on February 12, 2015 to shareholders of record as of January 29, 2015.

Strong Asset Quality

The Bank's credit quality remains very strong. Nonperforming assets were 10 basis points of total assets.

Net charge-offs were only $2.1 million for the year, less than 1 basis point of average loans.

Capital Strength

The Bank's Tier 1 leverage ratio was 9.43% at December 31, 2014. The Tier 1 common equity ratio was 10.90% at December 31, 2014.

Growing Book Value

Book value per common share was $28.13 at December 31, 2014, up 2.4% for the quarter and up 14.2% from a year ago.

Franchise Development

Loan Originations

Loan originations totaled $4.3 billion for the quarter. Single family originations were $2.2 billion, or 52% of total originations. In addition, over 52% of the quarter's single family originations were for purchases.

Mortgage Banking Activity

Loan sales volume and profitability for the fourth quarter were up compared to the same period last year. The Bank sold $991.3 million of primarily intermediate-term, fixed-rate home loans during the quarter and recorded a gain on sale of $4.1 million. The margin on such loan sales was 0.41%.

For the year ended December 31, 2014, the Bank sold a record $4.4 billion of loans, compared to $2.7 billion for the prior year. Gain on sale of loans for the year ended December 31, 2014 was $35.5 million, compared to $36.3 million for the prior year. These loan sales are used in the ordinary course of business to help provide a full range of lending options for our clients, while also managing asset growth and interest rate risk.

Loans serviced for investors at year-end totaled $9.6 billion, up 8.3% for the quarter and 59.8% from a year ago. Loan servicing fees for the year were $9.7 million, up from $7.2 million during the prior year.

Investments

Total investments at December 31, 2014 were $6.6 billion, up 37.6% compared to a year ago. As of December 31, 2014, investments that are high-quality liquid assets, from a regulatory perspective, totaled $3.1 billion.

Expansion of Wealth Management

Wealth management revenues totaled $46.8 million for the quarter, up 4.7% compared to the prior quarter and up 26.2% compared to last year's fourth quarter.

Wealth management revenues were $172.7 million for the year, an increase of 29.3% compared to the prior year.

Total wealth management assets were $53.4 billion, up 3.9% for the quarter and up 28.4% for the year. The growth in wealth management assets was primarily due to net new assets from both existing and new clients. Wealth management assets include investment management assets of $27.5 billion, brokerage assets and money market mutual funds of $19.7 billion, and trust and custody assets of $6.2 billion.

Deposit Results

Total deposits increased to $37.1 billion, up 4.3% for the quarter and up 15.7% for the year. At December 31, 2014, 58% of deposits were checking accounts.

The average contractual rate paid on all deposits declined to 0.17% for the quarter, compared to 0.19% for the prior quarter.

Income Statement and Key Ratios

Highlights

Strong Core Revenue Growth

Total revenues were $416.7 million for the quarter and $1.6 billion for 2014.

Core revenues were $401.3 million for the quarter, a 16.0% increase from the fourth quarter of last year. ⁽¹⁾

Core revenues were $1.6 billion for 2014, up 17.1% from 2013. ⁽¹⁾

Continued Net Interest Income Growth

Net interest income was $340.9 million for the quarter and $1.3 billion for the year.

Core net interest income was $325.5 million for the quarter, up 1.6% from the prior quarter. ⁽¹⁾

Core net interest income for 2014 was $1.3 billion, up 14.4% from 2013. ⁽¹⁾

Net Interest Margin

The Bank's net interest margin was 3.21% for the quarter and 3.32% for the year.

The core net interest margin was 3.06% for the quarter, compared to 3.09% for the prior quarter. For 2014, the core net interest margin was 3.14%, compared to 3.26% for 2013. ⁽¹⁾ The decrease was primarily the result of a decrease in contractual loan yields.

Strong Noninterest Income Growth

Noninterest income for the quarter was $75.8 million, up 34.9% from the fourth quarter of 2013. Noninterest income was $318.4 million for 2014, up 30.3% from 2013. The quarter's increase compared to last year's fourth quarter was primarily due to increases in investment advisory fees, gain on sale of loans and foreign exchange fees. The increase for the full year was primarily due to increases in investment advisory fees, gain on investments and foreign exchange fees.

Noninterest income represented 20.2% of total core revenues for the year, up from 18.2% for the prior year.

Noninterest Expense and Efficiency Ratio

Noninterest expense for the quarter was $244.2 million, a 2.4% increase over the prior quarter. For 2014, noninterest expense was $922.7 million, up 20.1% from 2013. The increase in noninterest expense from the prior quarter was primarily due to increased salaries and information systems costs and the increase from the prior year was primarily due to increased salaries, professional fees and information systems costs. These increases were primarily attributable to the Bank's investments in compliance and related infrastructure build-out to address enhanced regulatory standards as the Bank prepares to grow past $50 billion in total assets.

The Bank's efficiency ratio was 58.6% for the quarter and 56.0% for 2014.

The Bank's core efficiency ratio was 59.9% for the quarter, compared to 55.4% (58.7% excluding gain on sales of investment securities) for the prior quarter. For 2014, the Bank's core efficiency ratio was 57.6%, compared to 55.8% for 2013. ⁽¹⁾

Income Tax Rate

The Bank's effective tax rate for 2014 was 27.3%, compared to 30.4% for 2013. The decrease in the effective tax rate results from the steady increase in tax-exempt securities, bank-owned life insurance, tax credit investments and tax-advantaged loans.

⁽¹⁾"Core" measures are non-GAAP financial measures that exclude the impact of purchase accounting. See non-GAAP reconciliation under section "Use of Non-GAAP Financial Measures."

Conference Call Details

First Republic Bank's fourth quarter 2014 earnings conference call is scheduled for January 15, 2015 at 7:00 a.m. PT / 10:00 a.m. ET. To listen to the live call by telephone, please dial (855) 224-3902 approximately 10 minutes prior to the start time (to allow time for registration) and use conference ID #57294250. International callers should dial (734) 823-3244. 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 15, 2015, at 10:30 a.m. PT / 1:30 p.m. ET, through January 22, 2015, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (855) 859-2056 (U.S.) and use conference ID #57294250. International callers should dial (404) 537-3406 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

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, with a solid commitment to responsiveness and action. Services are offered through preferred banking or wealth management offices primarily in San Francisco, Palo Alto, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Boston, Palm Beach, 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. For more information, visit 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, our progress in preparing for enhanced regulatory requirements, 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; 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

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
(in thousands, except per share amounts)	2014		2013		2014		2014		2013
Interest income:
Loans	$	322,177	$	307,876	$	322,987	$	1,271,562	$	1,193,931
Investments	55,652		43,965		52,429		207,736		159,086
Cash and cash equivalents	1,170		1,637		980		3,711		3,001
Total interest income	378,999		353,478		376,396		1,483,009		1,356,018

Interest expense:
Deposits	14,470		18,049		15,935		60,454		60,817
Borrowings	23,674		20,605		24,472		91,795		71,026
Total interest expense	38,144		38,654		40,407		152,249		131,843

Net interest income	340,855		314,824		335,989		1,330,760		1,224,175
Provision for loan losses	14,076		7,815		13,515		56,486		36,969
Net interest income after provision for loan losses	326,779		307,009		322,474		1,274,274		1,187,206

Noninterest income:
Investment advisory fees	39,892		30,731		38,443		147,840		112,121
Brokerage and investment fees	4,341		3,912		3,665		14,404		11,892
Trust fees	2,600		2,478		2,604		10,483		9,588
Foreign exchange fee income	6,265		3,248		4,728		19,552		13,912
Deposit fees	4,634		4,545		4,653		18,468		18,258
Gain on sale of loans	4,107		306		13,713		35,515		36,290
Loan servicing fees, net	3,174		2,152		2,523		9,701		7,230
Loan and related fees	2,465		1,741		2,590		8,658		7,515
Income from investments in life insurance	8,389		6,756		7,770		29,558		24,365
Gain (loss) on investment securities, net	(567)		(441)		23,580		21,837		531
Other income	534		772		402		2,339		2,648
Total noninterest income	75,834		56,200		104,671		318,355		244,350

Noninterest expense:
Salaries and employee benefits	129,980		103,301		122,585		490,341		402,222
Occupancy	26,082		23,306		24,841		98,466		91,120
Information systems	26,360		22,132		24,445		95,387		79,955
Professional fees	17,042		7,316		18,355		53,429		22,488
FDIC and other deposit assessments	8,300		7,500		7,900		31,294		27,976
Advertising and marketing	5,484		6,994		6,204		25,703		25,459
Amortization of intangibles	5,368		6,218		5,580		22,744		26,147
Other expenses	25,534		24,162		28,467		105,382		92,630
Total noninterest expense	244,150		200,929		238,377		922,746		767,997

Income before provision for income taxes	158,463		162,280		188,768		669,883		663,559
Provision for income taxes	43,004		46,981		52,757		182,877		201,489
Net income	115,459		115,299		136,011		487,006		462,070
Dividends on preferred stock	13,889		12,800		13,889		55,556		40,671
Net income available to common shareholders	$	101,570	$	102,499	$	122,122	$	431,450	$	421,399

Basic earnings per common share	$	0.74	$	0.78	$	0.89	$	3.16	$	3.21
Diluted earnings per common share	$	0.72	$	0.75	$	0.86	$	3.07	$	3.10
Dividends per common share	$	0.14	$	0.12	$	0.14	$	0.54	$	0.36

Weighted average shares—basic	137,794		131,905		137,661		136,420		131,326
Weighted average shares—diluted	141,753		136,522		141,548		140,497		135,949

CONSOLIDATED BALANCE SHEET

	As of
($ in thousands)	December 31, 2014		September 30, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	817,150	$	1,372,728	$	807,885
Securities purchased under agreements to resell	100		100		100
Investment securities available-for-sale	1,393,357		1,648,013		1,571,206
Investment securities held-to-maturity	5,244,707		3,995,007		3,252,534

Loans:
Single family (1-4 units)	20,494,402		20,170,945		19,869,491
Home equity lines of credit	2,211,621		2,133,518		1,961,476
Multifamily (5+ units)	4,689,692		4,545,751		4,022,457
Commercial real estate	3,824,835		3,737,255		3,430,881
Single family construction	428,358		406,186		290,314
Multifamily/commercial construction	453,732		428,864		278,456
Commercial business	4,873,580		4,305,800		3,582,054
Other secured	436,918		459,105		397,878
Stock secured	285,240		250,378		163,650
Unsecured loans and lines of credit	231,552		225,542		202,197
Total unpaid principal balance	37,929,930		36,663,344		34,198,854
Net unaccreted discount	(152,764)		(166,756)		(220,147)
Net deferred fees and costs	31,203		28,570		21,841
Allowance for loan losses	(207,342)		(195,049)		(153,005)
Loans, net	37,601,027		36,330,109		33,847,543

Loans held for sale	271,448		339,680		58,759
Investments in life insurance	1,014,734		1,006,125		766,291
Tax credit investments	828,640		809,288		688,870
Prepaid expenses and other assets	750,891		749,551		680,756
Premises, equipment and leasehold improvements, net	165,703		162,991		166,544
Goodwill	106,549		106,549		106,549
Other intangible assets	110,001		115,369		132,745
Mortgage servicing rights	49,023		45,410		29,781
Other real estate owned	—		—		3,200
Total Assets	$	48,353,330	$	46,680,920	$	42,112,763

LIABILITIES AND EQUITY
Liabilities:
Deposits:
Noninterest-bearing checking accounts	$	12,542,881	$	11,949,000	$	8,859,276
Interest-bearing checking accounts	8,809,590		7,514,917		7,325,235
Money Market (MM) checking accounts	5,216,253		5,443,037		4,966,626
MM savings and passbooks	6,795,189		6,983,146		7,025,686
Certificates of deposit	3,767,016		3,717,307		3,905,893
Total Deposits	37,130,929		35,607,407		32,082,716

Long-term FHLB advances	5,275,000		5,275,000		5,150,000
Senior notes	399,512		399,486		—
Debt related to variable interest entities	36,039		38,199		43,132
Other liabilities	733,383		675,153		676,868
Total Liabilities	43,574,863		41,995,245		37,952,716

Shareholders' Equity:
Preferred stock	889,525		889,525		889,525
Common stock	1,383		1,382		1,328
Additional paid-in capital	2,313,592		2,306,159		2,042,027
Retained earnings	1,570,871		1,488,846		1,213,896
Accumulated other comprehensive income (loss)	3,096		(237)		13,271
Total Shareholders' Equity	4,778,467		4,685,675		4,160,047
Total Liabilities and Shareholders' Equity	$	48,353,330	$	46,680,920	$	42,112,763

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Operating Information and Yields/Rates*	2014		2013		2014		2014		2013
($ in thousands)
Operating Information
Net income to average assets ⁽²⁾	0.94%		1.07%		1.14%		1.06%		1.20%
Net income available to common shareholders to average common equity ⁽²⁾	10.37%		12.51%		12.80%		11.72%		13.50%
Dividend payout ratio	19.5%		16.0%		16.2%		17.6%		11.6%
Efficiency ratio ⁽³⁾	58.6%		54.2%		54.1%		56.0%		52.3%
Efficiency ratio (non-GAAP) ^{(1), (3)}	59.9%		56.9%		55.4%		57.6%		55.8%

Net loan charge-offs (recoveries) to allowance for loan losses	$	1,783	$	722	$	(223)	$	2,149	$	13,853
Net loan charge-offs (recoveries) to average total loans ⁽²⁾	0.02%		0.01%		(0.00)%		0.01%		0.05%

Yields/Rates ⁽²⁾
Cash and cash equivalents	0.25%		0.25%		0.25%		0.25%		0.25%
Investment securities ^{(4), (5)}	4.81%		5.27%		5.05%		5.06%		5.18%
Loans ^{(4), (6)}	3.48%		3.75%		3.52%		3.59%		3.96%

Total interest-earning assets	3.54%		3.70%		3.60%		3.67%		3.98%

Checking	0.01%		0.02%		0.01%		0.01%		0.01%
Money market checking and savings	0.08%		0.22%		0.14%		0.13%		0.20%
CDs ⁽⁶⁾	1.21%		1.01%		1.17%		1.13%		1.04%
Total deposits	0.15%		0.22%		0.18%		0.17%		0.21%

Short-term borrowings	0.00%		0.00%		—%		0.00%		0.19%
Long-term FHLB advances	1.58%		1.57%		1.56%		1.56%		1.63%
Senior notes ⁽⁷⁾	2.57%		—%		2.57%		2.55%		—%
Debt related to variable interest entities	1.67%		1.84%		1.68%		1.70%		1.79%
Total borrowings	1.65%		1.57%		1.63%		1.60%		1.51%

Total interest-bearing liabilities	0.35%		0.40%		0.38%		0.37%		0.39%

Net interest spread	3.19%		3.30%		3.22%		3.30%		3.59%

Net interest margin	3.21%		3.32%		3.25%		3.32%		3.62%

Net interest margin (non-GAAP)⁽¹⁾	3.06%		3.06%		3.09%		3.14%		3.26%

⁽²⁾

For periods less than a year, ratios are annualized.

⁽³⁾

Efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income.

⁽⁴⁾

Yield is calculated on a tax-equivalent basis.

⁽⁵⁾

Includes FHLB stock and securities purchased under agreements to resell.

⁽⁶⁾

Yield/rate includes accretion/amortization of purchase accounting discounts/premiums.

⁽⁷⁾

Rate includes amortization of issuance costs.

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Mortgage Loan Sales*	2014		2013		2014		2014		2013
($ in thousands)
Loans sold:
Agency	$	29,319	$	53,296	$	45,319	$	135,681	$	467,049
Non-agency	961,965		162,480		1,751,630		4,273,851		2,196,439
Total loans sold	$	991,284	$	215,776	$	1,796,949	$	4,409,532	$	2,663,488

Gain on sale of loans:
Amount	$	4,107	$	306	$	13,713	$	35,515	$	36,290
Gain as a percentage of loans sold ⁽⁸⁾	0.41%		0.14%		0.67%		0.77%		1.36%

⁽⁸⁾

Excludes purchase accounting discounts recognized in gain on sale of loans.

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Loan Originations*	2014		2013		2014		2014		2013
($ in thousands)
Single family (1-4 units)	$	1,885,418	$	1,862,710	$	2,251,341	$	7,932,174	$	9,039,956
Home equity lines of credit	339,001		308,318		378,374		1,458,448		1,271,646
Multifamily (5+ units)	339,505		216,388		374,816		1,443,357		1,695,073
Commercial real estate	272,211		247,825		312,668		998,700		1,156,273
Construction	210,312		196,085		256,992		894,786		868,070
Commercial business	1,044,474		994,361		1,016,432		3,445,664		3,042,350
Other loans	197,654		230,182		155,306		779,072		768,912
Total loans originated	$	4,288,575	$	4,055,869	$	4,745,929	$	16,952,201	$	17,842,280

	As of December 31, 2014
*Composition of Loan Portfolio*	Loans acquired on July 1, 2010		Loans originated since July 1, 2010		Total Loans
($ in thousands)
Single family (1-4 units)	$	2,919,939	$	17,574,463	$	20,494,402
Home equity lines of credit	633,328		1,578,293		2,211,621
Multifamily (5+ units)	349,455		4,340,237		4,689,692
Commercial real estate	592,789		3,232,046		3,824,835
Single family construction	4,691		423,667		428,358
Multifamily/commercial construction	1,151		452,581		453,732
Commercial business	328,332		4,545,248		4,873,580
Other secured	30,461		406,457		436,918
Stock secured	4,218		281,022		285,240
Unsecured loans and lines of credit	26,166		205,386		231,552
Total unpaid principal balance	4,890,530		33,039,400		37,929,930
Net unaccreted discount	(152,441)		(323)		(152,764)
Net deferred fees and costs	(4,982)		36,185		31,203
Allowance for loan losses	(8,339)		(199,003)		(207,342)
Loans, net	$	4,724,768	$	32,876,259	$	37,601,027

	As of
*Asset Quality Information*	December 31, 2014		September 30, 2014		June 30, 2014		March 31, 2014		December 31, 2013
($ in thousands)
Nonperforming assets:
Nonaccrual loans	$	45,962	$	50,179	$	47,373	$	52,109	$	54,492
Other real estate owned	—		—		4,767		3,200		3,200
Total nonperforming assets	$	45,962	$	50,179	$	52,140	$	55,309	$	57,692

Nonperforming assets to total assets	0.10%		0.11%		0.11%		0.12%		0.14%

Accruing loans 90 days or more past due	$	4,380	$	—	$	—	$	—	$	—

Restructured accruing loans	$	16,252	$	16,966	$	18,453	$	18,278	$	19,984

	As of
*Book Value and Capital Ratios*	December 31, 2014		September 30, 2014		June 30, 2014		March 31, 2014		December 31, 2013
(in thousands, except per share amounts)
Book Value
Number of shares of common stock outstanding	138,269		138,155		137,977		137,521		132,768
Book value per common share	$	28.13	$	27.48	$	26.82	$	26.21	$	24.63
Tangible book value per common share	$	26.56	$	25.87	$	25.17	$	24.51	$	22.83

Capital Ratios
Tier 1 leverage ratio	9.43%		9.51%		9.73%		9.85%		9.19%
Tier 1 common equity ratio ⁽⁹⁾	10.90%		11.07%		10.93%		11.12%		10.30%
Tier 1 risk-based capital ratio	13.55%		13.83%		13.74%		14.07%		13.34%
Total risk-based capital ratio	14.20%		14.47%		14.35%		14.64%		13.89%

⁽⁹⁾

Tier 1 common equity ratio represents common equity less goodwill and intangible assets divided by risk-weighted assets.

	As of
*Assets Under Management*	December 31, 2014		September 30, 2014		June 30, 2014		March 31, 2014		December 31, 2013
($ in millions)
First Republic Investment Management	$	27,453	$	26,255	$	25,132	$	23,286	$	21,812

Brokerage and Investment:
Brokerage	17,653		17,184		16,152		14,474		12,933
Money Market Mutual Funds	2,025		1,796		1,092		1,224		941
Total Brokerage and Investment	19,678		18,980		17,244		15,698		13,874

Trust Company:
Trust	3,057		3,044		3,149		3,173		3,013
Custody	3,189		3,103		3,143		2,985		2,879
Total Trust Company	6,246		6,147		6,292		6,158		5,892
Total Wealth Management Assets	53,377		51,382		48,668		45,142		41,578

Loans serviced for investors	9,590		8,859		7,283		6,198		6,000
Total fee-based assets	$	62,967	$	60,241	$	55,951	$	51,340	$	47,578

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Average Balance Sheet*	2014		2013		2014		2014		2013
($ in thousands)
Assets:
Cash and cash equivalents	$	1,845,498	$	2,590,814	$	1,547,482	$	1,468,877	$	1,199,650
Investment securities ⁽¹⁰⁾	6,304,984		4,696,478		5,734,607		5,697,744		4,322,772
Loans ⁽¹¹⁾	37,573,433		33,161,682		37,197,470		36,271,956		30,643,493
Total interest-earning assets	45,723,915		40,448,974		44,479,559		43,438,577		36,165,915

Noninterest-earning cash	263,915		230,262		247,101		239,345		240,043
Goodwill and other intangibles	219,140		242,297		224,630		227,516		251,942
Other assets	2,353,721		1,863,580		2,247,529		2,129,042		1,720,385
Total noninterest-earning assets	2,836,776		2,336,139		2,719,260		2,595,903		2,212,370

Total Assets	$	48,560,691	$	42,785,113	$	47,198,819	$	46,034,480	$	38,378,285

Liabilities and Equity:
Checking	$	20,694,274	$	16,011,898	$	19,211,769	$	18,572,545	$	14,420,567
Money market checking and savings	12,661,395		12,814,579		12,902,904		12,737,635		11,443,203
CDs ⁽¹¹⁾	3,772,544		3,995,699		3,698,444		3,687,912		3,447,556
Total deposits	37,128,213		32,822,176		35,813,117		34,998,092		29,311,326

Short-term borrowings	2		12		—		3		402,176
Long-term FHLB advances	5,275,000		5,150,000		5,520,924		5,474,726		4,253,562
Senior notes ⁽¹²⁾	399,499		—		399,472		216,706		—
Debt related to variable interest entities	37,615		45,874		38,640		40,070		50,709
Total borrowings	5,712,116		5,195,886		5,959,036		5,731,505		4,706,447

Total interest-bearing liabilities	42,840,329		38,018,062		41,772,153		40,729,597		34,017,773

Noninterest-bearing liabilities	943,984		685,217		752,674		733,347		571,576
Preferred equity	889,525		830,829		889,525		889,525		666,552
Common equity	3,886,853		3,251,005		3,784,467		3,682,011		3,122,384
Total Liabilities and Equity	$	48,560,691	$	42,785,113	$	47,198,819	$	46,034,480	$	38,378,285

⁽¹⁰⁾

Includes FHLB stock and securities purchased under agreements to resell.

⁽¹¹⁾

Average balances are presented net of purchase accounting discounts or premiums.

⁽¹²⁾

Average balances include unamortized issuance costs.

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Purchase Accounting Accretion and Amortization ⁽¹³⁾*	2014		2013		2014		2014		2013
($ in thousands)
Accretion/amortization to net interest income:
Loans	$	14,086	$	22,356	$	14,332	$	65,647	$	111,682
Deposits	1,313		2,802		1,468		6,352		11,897
Total	$	15,399	$	25,158	$	15,800	$	71,999	$	123,579

Noninterest income:
Discounts recognized in gain on sale of loans	$	—	$	—	$	1,679	$	1,679	$	—

Amortization to noninterest expense:
Intangible assets	$	3,649	$	4,289	$	3,808	$	15,552	$	18,113

⁽¹³⁾

Related to the Bank's re-establishment as an independent institution.

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 from the Bank's re-establishment as an independent institution, 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, yield on average loans, cost of average deposits, net interest margin and the efficiency ratio.

Our net income, earnings per share, yield on average loans, cost of average deposits, net interest margin and efficiency ratio were significantly impacted by accretion and amortization of the fair value adjustments recorded in purchase accounting from the Bank's re-establishment as an independent institution. The accretion and amortization affect our net income, earnings per share and certain operating ratios as we accrete loan discounts to interest income; recognize discounts established in purchase accounting on the sale of loans, which increase gain on sale of loans; amortize premiums on CDs to interest expense; and amortize intangible assets to noninterest expense.

We believe these non-GAAP measures and ratios, when taken together with the corresponding GAAP measures and ratios, provide meaningful supplemental information regarding our performance. Our management uses, and believes that investors benefit from referring to, these non-GAAP measures and ratios in assessing our operating results and related trends. However, these non-GAAP measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios prepared in accordance with GAAP. In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated:

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Non-GAAP Earnings*	2014		2013		2014		2014		2013
(in thousands, except per share amounts)
Net income	$	115,459	$	115,299	$	136,011	$	487,006	$	462,070
Accretion/amortization added to net interest income	(15,399)		(25,158)		(15,800)		(71,999)		(123,579)
Discounts recognized in gain on sale of loans	—		—		(1,679)		(1,679)		—
Amortization of intangible assets	3,649		4,289		3,808		15,552		18,113
Add back tax impact of the above items	4,994		8,869		5,810		24,704		44,823
Non-GAAP net income	108,703		103,299		128,150		453,584		401,427
Dividends on preferred stock	(13,889)		(12,800)		(13,889)		(55,556)		(40,671)
Non-GAAP net income available to common shareholders	$	94,814	$	90,499	$	114,261	$	398,028	$	360,756

GAAP earnings per common share—diluted	$	0.72	$	0.75	$	0.86	$	3.07	$	3.10
Impact of purchase accounting, net of tax	(0.05)		(0.09)		(0.05)		(0.24)		(0.45)
Non-GAAP earnings per common share—diluted	$	0.67	$	0.66	$	0.81	$	2.83	$	2.65

Weighted average diluted common shares outstanding	141,753		136,522		141,548		140,497		135,949

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Yield on Average Loans*	2014		2013		2014		2014		2013
($ in thousands)
Interest income on loans	$	322,177	$	307,876	$	322,987	$	1,271,562	$	1,193,931
Add: Tax-equivalent adjustment on loans	8,520		6,013		7,792		29,859		19,816
Interest income on loans (tax-equivalent basis)	330,697		313,889		330,779		1,301,421		1,213,747
Less: Accretion	(14,086)		(22,356)		(14,332)		(65,647)		(111,682)
Non-GAAP interest income on loans (tax-equivalent basis)	$	316,611	$	291,533	$	316,447	$	1,235,774	$	1,102,065

Average loans	$	37,573,433	$	33,161,682	$	37,197,470	$	36,271,956	$	30,643,493
Add: Average unaccreted loan discounts	161,556		234,580		177,380		187,097		277,231
Average loans (non-GAAP)	$	37,734,989	$	33,396,262	$	37,374,850	$	36,459,053	$	30,920,724

Yield on average loans—reported ⁽⁴⁾	3.48%		3.75%		3.52%		3.59%		3.96%

Contractual yield on average loans (non-GAAP) ⁽⁴⁾	3.32%		3.46%		3.35%		3.39%		3.56%

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Cost of Average Deposits*	2014		2013		2014		2014		2013
($ in thousands)
Interest expense on deposits	$	14,470	$	18,049	$	15,935	$	60,454	$	60,817
Add: Amortization of CD premiums	1,313		2,802		1,468		6,352		11,897
Non-GAAP interest expense on deposits	$	15,783	$	20,851	$	17,403	$	66,806	$	72,714

Average deposits	$	37,128,213	$	32,822,176	$	35,813,117	$	34,998,092	$	29,311,326
Less: Average unamortized CD premiums	(1,607)		(8,863)		(3,031)		(3,876)		(12,958)
Average deposits (non-GAAP)	$	37,126,606	$	32,813,313	$	35,810,086	$	34,994,216	$	29,298,368

Cost of average deposits—reported	0.15%		0.22%		0.18%		0.17%		0.21%

Contractual cost of average deposits (non-GAAP)	0.17%		0.25%		0.19%		0.19%		0.25%

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Net Interest Margin*	2014		2013		2014		2014		2013
($ in thousands)
Net interest income	$	340,855	$	314,824	$	335,989	$	1,330,760	$	1,224,175
Add: Tax-equivalent adjustment	28,766		23,919		27,710		109,323		84,830
Net interest income (tax-equivalent basis)	369,621		338,743		363,699		1,440,083		1,309,005
Less: Accretion/amortization	(15,399)		(25,158)		(15,800)		(71,999)		(123,579)
Non-GAAP net interest income (tax-equivalent basis)	$	354,222	$	313,585	$	347,899	$	1,368,084	$	1,185,426

Average interest-earning assets	$	45,723,915	$	40,448,974	$	44,479,559	$	43,438,577	$	36,165,915
Add: Average unaccreted loan discounts	161,556		234,580		177,380		187,097		277,231
Average interest-earning assets (non-GAAP)	$	45,885,471	$	40,683,554	$	44,656,939	$	43,625,674	$	36,443,146

Net interest margin—reported	3.21%		3.32%		3.25%		3.32%		3.62%

Net interest margin (non-GAAP)	3.06%		3.06%		3.09%		3.14%		3.26%

	Quarter Ended December 31,				Quarter Ended September 30,		Year Ended December 31,
*Efficiency Ratio*	2014		2013		2014		2014		2013
($ in thousands)
Net interest income	$	340,855	$	314,824	$	335,989	$	1,330,760	$	1,224,175
Less: Accretion/amortization	(15,399)		(25,158)		(15,800)		(71,999)		(123,579)
Net interest income (non-GAAP)	$	325,456	$	289,666	$	320,189	$	1,258,761	$	1,100,596

Noninterest income	$	75,834	$	56,200	$	104,671	$	318,355	$	244,350
Less: Discounts recognized in gain on sale of loans	—		—		(1,679)		(1,679)		—
Noninterest income (non-GAAP)	$	75,834	$	56,200	$	102,992	$	316,676	$	244,350

Total revenue	$	416,689	$	371,024	$	440,660	$	1,649,115	$	1,468,525

Total revenue (non-GAAP)	$	401,290	$	345,866	$	423,181	$	1,575,437	$	1,344,946

Noninterest expense	$	244,150	$	200,929	$	238,377	$	922,746	$	767,997
Less: Intangible amortization	(3,649)		(4,289)		(3,808)		(15,552)		(18,113)
Noninterest expense (non-GAAP)	$	240,501	$	196,640	$	234,569	$	907,194	$	749,884

Efficiency ratio	58.6%		54.2%		54.1%		56.0%		52.3%

Efficiency ratio (non-GAAP)	59.9%		56.9%		55.4%		57.6%		55.8%

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SOURCE First Republic Bank

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