First Republic 3Q17

Mike Rofflee

We have experienced a modest increase in our deposit rates, despite several increases in the Fed funds rate. Loan pricing in our market however has remained very competitive causing some pressure on our net interest margin

First Republic 1Q17 Earnings Call Notes

First Republic’s (FRC) CEO Jim Herbert on Q1 2017 Results

Later in the credit cycle but credit excellent

“At the current point in time, we consider ourselves to be somewhat later in the credit cycle and we’re paying even additional attention to prudent lending and credit quality. To that point, our credit quality continues to be excellent. Non-performing assets were at a very low 7 basis points. Net charge-offs for the quarter totaled only $0.5 million or a single basis point.”

Mike Selfridge

Loan growth 17%

“Loan volume was up 17% compared to the first quarter of last year. Single-family residential lending volume was 40% purchase and 60% refinance during the quarter. While loan demand is strong, loan pricing remains very competitive.”

Economic activity in regions strong

“Turning to geographic markets, economic conditions are very good across our footprint and our clients are quite active. In our largest market, the San Francisco Bay Area, the diverse and very dynamic economy continues to be quite strong. Residential real estate prices are stable, with the market that remains supply constraint. While the San Francisco Bay Area represents just under half of our total loan portfolio, our markets in New York, Southern California, Boston, Portland and Palm Beach also continue to perform very well. Economic activity in our regions overall tends to be stronger than the rest of the United States as a whole and we continue to benefit from this strength”

Pipeline is strong

“I would — let me just say, overall, the pipeline is strong and it’s about where it was at the end of last quarter. It’s hard to say on commercial and multifamily. Those tend to be a little bit volatile. I will say, as I mentioned in my remarks, half our growth is coming from existing clients. They are quite active. It’s still call it inventory constrain. So it’s hard to find good deals. But they are out they are working hard and finding them. So we — I would say we feel good about our future prospects in multifamily and commercial real estate.”

First Republic Bank 4Q16 Earnings Call Notes

First Republic Bank’s (FRC) CEO Jim Herbert on Q4 2016 Results

We’re coming up to the spring purchase season for homes

“I would add to that. It’s Jim. Let me add to that, the second. As long as the economies are strong in our markets, the purchase activity is currently strong and it will remain so. I will just remind everybody, we are coming now slowly towards the spring purchase season, which usually picks up quite a lot. So I don’t think we are in a rate – level that will of real estate activity very much at all, except the incremental refinance activity.”

Mike Selfridge

Economic conditions are very good in our geographic markets

“Economic conditions in our geographic markets are very good and our clients are active. In our largest market, the San Francisco Bay Area, as we stated last quarter, residential real estate prices have moderated and current loan demand is strong.”

Credit quality excellent

“credit quality continues to be excellent. Non-performing assets remain low at just 7 basis points. During the quarter and for the full year, net charge-offs were less than 1 basis point of average loans. We added $10.5 million to our loan loss reserves in the fourth quarter and $47.2 million during the year to support loan growth.”4

Mike Roffler

Mid-teens loan growth is right for 2017

Yes. I think, Steve, I would expect going forward, that refi, if rates continue to rise will subside as I said in my remarks. And with the backup in rates in Q4, there was a bit of a rush to refi that we saw and so that increased the activity. And as I said, we wouldn’t expect origination volume to have the percentage increase year-over-year that we indicated in Q4. But going into the first quarter, the pipeline is strong and we still think that mid-teens loan growth is right for 2017.

First Republic 2Q16 Earnings Call Notes

First Republic Bank’s (FRC) CEO James Herbert on Q2 2016

Customers are aware of Brexit but not letting decisions be driven by it

“I think the ladder is more the case Erika, they’re mostly not — they’re very aware of it of course, but they’re not — their actions are not being driven by it. It’s a little more — the awareness is higher on the East Coast and the West Coast, I would also note.”

VC and PE activity is steady now

“I’m not so much awareness, but reaction. The VC and private equity activity level is steady now. It bottomed in the first quarter, I would say and has actually picked up a bit and that’s been helped by a decline in valuations and thus increased opportunities, particularly in VC area.”

We’re watching NY carefully for weakness

“we’re watching New York carefully because there’s a lot of new units coming on. But we don’t tend to do larger buildings in New York anyway but I think we do some and our LTVs in New York are the lowest of anywhere in our marketplace probably the average LTV in New York is possibly — on multifamily is possibly sub 55. And so I think that, that’s the market that we’re watching the closest.”

We’re not seeing anything that causes us concern on the credit front

“let me speak to the credit front, the credit front in our portfolio we’re not seeing anything that causes us concern. So we’re maintaining very high standard and in dealing as I said with mostly clients who we have dealt with for an extended period of time. So we have a lot of history with them.”

Michael Selfridge

Business activity remains healthy

“Business activity remains very healthy across the enterprise, supported by the continued strength of our geographic markets and our very active client base. California, First Republic’s largest market is now the sixth largest economy in the world and has surpassed Brazil and Franc”

San Francisco economic conditions remain good but seeing a leveling off of real estate values

“Looking at the San Francisco Bay Area, overall economic conditions remain good. Though year-over-year job growth has slowed slightly, it continues to outpace both the State and the Nation. We’re now seeing a leveling off of real estate values and rents in the area and we believe this is healthy for the market.”

LA strong driven by a bunch of frou frou industries

“Los Angeles continues to be a particularly strong market for us due to the strength of its diversified economy in sectors such as entertainment, media, apparel and financial services.”

Cooling at the high end of the market in NY

“Turning to New York, we continue to see cooling at the high end of the housing market, although this is typically not a market segment in which we’ve been very active. However demand is otherwise strong across other segments of this market.”

Jason Bender

Credit quality still very strong

“Credit quality continues to be very strong. Non-performing assets remain extremely low at just nine basis points. During the quarter, net charge-offs were just $1 million or one basis point of average loans. We added over $14 million to our loan loss provision in the quarter to support loan growth.”

Michael Roffler

We are seeing banks stretch on the credit side

Dave, its Mike. No, we’re still seeing competitive pressures and we’re still seeing banks stretch on the credit side. Our markets and as we’ve reiterated in the past, we will not follow them on the credit standard side. We still think there is ample opportunity to go after the type of borrower that we want which is low loan to value liquidity.

First Republic 1Q16 Earnings Call Notes

James Herbert

Demand is still pretty strong in the pay but there is a lot of new supply coming on line

“specifically, the Bay Area, the demand is still pretty strong, but we do have a lot of new buildings coming on the line over the next 24 months. So I think the jury is out a little bit on the commercial real estate demand forward 12 to 24 months in the Bay Area. I don’t know if the new buildings will be fully absorbed. If they are fully absorbed, I could ripple backwards into the older buildings.”

Getting harder to maintain lending volume as competition has pushed LTVs higherBay Area economy remains strong

“The Bay Area remains a center for innovation, job creation, and economic activity. The real estate market continues to be characterized by limited inventory and strong demand for homes. Prices are now appreciating at a more sustainable rate, which we believe is positive for the overall market.”

PE and VC clients have exercised greater caution though

“More recently, we have seen our private equity and venture capital clients exercise greater caution, which has slowed the pace of their investing and in turn has decreased borrowings on capital call lines of credits.”

We’re not seeing any ripple effect from softer PE valuations

“as far as the overall market there, there has been a bit of compression in certain valuations, such as private equity valuation for the companies that are investing in. And in terms of the ripple effect, I would say that we’re not seeing anything yet. We’re seeing a modest compression may be in certain markets on medium home prices. But outside that, the markets are still active in – on the residential side. And if you look at the number of transactions being done, it’s still coming through at a decent clip every quarter.”

Jason Bender

Credit quality continues to be strong

“Credit quality continues to be very strong. Non-performing assets remain extremely low at just 10 basis points. During the quarter, we actually had a small net amount of recoveries. The credit quality of the bank reflects a continued focus on disciplined underwriting.”

Bob Thornton

Home buyers in LA have become more selective given appreciation of home values

“Turning to the Los Angeles market, we continue to see it to be a stable source of business growth and opportunities for First Republic Bank. The Los Angeles market is driven largely by the entertainment, media, apparel, financial, and professional service industries and it’s doing quite well. Single-family home buyers in the Los Angeles market during the quarter were higher than a year ago with continued demand – continuing demand. Buyers appear more selective, given the continued appreciation on home values. Overall volume in credit quality remains strong. ”

Palm beach home prices have stabilized after years of appreciation

“Turning to Palm Beach, home prices appear to have stabilized after several years of appreciation. Demand remains strong, given somewhat limited supply, but buyers have become more selective”

First Republic Bank 4Q15 Earnings Call Notes

First Republic Bank’s (FRC) CEO, James Herbert on Q4 2015 Results

James Herbert

Focused on our business despite considerable global uncertainty

“Looking ahead for a minute, while there is clearly considerable global uncertainty, we remain committed to executing our simple resilient business model has performed well in all environments. The model is focused on gathering deposits, making very high quality loans, and providing wealth management in our core domestic markets, which continue to have strong economies. ”

It’s possible that equity markets wont affect mortgage customers, but usually you do get some pricing pressure in the segment

“It’s always possible. Historically, it’s a little more likely that what you will get is pricing pressure in the segment, as Mike Selfridge alluded to already, but a reasonably good availability of flow of business. Our clientele is less affected to some extent because of the strength of their income, but more importantly the markets we operate in, the supply is so short in terms of availability of homes, that it has not been as dramatic as the overall housing numbers would indicate, pretty much ever.”

A psychological move towards caution is definitely happening

“What is happening is that we’re seeing a little bit of a slowdown, or a psychological movement towards caution – that’s definitely happening, and that translates into maybe a little more down, in fact, and a little less robust bidding. But so far, not much impact.”

CRE may be the one place that we’re paying close attention to from a credit standpoint

“The answer is we’re not really at this point–well, we’re not worried, but we worry all the time because of our sort of intrinsic conservatism. We re-review two areas in particular, business banking generally, although our largest segment is non-profits – they tend to be quite stable, and then our next largest segment is the one Mike has been talking about in terms of credit to funds, very stable as well, actually. But commercial real estate, we’re paying particular attention to. We’re not immune to the concerns that everybody has about it. I think we have mitigated that quite dramatically by our very conservative loan to value ratios.”

Demand remains strong in our markets though

“On CRE, not multifamily but non-multifamily commercial real estate, we operate in the mid-50% LTV range roughly, and so we’re comfortable there, but that doesn’t mean we wouldn’t have a problem or two. We don’t see that yet. The demand for office space and the demand for commercial space actually remains strong in all of our markets.”

Commercial Real Estate in San Francisco is calming

“We’re obviously intensely focused on it. I would say our best call would be that in the commercial area, it’s calming. The supply is beginning to meet the demand, possibly exceed it a little bit, but I wouldn’t be worried yet, although we are cautious. There is a lot of new space coming online in the next 24 months, commercial in San Francisco, much more than has historically been the case, so the rents appear to have topped a bit. Now, they’ve topped at a very nice level, I will say, historically. Some say it’s almost New York-like – that’s a little exaggerated, but not much.”

Residential is in short supply though

“And then the housing, the number one characteristic of the housing market in the San Francisco Bay Area is short supply. That’s the thing that’s most overlooked. It is very, very difficult to build new housing in the Bay Area for environmental reasons, zoning reasons, land availability – it goes on. And it’s expensive, and so there is by historical standards a fair amount of new housing that’s come online, but by comparison to demand, it isn’t 50% of demand.”

Michael Selfridge

Answer to question about weakness in mortgage production

“I think the demand is still there. There might be a little bit of caution based on prices and limited inventory, but overall it still appears to be pretty good from our perspective.”

On the capital call line portion of the business banking portfolio there is definitely a higher level of caution

“On the technology side, we do nothing more than handle cash management and deposits, so there’s no lending exposure there. On the capital call line portion of the business banking portfolio, I would say there is definitely a higher level of caution, given some of the valuations in that world. ”

Michael Roffler

Nothing unusual, although slight uptick in NPAs

“So I’d say it’s nothing unusual. Periodically, we work with clients who may run into a difficulty, but it’s nothing unusual. We feel that the portfolio continues to obviously remain very strong, and at this point those loans are very active in discussion with the clients, but nothing unusual.”

Katherine August-deWilde

Wealth management assets at 72B

“During the fourth quarter, wealth management assets were up $13 billion. For the full year, wealth management assets were up 35% to $72 billion. On an annual basis, wealth management revenues were up over 20%.”

Miscellaneous Company Notes 10.15.15

PrivateBancorp’s (PVTB) CEO Larry Richman on Q3 2015 Results

We see our clients remaining appropriately cautious

“Certainly our clients are mindful of geopolitical and other macroeconomic events and we see them remaining appropriately cautious. We are seeing our clients performing well and seeking new ways to build their businesses and this provides opportunities for us. The banking environment remains competitive in pricing and structure. It is important that we remain selective and disciplined. ”

Pressure points not manifesting in credit deterioration

“it’s really tough right now, Steve, to see where there is the next pressure point. You can point to various issues that all of us read about on the first page of the paper week-to-week that props up, whether it be energy, leverage loans, state of Illinois, all kinds of things that are out there, but we are just not seeing any of that at this stage really manifest into any systemic issues for us.”

LIBOR curves are not fun to look at

“I looked at the futures this morning for the 30-day LIBOR as they go out the end of 2016, the end of 2017 and they are not fun to look at.”

Credit quality is business as usual

“So we are at a very good place. I am very pleased with what I am seeing. I think the movement here is largely business as usual.”

Del Frisco’s Restaurant Group’s (DFRG) CEO Mark Mednansky on Q3 2015 Results

Restaurants affected by slowdown in energy economies

“comparable sales decreased 1.4% during the quarter, driven by lower guest count. The slowdown was partially related to the ongoing energy related issues affecting Texas and to a lesser extent Colorado, which together comprise a third of the brand’s comparable restaurant feed. ”

Lower cost of sales not enough to offset higher labor, operating and occupancy

“Lower cost of sales due to favorable prime beef costs and solid controls, was not offset enough for the higher labor, operating and occupancy expenses. ”

People want things a little quicker today

“today’s dining guests, unless they’re celebrating an occasion, or they want to linger a business meeting to have more time to discuss business, people want things a little quicker today and that’s one of the reasons we built the Grille brand…New cooking technology in the new stores has helped. We are starting to move some of that into the core group”

Colfax’s (CFX) CEO Matt Trerotola on Q3 2015 Results

Need to presume that markets would recover in 2017 at the earliest

‘ we’re seeing tough trends in the market and we think we need to presume that 2017 would be the earliest market base recovery. We’re going to be working hard also on our relative performance in those markets and trying to make sure that we perform as strongly as possible against that market backdrop.”

We’ve seen some more challenging trends on the oil and gas front

” recently we’ve seen some more challenging trends that are on the oil and gas front. And so we’re trying to — that’s one of the number of things that have taken some of the proactive cost actions to make sure they we’re prepared for whatever might be coming in the future. But I can’t say more than that in terms of where things might go in that sector.”

Oil and Gas and Marine are two of the highest users of welding

“the highest users have welding having some significant cyclical downturn, the oil and gas and marine being two of the key ones there. And so that combination of factors on the external and the currency challenges really stacks up to be a significant portion of our challenges this year.”

First Republic Bank’s (FRC) CEO Jim Herbert on Q3 2015 Results

Big banks are getting more aggressive in mortgage lending

“Yes, Erika, they are getting more aggressive. They are cutting both pricing and to a modest extent, standards. Their loan-to-value advanced ratios up to $2 million or $3 million have climbed into the 80% range. We are not following them. And that’s the cause for us losing some business. But as you can see, the volume has held up pretty well in the quarter, we’re happy with them. So we’ll compete on price, but we will not follow a change in terms or conditions.”

KeyCorp’s (KEY) CEO Beth Mooney on Q3 2015 Results

We’ve called rates wrong

“In the past and we’ve called this wrong, we continue to expect that interest rates would be going up, say 12 months down the road and we haven’t seen that yet. And so we’ll continue to reassess and we have the flexibility to manage that overall rate risk position fairly quickly with the change in interest rate swap position.”

Achieved a lot of loan growth simply because we have more bankers than we did at this point last year

“On the Community Bank side, we have achieved a lot of loan growth simply because we have more bankers than we did at this point last year. We have made a significant investment in commercial bankers, putting more feet on the street and we’re starting to see dividends coming from those investments”

Capital markets deals got pushed out a bit

“clearly the disruption in the market in the last part of the third quarter caused some of our deals and probably everybody else’s deals to be pushed out a bit. So there’s no question.”

UnitedHealthcare Group’s (UNH) CEO Stephen Hemsley on Q3 2015 Results

Risk pool served by exchanges would require more medical services than originally expected, so raising prices

“Like others we observe market-wide data this past spring that suggested the risk pool served by public exchanges would require more medical services than original expectations. Rather than wait for our own experience with our new members to fully developed, we increased rates and repositioned certain products market by market for 2016, and we expect improved performance next year.”

Raising prices double digits

“Average increases across the country are in the double-digits, and we also took steps to eliminate some products and reposition other products.”

First Republic 1Q15 Earnings Call Notes

Credit quality excellent, loan pipeline strong

“our credit quality remains excellent. Our loan pipeline is strong. Conditions in our urban coastal markets are very good, particularly in our home market of San Francisco Bay area.”

Have grown deposits significantly since 2010

“We are pleased with the continued momentum in our deposit gathering franchise, as well as the improvement in the overall deposit mix. We would note that checking deposits were 26% of total deposits in 2010 following our divestiture and were almost 60% of total deposits for the first quarter of 2015.”

We’re seeing more supply of houses come to market and people are getting better at acquiring houses

“The market is still a little bit supply constrained. There are increasingly – there is increasingly more supply coming on the market. We had a very strong quarter in originations for several reasons. Our clients who have been looking for houses were able to acquire them. We also did good business in multi-family business and commercial real estate.

But the person who can’t buy a house or couldn’t buy a house last year because they didn’t win in a multiple bidding situation kept at it and bought a house this last quarter. As we come into spring, we’re seeing increasing supply. But we seem to be both picking up new clients and our clients are doing a better job of acquiring the houses they want.”

We win new clients by following our private bank clients

“We continue to win new clients through the strategy of following our private banking clients to the businesses they influence.”

A mortgage is just an entree into a broader relationship

“Actually, no. I think it’s very important to realize that when we bring in a client with a loan, we do many, many more things with that client. That client brings us deposits. They bring us assets under management and other fee income, and other loans, often they are business loans over time.

So you should think of the single-family loan origination not only as an asset on our balance sheet, I wish we make a spread, but as the acquisition of a client, and that client not only does a lot with us but does more with us over time and then recommends colleagues to us. So it’s a basic tenet of our business.”

Adding permanent people for growth

” would say relative to what we’re doing, we’re continuing to add people in our infrastructure. You’ll start to see sort of a reduced professional fee spend, but we’re replacing that with permanent people. There is a lot of this, which is ongoing costs, to support a larger enterprise that doesn’t go away.”

First Republic Bank 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

The Bay Area is booming

“All of First Republic’s urban coastal markets are performing very well. This is especially true of the San Francisco Bay Area, our largest market, which represents 46% of the bank’s loan portfolio. A few statistics about the San Francisco region are worth noting. The Bay Area has the highest GDP per capita in the United States. More Fortune 500 companies are located in the Bay Area than any other U.S. region, with the exception of New York, which is First Republic’s second largest market.

The Bay Area has the largest number of top 10 ranked graduate programs in business, law, medicine and engineering in the nation, as well as the highest concentration of venture capital in the world. The vibrancy of the San Francisco Bay Area economy is a key driver of both our private banking and private business banking”

Enough housing inventory for our clients to find houses

“We realize there’s lot of talk about inventory issues. What we’re finding is that our clients seem to be winning the purchases perhaps with our help and our commitment letters. So there is enough inventory for the clients that we are working with to buy houses and that’s terrific.”

When the stock market goes down it does affect purchase volumes, but normally refis take their place

“Generally when there is a decline in the stock market, there is a pause in purchase activity. But when there is a decline in purchase activity because of stock market variations like this and rates are down, we see an uptick in refi activity and we usually get more than our share.”

A couple thousand clients represent 40% of deposits

“Couple thousand clients spread across the bank where we have very deep relationships with.”

First Republic Bank 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Transitioning to have 50b+ in assets

“As you all know, institutions with over $50 billion in assets are required to operate under significantly heightened regulatory and compliance standards. We currently anticipate that our four quarter ending moving average assets will reach this $50 billion mark about the end of 2015, or roughly six quarters from now.”

costs are going up

“In terms of our expenses, as reflected by our core efficiency ratio, we currently anticipate that these incremental expenses will translate over time into an adjusted range of 59% to 62% efficiency ratio for at least a while.

Based on current estimates, we hope to be able to bring the efficiency ratio back down to 60% or below sometime in 2016. This will occur as some of the initial costs of these investments plateau, and we reach a new, somewhat elevated, expense run rate.”

FRC has a simpler corp structure

“When people think about larger institutions, they almost automatically assume a much greater complexity.

With First Republic, this is, in fact, not the case. For example, First Republic does not have a bank holding company. First Republic has only four operating subsidiaries. We have an extraordinarily simple corporate structure.”

275k accounts across the whole bank

“First Republic also services far fewer accounts and relationships than other banks of a similar size. For example, we maintain our approximately 275,000 deposit accounts in the entire Bank.”

Most banks at 50b have 5x as many accounts

“Based on public data, this number of accounts is equal to less than 20% of the number of accounts at banks of a similar size. Having fewer accounts provides us with an opportunity for much better individual account oversight and better client service.”

Banking system much more concentrated than it used to be

“The banking industry is substantially more concentrated today than it was 10 years ago. For instance, America’s four largest retail banks; Citi, JPMorgan, BofA, and Wells, today have $8 trillion in assets, controlling a staggering 54% of all banking assets in the entire country. 10 years ago, these same four banks had only a 36% concentration. For perspective, First Republic has approximately one third of 1% of such banking assets.”

NPAs just 11bps. NCOs nearly 0

“Non-performing assets remained low at only 11 basis points of total assets.”

“Net charge offs for the quarter were less than one basis point.”

Building a platform is expensive

“The increase in future expenses is primarily around compensation related to additional employees, information systems, consulting and other professional fees. We have already added staff and we will continue to do for the rest of 2014 and next year to meet these higher standards.

Based on current estimates, these higher level of staffing technology cost along with the elevated consulting fees will result in a near term increase to our efficiency ratio in the range of 60% to 62% beginning this quarter, and likely last until the end of 2015.

We expect the efficiency ratio to peak in the first quarter of 2015 given the seasonal nature of payroll taxes. Based on current estimates, we think the efficiency ratio could return to a range below 60% in 2016.”

Someone is always still refinancing for some reason

“There are always some people who didn’t refi before or people who are refinancing because they are renovating their homes or taking cash out or other reasons”

Invest in the systems you need even if they’re more expensive

“we are very anxious to stay ahead of it as opposed to get behind it, and so that forces us or encourages us to invest more rapidly in some of the systems procedure, and we are trying to frontload the people aspect of it as well to make sure they are onboard that we have got the right people that they are working together as a team and are ready to run this. It isn’t just about getting there, it’s about running it…We have found generally over the years that investing in advance is very valuable.”

The expense is probably going to be permanently higher

“The 55% to 59% is probably going to end up landing at a somewhat higher level, but hopefully not much.”

example of increased scrutiny

“Our stress testing, in terms of liquidity, we run three or four scenarios. The guidance for a larger institution is eight or nine scenarios. So, we have to build up to that and that takes a considerable additional database and quantitative capability. It also takes an ongoing reporting capability that we have, but needs to be enhanced”

You invest in us because we think ahead

“one of the reasons you all have invested in us or your clients have — and we’ve run it well over the long time is — we think ahead. And this is ahead. And we need to be not a $50 billion bank; we need to be an extremely well-run $60 billion bank and thereafter. And we intend to be as equally good in the future as we have been in the past. And that means investing heavily and spending properly at the right time. This is the right time.”