14th Annual Credit Suisse Financial Services Forum
Feb 12, 2013 AM EST
FRC - First Republic Bank
14th Annual Credit Suisse Financial Services Forum
Feb 12, 2013 / 04:00PM GMT
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Corporate Participants
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* Jim Herbert
First Republic Bank - Chairman & CEO
* Brian Smith
First Republic Bank - Senior Managing Director
* Cari Rentas
First Republic Bank - District Manager
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Presentation
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Unidentified Participant [1]
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Next up, we have First Republic Bank. I am sure many of you guys know this story here, a franchise that was established in 1985 and has since kept its niche model in place, targeting that high net worth customer in select metro markets on both sides of the coast.
You might recall in 2007, they sold to Merrill Lynch for 3.6 times tangible book and then they were subsequently bought by BofA in 2008. And then, in 2010, management and a group of investors led a buyout to regain their independence and since the sale to Merrill Lynch in 2007, they have more than tripled in size in generating that core funded loan growth at a 20% clip and leading with the prime jumbo mortgage to help establish that broader relationship.
With that, very happy to have Chairman and CEO, Jim Herbert, here with us and a couple of his colleagues that I will let him introduce, if that is all right, when he gets up here. Thanks.
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Jim Herbert, First Republic Bank - Chairman & CEO [2]
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Thank you all for being here. We are going to go through slides here. Let me get up to a starter slide here. Let me introduce the folks that are here with me. Cari Rentas, on my far right here, has been with us about seven or eight years. Both Cari, and Brian Smith to her left, have been with the bank. Brian has been with us about 12 or 13 years now, Senior Managing Director, has a large book of business. Cari has been cohead of our offices in New York and they have both moved to Palm Beach recently and they are opening our Palm Beach office, which we opened last night.
And I would like to -- can you hear me? Is that okay? A little more like that. Is that better? Okay, good. Sorry. And we opened the Palm Beach office last night and so we are following our clients basically, particularly the Boston and New York clients down to Palm Beach and to Florida, but Palm Beach in particular. So I am going to ask them to weigh in here in a moment and then we'll end particularly on questions in terms of the Company.
I am going to go through the slides briefly, but let me start by characterizing what First Republic really is. It is a service organization that actually happens to be in banking. Our whole deal is a very old-fashioned, take care of the client, get to know them relationship banking. Brian, Cari have been working with their client base for a long time. I would expect they would continue to work with them for many years to come and what people really are looking for in good banking is someone that knows them and understands them and most importantly cares about them and can respond intelligently and quickly to their needs. And if they have a need that they can't meet, we can't meet, then we will direct them somewhere that can meet them. And our job as an organization is to be able to take care of our best clients' needs and so we constantly add products and items -- the wealth management side is very much that way.
The numbers speak for themselves. In terms of size, we are $30 million or so, $34 billion rather and we are about $32 billion in wealth management. Importantly, we have had, in addition to service, the other core principal, the enterprise, actually two other cores are, number one, never run out of capital and number two, good credit quality. Actually number one, good credit quality.
We have had about 20 basis points of cumulative losses since we started the bank in '85. We have never had a loss year. I started a bank in '80, sold it in '84 and started this in '85 and did not have a loss year in the other bank either. We are very conservative. That is contradictory to our growth rate a little bit, but our fundamentals are very core to how we operate. We are in urban coastal markets. I will come to a slide on that in a minute. We have attractive client segments.
The last year has been a good year, 20% plus growth. Wealth management is up quite a lot. We did make an acquisition. We very seldom make acquisitions. We acquired Luminous, which is about a $5 billion plus asset manager, great group of folks, about 30 of them. They have joined us. They are going to move into two offices that we operate in, Sand Hill Road and Century City.
Book value per share. When we bought the bank back from Merrell-BofA, BofA, we bought loans at about $0.96 on the $1 that are paying $1, so we have some book value accretion coming in over time. Our core diluted earnings, which is what I focus on, were up 25% plus last year. We also went to the market three times in preferred, perpetual, non-cumulative stock. We have used that vehicle over the years. It is a very good form of capital and we tapped the market three times and worked out quite well.
We acquired Luminous. We did their stock offering. This is a pictorial of how we did with our clients, pretty simplistic, but it is actually true. Brian and or Cari will handle the clients' needs pretty much top to bottom and bring the piece of the bank to the client that they need, but their banker is that person and that is how the client thinks about it. And that is who the --importantly that is who the client refers to their like kind friend. So our growth rate is enormously organic. 70% of our growth at least is one-off referral.
Let me just play this, less than a minute. It is how we market the bank. It's testimonials basically of all kinds. (video playing) Basically that's the -- this is why we grow and this is a little business schooly like, I'm sorry, we never have figured out a better way to say it, but the bottom line is we do a really good job for the clients. They get excited about that and they tell their friends and it is an old-fashioned model, but the glue, the thing that makes it work is we don't change all that much and by that, I mean even the face of the banker that you are dealing with doesn't change. People hate change in their bankers. They just hate it. They want to have somebody that knows them and stays with them and then adds products and services all the time and they are comfortable with and that is really -- the top box is 70% of the growth.
We do the other obvious things. We hire new people that bring books of business with them. We open new offices, Palm Beach and we have a very focused marketing activity because we know who our likely next client is, where they live and what they do. This is -- we have been trying for years to kind of talk about the geography we are in, so this is a chart we have come up with that is done by the Rosen Consulting Group out of Berkeley. It took about six months. This is basically a GDP of our markets versus the country and it makes the obvious point that our markets have held up better and recovered better than the economy as a whole. So when you buy First Republic, you are buying a very specific set of geography. Silicon Valley is about 35% of the bank, San Francisco, San Mateo, Santa Clara counties, just those three counties and just most of you know the story in San Francisco, but Silicon Valley is definitely in the city now. It wasn't before, but this time it has come up to the city. It is a big deal actually. It is transformative for San Francisco. And then New York, Boston, West LA, up and down the coast and San Diego and now Palm Beach. I am not going to bother to read that. I just went through the areas.
We have very attractive markets. We tend to focus -- this is the Capgemini study, the World Wealth Report. Their metric, their core metric is households that have $1 million of liquidity or more. 55% of such households live in our markets versus only 21% of all households. So it is very target-rich, the markets we are in and then our share of the markets by market are there. We have done this study every two years for eight years now.
We have grown our share -- our number of high net worth households. This is one measure of our success. It is not our only client base. Our total client base, that shows a 43,000 household count in '11, about a year old data, year and a half now. Our total client base would be about 110,000 relationships. It is organic growth, very strong, 20% plus. That is not a target; it just happens. It is really not -- we have a business plan, but we don't set targets for growth ever. Silicon Valley does contain about a third of our client base. That is obviously very beneficial. They are on a serious roll we all know.
Balance sheet makeup, single-family home loans, boring old single-family home loans, about 60% average LTV, but it pays the bills. We make a nice spread on it because we are deposit-funded mostly with lower cost checking accounts. I will come to that in a moment. And this is the heart and soul of the client who decides where the law firm that they run banks and where the private school that they are on the board of banks. So we follow the client to their assets and to the things they influence or control. And that has led us to business banking, which has become a pretty big business actually.
Let me just do this and then I will get to business banking, but the attribute of our home loan clients, their average net worth is about $14 million, call it $15 million, but the median is important. The median is about $3 million. But note, in each case, their liquidity is almost equal to their loan and in fact, the average is four times the loan. These are highly liquid clients. A lot of young professionals, lot of entrepreneurs, the gamut of folks that you might expect in the urban markets we are in.
Our historical loss experience, we have lost 5 basis points on home loans of $60 billion in 29 years. That includes '08 and those are on loans that we keep or sell. We don't distinguish. If we sell loans, which we do quite a lot of, we keep servicing. Total loans are about -- a loss of about 18 basis points on every kind of loan we have ever done. Charge-off experience this past year, we had a 1 basis point charge-off on the loan portfolio.
Business banking, this is a very big deal actually. We are about a 50% business bank now from a deposit funding point of view. Average loan outstanding is about $1.5 million, deposit size $0.25 million. 80% of these businesses that bank with us, the principals bank with us and that is how we got to their businesses. What are they? They are nonprofits and schools, biggest category, the bedrock of the communities that we live in. We bank a lot of them.
Capital call lines to venture capital and private equity funds, we bank about 800 funds nationwide. Most of those funds are on the coast. Obviously a lot of them are in Chicago as well, we do a few there. So it is a good coastal urban kind of business base is what it is -- law firms, accounting firms.
Deposit franchise. Business deposits are 40% plus now. That is mostly checking, and then we have three channels the way we think about it. We have the business channel and then on the consumer side, we have the preferred office channel and we have the preferred banking channel, which is linked more to the lending.
Core deposits, 97% of these deposits are core. We have been running out CDs with the low rates, been tuning them down in price and that tends to move out the single product CD client. Deposit offices are very large actually, very profitable. We have been doing deposit -- we have about 65 now, 70 probably by the end of this year roughly.
The core efficiency, we are a high-touch bank, so our efficiency ratio tends to be a little high, but it has been pretty stable and we are operating quite comfortably and this is the core efficiency ratio without purchase accounting. It is truly the core ratio. And we are very comfortable in the 58% to 62% kind of range.
Just one measure of efficiency of people. We do larger, average size, very clean transactions with less number of clients with very good people. On the average, the assets per person in our bank are about 2.5 times in our bank and that has to do with the clean, large, average size and very strong people handling a lot more dollars, but probably less people in terms of clients. Profitability is almost 3 times -- pretax profitability -- pretax profitability is almost 3 times pre-provision of most banks.
Private wealth management has grown very nicely, took a giant leap this last year, as you can see from the shading. The top shading is -- that includes Luminous as well, the acquisition, as well as our own internal growth. Fee income is climbing -- we have no Luminous income in the year. So that doesn't show up at all yet.
NIM is under pressure. We can talk about that in Q&A, but net interest income, which really pays the bills, is actually climbing rather nicely and steadily and continued to climb in the last quarter of the year, translating into core EPS, a very nice growth rate.
Since we came out, we bought the bank back. The first quarter that we were independent was the third quarter of 2010, so it has been about two and a half years in terms of reported quarters. It is going well. Stable margin. We work really hard at asset liability matching. We have spent a lot of time on it. We're on it every week and it has resulted in a very stable NIM, even in volatile periods. Again, that is core NIM, that is not purchase accounting NIM.
Book value is accreting rather nicely both through accretion of purchase accounting, as well as regular income. Stock performance has been good. The chart on your left is the performance up to but not including the purchase by Merrill and the one on the right is subsequent to coming public again.
So with that -- I will make one last point, sorry. We bought it back with private equity ownership. They were at 1.73% of all the ownership. We have managed to get them down to 14% through a series of offerings and block trades. So that overhang is pretty well gone really at this point.
The largest holding position, two Colony Capital GA who were our leads, each of them have a representative on the Board, but they started, as you can see, up in the 22% range. So they are very happy with that achievement and that overhang is still there a little bit, but it has gone -- we moved 45 million shares in the last year. We do a stress test voluntarily; that looks good.
With that, let me stop and then open up for questions, okay.
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Questions and Answers
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Unidentified Participant [1]
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Maybe we can start with the polling questions, if that is all right. So the first one, what concerns you most about FRC shares? Loan growth, expense growth, Basel III or QRM?
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Jim Herbert, First Republic Bank - Chairman & CEO [2]
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This is cool. I haven't done this before. So you all are voting, is that the deal?
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Unidentified Participant [3]
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Yes.
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Jim Herbert, First Republic Bank - Chairman & CEO [4]
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I like it. Do you have a vote on CEO in here? You don't have a CEO vote in here, do you?
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Unidentified Participant [5]
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Okay, more growth-oriented though. Okay, next question, when evaluating the attractiveness of owning FRC, what do you struggle to understand? One, increased operating leverage; two, ROE potential; three, sustainability of growth or margin outlook?
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Jim Herbert, First Republic Bank - Chairman & CEO [6]
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(inaudible) growth.
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Unidentified Participant [7]
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Again, yes, more tilt toward growth. Okay, do you think the market is giving First Republic enough credit for its wealth management platform? Yes, no, or you are unsure? All right. Interesting. It looks like there is some potential there. Do you think FRC is a willing seller, yes, no, or unsure?
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Jim Herbert, First Republic Bank - Chairman & CEO [8]
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Who chose the music?
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Unidentified Participant [9]
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All right. I like that answer. Then the last one, if you do think they are a willing seller, when? 2013, '14 or '15 and beyond? Well, all right, maybe that Luminous deal pushed things back a little bit. Okay, thank you for the polling questions.
Let's move to Q&A. Maybe I will just start with one and then we can open up to the audience. Maybe I might need a hand with the mic. But Jim, maybe can you start with maybe an update in January on what you have seen kind of to date from a volume perspective. And there is some concern, not just with your business, but banks in general with the pullthrough of growth in December and whether or not -- I notice that you obviously have a unique model here, but just curious what you kind of have been seeing in the month of January?
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Jim Herbert, First Republic Bank - Chairman & CEO [10]
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Well, we obviously don't give out interim quarterly numbers, but we are satisfied. It has been okay. We saw the same thing I think most people saw. All kinds of transactions for various multiple reasons moved into the fourth quarter, particularly in California. Remember, we are California-based and California had a big tax change. Although most people did not realize it was retroactive, so it almost didn't matter when you acted, but people did anyway, and then anticipating the federal changes.
I would say the expected difference between the fourth quarter, which is usually our best quarter, and the first quarter, which is usually in fact our lowest quarter for loan volume, not necessarily for earnings, will be normal this year maybe. We would have thought it was going to be greater, but I am not sure it is going to turn out that way. The rates are still very attractive for refinancing and Brian, you might talk to your purchase loan volume. Is that on?
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Brian Smith, First Republic Bank - Senior Managing Director [11]
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We are seeing refinances to purchases roughly 60/40 and that is -- the purchase numbers are growing. Two years ago, it was probably 75/25 and even the refinances are an excellent way to acquisition new clients and when they come in through a refinance, we incent them with a checking account, we incent them with service. And I can think of several instances where we did a refinance for somebody a year ago and then their neighbor, their friend is the next -- he wants to talk to you and it builds. It is very accretive.
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Jim Herbert, First Republic Bank - Chairman & CEO [12]
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Cari, how about deposit flow and client base?
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Cari Rentas, First Republic Bank - District Manager [13]
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It is very much the same. We are acquiring clients one to the next and a relationship price on both sides of the business. So we incent people to work with us no matter what their need is and then we lead them to our colleagues. So we take a very team approach to the client acquisition and it benefits both sides of the balance sheet.
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Jim Herbert, First Republic Bank - Chairman & CEO [14]
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And the sense of volume is not diminished really?
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Cari Rentas, First Republic Bank - District Manager [15]
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No, not at all and as we enter what aren't new markets, but new areas in our existing markets as we follow our clients, which is what has led us from one place to the next, we are seeing the volume continue and additional volume walk into the offices.
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Unidentified Audience Member [16]
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With the increased tax burden in California, what is the risk that your high net worth clients, particularly as they get towards retirement, seek say a market where maybe you guys aren't present just to pick up a better tax regime?
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Jim Herbert, First Republic Bank - Chairman & CEO [17]
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Well, it is a real issue actually and in fact, we have already seen it. The question is what tips them over. We were at 10% before. Now we are at 13% more or less in California. Is that 3% the delta that tips them? Some people, it has. They have kind of had it; is the one that put them over, coupled with everything else. But we are already active in Jackson Hole. We have a lot of loans in Jackson Hole. We actually historically have been quite active in Las Vegas. We are not right now, but we do have some loans there and we have come to Palm Beach and quite frankly, one of the real drivers is our clients are down here for all kinds of reasons, including tax.
Particularly as a -- your allusion to the aging is obviously a big deal because the baby boomers are just beginning to retire and in the case of our client base, they have a substantial accumulated net worth. Not all of which has been taxed. The building they haven't sold yet, whatever, the company they are about to sell. And so I think it is going to play an increasing role.
We follow our clients. We have a lot of business in Vail, Hawaii, Las Vegas, Jackson Hole, Palm Beach. And so the question is how much do we have to follow them to keep share and if we are their bank, with electronic banking and ATMs free, rebated, that sort of thing, we probably don't have to go to Jackson Hole to follow the person from California to Jackson Hole, but there may be a lot -- there may be a critical mass there that would help us pick up new clients. That is what we are doing in Palm Beach. We are following our critical mass. We have critical mass in Palm Beach. I think this is going to be one of the fastest success offices we have ever had because we have a critical mass down here already.
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Unidentified Audience Member [18]
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Can you talk about possibly other markets? I am a little confused why you are not in the DC market. It seems to be the -- from home prices, to wealth, to law firms, lobbying firms, it seems to be the place to go.
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Jim Herbert, First Republic Bank - Chairman & CEO [19]
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Everybody is a lawyer. It is an obvious one actually and we have thought about it, but, you know, it is interesting, the average income in DC is high. The peaks and valleys are a little muted and the entrepreneurship, which is actually one of the bedrocks of our enterprise, is muted for all kinds of reasons.
The other thing is that there is a lot of turnover. It is not the most stable town out. There is a core that is very stable; I am not knocking DC in any way. And in fact, I lived in Virginia and I did business in DC, so I understand the town fairly well actually, but before the banking business. But there is just a lot of turnover and that is not necessarily the best place for us.
We function extremely well in the highly stable energized urban markets. The more vertical they are the better because the buzz happens best up and down the elevator, so to speak. LA, for instance, is very challenging for us. We've dug in and we've figured it out, but it took a long time because it is so horizontal. Washington is a little bit that way, government buildings withstanding.
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Unidentified Audience Member [20]
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(Inaudible - microphone inaccessible) M&A front for an opportunity where the management team and the culture stayed in the bank and you basically become -- similar to your Merrill Lynch agreement?
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Jim Herbert, First Republic Bank - Chairman & CEO [21]
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Well, having sold to Merrill, it is a little hard for me to say no. We were approached a lot of times and we had some alternatives even at that time other than Merrill, but Merrill made sense to us because their deal with us quite clearly was we will keep you separate, we want you to be our Tiffany's bank, take care of our best clients and do what you do also and take us to your clients.
If you think about it, that actually makes a lot of sense and they were an American icon. So why not? The price was very right, so the shareholders were very well taken care of and that is obviously the first issue. But then I have got two other constituents. I've got an employee base and I've got a client base and both of them fit very well with that too. I think we let five people go in that merger. And we lost no clients at all. In fact, we doubled inside of Merrill and BofA in three years. So not from their client base, just from nobody else home at the other banks. So it can work and that would've worked I believe actually, but you have to have the right culture. The culture is everything. This whole deal is culture.
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Unidentified Participant [22]
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On the QM front, as you understand it today, I know there is a lot of uncertainty still with it, but can you give us a sense for what you think the impact might be with your interest-only feature on about 40% of your loan book?
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Jim Herbert, First Republic Bank - Chairman & CEO [23]
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It is a very interesting question. We are not really sure. The question is, most of you are probably familiar with it, interest-only loans are not going to be qualified mortgages under the proposed rules from the Consumer Finance Protection Bureau. Making them disadvantaged both as to collectability possibly, although I'm not sure of that because there is an ability to pay test, which we more than meet in every case. Wouldn't make a loan if we didn't. But the question in the secondary market, acceptability of IOs and things of that nature.
I am actually cautiously optimistic. I think they made a mistake on this one and we wrote paper saying so, but it didn't obviously carry any weight. So we have sold packages of IOs very recently subsequent to the information coming out. Prices are fine, but I think it is early days yet and it is not a final rule yet. But then the capital requirements, we can sustain the capital requirements.
The flip side of it is I find myself wondering what competitors will do and they will either stay in the business, private banking sections of big players or they will go out. If they were to go out, it could be interesting.
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Unidentified Participant [24]
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And how might you tweak the product now?
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Jim Herbert, First Republic Bank - Chairman & CEO [25]
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Sorry?
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Unidentified Participant [26]
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How might you tweak the product if you have to?
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Jim Herbert, First Republic Bank - Chairman & CEO [27]
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Depending entirely on the competitive environment. That product is not of our making. That product is of the clients' desire and so we respond to their desire. The IO loan is a particularly good product for someone who has an unpredictable bonus stream and actually a vast majority -- well, a large percentage of our IO loans in fact make unusual principal payments along the way. The bonus comes in, they pay down. The bonus doesn't come in, they don't pay down. So it works very well and so -- and from my point of view, if I've got a really good credit paying me like clockwork, why would I want to make a new loan? I'd like to keep that one on the books.
So if you think about it logically, it is really the best kind of loan there is for a bank to make if you have a loan to value ratio and a credit that will see you through the peaks and troughs, which we appear to be able to find. So I don't know -- it is hard to call yet. It is too early.
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Unidentified Participant [28]
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Feel free if you guys have questions in the audience, just raise your hand. Maybe on the Luminous deal that closed just before year-end, can you give us maybe a sense for what you might be surprised about maybe both positively and negatively or what's --?
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Jim Herbert, First Republic Bank - Chairman & CEO [29]
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Well, I think positively we have been pleasantly surprised that not only have they not lost clients from the announcement of the acquisition, but they are still growing. So that is a litmus test of their relationship with their clients and the perception of First Republic as an acquirer or by their clients and we like that a lot. And they had, of course -- we had a got to get approval from a high percentage before we will close test in the deal and they met that rather handily.
And then I think the other side of it is the risk is always culture and the starter indicators are extremely good, but I think it takes a year to find out are they comfortable inside us, are we comfortable with them, are their clients meshing. The early signs on that are very good, people getting along very well, a very cooperative environment. They are intensely service-based like we are.
That is the first acquisition we have made in many years, maybe a decade, and we have probably looked at a lot of money managers. And the decision was based on culture, so I think we got that right. But that is still out. The jury is always out on culture for about a year. I think that is the risk factor. They have contracts; that is not the issue, but you can't make people come to work.
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Unidentified Participant [30]
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Okay.
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Jim Herbert, First Republic Bank - Chairman & CEO [31]
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Brian, have you had any exposure to them at this stage or is it --?
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Brian Smith, First Republic Bank - Senior Managing Director [32]
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No, not yet.
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Jim Herbert, First Republic Bank - Chairman & CEO [33]
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Not yet, really. They haven't gotten to the East yet.
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Unidentified Participant [34]
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Maybe on loan pricing, we have seen a backup in rates a little bit here on the long end at least. Just curious in what you are seeing -- whether or not you've seen some stabilization in pricing. I think you are doing the 1-to-4 family stuff closer to the low 3%s. I think your portfolio yield is 376 right now. Just curious what you are seeing on loan pricing.
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Jim Herbert, First Republic Bank - Chairman & CEO [35]
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And Brian, you can confirm this for me. It is pretty stable, isn't it?
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Brian Smith, First Republic Bank - Senior Managing Director [36]
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Rates have been very stable even with the uptick of the 10-year, our pricing has been relatively flat.
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Jim Herbert, First Republic Bank - Chairman & CEO [37]
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It stopped going down, which I think is the most important fact probably in that response so far. The steepening of the curve, which is fairly modest anyway, hasn't really resulted in any uptick, that is for sure. But it stopped it from declining in the 5 and 7-year hybrids, which is good.
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Unidentified Participant [38]
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On the --.
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Jim Herbert, First Republic Bank - Chairman & CEO [39]
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If I could add to that for a second, just for perspective, I got a question in a one-on-one session a little while ago. Don't hold me to this exactly, but, as a practical matter, if the curve were about 50 basis points steeper from 2 to 10, we would be operating almost at perfection. Lower rates very stimulative for real estate activity, a lot of volume and about 50 basis points more on a 5/1 or a 7/1 and that is about exactly where you would like to be given the cost of funds is driven more or less by the short end. We are about 50% checking now anyway. And so everybody thinks rates are terribly low and in fact, they are within about 50 to maybe 75 at the most of slope of yield curve to perfection for our business. I don't want them to go lower, but we are not dying at this level by any means. And we would love the ability to acquire clients.
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Unidentified Participant [40]
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Any other questions in the audience? Maybe just one more as it relates to the muni portfolio, if that is all right. Part of the reason why you have -- I think your margin has held up relatively well is probably because you have exposure to munis and the duration there I think is probably seven plus years, so the degradation in rates there isn't as bad. But just curious, that hasn't posed a problem being a larger concentration in your securities portfolio. I guess what is your view on how you might diversify that, if at all?
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Jim Herbert, First Republic Bank - Chairman & CEO [41]
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Well, we established the position relatively rapidly when we were coming out of Merrill because we had cash -- BofA -- we had cash and we didn't have any investment portfolio and we have had traditionally for many, many couple decades a moderate kind of 5% of balance sheet muni portfolio held in the held to maturity category.
The practical duration on that portfolio is probably between 9 and 10 years, maybe 8 to 10 years, but obviously as the portfolio grows and gains age of its own, that duration can come down a bit. The add rate to the portfolio is slower now than it was when we first came out and so I think that portfolio has probably almost peaked as its percentage of total that we will operate at.
We have also added some shorter-term CMBS at the senior level. We like it, we understand it, we analyze the deals as if we were making loans and we have added some CLOs recently again at the senior level for diversification. But we are not piling into investments. It is getting overheated.
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Unidentified Participant [42]
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I think we will leave it there.
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Jim Herbert, First Republic Bank - Chairman & CEO [43]
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Thank you all very much. I appreciate it.
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