First Republic Bank Investor Day - Day 2

Nov 02, 2016 AM EDT
FRC - First Republic Bank
First Republic Bank Investor Day - Day 2
Nov 02, 2016 / 03:00PM GMT 

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Corporate Participants
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   *  Jim Herbert
      First Republic Bank - Chairman & CEO
   *  Shannon Houston
      First Republic Bank - VP, Director of IR
   *  Mollie Richardson
      First Republic Bank - SVP, Chief Administrative Officer
   *  Rosana Han
      First Republic Bank - SVP & Head of Community Reinvestment Act
   *  Margaret Mak
      First Republic Bank - Executive Director of Preferred Banking
   *  Kimberley Hutchinson
      First Republic Bank - Executive MD, Relationship Manager
   *  Chris Coleman
      First Republic Bank - SVP, Head of Business Banking
   *  Todd Rassiger
      First Republic Bank - Senior MD-Business Banking
   *  Miranda Holmes
      First Republic Bank - MD, Financial Planner
   *  Bob Thornton
      First Republic Bank - EVP, President of Private Wealth Management
   *  Jon Goldstein
      First Republic Bank - MD, Portfolio Manager
   *  Steve Soja
      First Republic Bank - MD, Portfolio Manager
   *  Catherine Evans
      First Republic Bank - Senior MD, Portfolio Manager
   *  Hafize Gaye Erkan
      First Republic Bank - Chief Investment Officer, Chief Deposit Officer
   *  Mike Selfridge
      First Republic Bank - SEVP, Chief Banking Officer
   *  Scott Dufresne
      First Republic Bank - Regional MD-Boston
   *  Mike Roffler
      First Republic Bank - EVP, CFO
   *  Gabriel Robles
      First Republic Bank - MD, Relationship Manager
   *  Jason Bender
      First Republic Bank - EVP, COO
   *  Ani Vartanian Boladian
      Rubicon Point Partners - Managing Partner
   *  Brewster Ely
      Town School for Boys - Retired, Head of School
   *  Brigette Lau
      Social Capital - Partner
   *  Steve Lefkovits
      Joshua Tree Consulting - President & CEO

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Presentation
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 Shannon Houston,  First Republic Bank - VP, Director of IR   [1]
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 Hi. Good morning, everyone. Welcome back. Thank you. Welcome back to First Republic's Investor Day, our second session here. Before we get started just a couple of quick comments. Please note that we may make forward-looking statements during this event that are subject to risks, uncertainties and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliation of non-GAAP financial measures, please see the Bank's FDIC filings and reports all available on the Bank's website.

 Additionally, this event is being simultaneously audio webcast and a recording will be made available for replay following through the Bank's website. These sessions are not confidential and participants should have no expectation of privacy. Your participation in this event implies your consent to the Bank to so record these sessions for use in the webcast and public website posting. And with that, we're going to play a short video to get started and then we'll turn it over to Jim Herbert, Chairman and CEO. Thank you.

 (video playing)



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [2]
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 Good morning, everybody. Hope you had a good night. I wanted to talk for just a couple of minutes in general and I have one or two slides. But hope you enjoyed yesterday and you'll find today equally informative hopefully.

 I want to just make a couple of -- talk on a couple of subjects for a second. Management depth, you had on display yesterday, I think a great deal of the management depth of the Company, you will have more today. Let me make a point, over 30 years or so, Kath and I led the enterprise together and one of the things that allowed us to do that hopefully successfully was that we were on the line basically every day in every market. I think from some of the titles are not self-evident of something we did about a year ago. Bob Thornton, who runs wealth management also is responsible for the banking in Los Angeles region and in Palm Beach. He has had direct reportees he has headed for a year. So he's out with clients on the line working on loans, but he runs wealth management.

 Gaye Erkan, has in addition to our other responsibilities, Portland and Boston reporting to her. So Scott Dufresne, who you saw up here yesterday reports into Gaye. And she has been out of the market. Jason Bender, Chief Operating Officer also has Southern California reporting to him. So he's been on the line with clients doing lending. Mike Selfridge, has all of Northern California, which about 45% of the Bank and business banking, which is half our deposits reporting to him, in addition to his other duties. And then Mollie Richardson rather has legal lending, which is something I'm going to talk about more here in a moment. So we have direct line responsibility in banking going to five or six key executives. That's been going on for a year. We did that in order to make it clear that they had to understand the other pieces of the business, so to speak, wherever they were coming from. In the core of the business, in the place where the rubber meets the road is out with the clients in the markets every day, which I still do all the time as well. So that's I think a very important aspect of the Bank. We do not have siloed (inaudible) leaders. We have people that do business every day and by the way lead.

 You've seen the other thing I think this slide in last couple of days, and particularly last night although I sorry it wasn't going to the webcast was, a group of very dedicated, charged up, culturally in sync client facing folks. We have a deep and wide culture. And I think you saw that, you'll see more of it today. Culture, we believe culture and team work win. They trump strategy, they trump everything in this business. It's a service business. The only thing we can deliver is that. Products are products, everybody has products. There is not a financial service product that has any protection whatsoever. The one that does have protection is service and trust. Those are the products that have protection, everything else is in the public domain.

 I guess I'd ask you to think about a simple question. You met some of our bankers in last day or so. Would you like them to be your banker? Would you like them to be worrying about your financial condition when they get up this morning? I use them, I love it. I sleep better because they're not sleeping, they are worrying about me. So, think about it. That's what brings people here, that's what keeps people here, clients as well as people.

 We're in great markets. This is a fundamental tenant, we got lucky. The markets are also connected. The bi-coastal markets that we operate in actually know each other very well. LA-New York, entertainment, investments, import, export all the things. San Francisco-New york, San Francisco-Boston, Boston-New York, LA-San Francisco, the markets are connected. Dallas-New York, Dallas-San Francisco not the same connectivity. Great markets, but not the same connectivity. So it isn't just that there are other good markets that we're not in, it's that there are other good markets that were not in, they don't connect quite the same way. Chicago-San Francisco connection is quite modest. Chicago is a great market. So we have also thought about the connectivity because our brand carries word of mouth. Those who travel carry the brand, they speak about it.

 Ken Rosen made a couple of points, many actually in his presentation. But one of them was about urbanization or suburbanization. What we're experiencing and I think most businesses operate in the urban markets not just coastal is that, in fact the young folks are being drawn to the urban activity like moths to light. There's so much going on, it's so exciting, the arts, the culture, but the activity level, the job opportunity is obviously the most important of all actually. But on the other side of the age range, the older folks that have done well and can afford the cities and like them are not leaving as much, or they're keeping that footholds. It's happening in New York, it's happening in Boston, it's happening here in San Francisco and in fact it's extremely downtown. And so the clients that we have in these cities, in fact, are staying. And they are living longer and they're more active longer. So in fact, we have a major demographic flow towards our business model and it's working very well.

 Let me talk about the other in for a second. We have a part of the Bank called Eagle Lending. It basically grew out of, and still does, kind of a scored business lending product. It was originally intended to assist the offices to be able to lend and respond to the doctor's practice that would be delighted to come over $100,000 line of credit, they needed it quickly, so we came up with a score of business product, about 10 years ago, 12 years ago. I was opposed to it by the way, but it worked. And David made it work and the team it work. And Patrick Macken runs this area of the Bank.

 And that has gone along, it's done well, it's a nice piece. Then we morphed it into two things. On the right of the slides here, we morphed it into the professional loan program. And the professional loan program is a program for young professionals and PE firms, venture capital firms, law firms, accounting firms, that have been given the opportunity to buy into the firm or to buy into the funds.

 Now step back, you're running a PE firm, you've got 100 employees, 200 employees. Who do you choose to say you can buy into the funds? Not the person you're about to let go. You choose the best of the best. They're going to be your next partners. So what we do is, we come in and we bank them to make the investment. 60% advance, 70% advance, 80% if there is a guarantee, their personal guarantees on all of it full recourse and collateralized and often tri-party agreements are guaranteed by the firm. That has been very successful. I will show you some stats here in a second.

 And then the other one is Eagle Gold All-in-One, the all in one is we call it, which is a student loan refinancing. We are very aware, as everybody is, of the student loan debt problem. We think it ought to be solved. We can do a little bit to help that. So we basically have put forth a program in our markets only, geographically, that refinances $60,000 and above size student lending. And we've put it into -- we're very competitive, but very high standards, I will show you those in a minute. And basically we are effectively the best deal in the market-bar-none. No prepayment penalty. In fact, we offer a 2% rebate or incentive to prepay within the first couple of years. We want them to pay it off, we want to help them pay it off. And that has worked out very well. There are some stats on these two programs.

 When we take the professional loan program first, loans outstanding $0.5 billion. Average loan outstandings, couple of hundred thousand. Average age of borrower, 40. This is where I am really going. Average education by the way is probably a graduate degree. FICO score, 760, total number of households get 2,200 of these. By the way, that includes a lot that have been paid off already and does not include a lots that have been paid off already as current outstanding loans. So probably 3,000 households roughly as an estimate. All in one, $665 million; average loan, $134,000, average age of borrowing, this is at the time of the loans were made in this case, 32. FICO score 767. Number of households, 4,900. We started this a year and three quarters ago. And David, how many losses? Zero losses. How many delinquencies at 9/30? Zero in both programs. Zero, this is our next generation of clients. Take those numbers and multiplying times five years we currently have about 48,000 borrowing clients in the Bank, you can see meaningful shift coming.

 With that let me turn it over to the next panel. Thank you very much.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [3]
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 Good morning. I'm Mollie Richardson, Chief Administrative Officer at First Republic. Yesterday, I had the opportunity to lead a panel discussion on culture and talent at the Bank and this morning, we are going to speak on our initiatives around community engagements. But before we do so, I'm going to have my colleagues who are sharing the stage with me this morning introduce themselves. They can say their names, the role at the Bank and give a description of what you do and how long you've been at First Republic.

 Rosana can we start with you?



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 Rosana Han,  First Republic Bank - SVP & Head of Community Reinvestment Act   [4]
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 Good morning. My name is Rosana Han, I'm Senior VP and Head of Community Reinvestment at First Republic. In this capacity, I oversee the development and implementation of the Bank's community reinvestment strategies. I joined First Republic in 2010. So I've been with the Bank for over six years now. Prior to First Republic, I was the Director of Community Reinvestment at United Commercial Bank for 17 years.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [5]
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 Thank you. Kimberley?



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 Kimberley Hutchinson,  First Republic Bank - Executive MD, Relationship Manager   [6]
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 Hi. My name is Kimberley Hutchinson, I have been at the Bank for 23 years. I am presently Executive Managing Director, Relationship Manager. So I bring in business. I started with community reinvestment lending and first time homebuyers 23 years ago and that's evolved into doing lending in that same space for commercial real estate residential and apartment buildings.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [7]
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 Gabriel?



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 Gabriel Robles,  First Republic Bank - MD, Relationship Manager   [8]
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 Hi. My name is Gabriel Robles. And I am a Relationship Manager focusing on CRE lending primarily in the underserved communities. I have been with FRB for three years now. I have been in banking for 25 years and in a very similar capacity (inaudible). I met with in our firsthand banking many years ago.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [9]
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 Okay. Thank you. Community engagement has always been a part of what we do at First Republic and is a key priority for the leadership team and all of our colleagues. Our presentation today will cover four core areas of our community engagement initiatives through lending, investment, service and our new Community Advisory Board. Rosana Han was recently honored at the San Francisco Housing Development Corporation for her two decades of work in underserved communities. And I'm going to now turn the presentation over to her to share her role and experience as well as provide an overview of our community engagement effort. Rosana?



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 Rosana Han,  First Republic Bank - SVP & Head of Community Reinvestment Act   [10]
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 Thank you, Mollie. At First Republic we're dedicated to creating opportunities for people so they can achieve their potential and improve their lives. This expands to all we do and it's reflected in our community engagement efforts. We are very appreciative of our partners in this space, including non-profit organizations and government agencies such as the San Francisco Mayor's office of housing through the first time homebuyers program.

 Let me begin by quickly touching upon our lending in low to moderate income areas in our footprint. Over 20% of our residential home loans were made in low to moderate income areas in 2015 and 25% of our small business loans were made in those areas last year. Through dedicated effort we've also seen significant growth in our single-family residential lending to lower and moderate income borrowers at 14.6% for 2015. Our efforts in lending, as well as investment and service has resulted in a consistent satisfactory Community Reinvestment Act leading over the last 25 years. Mollie will cover the investment and service activities in more detail later on in this presentation.

 In addition to small business lending, we also wanted to note that service to non-profit organizations and schools is the core competency of our business banking team. In fact 36% of the business banking loan portfolio were made to this segment. You'll hear more about this from our business banking team later today. In addition to residential and small business lending, First Republic has originated over 1400 community development loans totaling over $3 billion. These loans have helped to stabilize and revitalize underserved communities throughout the Bank's footprint.

 Let me turn to Kimberley to share a little bit about her book of business and how we create customized solutions for our clients in the community development lending space.



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 Kimberley Hutchinson,  First Republic Bank - Executive MD, Relationship Manager   [11]
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 Thank you. My book of business consists of, like I mentioned before, residential, commercial real estate and apartment building lending. And when it comes to community reinvest and lending in low to moderate income census tract, we really do it exactly the same way that we do it all over the Bank. It's each individual understanding their story and their balance sheet and then looking at the individual investment. So it's exactly the same way that we would lend in anyway.

 So basically, what I think differentiates us from our competition and has enabled us to grow our business, is we go out and we meet the clients. And especially when there is early client to the bank we bring a member of our credit committee with and we get to know their story and their objective and their credit and we see the property. And sometimes we visit the portfolio just to see how they operate their business. And by that way we develop a bond between them and our credit committee and we're able to make better credit decisions and build our business that way.

 In addition to that we can offer pricing that's advantaged and low to moderate consensus tracks, which has been very helpful in growing that business. And then what happened is the clients come in and we then -- they get to know -- we get to know them and they get to know us so well that we also bring over their checking and their personal loans and wealth management in the trust. Then they never want to leave, hopefully, and we've done that over many, many years successfully. And I think that simple approach of getting to know the clients first, their story and then their investments has been mutually beneficial to both the client of the Bank.



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 Rosana Han,  First Republic Bank - SVP & Head of Community Reinvestment Act   [12]
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 Thank you, Kimberley. As we continue to expand our efforts in community engagement, we are also adding talent to our team. We're particularly pleased with the recent hiring of Lena Robinson, as our Director of Community Development. Lena join us from the Federal Reserve Bank of San Francisco and she is one of the most respected professionals in the community development space and we are very excited to have onboard. So with that, let me now turn back to Mollie to talk a little bit about our Eagle Community Home Loan Program.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [13]
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 Thanks, Rosana. At the end of last year we launched the Eagle community home loan program which offers very competitive rates along with other benefits and First Republic's exceptional client service. While this program is utilized across the enterprise, we do have a dedicated team of professionals who are expert lenders in this space. I am going to turn to you Gabriel here.

 So, Gabriel, how would you share, how you have built your network and how our efforts with community engagement overall are resonating with potential clients?



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 Gabriel Robles,  First Republic Bank - MD, Relationship Manager   [14]
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 Over the last 25 years I have built a very strong client base. I've build relations with local real estate professionals, local non-profits, local housing organizations as well. But here at FRB I count on really good support from our marketing department, it's great, and my efforts in the investor community, a very experienced CRE department and a very smooth and effective loan process. Having the programs in place just like the Eagle community is also key. This Eagle community program done quite a bit upon over the past 11 months, I guess since we started the program and it's really helped my efforts tremendously. Clients have been able to save hundreds, really just with that low rate refinancing, getting the PMI or private mortgage insurance, saving hundreds for families that are of more modest income is life-changing for them. I mean it's tremendous. So to me I see them taking those savings and doing things that they couldn't do before, save for the kids' college, invest in things they never could have done before. It's tremendous and I get to experience that on a daily basis.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [15]
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 So, we talk a lot about culture at First Republic in the importance of culture. Gabriel how would you say that our service focused approach help differentiate us from the competition?



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 Gabriel Robles,  First Republic Bank - MD, Relationship Manager   [16]
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 I love the fact that here my client get treated the same. Whether they are attorneys, doctors, gardeners, teachers, CEOs they all get that private banking experience no matter who they are. In fact, a lot of my clients they were very shy when they approach a bank, intimidated. They walk into a big branch like ours and they always want to turn back. The key for us is to listen and understand what their needs are, right. Take the extra time, get to know them. Without getting to know them you really can't offer the right solution. Offering the right solution and then delivering, that nets me referrals from their family and their friends and that's I think 80% at very least and my business is just referrals from their friends and family.

 And just on more of a personal note, I grew up in an underserved community myself and my parents were immigrants. They came here with two goals become owners and get their kids through college and thank goodness they accomplished both of them. So, in my current role and my capacity, I get to help people with similar goals and that is what I love about what I do and I'm passionate about what we do.



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 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [17]
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 In addition to lending, investments and service are also core to our community engagement efforts. As of June 30 we have committed just over $1.3 billion to low-income housing tax credit investments, which have helped to finance the development of over 70,000 affordable low-income rental units. Turning to service, First Republic offers two paid days a year to every member of the team to serve a community organization of his or her choice. Our colleagues are committed to community service, which provides a great chance to help others, fosters teamwork and quite simply it's just fun.

 We are delighted that since January of 2016 first republic employees have given nearly 10,000 service hours. Lastly just last month, we established a community Advisory Board, with the objective to further strengthen fair lending and community reinvestment act programs at First Republic. We are delighted to have community leaders provide us with strategic guidance on affordable housing, small business and economic developments and financial empowerment initiative. We recognize that affordability in our markets is a challenge and we aim to serve our communities, because it's good business and simply the right thing to do.

 So, with that I really would like to thank Rosana, Kimberley and Gabriel for their time today and joining me here with you. And as we close, we would like to show a quick video on our community engagement and volunteer efforts, before we transition to our next presentation. Thank you so much.

 (video playing)



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [18]
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 Good morning, everyone. I'm delighted to be here today with two extraordinary client service professionals and prominent leaders of First Republic, Margaret Mak and Scott Dufresne. Margaret and Scott would you introduce yourself?



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 Margaret Mak,  First Republic Bank - Executive Director of Preferred Banking   [19]
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 I'm Margaret Mak. I have been with the Bank for over 30 years, started in branch banking, then did preferred banking and now I do relationship management for individuals and the businesses.



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 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [20]
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 Good morning. You may remember from yesterday. My name is Scott Dufresne, I am the regional Managing Director of our Boston business. I joined the Bank in 1993, down in Southern California. And as you heard Jim say earlier this morning, I'm a true player coach. I deal with clients every day in addition to leading our Boston business. Two minutes of background on me. When I joined the Bank in 1993, we had three relationship officers in Southern California in the lending side. It was me, Mary Deckebach who you saw in the video yesterday, our RMD in Los Angeles today and one other.

 And in addition to working with clients, I take great pride in being a builder. And part of what I do every day is think how can we grow our team as the player coach that I do. So, our Southern California business has grown dramatically and as you've heard before our Boston business which started in 2006 we've had great success. And in addition to the pride take with working with clients, I take great pride in what we've created in that marketplace with a great deal of help from a number of people in the Bank. It's truly a team effort as you've heard about collaboration for last day -- yesterday and today.



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [21]
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 Thank you for joining us today. In this session. Margaret, Scott and I will focus on deposits and opportunities ahead. Deposits are the backbone of First Republic. Deposits are key to long-term relationship because it's one banking service that provides the most regular and consistent contact with our clients, which in turn leads to deep-lasting relationships. After all history shows the more our clients interact with us, the more transactions they have, the higher the net promoter score, a measure of our client satisfaction and loyalty.

 Furthermore, deposits are the most common client touch point at the Bank. Over 90% of our First Republic client households have a deposit relationship with us. The strong growth in deposits provides funding not only for our loan portfolio, but also for our securities portfolio. As you know, this has been a special beneficial as we were building our on-balance sheet liquid portfolio, increasing our high quality liquid assets to at least 12% of average total assets by this year-end. In addition to the strong growth deposits as a low rate funding source creates an enormous value for the enterprise overall.

 With that, let's take a look at the growth of our deposits over time. As you know, consistency is our goal across the board, particularly when it comes in growing deposits. As you can see on this chart, strong year-over-year growth in deposits, a 21% compounded annual growth rate over the past 20 years. And consistent across various rate environments and macroeconomic events. And our focus on consistent and stable deposit growth has also resulted in a significant victory of our FHLB, Federal Home Loan Bank, advances and borrowings over time. Deposits represented 75% of our total fundings by end of year 2000 versus now almost 90% of our total funding replacing a significant portion of FHLB borrowings with a much lower rate, but more importantly with a relationship base and stable funding source.

 Over the same time frame, checking has increased from 11% of our total deposits to 61% today as of 9/30. Well, in case you're wondering how does this happen, let me just turn to Margaret Mak. Margaret, in the mid-1990s I believe, Jim asked you to establish preferred banking at First Republic. Could you please share with us the evolution of Preferred Banking and your role in it.



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 Margaret Mak,  First Republic Bank - Executive Director of Preferred Banking   [22]
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 Okay. Glad to. So what is preferred banking? It starts with clients asking me to do more than the CDL loans. 30 years ago when I first started, our clients on the deposit side were basically CD biased, so they wanted a CD with high interest rates. At that time CD rates were 10%. So clients want an interest check every month. I don't know whether any of you remember an interest check, but that's what they used to get. But on lending deposit clients begin to ask us to do more with them. In 1999, in order to be the one-stop bank for our clients, we started preferred banking. We had a team of deposits experts who could do anything from converting accounts to cash management. We took care of the clients' day-to-day needs so they do not have to. This was the start of true relationship banking.



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [23]
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 Thank you, Margaret. With that, let's take a look at the diversification of our deposits. First by client type, pretty even between consumer deposits and business deposits. Turning to channel, preferred banking represents 57% of our deposits. These deposits are generally sourced by our relationship managers like Scott and our preferred bankers like Margaret working together as a united team. Another strong contributor to our deposit franchise is our preferred banking offices, our branches, a strong retail presence supported by a network of 70 preferred banking offices now representing about a third of our deposit growth sources. And Wealth Management sweep deposits now grew nicely now at 9% of our total deposits.

 In terms of geography, we are very pleased with the diversification of our deposits across our footprints. With San Francisco representing now only 43% of our deposit base.

 Let's talk about the opportunities in terms of the deposit gathering in front of us. Let's start with wealth management. Private wealth management have been a great contributor, a growing contributor to our deposit franchise in two respects. First, getting a trial from our wealth management client households to try yourself on deposit services. And second, through wealth management sweep deposits.

 To start with the first, the number of wealth management households with a deposit relationship increased 13% per annum over the past two years. Yet, we have a great opportunity in front of us. Only 48% of our wealth management households have a deposit relationships with First Republic and yet everyone has a deposit accounts on wealth. And wealth management sweep deposits are now 9% of total deposits growing nicely from the 6% at the end of 2010. We are very pleased with the diversity -- diversification and the stability, as well as the countercyclical nature of these balances and Bob will talk about sweep deposits in more detail shortly.

 Now let me turn to Scott Dufresne to speak about another opportunity in front of us as we continue to serve our nonprofit clients which in turn serve our communities.



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 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [24]
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 Thank you, Gaye. I'm going to speak briefly about our nonprofit business, but the next panel that's going to follow me Todd Rassiger, one of my teammates in Boston who is going to go into a bit of a deep dive on our nonprofit lending business as well. But as you know, we've been in the nonprofit banking business originally starting in the Bay Area and we've taken it to all of our markets and we've had very good growth on this deposit side. There is a slide here that you'll see that our deposits in the nonprofit space has grown from one $1.6 billion to $2 billion of deposits at the end of September, 2016. We've had good growth there. We've also had individual growth bringing in new organizations. This is a specialty -- a vertical specialty in the bank where we're now well known for this and our reputation precedes us every day, helps us to open doors. In addition to doing this nationally, we've had success originally in the Bay Area, Southern California, New York. We also took it to Boston, which I'm going to give you a brief overview of some of the nonprofits that we have in our Boston market that I'm extremely proud of.

 We started our nonprofit business in Boston, approximately five years ago and we tend to bank local nonprofits and the issue was we're after two things. One, the institutions are wonderful institutions and they have fantastic boards that we also look to bank the individuals. So parlaying off of our team with experience in the Bay Area and New York, we went after a number of independent schools in the Metro Boston area. There was a collection of schools known as the Independent School League. There is 16 that make up this collection. In the last five years, we brought in 11 of these schools. So we currently bank 11 of the 16 independent schools in the Metro Boston area. And when we say bank them, it's not a money market account and they hypothetically bank somewhere else. This is true. They did a cash management of the school, as well as lending needs that they might have building out to dormitories or a new gym that's sort of thing. That's something we're extremely proud of. It's not just the school but it's the board of trustees that we also reach out to as well. And as the reputation has grown, we've had other clients that were on a board of a prospective school that we wanted. We reached out to the board member, we asked for an introduction, and we've had great success there.

 In addition to the schools, needless to say, Boston in the City dates back a long, long period of time. Okay. This is not something that was created in the last 50 years. In addition to the schools, we have two museums that we bank. I did a little research this morning. One of these museums was formed in 1799, okay. It was not easy for them to make the decision to leave their existing bank that they were with for a number of years and come to First Republic. What was it, it was people, it was service, it was an expertise in the space.

 There was another museum actually downtown Boston that we chased almost from the time we opened the doors, and we couldn't quite land them and everything, is about timing and we recently brought in this museum in the last six months. Todd worked on that case, something we're extremely proud of. This museum started in 1903. It is a who's who of who we have. But again it's not just the institution, it's the people behind it as we look at the Bank. So it's something we're extremely proud of. It's a little bit of a Boston tidbit, but there is every one of those stories in New York, Los Angeles and San Francisco as well.



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [25]
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 Thank you very much, Scott. We have now highlighted only if a few opportunities in front of us for low rate stable deposits through getting a trial from our wealth management on the relationship, through wealth management safe deposits and through serving our nonprofit organizations. So as our deposit gathering is now firing on all cylinders and as you may remember 93% of all of our households have a deposit relationship with us, it is really important to continue to provide efficiency and productivity to all of our colleagues in the client-facing roles to enable them to do more of what they do best, provide best-in-class service to our clients. With that we have been added for the last couple of years and we have an Eagle intelligence support program.

 In case you're wondering what an Eagle intelligence support program is Eagle intelligence support team provides data leverages, data analytics and technology to provide not only past or snapshot data on your existing or prospective clients, but also anticipatory analytics. So let me give you, given the looks in the audience, so let me give you field tangible examples of that.

 Eagle intelligence support team just launched three services to our colleagues internally. The first one is the Eagle TearSheet. What Eagle TearSheet is, it's just a two-page summary on your prospective clients who was a referral from -- likely to be a referral from one of our existing clients and you're about to go on meeting. Wouldn't be nice to have a neat two-page summary about the background of the prospective clients, the company, the nonprofits, the boards, the key connections that they have, pulling data publicly available data, including social media, pulling data and information from 10 to 15 different data sources and putting it at Margaret's and Scott's fingertips?

 Eagle Miner, as the name implies, mines your client database and reminds you, because time is the constraint for everyone here in this room, reminds you of the clients, who have upcoming 10-year anniversaries with First Republic, clients with birthdays, loans coming due, maturing due, or CDs maturing, that you may want to have a suitable conversation with the client. And last but not least, we are piloting this one, Eagle Connect and Scott and Margaret have been wonderful feedback providers. It's the tool to visualize your client network. While Margaret and Scott are serving a number of clients at any given time, it's like the LinkedIn, a web less network that shows and depicts and also allows you to update real time the relationship, the breadth and the depth of referrals and so on.

 Now while we are really excited about all these technologies advancements and Eagle intelligence, we continue to believe that high tech cannot replace high touch. Technology, however, can provide leverage and support to the high touch -- human touch service model, which is what First Republic is known for.

 With that, I would like to turn it back to Margaret and Scott who are the epitome of client service and the human touch of First Republic.

 Margaret and Scott, how do you partner together to provide the best-in-class service to our clients and at the end of the day what wins the client? Over to you.



------------------------------
 Margaret Mak,  First Republic Bank - Executive Director of Preferred Banking   [26]
------------------------------


 This is my favorite part. I mean this is actually terrific because not only do we work collaboratively with our business bankers, our wealth management, people, we work collaboratively together, kind of like each other. We do.



------------------------------
 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [27]
------------------------------


 Yes, we do.



------------------------------
 Margaret Mak,  First Republic Bank - Executive Director of Preferred Banking   [28]
------------------------------


 We do. I kind of -- that's my view of 30 years and I like who I work with. It's kind of nice. It's family. And our clients feel that. So here is the good story (inaudible) me working with Scott. Got a call from a client who is based in New York. This client is really, really big and he asked us to do a loan. And I knew that he wanted somebody in front of him. So this is a client that really wanted somebody to sit down with and talk about a very complicated financial situation. He wanted to buy something very, very big and he needed a loan on one of his properties. So I knew that Scott is going to be there in person in New York, so I called him and said, Scott, would you please help me.



------------------------------
 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [29]
------------------------------


 So I got the phone call from Margaret, as I often do, and she said, I hear you're in New York, would you happen to have some free time, I have a significant client of mine. And needless to say if you think there is pressure working with a client when it's working with one of Margaret's clients it even adds to that. So when Margaret asked I answered and I went off and met with our clients. So that role was part of the collaboration, and I know you've heard a lot about this. But it's truly how we operate and how we team. So it is Margaret's client and it remains Margaret's client. And one point I'll add is when you have met the other relationship managers here and last night, there's no geographical bounds. So hypothetically just because Margaret is based in San Franscisco that doesn't mean she only works with San Franscisco clients. This happens to be a New York client, okay. So Margaret asked me to meet with him, I met with him, I handled the transaction piece as part of the team and the relationship stays with Margaret. And that's something we do on a regular basis and everyone does that in the Bank. It's actually quite, quite common.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [30]
------------------------------
 Thank you. Finally I would like thank my colleagues and everyone in the audience. We will now move to business banking and I'll remind you that we will be more than happy to take all your questions during the Q&A session at the end of this morning. Thank you.



------------------------------
 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [31]
------------------------------
 Thank you.



------------------------------
 Margaret Mak,  First Republic Bank - Executive Director of Preferred Banking   [32]
------------------------------
 Thank you.

 (video playing)



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [33]
------------------------------


 Good morning again. Great to see everybody. It's my pleasure to talk to you about business banking and I'm joined by Chris and Todd. We'd like to talk to you about the importance of business banking to the franchise, how we're winning opportunities and serving clients and then what our opportunities are that lie ahead for business banking.

 Before we get started though, I want to ask Chris and Todd to briefly introduce themselves.



------------------------------
 Chris Coleman,  First Republic Bank - SVP, Head of Business Banking   [34]
------------------------------


 Thanks, Mike. I'm Chris Coleman, Head of Business Banking. I've been with the bank nine years. It's great to see many of you again. Thank you.



------------------------------
 Todd Rassiger,  First Republic Bank - Senior MD-Business Banking   [35]
------------------------------


 And I'm Todd Rassiger, Head of East Coast Business Banking. I have been with the bank for five years.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [36]
------------------------------


 Thank you both. So let me start with where we've come from as is it relates to business banking. The beginnings of business banking actually started in about 1999 and what happened was our clients that we're getting that extraordinary service on the personal side then asked us if we could serve the businesses that they owned or influenced. So we hired a banker around that time, a gentleman named [Scott McRae] who is still with us today. He did his first business banking loan, I think it was about $50,000 and that was the beginnings of an incredible journey that you'll see here as it relates to First Republic.

 Over time, we continue to invest and refine the strategy and as you'll see that led us to where we are today, which is, we focus on nine roughly nine industries. And so we have hired and invested again in bankers that have very specific expertise in these nine industries. And again, if you go to the foundation of what this is all about it's following the satisfied clients to the businesses that they own or influence. So today we're quite proud. Business banking represents about 14% of our total loans in these nine industries. The two largest industries we serve, private equity investor capital and schools and non-profits. But we also have great bankers in the areas of wine, professional services, entertainment, aviation and investment management firms.

 With that if you look at the portfolio overall, the average loan size is about $2.9 billion and like everything at First Republic credit is really the pillar, credit quality. So we have originated about $24 billion worth of loans since the inception in 1999.

 Net charge-offs, about 35 basis points on that number. So roughly 2 basis points per year, which is quite exceptional and again very focused in what we do, great quality, great credit quality, and then the opportunity as it was mentioned earlier to look at banking on the personal side, the associates, the principles, the partners, the trustees, the boards of directors. And that's really what we're all about as it relates to business banking.

 The great opportunity has been deposits, and Chris will touch on them, but if you look at the impact this has had on the deposit franchise for every dollar we lend out in business banking, we get about $4.2 back in deposits, which is quite substantial. Chris, why don't I turn it to you to talk more about deposits and how we are winning business?



------------------------------
 Chris Coleman,  First Republic Bank - SVP, Head of Business Banking   [37]
------------------------------
 So as referenced by Gaye in just the prior presentation, business deposits are a big component of what the Bank has overall. You see just over half of our business deposits. As much as the loan, the business loan is often the lead product when talking to a prospective client. We have many, many deposit-only clients and in an integrated fashion we work with the branch offices, the PBOs and the preferred bankers and business bankers and RMs and including, in fact, wealth management, all are driving more and more deposits in an integrated fashion.

 Mike mentioned the 4 to 1 ratio deposits alone, quite compelling for the Bank as a source of funding and that overall business deposit cost of funds is just 6 basis points as of 9/30. Importantly, these deposits are diverse across industries and geographically. And that provides a level of stability and continued relationship building for personal banking.

 With that, Mike, we will go to the slide. A little bit about our competitive position with respect to business banking. We like to think we have the best of both worlds of a small bank and large bank. And being modestly sized, we can provide the customized solutions and service model that a lot of small community banks can provide. And, yes, we have the breadth of the product offering for the most complex needs of our clients.

 Our industry expertise is a leading competitive advantage for both risk management and growth. Mike showed you the chart of the key industries we are focused on. This means we have bankers, such as Todd, deeply knowledgeable about nonprofits, others and private equity, the wine lending. We know where to pick our spots. The risk management side means we can detect earlier when you have people focused on that industry, we can detect the headwinds and alternative solutions typically well ahead of the competition. So risk management is key there by being focused. We are not all things to all people. And then secondly from a marketing standpoint, that industry expertise allows you to gain referrals from clients and it makes for a very efficient marketing network for new client acquisition.

 The key really I think throughout the Bank on the lending side is the integration of sales and credit. So that's another competitive advantage we have. This is a genuine partnership of the credit approvers and the business bankers' relationship managers. That integration is novel, it's unique. Yesterday, a couple of folks mentioned the clawback provision that is business bankers are not only hired to have and required to have great credit skills, they are held accountable financially. And even, in fact, more than that clawback on a specific loan if it did go badly, it's the opportunity cost that they have to spend the time working with that client through a troubled situation. That's actually a greater cost to that business banker, opportunity cost, time spent.

 We don't have the structure like many banks where you have a trouble loan, ship it off to a different department, no, no, you own this, you as a business banker own it. So that's very, very unique for us. And then conversely the credit approvers have substantial experience, not only in credit but in client facing positions and a realms of responsibility managing teams. So that brings a sensitivity to client situations and a level of creativity to make things work in a prudent fashion. So those are some of our competitive advantages.

 With that I'd like to now turn to Todd to talk about some of our opportunities underway and ahead for us. So Todd.



------------------------------
 Todd Rassiger,  First Republic Bank - Senior MD-Business Banking   [38]
------------------------------
 Great. Thanks, Chris. So Jim mentioned connectivity this morning and I think that is a great word to describe the verticals that we choose. You heard credit obviously is the key leader why we are in these metrics, but the connectivity of these different verticals is really important and I'll give you an example. So this morning I was on the phone with a general partner, a venture capital firm. We started talking about his fund and its final closing, raising his final $10 million in the state of fundraising venture, but it quickly flipped to a school that he is on the board of in Boston that's acquiring a building. And then it evolved into a loan that he might need for a home (inaudible). So this is a perfect example.

 I was the consistent piece on that call. I didn't bring in two other people in silos to have call. And at the end of the day, it's that connectivity that our clients share across these different worlds and these different verticals that we've chosen. So I look at this. You've heard the analogy of fishing in the right pond, but I almost look at this as a water column, the diversity of business within that water column. And for business banking what's exciting for us is the future. There is so much diversity in that on two sides. One on the business side and we start with the loan, we start with the cash management, but we can grow into foreign exchange, we can grow into insurance products, which I think is a high potential area for us in the business side, we can grow into business advisory and planning. Endowment management is an area that we're starting to get some traction. And then on the individual side, the personal banking, the 401(k), the all-in-ones, the partner loan programs, so in any given time in any one of these relationships, we may be targeting one of these different areas. But there is so much richness within. And then as I described in my example, the kind of boomerang effect of successful people have lots of -- wear lots of different hats and we can be there at the table.

 And in fact the thing that I love more than anything and this was not the case when I first joined the Bank is I love referring mortgages. I am a business lender and I came in with a little bit of an attitude like I don't do mortgages and I don't underwrite them. I have quickly drank the Kool-Aid, which is -- it is the best way to get trial with a client on the business side. So if there is a business client, CFO, CEO, has a personal need and we can satisfy that I know that we've earned his trust or her trust and that will grow the relationship.

 So in terms of, now diving into the specific verticals, nonprofits, you've heard a lot about. Obviously from a community engagement standpoint it's incredibly import. We've had -- from an economic standpoint I gave some stats last night. One of the things that I did not mention is that -- well, the idea of economic wealth transfer, in 2014, there was about $330 billion that was donated to nonprofits, 80% of that was from individuals. The rest were corporate and foundations. So there is a significant amount of money in assets that this sector generates. So what's the future look like, we've had great traction with schools, with cultural institutions. We're looking at other sectors to grow into as well. Historical societies, performing arts, community foundations, family foundation. And what we're doing is marrying this idea of great execution, which the relationship always has to start there with great execution, but then all this mass intellectual capital that we've developed through all these clients that we've earned the trust of and leveraging that into convening non-profit leaders, CFOs, executive directors, trustees of these organizations. So you'll see a lot more of that and it's not just a lending play, it will be an asset play with endowment opportunity and foreign exchange and insurance.

 The other sector -- another sector that's obviously significant for us is private equity, venture capital. From and East Coast standpoint there is about 1,300 private equity and venture firms between Boston and New York. We are literally probably in about the second inning of that. And as I shared it's not just about the firm, it's about all the partners and the associates that we can grow with.

 The third area in terms of professional service firms I think of this as the backbone of First Republic. These are the individuals that are doctors, lawyers, CPAs, they are consultants. We're working with them individually. We're working with their firms, they're using our partner loan programs. The next generation is refinancing their law school or their medical school. So this is an area that, use the baseball analogy, I think of this as singles and doubles. It's not -- we all love home runs, but this is an area that will continue to grow and build a diverse set of individual and business clients.

 The last piece on tech side is think of this, the West Coast, we've done a significant job, East Coast I think it's about $16 million went into pension funding, went into New York and Boston based companies and we are just getting started on that. So we're very excited about the deposit play. This is not a lending play for us on the tech side but from East Coast standpoint it's very exciting.

 And this, lots of circles here, at the end of the day the circles, this is an example that just shows how relationship begins and all the ways that we can grow it and the circle in the left-hand corner is the individuals associated with one non-profit. And if you think about 10 trustees of a cultural institution and the connectivity that they have and we could probably produce dozens of smaller circles that orbit around that left side of the graph, but the idea here is we are trained and we go out and we develop relationships and grow those.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [39]
------------------------------
 Maybe two questions for each of you. Chris, I want to follow up on your comment about credit. How we're collaborating with our Executive Loan Committee? How does that process work and how would that be different than other organizations?



------------------------------
 Chris Coleman,  First Republic Bank - SVP, Head of Business Banking   [40]
------------------------------
 Well, we do have, as I mentioned, if you overlay an industry focus again you have a deep understanding among credit, the credit folks, the approvers and the business bankers. So the business bankers fundamentally are responsible for initially screening and then we have a pre-screen discussion with the credit folks. It is collaborative. As I mentioned, it is viewed as a partnership because it's a mutual ownership for their credit risk as well as trying to grow the Bank. And again a lot of the credit, most of the credit approvers have that client facing experience in their background, and client sensitivity and they're out meeting clients.

 I once worked for a bank where the Chief Credit Officer said to all the approvers don't go meet clients that will buy a few. It's the flip here, it's meant to be to get a deeper understanding of their business model, but also as Todd is talking about, to explore all their needs. So when we go out that could turn into a discussion about a student refinance program for their associates or an equity buy-end program under the professional loan program and the credit folks are equipped to talk through that discussion as well.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [41]
------------------------------
 Good. Todd, you touched on something that is really interesting. I spoke yesterday, a little bit about the lack of silos here and in the business banking world, outside, there is that hubris personal banking which when you come here it's bit of an epiphany of how important the personal banking relationship can be to winning business banking. Describe that a little bit more and describe how you're working with other teams in sort of this non-siloed environment.



------------------------------
 Todd Rassiger,  First Republic Bank - Senior MD-Business Banking   [42]
------------------------------
 Sure. So one of the best things I think we can do is when we bring in a preferred banker, and for those of you in the room that are clients, you know that experience with the person you call, if we can bring that person in, then I know that we will exceed their expectations. And this is banking, to have people come up to you and say I love First Republic or I'm incredibly happy is not only gratifying but it's because they have that person and that bridge. So I know if we can get to that or the RM doing the mortgage who is going to take care of it and figure out how to underwrite a loan where it's 50% loan to value in Wellesley but someone's W-2 only shows $10,000 in their income and they well pursue their K1s and their partnership interest and we get that done, I know that we will earn that business. It's good.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [43]
------------------------------
 I want to thank you both. Thank you all. And again, this is an important and meaningful part of the franchise, not only from the loan side, good safe lending, but the deposit franchise and the opportunity to bring together the personal banking with the business banking, and we feel good about our opportunities. Thank you. I am going to hand it over now to our wealth management panel.

 (video playing)



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [44]
------------------------------
 Good morning, everyone. I'm Bob Thornton. One of our key values is to stay humble. Watching yourself on a video on a big screen like that is a great way, I guess, continuing one's humility. I'm going to go through a very brief presentation on our wealth management business and then I am going to introduce some of my colleagues who are up on the panel. I will pose a few questions to them and then we're going to take questions from the audience.

 So what I'm going to the touch on today is what's the growth in -- how has our wealth management business grown, why it's become an important source of stable deposits, kind of what's the approach, how do we win business and why do we win business, what's the growth opportunities ahead and finally a little bit about sort of market position and competitive advantages.

 So, first, as you can see on the slide we've had a very strong source of growth since we became independent from Bank of America. And there are a number of different growth drivers that really have contributed to that. First is existing clients increasing the amount of money we manage. Our retention rate is about 98% year over year and that shows a high degree of happiness and clients wanted to continue to do more with us and their balances reflect that.

 Second, new clients and taking trials. Similar to what Jim talked about at the home loan mortgage, we really don't have big minimums. We want to serve the client. We want to build a relationship because we believe that leads to a larger relationship.

 Third is penetration of banking clients with wealth management services. I'll talk a little more about that. But as our clients grow their wealth increases they do more with the bank. Having a wealth management relationship with is a natural outcome.

 Third is hiring. We have been very fortunate to attract a very great number of talented advisors from other firms, which have added to our growth and frankly raised the bar in terms of what we do and how we serve our clients. Acquisitions we'll talk a little bit about that. We've had a couple of acquisitions. They've been very successful. And finally market appreciation.

 So let me talk a little bit about what's the source of our net asset growth. As you can see over the last five years market appreciation has generally been a positive, sometimes it's not. But our real goal is to grow our assets regardless of market performance. And that's really been a fairly consistent story over the last five years. We had particularly strong 2014 and 2015 through a number of hires we brought on to the team and we're having a good 2016 so far.

 The other thing that I often get questions about is what's the growth of the business, how much of acquisitions contributed to the growth of our business. So one of the slides, we want to share is while we're very proud of the acquisitions we've made, we have very strong organic growth. So this slide shows, again since 2010, our compound annual fee revenue growth has averaged 27% a year.

 One of the things that's been important in terms of the wealth management's impact on the Bank has been the increased percentage of total Bank revenue wealth management represents. In 2010, we were 6% of the Bank's total revenue. As of the third quarter of 2016, we're approximately 13% of fee income and that's important in part because the Bank hasn't stood still during that amount of -- period of time. The Bank has had very strong growth so for us to become a greater proportion of that, we had to grow at a higher rate than the Bank.

 One of the things Gaye I talked about was the increased opportunity for deposits. So the deposit opportunity with wealth management comes in two ways. First is, all of our wealth management professionals understand the importance of deepening relationship with clients and having great bankers service their clients on the deposit or lending relationship. We've grown that 13% per annum over the last couple of years. For example, all of the recent hires that we've made over the last year have referred their clients to banking and the vast majority of all of our wealth management professionals refer their clients -- have referred meaningful deposit relationships.

 The other -- and as Gaye also pointed out, only about half of our existing wealth management clients are banking clients. So we will continue to grow that. The other source of deposits is sweep balances, and that's about 9% of our deposit base, those are very stable, diversified deposits that exist in most of all our relationships.

 So one of the questions I often get is why do we win, why do we win against other firms. And this chart really depicts in our mind why we're successful. We occupy a very unique niche in the wealth management business. On the one hand, we do have the breadth of products and services and resources of the large firms. We can do anything for clients, whether it be the breadth of investments, alternatives, equities, fixed income, but we also have trusts, foreign exchange, insurance, other services to service the client and the sophistication of environment.

 On the other hand, we have a lot of the attributes that are attractive about boutique firms and smaller firms. It's for a flat organization we allow appropriate customizations. There's a high entrepreneurial spirit. So that really makes us -- we have the bigness but can act small and that's really what's been attractive to a lot of the people we've hired. And it is important to clients when we really talk about how we can help them.

 As I mentioned in the beginning, we've been fortunate to hire a lot of very talented colleagues from other firms. And as you can see over the last few years, many of the name firms you are familiar with had joined us. And not only have they brought terrific clients, they've also brought a continuing level of expertise to our organization. They've all assimilated into our culture quite successfully and I say that both from the standpoint of sort of understanding the business and contributing in different ways to how we grow the business to referring clients in the banking side. But this has been something that has been something we're quite proud of, because candidly five years ago we wouldn't have had half of the advisors of these firms even talk with us. But it's really reflective of the growth of the franchise.

 So I want to introduce four of my various esteemed colleagues to you who is going to help field some of the questions you may have today. So why don't we first have each of you briefly tell the audience your name and what your role is at First Republic and I'll start with Miranda.



------------------------------
 Miranda Holmes,  First Republic Bank - MD, Financial Planner   [45]
------------------------------
 I am Miranda Holmes. I'm Senior Financial Planner with First Republic. I joined in 2012 from UBS Private Planning Services.



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [46]
------------------------------
 I'm Jon Goldstein. I'm a Portfolio Manager at [Minna Park] and I joined as part of the Constellation acquisition about a year ago.



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [47]
------------------------------
 I'm Steve Soja. I'm a Portfolio Manager. I joined from Credit Suisse last year.



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [48]
------------------------------
 I'm Catherine Evans. I'm a Portfolio Manager here in San Francisco and I've been with First Republic since 2002.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [49]
------------------------------
 So, Catherine, let's start with you. How you're seeing the wealth management platform evolve and the brand reputation grow over your time at First Republic?



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [50]
------------------------------
 The platform has evolved a great deal since I joined in 2002 when we really had just acquired a few registered investment advisors who are very specialized. I would say, in particular over the last years, we've grown in just the breadth and the depth of the platform, particularly alternative investments. So we have expertise and capabilities now on the research side, on opportunities for clients that are really directly a thoughtful approach from our research team on the non-liquid public market. And then in addition capabilities around larger more complex clients like financial planning which Miranda will talk to you later.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [51]
------------------------------
 Steve, we had a little bit of a match.com situation with you. Given Credit Suisse's decision to exit the business, we were lucky enough to partner with you. What made you decide to come here and how has it been for your clients?



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [52]
------------------------------
 I appreciate that comment, but transitions are very tough. So moving from one firm to next and trying to grab your clients, getting them to come over is a very tough process. It involves a lot of work, a lot of team work and a lot of intensity. But there are three things I thought about when I came over. First was culture. I wanted an organization that can do write downs, service orientated to get it done for the client. Number two was, I didn't want really a sioled organization. I wanted some place that I could go out and not only expand my relationships, but also grow. And the third one was I wanted both sides of the balance sheet. Really rich people borrow money, so they're looking for ways, not just one of the securities, but what else can you do for them, the real estate side, the health side, the aviation side. Having that in my -- having to be able to deliver that has been very powerful.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [53]
------------------------------
 Thank you. Jon, you and your partners built a very successful firm Constellation Wealth Advisors over several years and decided to join forces with First Republic. Why First Republic?



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [54]
------------------------------
 So, first I'd agree with Steve that transitions are painful on both sides and for us it was even a larger decision because we were moving our entire company. And the way we explained it to clients, and I should also add at the time, we are an independent firm and we prided ourselves of providing unconflicted counsels for our clients that was a key tenet of our business model and to come to our clients and explain that we were partnering with First Republic indeed makes sense. So consistency of culture, focus on the client, independent decision making all those things that were important to us were in place here.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [55]
------------------------------
 Great. So, Miranda, you are one of our MVP. Miranda is a financial planner, in great demand to go out and meet clients. How was planning in your role different in First Republic than in the prior firms?



------------------------------
 Miranda Holmes,  First Republic Bank - MD, Financial Planner   [56]
------------------------------
 Well, I think we offer a lot of great services across the board in financial, tax, and the state planning and charitable planning. So we cover everything from broad cash flow and retirement financial independence planning, tax minimization strategies as well as insurance planning, state planning, wealth transfer and philanthropic planning. But I think one of the things that's different is that we provide a really high level of complex analytics that not all firms offer. And in addition to that, we really have a great team based approach. So I'll just tell a quick story if that's okay.

 We were working with a client who -- a banking client who is the partner at -- a very successful partner at a private equity firm. And we've been looking to leave his firm to go to a new opportunity and was going to liquidate a lot of his holdings there and wanted to find out if he was going to be able to be financially independent if he left this firm and also make sure that he had everything lined up that he needed to. So we ran some cash flow analysis for him to see if he left and went to his new opportunity how would things look. And not only was his situation looking fantastic, but he had such substantial assets that he would have -- his wife passed away, they would have significant state taxes due. And what we also discovered in our projections with the state was continuing to grow at a quite rapid pace.

 So we put together a number of wealth transfer strategies for them. We took a look at their state planning, brought in a new state attorney, they haven't updated those documents in long time. They were very philanthropically oriented. So as part of the liquidation of these assets as they transferred to the new opportunity, they brought in a significant amount of assets. We brought in a portfolio manager, had a wealth advisor coordinating, we brought in our insurance team to help with an insurance policy for these state taxes, we brought in our trust officer to help with the state planning, we brought in our Delaware Trust Company as we helped them create a new Delaware Trust to do some wealth transfer. So it was really a broad team approach. We had all the different members of the team really working together to take care of the client.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [57]
------------------------------
 So before opening to questions, I think there is two observations. One, I'm very proud of the business that our colleagues -- my colleagues have built over the last several years. And secondly, I strongly believe that we are in a position to compete with any firm to win any client and frankly we are and we do. So I'm going to slip over to join my panelists on the dais and we're happy to field some questions from the audience.

 There's a mic for that gentleman.



==============================
Questions and Answers
------------------------------
Unidentified Audience Member   [1]
------------------------------


 Thank you. I'll start off, Bob, a couple of questions in there, two on the client front, one on the business front. You talked about 48% of customers having a deposit relationship. Where do you think the industry is on that metric and what would be an aspirational goal for the Bank?

 And second, it's obviously been a very difficult year for flows for the industry. You guys have been able to outgrow it. Do you have any sense of what percentage of your clients' assets you actually have and where do you think you could get to over multiple years?

 And then lastly for the business as a whole, you guys have gone out and done a lot of strategic hiring, brought on some great teams and that caused margins to be a little bit elevated in the business. How do you see margins in the wealth business progressing over the next several years?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [2]
------------------------------
 Okay. So the first question is what is our aspiration on deposits. Our aspiration is a 100% of our clients have a banking relationship. It will take time to get there, but again as I said we have a terrific number of bankers, preferred bankers from deposit relation, but the lending relationship. One of the keys has been I think, there's two things, one is, and this has been typical people providing services in the Bank, is one people need to get comfortable with it. They understand that people provide the services, they understand the basics of the product or service. And the biggest change in our wealth management business professionals over the last two, three years is that while we had some deposit referrals now, virtually everybody refers it, and they're very comfortable with it. So I think that helps to accelerate and grow the cross-sell.

 That's one of the most important things in terms of our business growth around the deposit side of the business. From the standpoint, I think your second question related to client. I would say that the majority of the clients we have, probably most of their assets and we have a straight 401(k) or IRA somewhere else, but we have those assets. But the big feature of the Bank's philosophy and how we grow our business is trial and we're still not a household name, main street name and I'm not sure that we aspire to that.

 But when we meet with a client, we want to have an opportunity to serve them and there's a lot of ways we create that relationship opportunity. And what we typically find is, once they work with us, then they add and move a lot of their assets from other firms.

 I did a review of our kind of net client flow and net additions over the last year and I was quite startled to see how much clients added in terms of net new assets from existing clients. The third question you asked is really more I think, going to sort of efficiency ratio, where does the business go. And as Mike Roffler and all sort of shared previously, typically the efficiency ratio sits on the 80% sort of range, give or take. And I think that will gradually continue to improve, but I think that when we balance efficiency ratio versus growth, we want to continue to have growth and increase the overall profitability. And one of the things I just mentioned is part of that, relating back to Gaye, comes from deposits. For example, sweep balance is a very meaningful part of the Bank's deposit base. They are starting stable, they are relatively low cost and we're not compensating people for sweep balances. So that's an important part of the profitability contribution of the business beyond pure efficiency ratio on the fee business.



------------------------------
Unidentified Audience Member   [3]
------------------------------


 A common theme you might be able to comment what's the timing of bringing new clients over to the banking side? That's a big part of why you are [48 and not 98].



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [4]
------------------------------
 Well, for us it was -- overall, it's a process of about six months of intense work for the assets to come over. And my situation was a little bit different because Credit Suisse now longer was in the private wealth business. We are very successful in transferring those assets and they're very happy to hear. When we brought them over, they quickly moved to, hey, we look and we refi-ed the property or something of the sort. So that business just exploded, didn't even realize how great and what the potential was there. They came to me because I was at First Republic. I don't even have to suggest it to them. That's how powerful I felt that reputation was here in the Bay Area.



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [5]
------------------------------
 I would add on the banking side, it's easy as the need arises, it's an easy referral to make. And before we were part of First Republic, we were regular referrers anyway. The goal being just want the client to be handled perfectly and not have any issues associated with that kind of business. So, it's terrific being under [110].

 On the deposit and banking side it's a tougher ask. So quickly after transitioning all the investment business over, but whenever there is a pain point, something didn't get handled well, it's a great on tray to suggest it. And the question I always ask is, can you name the person you deal with at your back. And the answer is almost ever what do you mean by that. So, at this Bank, you know the name of the person you deal with. And that goes a long way with our sort of households.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [6]
------------------------------
 I think on that point to add to what Jim said is when we meet with recruits to bring over the business and we ask about their banking, quite candidly in many cases they don't really have the confidence in their institution to do a great job in the banking. So they don't work for banking. So it takes a little while for people to say, hey, this is not only not going to be a bad experience, this is going to be a great experience for the clients. And that's really why we're seeing that sort of accelerated growth. Another question.



------------------------------
Unidentified Audience Member   [7]
------------------------------
 Are there any generalizations you can make about the investment expectations of your clients? I'm sure it's difficult to do so, it's probably to Goldstein. But in terms of the importance of managing investment expectations with what you folks can deliver on the wealth management side, for example, would it be logical to assume that most of your clients have made a lot of money already, they want to be conservative -- conservators of their capital such that if you don't present well in a bear market you are going to be in trouble or maybe you can talk about what clients expect relative to what you can deliver on the investment front, especially given where we are on the markets today?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [8]
------------------------------
 Maybe Jon why don't you take that one and maybe Catherine you can add on?



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [9]
------------------------------
 I'd probably tell you every TM has a unique clientele and drilling down further every client has unique circumstances and goals. So in our case clients come to us rich and the only way we mess up this is to become unrich. So preservation is everything.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [10]
------------------------------
 Catherine?



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [11]
------------------------------
 I think having been at First Republic for a long time, my clients are going to the bank and they tend to come to us with an asset preservation goal and I think what we really do, excel at goal-based investing really needing getting to know our clients understanding what drives their motivation, what is their expectation, is it cash flow asset preservation, it's rarely growth.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [12]
------------------------------
 Another question.



------------------------------
Unidentified Audience Member   [13]
------------------------------
 Just to segue on that comment about, it's more about wealth preservation than hyper growth. You mentioned a little earlier that you have brought on alternative as a significant offering. So how does that play into the wealth preservation and I'm curious what sort of alternatives you have available, what's popular? And if possible, how much of the total AUM is in alternatives?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [14]
------------------------------
 So I'm going to make a couple of brief comments and then again I would turn to one of my colleagues. We approach alternative investments a little bit differently than our competitors. Couple of important respects. Number one, we don't have specific goals of how many different funds or new alternatives we're going to offer. We really look for unique dislocation opportunities to offer an alternative investment. We also don't see the client or take performance fees on alternative investment. The advisory fee that the client covers is an alternative investment. So it's really up to the advisor to decide, that is the right investment for the client relative to other liquid or different types of investment alternative returns. I think philosophical a little bit differently. I don't know, Jon, you want to just chat a little bit about the nature of some of our alternatives, add any color?



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [15]
------------------------------
 Sure, happily. This is something that's new to the organization, it's a jewel. At FRIM, First Republic Investment Management, the capabilities that they've built go well beyond the footprint of the current system. Fortunately, I sit on the investment committee. So I see the flow. It's purely advisory. Nothing proprietary. We create feeder vehicles into institutional quality alternative offerings. In fact I would argue and I often do to clients that investing in the space aids the preservation aspect of the portfolio outcome. The public markets offer a limited opportunity set. So ignoring this part of the investment spectrum would be a mistake. And it includes hedge, real estate, debt instruments, not so much private equity or venture but it's quite broad.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [16]
------------------------------
 Only thing I'd add, it's a relatively modest percentage of our assets for management in part because we're only offering to qualified investors, people really can withstand the lockup and liquidity provisions. And so it's appropriate for certain clients but not for all clients.

 Other question. Steve?



------------------------------
Unidentified Audience Member   [17]
------------------------------
 Can you talk first about the penetration of the Bank clients, what percent of them actually use wealth management today?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [18]
------------------------------
 So we have a relatively modest penetration of our Bank client base and the reason for that is that; one, we have a very large client base and we have been very successful in growing the relationships with our banking clients over the last several years. So we have maybe 140, 150 relationship managers. The assets of those bankers as I referred year-over-year have increased significantly every year. So we're doing more and more with our clients but as you know wealth management is a very important decision clients have to make in terms of who's going to manage our assets in doing that. It's a little bit long of a sales cycle.

 So the good news is in terms of our client penetration as we continue to see very significant growth every year from our bankers in the wealth management referrals. I would say -- I mean you saw our growth charts I would say generally 40% to 50% of our growth comes from banking clients and we've had very significant growth. But as the Bank grows and as those clients grow, there is a lot of room to continue that growth. I think we could grow our business in the low teens just from existing bank client referrals without bringing another business and that is an important leg of our growth. Other question?



------------------------------
Unidentified Audience Member   [19]
------------------------------
 I can ask one?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [20]
------------------------------
 Sure.



------------------------------
Unidentified Audience Member   [21]
------------------------------
 So for Jon and Steve, there's only so much time in the day, right. So when you think about running your business, how strong is the incentive for you to go out and try and get the deposits of your customers versus just keep adding new wealth management clients? So, in other words, we talked about only half of wealth management clients having a deposit relationship. How significant is the incentive today for you guys to grow that business?



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [22]
------------------------------
 Well the significant -- I mean there is incentive because we want to deepen the relationships with the current clients. A lot of times when you have your own established businesses, while you're also managing the referrals that come to you just from your current client. So I think one of the cool things about the way we're set up is that we get to go out and go to visit a branch or go down and visit one of the banking offices or even in our own office we're kind of set up a little uniquely. We have the facility of saying, we have relationship managers, we have bankers, we have Miranda right around the corner. So there's always this continuity of when there's an opportunity for us to expand the relationship we do it But I don't go out and say we want your deposits. That's really not the lead for us, it's really about the lead for the relationship. We do go out and say we can do this and we can do that, but it's not really deposit account base driven model at all.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [23]
------------------------------
 Another question?



------------------------------
Unidentified Audience Member   [24]
------------------------------
 So, one of the things I've been a little confused about is yesterday it was discussed that there is one sort of point of contact for a person, the relationship manager, but it sounds to me that there is one point of contact on the banking side and a completely separate point of contact on the wealth management side. How does that work and ultimately does it morph up to one for both?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [25]
------------------------------
 So I'm going to make a brief response to them and as Catherine to share. So, I think yesterday there was a lot of discussion about our relationship managers. Scott Dufresne, Kelly Abreu and Scott and due to the nature of their title they have historically been finding clients through referrals to do mortgages and then their job is to deepen the client relationship. But a key underlying principle of how we've been able to successfully grow our businesses is the person that introduces the client to the Bank is ultimately the quarterback of that relationship. So if I bring in the client to the Bank and Cath is going to talk about that, she is really going to be the quarterback or the small-end relationship manager of the relationship. But why don't you talk about that a little bit Catherine?



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [26]
------------------------------
 So I think it's really -- it's a team approach and I do think there's a lot of trust involved in that. So I think a relationship manager is typically the point of entry for any client. They continues to be the point of [auntre] for other aspects of the business. So if the client which happened to me last week -- a client really talked to the relationship manager and said that the relationship manager asked about, I hear you are in wealth management, my manager retired, do you have somebody I could talk to. So that relationship manager called me, hey could you reach out to my customer, let's set up an appointment and we will go together. So that there, the point of auntre continued. This is a 20-year client of the Bank. The first time that they have reached out to us on wealth management. The relationship manager has reached out to them previously, but only hearing about it obviously from outside when the friends said you should call First Republic they do wealth management now. So we get those auntre.

 And then just like with preferred banking day-to-day conversations for an investor management happen with the portfolio manager. The client even knows who to go to for their immediate needs. But there's a lot of trust in that relationship. So I know that in a conversation having with our client, they mentioned they're buying a second home and immediately going to pull that relationship manager into that conversation. So it continues to evolve.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [27]
------------------------------
 One of the cornerstones of the way that the Bank was built was -- I moved to California in 1993 to my first mortgage, Mary Deckebach who was on the pick-up, was my relationship manager. And even though she introduced me as a client, I always felt Mary was my advocate. I think that's one of the real strengths. The person that you trust that brought in and if you're having it, you always want to be able to go to them as your advocate. Even though, Jon, maybe managing the day-to-day investment relationship, the original person who brought you in is our advocate and they are the one ultimately responsible for the relationship.



------------------------------
Unidentified Audience Member   [28]
------------------------------
 (inaudible - microphone inaccessible)



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [29]
------------------------------
 It could be Miranda, it could be a preferred banker, it's whoever really say look this as a great place to conduct your business and then, as Catherine said, they build the team around them. And the thing that's unique about the business, the fluidity is everybody is -- sometimes you're the pilot and sometimes you're the co-pilot. So if you bring in the client you're still the pilot, I'm going to pick the team. Other times Steve may bring in a client and the relationship managers playing the role of servicing the client doing lending and he's sort of the lead. So you're exactly right.

 Yes, there was a question in the back.



------------------------------
Unidentified Audience Member   [30]
------------------------------
 Thank you. In talking about how you hand off work with each other and managing some of the relationships, I'm wondering if you could talk at any depth about how from a I guess an incentive standpoint how you incentivize those types of interactions or other than the fact that you want to be good employees and be a good corporate citizens?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [31]
------------------------------
 So let me give you a philosophical answer, factual, but philosophical answer to that question and then maybe Miranda and Catherine. We recognize that having successful team work in the end going to bring us the most opportunity and have the happiest clients. So the way we design our incentive arrangement or compensation is people effectively it's not a zero-sum game. If you are brought in to support a relationship you're going to be compensated to do that but you're not going to be taking it away from someone else. So it's very clear how you're going to get compensated. We don't want people not to include others to be able to do the business and it's something we want everyone to sort of win. But I don't know, you spend a lot of time working with advisors as a financial planner maybe you could just talk a little bit about the nature of your engagement with people in that way.



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [32]
------------------------------
 Yes, so for me there is no compensation one or the other whether I work with the other team members or not, but what I find is that the service that we can provide, the client experience, is so much broader, deeper, stronger if we can bring in experts from every different area of the Bank and private wealth management to address all the different issues. So we're still good at working together. That's been my experience here over the last 4.5 years. It's such a seamless way that we all coordinate and work together that the experience is just so much more powerful when we have all the different team members involved. So I think it's just a natural way to do business. We know that we can offer a better solution for the client that way and the clients respond really well to it. They love it. They love having their -- we've got a couple of clients who call it their A team. So they love the fact that they have their team at First Republic.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [33]
------------------------------
 Catherine is unique in that. She is a Portfolio Manager, but she started her career as a Relationship Manager on the lending deposit side. She was a Wealth Adviser, which is a business development role. I don't know what that observations of a year time maybe you had around people's motivations and incentives to work with one another.



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [34]
------------------------------
 (inaudible) career flexibility. I think that in terms of referring flexibility, Steve had a good point. There so many logical points at the end of the clients, even if they don't bank with us on our wealth management introduction. An example is a client wrote a property tax check on their other institution checking account. They are not a significant client of that institution, they may just have an operational deposit account there. They don't have a lot of flexibility on how they're going to cover that check that same day if they don't anticipate it, which happens with our clients (inaudible). We have got a significant wealth management relationship and so I'll be on the phone with them and try to get a wire over, making sure that we're trying to meet their deadlines. If it was internal, this is what I described to them, it wouldn't be a problem. So just making sure that when we have those opportunities with the client, just say listen if your checking account is here the preferred banker I work with sits two steps away me. We would be able to make sure we have obvious funds here, there just wouldn't be the same sort of hick up and operational issues for you. So I think those opportunities present themselves on a regular basis.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [35]
------------------------------
 Other question.



------------------------------
Unidentified Audience Member   [36]
------------------------------
 I have one question I'd like to pose to the panel and start with Steve and Catherine. Competitors, which competitors do you see the most, how do we win or what's been different for you from the competitive side of being a First Republic?



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [37]
------------------------------
 Right now I can talk about -- I'd talk about a live client right now. We're in a situation where they're at an RA here in San Francisco. It's a $15 million account. This RA doesn't have one thing that we have that they don't. We have the ability to do long term trust planning. So we can put the money in a dynasty trust, get the money through with Miranda's help, do the proper state planning, put a life insurance policy within the dynasty trust. That dynasty trust is run by our Delaware trust company. Eventually when this person passes it will be a $30 million policy which will then turn into cash which we will then manage. So being an RIA, they don't have those capabilities. They will have to go out and outsource and give it to another trust company. And then once that moment passes those assets are gone. So that is a great feature that we have. We're going to win this business I am 100% confident we won't tell you I just can't do that (multiple speakers).



------------------------------
Unidentified Audience Member   [38]
------------------------------
 I am glad to hear that Steve.



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [39]
------------------------------
 We'll see that through.



------------------------------
Unidentified Audience Member   [40]
------------------------------
 Catherine, how about the larger competitors and the household names we go up against, what we're not as well known?



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [41]
------------------------------
 I see competition from all the big firms, from independent registered investment advisors. I would say that we compete really well across the board. I think what we do really well and where I see us succeeding is that we often compete in a situation where client has assets with one firm as their main source of advice. If they have a number of accounts that that advisor just may not have really given the whole view. One of the processes that we go through when we do a proposal for a client is we gather all the statements together and give them a full view and then that further leaves us in an opportunity to help them consolidate the relationship and provide a much more seamless experience in terms of tax planning, in terms of distribution planning when we get into a requirement of distribution on higher rate. So I think that where I see competition from the Wells Fargo or Morgan Stanley, those are often the primary source of competition. But it really comes down to having that thoughtful holistic experience where we take the time to really understand the whole picture gather the remaining assets and provide a different experience.



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [42]
------------------------------
 One other things Jim talked about yesterday was how deepening the client relationships and the number of things you do if the client leads to greater and greater client satisfaction. I think one of the most exciting parts about our business in terms of the wealth management business is that we do more things with clients now. We've invested in the capabilities. We've brought in the talent to do that and it's a great offense and defense play. You don't want to another firm come into your clients to address things that you're not talking about and that's one thing we really stress with our advisors. And on the flip side, it creates a much more positive and sort of permanent relationship with the client.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [43]
------------------------------
 Any other questions? Yes.



------------------------------
Unidentified Audience Member   [44]
------------------------------
 I have a question. Given that you've hired and acquired folks from a bunch of different other firms over the years, how consistent is the customer experience and the service offering across your platform? For example, if I'm working with someone from Luminous versus someone who came from Credit Suisse, how similar or different is the client experience going to be?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [45]
------------------------------
 So let me make one brief comment on that and I am going to turn it to our panel. There are a lot of consistencies around how we serve clients, it's the culture, it's the orientation, it's coming from a common platform, but we also recognize that advisors have different talents and ways they serve their clients. So I don't know, Steven and maybe Jon, one of you talk a little bit about consistency of how we serve the client.



------------------------------
 Jon Goldstein,  First Republic Bank - MD, Portfolio Manager   [46]
------------------------------
 In our role the front person, the person who does the day-to-day, they always run their business a little bit different. My personality is different from the others on the panel here. But we're all trained to know what's important and that is that holistic type of approach.

 But I think having the -- in my partners at Luminous and Constellation, I can talk to them about what they had before and what they have now. I couldn't really do that before. I had to kind of say what you have in RA, what did you have and how do you add value? So I think my ability, my offering has expanded by having partners within the firm that were once truly an RIA and can now share to me the broader scope and how we go out and actually sell against RA, or sell against another investment banker like a Goldman or Morgan or something of the sort. So net net I think that the delivery of products and solutions and approach is consistent. I think the personality is just a little different and that's fine.



------------------------------
 Steve Soja,  First Republic Bank - MD, Portfolio Manager   [47]
------------------------------
 I think it's an advantage. So I've been doing this more than 25 years and the way that individual advisors grow their business is better practice management, so consistency amongst their clientele, a little scale, larger clients is the only other way. Any PM here at the firm has access to the same product set that every other PM has. It would be a terrible place to work if we were told this is what you should offer. Then we're salesmen, we're not advisors. So I think that the Company is in a sweet spot. It has scale to provide best-in-class investment offerings but we're still small enough to add that sort of boutique approach and I would tell you that we're doing exactly what we did before we joined, which makes us very happy.



------------------------------
 Catherine Evans,  First Republic Bank - Senior MD, Portfolio Manager   [48]
------------------------------
 I think we have, what I call a team of rivals approach. I think people select into our culture. So I think that if you are coming here with sort of an attitude to be collaborative with your peers it's probably not a great culture. And I have found in here long time that the more talent we bring in great for caliber and not once have I met with PM or another hire who wasn't willing to tell us how they approach their business, how they've been successful, what we can learn from them. I think Bob has done a great job in giving us response to make that learning experience.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [49]
------------------------------
 One or two more questions from anybody. Okay. Shannon, I'll turn it back over to you.



------------------------------
 Shannon Houston,  First Republic Bank - VP, Director of IR   [50]
------------------------------
 Okay. Good. Thank you very much. Thank you all. We will now take a break until 10.15 this morning. First though please note that investment products and services discussed during this and other sessions during this event are not FDIC-insured, are not guaranteed by the Bank and are subject to investment risk including potential loss of value. We will now take a break until 10.15. Please help yourself with the coffee and snacks and please visit our kiosks. Thank you.

 Hi, everyone if you could make your way back to your way back to your seats we'll get started with our last session here. Thank you very much. Before we bring on our group of client panelists let me first say that, in keeping with requirements set out by the US Securities and Exchange Commission First Republic Investment Management does not allow the use of client testimonials and therefore will not be represented on the panel. With that let me turn it to Bob Thornton, who's going to host a group of our fantastic clients. Thank you.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [51]
------------------------------
 Welcome back from the break. I'm Bob Thornton and I looked out I got the most exciting panel today because it involves a few of the most important people, which is our clients. So we want to give you opportunity to ask our clients about their relationships and experiences with First Republic. But I first would like to and I will start, to begin with Ani, I'd like for each of our panelists give their name and a little bit -- a brief background about what you do today.



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [52]
------------------------------
 Sure. My name is Ani Vartanian Boladian. I'm actually born and raised here in the Bay Area. That being said I have been all over the country. My background is in real estate private equity. I co-manage a fund called Rubicon Point Partners with my partner plus husband. Now we invest in pension -- our investors include some of the largest pensions funds, family offices endowments and we invest in commercial real estate, predominantly office and industrials throughout Bay Area.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [53]
------------------------------
 Brewster.



------------------------------
 Brewster Ely,  Town School for Boys - Retired, Head of School   [54]
------------------------------
 I'm Brewster Ely and I'm much simpler than that. I'm now retired Head of the Town School for Boys, which is an independent K-day school in San Francisco. My roots are back from the East Coast and the suburban New York area in Connecticut. And I was head for 27 years in education for a long time. And the only reason I showed up today is because I don't have to wear a tie any more as a retired person and I got to put on a tie this morning and my wife said, look you can remember how to tie it. That's why I'm here.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [55]
------------------------------
 Brigette.



------------------------------
 Brigette Lau,  Social Capital - Partner   [56]
------------------------------
 Hi, everyone. I'm Brigette Lau. I'm Co-founder, as well as Board Partner of Social Capital, a venture found in Palo Alto. I spend most of my time investing in education companies for Social Capital but I'm also a local investor in food businesses such as Tin Pot Creamery and Burdock.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [57]
------------------------------
 Steve.



------------------------------
 Steve Lefkovits,  Joshua Tree Consulting - President & CEO   [58]
------------------------------
 Good morning. My name is Steve Lefkovits and I have two businesses. I'm a partner in a telecommunications consulting business based in San Rafael and I own a business that throws the managers conferences for commercial real estate executives nationwide.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [59]
------------------------------
 Great. So I'm going, as I mentioned, ask the panelists a few questions. I want to ask everyone the same question and then we'll take some questions from the audience. So maybe we'll start with you Brigette. How long have you been a client and how did you get to First Republic?



------------------------------
 Brigette Lau,  Social Capital - Partner   [60]
------------------------------
 So I believe our banking relationship started back in 2009. I have just had my first child. We were in the process of looking and buying a new home and we had a friend and advisor who recommended First Republic and said you must bank with them. And so it really started with our first mortgage.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [61]
------------------------------
 Great. And Brewster?



------------------------------
 Brewster Ely,  Town School for Boys - Retired, Head of School   [62]
------------------------------
 I was hoping you wouldn't ask me this because this sort of a [tackleness] to my answers. So the school, which does this institutional banking, banked with another bank here in the city, which I'll leave nameless but they didn't invite me to come down to see their stagecoach, and one day I called them and I said we need an answer on a particular topic, and the next day I called and asked the same question again, and the next day the same question. For the third time my next call said if I don't hear from you today we will not be a client. The next day we were not a client. We've done some homework. First Public Bank had a reputation. It was then really more of a boutique bank in San Francisco, had good early returns, and so we left the stagecoach and got on the bus.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [63]
------------------------------
 Ani.



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [64]
------------------------------
 I've been a client since 2001. I learned about First Republic Bank from my colleague who used to be at Goldman Sachs and recommended this bank to me.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [65]
------------------------------
 Steve.



------------------------------
 Steve Lefkovits,  Joshua Tree Consulting - President & CEO   [66]
------------------------------
 I've been a client for about 4.5 years and I became a client because one of my best friends called up one day and said you're not going to believe it, I just had the best customer service in my life. And I said I can use some of that. I don't know where was that and he said, oh, it's with First Republic Bank and I looked at my phone I did not expect that. And he said, listen, just call this crazy lady, she is going to give you a great service. And he gave me a direct dial and I did, that's true.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [67]
------------------------------
 That's great. So Ani how would you describe your relationship with the Bank?



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [68]
------------------------------
 So the Bank is very integral part of our business. We treat them as one of our partners actually. And I just want to spend a little time in terms of the history and my relationship with First Republic Bank of because I think I'll tell you a lot about and give you color about First Republic.

 When I first started with them in 2001 it was just a separate private personal account that I had. It was a check in account or a savings accounts. I then joined a real estate private equity firm here in San Francisco, called Rock Wood Capital. They have an office in New York. And there was a relationship banker that was banking the partners there. And soon this individual ended up becoming my relationship banker as associate or a young Vice President. And she just stuck with me and would check in and what not. Again it was a personal individual account, so nothing particularly exciting or anything of that nature. And I subsequently joined the US Department of Treasury during the financial crisis to manage the TALF program, Term Asset-Backed Loan Facility. She kept tracking with me and connecting with me and checking in how am I doing and there is any other if they can do anything for us -- for me. Subsequent to that we started Capital Partners after the financial crisis started to settle down and we pulled away some of the financial support that Federal Reserve and Treasury was providing and came back here and we started Capital Partners.

 Today, we have I want to say maybe a couple of hundred deposit accounts with First Republic Bank. We do business with a bunch of different banks, money center banks, and they consistently ask for our deposits. For instance, just a month ago, we signed we acquired a building and we received an $80 million loan financing from another money center bank. And as you know the condition, as always, we want your deposits, we want your deposits and consistently. We said you are not going to get our deposit and that has been on the business side. And then personally First Republic has now subsequently has banked my family, my parents, my brother, my friends. I mean like it's like an amoeba, it just keeps on growing, partially because of the service that we receive, which is bar none. I mean, there is no other bank that provides this level of service that I've experienced and I have dealt with some of the largest banks in the country.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [69]
------------------------------
 So Steve someone turned you on to First Republic. How would you describe your experience in the last four and half years? Do you have a story, an anecdote that would best illustrate that or how would you talk about how things work here?



------------------------------
 Steve Lefkovits,  Joshua Tree Consulting - President & CEO   [70]
------------------------------
 Well, the first word that comes to mind is personal. I know a lot of people at the Bank and the thing that really strikes me is I've worked for a bank, I've had many banking relationships, banker friends, I've banker sibling. But the thing that really strikes me is that there's a personal ecos about First Republic that I think is the common thread of all my interactions, whether I'm dealing -- whatever level of person I'm dealing with at the Bank. There is a confidence that I see in the people and the Bank that they can do what's right for the customer and that's what's right for the Bank.

 And so it never gets someone trying to sell products because it's good for the Bank or trying to push something that's good for the Bank. My big story on that is that when I became a client we were going through a partnership restructuring in our communications company. And I came to the Bank looking for a loan to help out with that restructuring and I got some personal advice that was really meaningful to me and was in my best interest, but wasn't necessarily in the best interest in the relationship. It didn't lead to the Bank selling more product to our company. It led to me being in a better financial and personal situation because my banker said, look I look at your Facebook page, I see who you are, who you are is this person. Here is what you should be doing and focusing your energy on. And as a minority partner, as a junior partner in this relationship, you really should be thinking differently about this than the majority equity owner. And it was just a stunning advice to get, to get personal financial lifestyle advice from my banker. And it created an intense loyalty between me and the Bank that goes on to this day.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [71]
------------------------------
 Brigette, how about you? Describe your relationship with First Republic.



------------------------------
 Brigette Lau,  Social Capital - Partner   [72]
------------------------------
 Well my banker is Kellie. And I consider her a friend and trusted advisor. We started off very simply with the mortgage and it's really expanded into all facets of our life, to our local businesses, to our venture fund and everything. So it has been fantastic. I characterize the relationship as just incredibly thoughtful, high touch and supportive. Any time that I've come to Kellie for questions, she always has answers and that's what I love about it. And she is also very aware of all of my interest and we touch base probably once a quarter and it's just a great relationship.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [73]
------------------------------
 So, Brewster you talked about how you came to First Republic. How did that relationship evolve over time? What sort of hallmark moments stand out for you?



------------------------------
 Brewster Ely,  Town School for Boys - Retired, Head of School   [74]
------------------------------
 So my answer would be, it's complicated. When you run a school -- an independent school, one of the things that happens is you -- as you do in your businesses, you work with a group of people of this produce. And so we have non-experts in education, trying to make decisions about education and bringing their especially in the finance side of the school world, which is important, bringing their own particular vent on how you move forward, especially in schools, so many schools public and non-public, are concerned with facilities and building. And so to try and bring that group together to have some cogent thinking about how they will fund major projects is not always that easy and those committees change annually.

 So in the sense of working with First Republic, the Bank was willing to recognize what a school community is like, what different constraints on it are. And we ended up having nearly $30 million worth of indebtedness or availability for a loan from First Republic in the not -- just a several years ago. And the Bank was actually willing to look at our needs as they change and change some of the covenants of our loan which was not easy, not conventional, but it was necessary for us. And so, instead of just saying, sorry, this is the business that we are in, this is the business that we do, they looked at us and said, here is the business that you need and it was great. And I can tell you sitting on those committee meetings that members of the Bank will never do this. And I've had the opportunity to work with the Bank long enough and said, I don't agree with you, I think they will, not only were they willing and they did, they changed these covenants in quite remarkable ways.

 Now I said it was complicated and I won't take too much air time, but then you get into my own personal life, which separates business and industry, if you will, our small industry into the personal side, so the Bank owns both of my homes and the Bank has, -- we have in the Wealth Management sector, the leadership there has been extraordinary. My greatest embarrassment over the summer is that one of the executives in the wealth, management section has called me three times over the summer saying are you and Nancy going to be in touch, so we can have our meeting to see how your retirement looks. I said, I'll call you back and I'm -- we are just back in San Franscisco last weekend. Now I know I have to call her, but this is the kind of representation that you get. I have totally -- I'm not a finance guy, I have totally let some of those personal needs slip, but here's the banker in wealth management who is not. And then you work with your personal banker, my other level in First Republic Bank and I'd just leave it at this because this is from the sublime to the ridiculous, I have three children and the woman we're working to is magical. Has taught my kids how to stop bouncing checks, something I couldn't teach them.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [75]
------------------------------
 So, Ani, you talked a little bit about how the relationship evolved. Anything else you want to add in terms of the nature of the relationship today? How do you think about First Republic today?



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [76]
------------------------------
 So, as I mentioned, they are our partner and I have got so many anecdotes. I just don't know which one to pick. Another anecdote is with our firm, we have set up a separate banking relationship with deposits with another bank so we could diversify our exposure away from First Republic Bank. And it's a bank that everyone knows quite well, that was mentioned here on the panel.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [77]
------------------------------
 The one with the stagecoach?



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [78]
------------------------------
 It's something like that. And it was the most excruciating experience I have ever had in the sense that we were trying to open up accounts and it was difficult to open, it was difficult to transfer funds and it was equally difficult to close down.

 After six months of this, I tried to close it down and we had to have team meetings with these folks in our office for like three month to figure out a way to shut down these accounts, when you get charged that it would have additional paperwork to file and what not.

 And on the other side, the First Republic Bank is like we are here willing, ready to help, tell us how we can help, how can we make your life a little easier. We have one -- I also, my relationship manager is Kellie. Kellie has a gentleman, he is our guy. If we need anything, we reach out to him. It's a one-stop shop. This is what we need. This is what we need to accomplish. We have -- whatever it is, he makes himself available and what really struck me with First Republic Bank is that it's a team atmosphere. I'm not on that side of the organization, so I have no idea how things work, but when somebody is out there is another body that like steps right in and it's seamless. From my manage point, it's absolutely seamless.

 Somebody has gone, somebody else will step in and make sure that whatever it is that we need, all gets done. For instance, my partner if he is traveling, especially if he is traveling overseas and our gentleman is out of town, that guy is going to step in. He is going to call every single person in the organization to be able to track down my partner. Whereas with other companies, we've noticed that it's one phone call, two phone calls, minimum that they need to do and it's all new, they've done with it what they had to do. So that's just another anecdote and got more.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [79]
------------------------------
 Well, I have a couple of more questions that I like to pose, but I want to open it up to our audience to take advantage of talking to actual clients about the First Republic experiences. Is there any questions we can field? Yes. Matt.



------------------------------
Unidentified Audience Member   [80]
------------------------------
 Some of you have been clients of First Republic back before they were acquired by Merrill Lynch. Can you talk about the experience when first public wasn't independent and whether or not your service levels changed?



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [81]
------------------------------
 I cried. I (inaudible) my two managers like this is awful, this is exactly why we do not -- why we're not with some of these other firms, like you are just one of those same now. And so long as they become -- keep that level of relationship and the quality, hopefully independent, then speaking from me and my life cohort of people, we will be happy. But I was so upset I called her up, I was like this is awful.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [82]
------------------------------
 Brewster, did you see any change during that?



------------------------------
 Brewster Ely,  Town School for Boys - Retired, Head of School   [83]
------------------------------
 There is a yes or no to that. And I think it's one the most important questions that investors could ask about the Bank. As someone who runs a school what we look for in today's society is we look for the social emotional side of what we offer for kids, what kind of next-generation of young people we're bringing to the system. So you have to wind the question back to the very earliest days of the bank. And as I have just retired, I had only one fear for the school that I was responsible for for so long and that is the that the emotional quotient of the school will be in intact, will remain strong that the school will not lose its path in putting the natures of people first.

 So I've had the good fortune because I had been known the Bank long enough and the people involved to get to Katherine August and Jim Herbert well. And what I know about this bank and it takes you through those different stages, is that there was a core philosophy behind this bank when they started. And both Katherine and Jim had then young children, much more grown children now. But in the earlier days, they look at the bank and obviously they were looking to build a bank and make it successful which it has been through these various iterations that you referenced. But at the end of the day there's a core culture decency and an investment in human nature that they spoke about regularly, I'm not sure how much bandwidth there is in a larger bank, they didn't talk about that.

 But what I know is as with the school business that a rebuilt core and when I talk with people who and I work with friends who are in the bank and who were working in the East Boston area, the same core values hold. So when you talk about -- the Bank runs its marketing, if you will, on good public -- on good service to its client which it has. But you have to look underneath that. What's underneath that is that commitment to the values that those two people in particular and some others wanted for their children. And they brought them into their professional world and believe me it counts and they have not wavered. And I know an awful lot of people involve in the bank. So I have our wealth management person who we had sort of merged years ago and she lives up in across the Golden Gate Bridge and we couldn't get down to the office to do something we need to do.

 She said, can I stop by your house on the way home and she did, like I grew up and doctors to your houses, I can say a public bank came to our house and it was great. And those, if you look beyond good service, look beyond the core of what is the value and the value behind that which this bank and I actually ask them the question regularly. You are getting bigger, you are losing this and you can see the determination not to lose that core value of the Bank regardless of how big it gets. And from your perspectives that's what you're looking for. You looking for the value added and then how well they do their service.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [84]
------------------------------
 Other questions we can ask -- now let me ask one question maybe Brigette and Steve, we talk a lot about service and values, but if you just sort of sit back and say some of -- just tell me how they're different. Brigette what comes to mind first and foremost, just why are they different?



------------------------------
 Brigette Lau,  Social Capital - Partner   [85]
------------------------------
 High touch again is something that an amazing customer service. I remember there was one time we have just opened tinpot and Becky and in a sense were first time regional operators here and we were having trouble with our cash deposits. And I think we called up Diane, she sent someone over, they literally spent an hour with us, helping us set up a process of our petty cash and here is all the plastic bags you need to do acts and so there was such a level of customer service that really cemented our personal banking relationship because it really filters down to all notes of my life. And yes, it's topnotch.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [86]
------------------------------
 Steve?



------------------------------
 Steve Lefkovits,  Joshua Tree Consulting - President & CEO   [87]
------------------------------
 The way I think about it is this. In our consulting business we've got 100 clients and they do business with us because we make them some money, but mostly because they like us. And it's an emotional personal relationship with our clients. And they often ask us for advice. And so the thing that makes them different to me is that I feel 100% comfortable recommending anyone at the Bank to any of my clients for any of their business or personal financial needs. And I feel like it makes me look like I'm smarter than I am and I would never do that for another bank. And I have recommended our clients, private equity funds, our real estate investors, personal friends to the Bank with a 100% confidence that whoever they speak to is going to give them a good experience, maybe not always get what they want, but they're going to get the right answer.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [88]
------------------------------
 And if you had to pick that most prominent difference between First Republic and other organizations, what would it be, what would be that one or two, the one, the most, Brigette, no Ani I am sorry.



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [89]
------------------------------
 I think one or two --



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [90]
------------------------------
 How most different, I mean just most tangibly how are we different?



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [91]
------------------------------
 The client service is bar none and the follow-through is fantastic. And they do it with a level of care that you don't see in today's world.



------------------------------
 Brigette Lau,  Social Capital - Partner   [92]
------------------------------
 Can I just hang on to that a little bit?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [93]
------------------------------
 Yes.



------------------------------
 Brigette Lau,  Social Capital - Partner   [94]
------------------------------
 So I have the opportunity to know many of the high net worth individuals who work with the Bank and I serve on five or six boards that have been in San Francisco and I have watched the Bank reach out to these different organizations including such as the Boys and Girls Clubs of San Francisco and other elements of the city. But what's interesting to me is that because I had the chance to work with some of the people who at the higher end of the banking spectrum and they love the bank, but today Ubered here my home that the First Republicans most doesn't and coming along in the Uber and I am talking with the young men driving and I said -- I told him where I was going and asked him what he was doing and he was looking for a job in marketing, I brought his resume along, and just wasn't kidding, but I told him that I was going to be in a panel for First Public Bank. And he perked up, he said, oh, I bank with First Republic which is now at the other end of the spectrum and said they are great. So here is a bank that takes seriously the different valuations in human resource, the financial resource, and they do it in a way that there's a broad spectrum of pleasure with the bank. So you're running large investment pools, what do you want, do you want a bank that's reliable and strong but also cares about the human element to it?





------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [95]
------------------------------
 Well, we are out of time. I want to --



------------------------------
 Shannon Houston,  First Republic Bank - VP, Director of IR   [96]
------------------------------
 I am so sorry, Bob, since we have time for one more question, we have a question from Jeff here.



------------------------------
Unidentified Audience Member   [97]
------------------------------
 Thanks. Have any of you had experiences whether this is product, there is loan, something you want from First Republic and you're not able to -- they are not able to make it work and how has that discussion been and how have you kept the relationship going moving on from that?



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [98]
------------------------------
 Ani is quite as drum struck.



------------------------------
 Ani Vartanian Boladian,  Rubicon Point Partners - Managing Partner   [99]
------------------------------
 We bid out financing a few times and they can always meet the turns that we might get from somebody else, but that's okay.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [100]
------------------------------
 I think one of the hallmarks that we try and emphasize with our professionals whether it's banking lending is the quick yes quick no. We know what we're good at. We know what types of credit we're willing to take on. There are times when it's not going to be for us and we find that if you're a public pretty quickly and say, this is not really the best thing for us, they really appreciate. What they don't appreciate is being sort of strung along when you really know you're probably not going to get there. And then they find out that a week or two later. So, speed of getting things done is so important, but on that rare occasion when we think this isn't for us letting the clients know that quickly is important.

 So I want to thank our panelists. I think they've also spoke a lot about the strength of culture and relationship and service. But I hope that the actual tangible stories they've shared and their relationships have brought that a little bit more further light for you. So, Shannon?

 (video playing)



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [101]
------------------------------
 Okay. So the most two important words of today are game seven. So, anyway -- it's hard to wait another six hours to be (inaudible). So I am going to talk a little bit about financial planning and principles, and then we're going to have the broader group come back up for an open Q&A session. There are a few basic tenets sort of First Republic that we've lived by for many, many years. And I sum them up in sort of three words; consistency, stability, predictable, all of that, while continuing to grow very safely.

 So we're going to talk about a few things around capital, the net interest margin and our efficiency ratio. Here's our capital slide. You've all seen it before, and I thought I'd start with sort of philosophy that we really tried to be well capitalized and make sure we have sort of 18 to 24-month runway. So what does that mean? We always want to have enough of a capital buffer, protection that if there is challenges in the world, think of 2007 and 2008, there were real challenges in the capital markets, we want to be there and have that buffer to be able to continue to serve clients in all environments. It's really important to be safe and sound and a lot of times it will happen. 2007, 2008 is a great example.

 The markets, the competitors sort of shut down, right. They become internally focused on credit, internally focused on sort of their challenges that exist. We had a great runway in open playing field at that time. And so, having the capital buffer allows when those opportunities exist to be there for our clients. You've heard for a day, I talk about the service. Well you can't be in service and be a service company if you shut down, and the markets are uncertain, so you stop lending. That's not who we try to be. We want to be there for our clients in all environments.

 The other word, let's say, is this and we have this experience. The markets are always open and when you're growing safely there is sometimes this need to raise additional capital in advance of when you need it if the growth opportunity still exist. Sometimes the markets aren't very favorable towards that. And so, we look for those opportunities and you've seen it in the last five years where opportunistically we would access the capital markets.

 This buffer gives us the ability to grow safely and so it's really important how we think about it. If I actually look at the slide here, recently as you all know, we were de novo. So 8% tier 1 leverage was really all that mattered, everything else took care of itself. That was our sort of binding capital ratio. So what did we do? We raised preferred, we raised common, because that counted towards the leverage ratio.

 Well that has changed now, the FDIC changed their rules, we got benefit of that. So recently what happened and you saw this in, I guess it was August, we actually have flexibility now in the types of capital that makes sense. And so, we're more now a bit focused on looking at common equity tier 1 and also the total capital ratio. So you saw the first sort of optimization that occurred in August where we raised $400 million of subordinated debt and our intention is to redeem the Series A Preferred coming here in January. That adds about $200 million -- $190 million of capital. And if you look at that piece, it saves about $2 million a quarter. So it's a good economic benefit and also sort of right sizes the different components in our capital structure.

 Now we talk about -- I know questions will come up, what's the right range is. So it's an interesting discussion because knowing you want to have an 18 to 24-month buffer will probably always going to be a little higher than one might expect given the risk profile that the Bank has. We feel pretty good and outlook looks good. You could see the common equity tier 1, it could actually be in the nines, maybe the high nines but you could see that happen and the leverage ratio come down a little bit from where it is given the safety of the balance sheet and how it exists. That being said, we are opportunistic and when the capital markets are open and if we see growth opportunities, we will take advantage of that to be able to continue to serve clients into the future.

 So dividends. Let me just talk for a minute about this. Our practice since about 2012 has been to pay about a 15% to 20% dividend of earnings. We do think that's an appropriate range for a couple of reasons. One, there is a discipline to returning capital to shareholders, we think is important. But another one, and some of you might be in the room actually, there is certain investor base that needs the form of current income to be able to invest in more of a growth company. And so that expands the potential pool of investor base quite dramatically when we were able to start that in. In fact in the prior bank, I think we didn't pay a dividend for almost 20 years. 2003 was the first dividend that was paid, and it broadened the institutional base dramatically at that point in time. So, we did a little of a work looking at the S&P 500. And so this chart here, you'll see us in the 15% to 20% bucket and there is about just under 50 companies, 46 companies that grow in that range. Their dividend yield is about 1.4%. Last I checked the Bank's dividend yield sort of ranges between point [0.8%, 0.9%]. And so we think that we're trying to balance investing in growth with our capital versus modest dividend we think is appropriate for a broad shareholder base. The one thing I would comment on is we're not repurchasers of stock like many banks you might invest and that's not something that we've ever found appropriate to do.

 Let's turn to the margin for a minute here. Again if I come back to stability, one of the three words I mentioned earlier, it's a pretty good example of that over a variety of interest rate cycles, maintaining a pretty tight bound of net interest margin of about 3% to 3.30%, pretty consistent over time. There were a few years it was above that rate right out (inaudible). And obviously the current couple years does represent a pretty low rate environment that we've been able to maintain about 3.10% margin while the curve has been pretty flat. And the other thing this does obviously affect, and I going to get to you in a minute is there is a revenue side of this that impacts the efficiency ratio that I know we talked about a little bit yesterday.

 Ken Rosen talked about his view on sort of the macro environment. So we thought that normally you see this in our 10-Q which will be published here in a few days, but it's our interest rate simulation for September 30 that looks out a year in two years for different interest rate environments. Given his discussion about maybe rates are moving a little bit in the last sort of three to four weeks, you've seen a move-up in treasury yields. We wanted to sort or just remind and talk about that we do try to run, maybe a little slightly asset sensitive which people sometimes think of that is unique to us. But there's a few reasons why that is the case. I am just going to talk about it briefly. So you see here, maybe focus on 100 basis points since that's maybe more realistic.

 There's a modest benefit in the 12 months, immediate, but then the second 12 months, it sort of jumps up a bit more and I'll talk about why here in a minute. There's really a few reasons that contribute to that asset sensitivity. You heard from Gaye and others about deposits checking. Our deposit bases is considerably different than it was when we went into our prior interest rate cycle where 60%, 62% was checking which is largely operational type activities that our clients need and use.

 The second is our loan portfolio actually does have roughly 35% to 37% adjustable rate loans that would start to benefit if rates rise and the third is really one that's more nuanced, I would say, and that is the dynamic simulation. And so a growing balance sheet naturally reprices a bit more quicker. And so if you think about just some round numbers, 15% loan growth, then you think about that's growth on top of repayment of loans. Our repayment of rates even in rising rate environment still stay high single digits, 10%, 11%, 12%, they don't drop like you would see in a normal portfolio, because our clients are active.

 And so if you add those two things together, you get about 25% of the book that re-prices within a year's time and so that's why the second year benefits more because you've got two years' worth of that. Now will rates rise, a fair question. Maybe that will depend on what happens next to Tuesday, but we will see.

 Okay. Efficiency ratio, so Jason touched on this a little bit yesterday. This sort of shows the last six quarters, right around 60% over time, pretty stable though. And I think that again the hallmark of what we are trying to do while we balance franchise investment with the growth opportunities we have, one of the important things we talked about yesterday is that the spend or the investment we're making in the middle 2014 through the early parts of 2015 was very much preparing for regulatory enhancements being $50 billion and all that went into that. And we've really been able to pivot towards franchise investment, the kiosk you see around here today, the discussion Jason and Dale and others said yesterday. We're really excited about that because, I mean, you heard the great clients tell the stories that really helps us keep our service levels high which then leads to all the growth you've seen.

 The other thing is obviously, this represents a growing wealth management contribution, naturally higher efficiency ratio. Jason, made a comment yesterday that I thought I would talk about actual numbers. So professional fees, if I remember 2014-2015, that's all everyone want to talk about, right. How much professional fees are going up. This year, they're down 33% for the first nine months of the year. And IT is up 29% and so the discussion we had about next online banking, loan origination system, we've been able to migrate that regulatory consulting spend, which was very important for us to build capital stress testing, liquidity stress testing to the levels that are appropriate for a bank of our size. But we were able to move that now into sort of more client-facing initiatives and also adding, you heard from relation managers adding people to their team, right. The client, it's like, we call the team takes care of it, that's really important for us to have the team involved in making sure the bankers are well supported.

 So I have just a perspective we thought we'd show. It's a representative sample of banks over $50 billion, up to $250 billion, sort of zero efficiency ratio. This is a fixed-quarter average so we're right around 60% and given our high touch service model, we think that, it's pretty -- has been a pretty good place for us to be and this is why we've talked about low 60%s given our growing contribution of the wealth business, investments we're making in the franchise. Obviously, if you could tell me what would happen with interest rates and will the margin improve a little bit, if rates do rise, that obviously helps efficiency also. It is an important part of that equation, but we're not going to sacrifice on the investments to the client, even if the low rate environment were to persist.

 So what does lead us to? So for the last sort of day, you've heard about service, clients satisfaction and where this all -- how it all translates into growth, right, we heard about the markets, Net Promoter Score and all of that is a function which leads to our growth.

 Opportunities abound, right, our existing geographic markets have plenty of runway. Somebody said there is 96% to go on the one slide where we showed our market penetration of 4%. You also got to hear great stories from bankers on how they deliver service each and every day and how clients feel about that service. And so we try to build deep relationships one at a time. We're really diligent about managing risk, right credit risk. You heard from David Lichtman. Capital, be very strong and capitalized and they have a really good -- Jim said this in his opening, really good at the regulatory side of the equation, too and keep all constituents happy because that leads to a happy shareholder base if you keep your clients happy and employees happy.

 So this shows 14% growth in tangible book value since the end of 2011. And really we think about in all environments, growing tangible book value well and sort of a return of 10% to 12% all environments. Could it get a little bit better? Maybe if the margin got a little bit better, but it's not about trying to make a 15% return one year, so you can make 3% negative the next year. And so we always come back to what's your time horizon and how far do you want to look out and that consistent stable result over time while growing we think has great benefit.

 With that I'm going to call our other members of the senior management team back to the stage and we're going to do an open Q&A here for the balance of our time.

 (video playing).



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [102]
------------------------------
 We want to take questions. We're wide open for whatever is on your mind. We have everybody here that can answer them. I'm going to differ direct. So, issues, questions?



------------------------------
Unidentified Audience Member   [103]
------------------------------
 I had a couple of questions, Jim. So the business bank when we think about it has moved from a niche business. It's really an important business for the Bank, right $7 billion of deposits growth year-to-date, over $5 billion is from the business bank. And you guys give us the slide, which breaks out the loan mix of the business bank. What I care a lot more about is the deposit mix in the business bank. I think one of the slides of $2 billion coming from tech. Can you give us color on what makes up the business bank deposits, where is the growth coming from because if that's not sustainable you will not be able to fund the loan growth?



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [104]
------------------------------
 Yes, I'll take a shot at it and Gaye if you want to also add to that. We don't disclose the actual numbers in terms of how it's spread out. But if you look at the average deposits, Steve, they are actual less than about $400,000. So there's granularity in the deposit base and your referenced to tech. If you look at the opportunities both loans and deposits, I think there are great opportunities. Technology when they talked about -- Todd talked about venture backed that was relatively new. We have been doing it, but we had a little more focus to it. Now we've found an opportunity there. And I want to reiterate we're not lending to those companies. But we found an opportunity to provide cash management depository services and then true to the strategy go after the entrepreneurs as consumer clients of the bank.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [105]
------------------------------
 Gaye you have some numbers in terms of magnitude.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [106]
------------------------------
 Absolutely. So business banking deposits are just over 50% of our total deposits, as you have seen. We are very pleased with (technical difficulty) across industries and sectors. No one industry or sector represents any more than 10% of our total deposits. Having said that, within that, there is also great diversification across firms and companies and so on.

 I also would like to mention that we would expect a healthy balance, because after all, majority of the time the way we actually get those business deposits is following the individual. It's all about the people at First Republic and in general, the way we end up with the non-profits with the businesses, professional, medical services, registered investment advisors, real estate development companies, they're all coming following our individual clients from personal banking into their businesses as they let us to.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [107]
------------------------------
 I think, if I can add the point that Gaye makes about how we get these deposits is really important, because it's not only how we get them, it's how likely they are to stay. If you're banking -- if you're doing the personal banking of the CFO or the personal of the CEO, the person in charge of the decision, the business banker at the school or the head of the school, the likelihood of losing that is much lower than if you just came in the front door of four other banks and happened to bid low on that day. It's a very different relationship. We don't count on that. But it is there and it's quite different. And what that does is that -- it does two things, it makes it stick here, but it also gives you a very ear to the ground on are you doing it right. Because they call you up and tell you if it's not, it's arm's length is kind of like, hey, you know, can you help us more on this. So we here an early warning. The other thing is, we have about how many 100 law firms, and so on?



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [108]
------------------------------
 Yes, we have in terms of law firms more than 1,000 different law firms that we are banking, close to 500 accounting firms, healthcare companies, close to 2,000 healthcare companies. It's a great diversification. Not only that what Jim just knowing the individual and the people who influence the business, there is really and I'm thinking when I'm looking at the top 10 depositors I know exactly what I call the banking if I have a question about the deposit or the liquidity needs and so on, we can easily make the phone call and get the information from them. So it's a very seamless relationship-based approach to it.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [109]
------------------------------
 Total funds are about 3,000 now.



------------------------------
Unidentified Audience Member   [110]
------------------------------
 If I could ask one more question, whether it's business bank, wealth management you are obviously here is there San Francisco, at this stage has there been a big employee or customer fraud from Wells and can you talk about for your businesses what that you think that might be?



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [111]
------------------------------
 I'm happy to start. We've seen opportunities, it's not the way we want to win business we think the Bank can win business based on the merits that we have to offer. So we will let Wells do what Wells does and we will continue to do what we do and win every day on the merits of which you've heard from the client panel.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [112]
------------------------------
 I'd say the same from the wealth management side.



------------------------------
Unidentified Audience Member   [113]
------------------------------
 Mike, I know not to expect you to buy back shares. But can you realize your goals of 10% to 12% tangible book value per share growth, let's say, over the next five years and keep your share count flat assuming there aren't extraordinary events and would that be a goal even?



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [114]
------------------------------
 So over five years that would be a pretty long time, I would say. If you're growing roughly at 15% and let's say you're returning 12%, so there's a little bit a gap, there is an ability to, as I talked about, maybe reduce a little bit of our current capital ratios, given the safety or the nature of our assets, but five years will be probably a longer time that I would think.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [115]
------------------------------
 To put a finer point on it, no, it's not possible to keep the share count steady over five years, that's too long and the reason is the gap. The other thing is that, I don't have a number, but I've been doing this a long time, and stuff happens. It's been a kind of a honeymoon period here with all the lose money and so on, but the reality is that there will be a downturn. And in the downturn, if you look back at the Bank, and this goes back to the Bank I started before this one and maybe if you go through from 1880 all the way through now, we have always done the best when conditions are the worst.

 The growth rate of the assets, the opportunities are the most extraordinary when everybody is in trouble. And so staying ahead of that is import, very important, being ready for that moment, not that we anticipated eagerly, don't misunderstand me, but it does happen and it will happen again. That's axiomatic. And so the question is when and how deep and are we ready, and that's kind of point one.

 Point two, we have a rating sheet here, I think we have it in the room, but the ratings on Bank are quite high. And one of the reasons is the long-term consistency through up and down. Number two it is a growth organization. We're cognizant of that. We don't get up in the morning to have that happen, but it does happen for all the reasons you've heard here. And the important thing is to anticipate the growth. So we try -- this isn't a hard and fast rule, but we try to have a couple of years of capital because when banks are shut out from capital, it's a 24-month period -- 12-24 months, 1980, 1981, 1982, the late 1980s, early 1990s, 2000, 2001, 2002, 2008, I have been all of those. And you always get shut out for 12 to 24 months. What you want to do is go into that moment with enough capital and not worry about it.



------------------------------
Unidentified Audience Member   [116]
------------------------------
 Yes, Jim. Two questions please. One of them, what are the many attributes you have incumbent of Warren Buffett's succession concerns? So I'm just curious what if you know tomorrow what happens, do you have a successive chosen. Obviously, your personal has been very important in terms of making the culture what it is and books have been written about how Berkshire's culture might persist after Buffett. But maybe you could expand on that what happens succession wise. The other one is a different subject, it has to do with securitization, securitization of the jumbos. I think you talked earlier, but you did an interesting one with JPMorgan recently. Perhaps you could comment about the composition of the buyers to the jumbos how that's changed over time and what makes that market tick, really how big is Redwood Trust these days, how much other the banks can play in terms of buyers of your jumbos? Thanks.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [117]
------------------------------
 Let me ask Jason and maybe David to back him up on the buyers, but let me take the first one first. I think succession is sitting to my right, that's why I needed to be on the end. But we have -- one of the main purposes of the Investor Day in fact is to make it clear to many of you who put a lot of money into our stock which we thank you very much for, to be clear that there is a very, very deep bench here.

 The other thing is some of you at least last night saw Katherine August-deWilde and Jay and Willis Newton come, we generally keep -- they are still very active captains, life cherishes in the Bank all the time. Actually Wealth Management Bob reports into Katherine and Willis is on several committees and helping us out, so there is a continuum. The current structure is that I will say as CEO until the end of next year and then stay on as Chairman for four more years, I believe it is, after that. And I expect that to be an active role.

 Having said that, we have all the people we need on the bus. The question is getting the seats exactly right, but the main thing we're doing is making sure that everybody has the full experience of running the pieces of the Bank. That's what I alluded to earlier when I talked about business regions reporting into people. They are not just reporting. That's kind of like the second -- that's the minor part of it. What's happening is that Bob is out on calls with Mary Deckebach in LA, Gaye is out on calls in Boston, Jason is out on calls in San Diego. And so they are out in the loan committee activities, meeting clients, taking deposits, cross selling products. And so everybody knew how that all worked but I wanted to understand exactly how it works. And they have the experience of winning and losing, learn more from losing than winning. And so I'm not -- this is not a theoretical conversation for me, I own a lot of shares. So you can be rest assured I'm sitting right where you are.



------------------------------
 Jason Bender,  First Republic Bank - EVP, COO   [118]
------------------------------
 Let me take a stab at your question about loan sales. We have sold loans every quarter, I think, since basically the inception of the Bank. So we're very active in the secondary loan sales markets. We sell to a variety of purchasers. There is a component that's flow based primarily to Fannie Mae. But we also sell a lot in all transactions each quarter as you know. And the buyers of those loans in those transactions varies over time.

 We're constantly looking to add new purchasers so that we've always got an inventory of folks who are interested in the loans. And it goes back and forth. Sometimes the securitization market is rich and they've got the good bids and other times it's balance sheet buyers. We've seen over the last 12 months,18 months an increase in balance sheet buyers and we've had some great sales to those folks.

 When it comes to the securitization market over the last couple of years, one of the things that's really impacted that has been the QM rules and some of those issues and what's been encouraging is that the securitization markets are now starting to find some acceptance for those types of loans, the securitization that was referenced yesterday was a good example of that where there is a higher percentage of IO loans in particular in that. So we're encouraged by that.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [119]
------------------------------
 I would add a couple more of pieces to what Jason said, one is we sell loans for a couple reasons; one, to manage balance sheet growth; secondly, to manage interest rate risk and when we sell loans we always service it. So from a client standpoint they don't know. They make payment to us, they call us if there any questions about their loan, their interest rates and so forth and we keep that relationship with the client and then pass through the interest payment for a servicing fee to the owner of the loan. We're also not striving to make a lot of revenue out of our loan sales. I think it's been $0.01 a share for a long time in that range. What we're really looking to do is make sure that we've got access for those loans so we can provide our clients with the loan products that they really want or need.



------------------------------
Unidentified Audience Member   [120]
------------------------------
 This question is for Mollie Richardson. Thank you for the presentation on the community reinvestment programs that the Bank has in place. We really are first learning more about these, I guess on the second quarter conference call in July, then there's been a series of announcements hiring additional people in that area. And we did also (inaudible) obviously ran a story on August 16 about the Bank's community reinvestments. The FDIC is kind of growing interest there. So maybe you could comment on how regulators are viewing the Bank's CRA program. And is this becoming more of an issue or as these programs been in effect for several years not much has changed? I mean, we can see the amount of hiring, but maybe just your perspective on that area would be helpful.



------------------------------
 Mollie Richardson,  First Republic Bank - SVP, Chief Administrative Officer   [121]
------------------------------
 Sure, I'll share my perspective and I think my colleagues can also jump in as well. I think first and foremost for us we're pleased with our satisfactory record over the last 25 years on our CRA ratings. I think one of the things that we've realized is community engagements, including CRA is part of, sort of the fabric in the DNA of our business model and perhaps we take it for granted but it is the part of what we do. And we don't necessarily articulate or communicate as much as we should, how much part of the business it is for us. We do think of ourselves as a community bank. But I think we also are always looking at ways that we can do more and improve and at the end of 2015 we self-identified the need that we could do more in this space since the development of our Eagle community home loan program itself. And I am not sure anyone has any other comments.



------------------------------
Unidentified Audience Member   [122]
------------------------------
 Couple of questions, if you don't mind. First on high net worth markets and speaking about how in places like New York City, Boston, your market share of high net worth households is pretty low. But I'm curious to what extent you can talk about how many high net worth households out there are ones that you would not want based on whether the client is highly levered relative to their income or perhaps they have low liquidity or other reasons why that wouldn't fit your credit profile? And then secondly, question on professional loans, trying to get a sense for how big that market is and to what extent other banks offer these loans, I am just not as familiar with what the competition looks like in that market.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [123]
------------------------------
 Let me take a stab at that. On the professional loan piece, we think we're just in the early stages of getting traction in there. We have a couple of hundred programs in the bank from smaller firms with 5 or 10 partners up to bigger firms for 300 or 400 or 500 employees taking advantage of those loan program. So we think there is a lot of opportune in there. We think it's a great business to do like the standalone loan. It's a safely underwritten loan to an up and coming employee at that firm backed by the assets of the firm. And if they aren't ready to bring the client into the Bank, where we start with usually a basic checking account order the other as a loan payment, direct deposit of their paycheck and then we do more with them. We build a relationship, they normally buy a house, buy a second home, leave and bring us to their new firm. And so the opportunities there are tremendous and we're beginning to get referrals. We did a program for company A, they now refer us as the company B and that's beginning to take off. So we think there's a lot of growth from there.

 On the first question about, high net worth households, you're right, they're not all created equal. We sit down with each client one at a time, hear their story, understand their financial needs, understand how they manage their money, do they pay their bills on times, are they prudently managing their financial life and then make decisions on a case-by-case basis.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [124]
------------------------------
 Maybe to add on the deposit side we would welcome all stable diversified deposits, (inaudible) don't need to be high net worth clients to be a deposits client.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [125]
------------------------------
 If I can make a couple of points on POP and the all-in-one, but quickly on the high net worth, we have 1.5% share. First of all it's only about 40% of our business, the whole segment. It's just a good circa as a measurement for opportunity. The percentage of high net worth households, as a percentage of total in the United States in the markets we are in is growing at 1% per annum for the last 12 years. So the concentration of such households as a percentage of total in the country is going up. It's gone from -- it's at 58, it was at 46 and in 2003. So the markets are getting extraordinarily stronger. This is not a minor move, it is only 12 years.

 But the high net worth share that we have in the York is 1.5%. But we have a $12 billion bank in the New York. So this is really big opportunity. The AIO and PLP, one other things that does is most important were first all the PLP, the Professional Loan Program, the deposits from those borrowers fund the loans more than a 100%, to give you a sense of their liquidity as a group, even at their young age. The other thing is that -- and we don't really know, but we've done some rough estimates, about 15% to 20% of the PLP borrowers have already bought their first home. The rest have not.

 And then the all-in-one student borrowers almost none have purchased their first home, maybe 10%, 5%, some have but not too larger group. For 36 years and 2 bangs, our lead product primary acquisition products has been the home loan. The borrower of that home loan first time when we get him, tends to be kind of late 2030s or early 2040s if you average the PLP on the IO programs, we bought the age down of the introductory point to our borrowing clients by almost a decade through these two programs that is a really big change. And we have about 50,000 borrowing clients in the Bank, consumer borrowing clients in the Bank. Those two programs today already equal 7,500 roughly.



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [126]
------------------------------
 Can I return real quick to this notion of the markets? I just want to reiterate one point when it comes to market penetration. We don't, and this came up a bit over dinner last night too, we don't focus so much on the market penetration as we focus on the health and the growth of the market themselves. I think your question is in this two. One, which is there are always going to be some clients that we don't necessarily want to do business for a variety of reasons. When you're in a market that is growing as fast as you yourself want to grow, you have your choice of clients to do business with. And so I'd much rather be in a market where we're just keeping pace in market penetration, but that market is adding high net worth households or attracting high net worth households as opposed to taking an ever-increasing market share of the small market where you have to stretch in order to gain the next new client. We don't have to do that in our markets. And I think that's really fundamental to understanding how we can grow organically the way we do, but also how we can grow safely the way that we did.



------------------------------
Unidentified Audience Member   [127]
------------------------------
 So First Republic obviously synonymous with high net worth, right. But we found out from the panel this morning that one of your customers is a job-seeking Uber driver, which is fine. 20% of your offices are in low income neighborhoods, great. Staff likes CRA. Can you give us a little more quantification like how many of your client are not high net worth? I mean I don't know if there's like an income stratification you can say right, here is how many, I won't say, Uber drivers. But here's how many customers we have in this income bracket, because we hear about the average and the medium that's very, very high for your customer base, but how much is that skewed by -- half is your customer base and the other half is have your customer base and the other half is very much more mass market if you will.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [128]
------------------------------
 I would say of the all in one customers for instance is not on their high net worth. Zero. I mean, 60% of our consumer client base does not fit the high net worth definition. But it's not, again I go back to the fundamental word time, we bank law firms, we bank managing partners of law firms and we bank the newest associates they just hired. What they have in common is they are serious hard working professionals operating in the geography that we operate in and they have a credit record sufficient for us to be comfortable that they manage their fares properly. But they manage their fares properly relative to their size.

 Our community, our Eagle community loan program is not changing our credit standards. It's not -- there's lots of good credit everywhere. The real challenge is connectivity to that particular market, that particular group of people, that particular area. And that's one of the reasons we've been hiring more loan offers. But the ability -- the market -- there is no market in America that is more diverse than San Francisco Bay Area and New York, and Boston even for that matter. So we're in the most diverse geography. The Company speaks 50 languages inside the Bank. I mean it's an incredibly diverse thing.

 But the high net worth, our approach to this has always been when we hung out our shingle, the lawyer -- the partners in the law firms already have banks. It was the associates that didn't have a bank. So in fact that's about all we did. Well, we are now 30 years old. And they went through partner, went through managing partner and have retired and are looking for a management. So all the time we have this new bank coming up inside the older bank. If you measure where the wealth management assets are by age, they of course are in the older clients, but that's called compounding. And the loans tend to be younger, but that's the young senior partner to be. And so the markets we're in are blessed with an enormous amount of new jobs for highly qualified folks of all kinds, engineers, lawyers, doctors, accountants whatever. What they do have in common is that these urban markets are beehives of activity. We all know, we live in them. And so the intensity of the client base is one of the most important characteristics that we have and that's why get the testimonials you get because -- I think, Ani said she had 100 accounts.



------------------------------
 Bob Thornton,  First Republic Bank - EVP, President of Private Wealth Management   [129]
------------------------------
 Couple of hundred accounts, yes.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [130]
------------------------------
 Oh, my god. And that's fairly serious relationship. But she didn't try out that way, she tried out mortgage.



------------------------------
Unidentified Audience Member   [131]
------------------------------
 Thanks and then just a question for Mike. The asset slide that you put up, it was like 2.3% base point. If I remember right, I think it's down from 4% or something last time you published that slide.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [132]
------------------------------
 I think they're relatively consistent. I don't have June 30 in front of me, but I think it might be a little bit less, but not that much. I don't think.



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Unidentified Audience Member   [133]
------------------------------
 Okay. But I guess, broadly speaking, like potentially if we're going to a rate hike, December like wouldn't it be the first product to be a little more asset sensitive going into that?



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [134]
------------------------------
 So we are -- this goes back to sort of consistency and stability. We're not trying to bat one way or another. So the Fed may very well look to move in December. There will be a modest benefit to that. The place where we get more of a benefit is probably in the middle part of the curve and if lending rates can pick up a little bit. And so I think we're not, David mentioned, we sell loans, we've used the Federal loan bank, it sort of a multiple layer of our sort of risk management to try to be slightly asset sensitive because then you'll grow at the same time.



------------------------------
Unidentified Audience Member   [135]
------------------------------
 Sticking with the asset sensitivity slide, it's been a while since we've actually been in a rising rate environment. And you have done a good job of diversifying the deposit base from where you were at last time. But do you still have a lot of large concentrated deposits. What work could be done on deposit beta analysis and can you share with us what you've done in terms of expectations for retaining some of those larger depositors as you continue to diversify the deposit base?



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [136]
------------------------------
 Let me start then you can add.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [137]
------------------------------
 Go ahead.



------------------------------
 Mike Roffler,  First Republic Bank - EVP, CFO   [138]
------------------------------
 We obviously do study our deposit betas a lot, and you're right, I think we're going on, I don't know 10 or 11 years since we've actually had the rising rate environment. We estimated about a 60 to 65 beta in our money markets and that's in our disclosures and you can see. I think the fair thing to say is that the first rate move happened last year and that didn't come true. So the demand was less than the first rate move and probably is less until rates get to a little bit higher level review. And maybe if you want to add.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [139]
------------------------------
 So the service nature of our deposits while we may expect a modest impact, there is the competition, there is rate environment, we think that one of the biggest mitigants that we have towards that impact is the service nature of our deposits and the relationship especially as you're talking about the top deposit relationships, they are multi-client, multi different relationship, a lot of touch points with the client for many, many years, very long average tenure of clients with us has been stable. So, despite the historical experience that we have had in terms of being able to lag such changes in the market, those assumptions that Mike has mentioned on what's driving our gap analysis in the 10-Qs that are much more conservative than what we have actually observed historically.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [140]
------------------------------
 And importantly, in the gap analysis that we have in the 10-Q, we still have what, Mike, about -- 45%.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [141]
------------------------------
 45% of refreshing repricing, [60 to 65] on savings account that are much more conservative than we actuals are.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [142]
------------------------------
 So the ALM that you're looking at is actually got a major hedge bed in it that would possibly benefit greater than anticipated in a rising rate. We take almost half of our checking and put it in the immediate adjustment category. So we didn't put a lag on it.



------------------------------
 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [143]
------------------------------
 Maybe just lastly on that, if you go back to second quarter to Mike's points, we did have one Fed hike, 75 basis points in the fourth quarter of last year. If you go back to second quarter and third quarter of 2015, our deposit rate was (inaudible) 14.7 basis points and 14.2 basis points and in the last quarter that we had in the third quarter it was 14.5 basis points despite the hike that we've seen. So we are pleased with the growth at ending able to do that at almost 15 basis points.



------------------------------
Unidentified Audience Member   [144]
------------------------------
 You sold the Bank once before in 2007. What did you learn from that experience, which will make you think about whether you do it again, how you do it again, when you might do it again?



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [145]
------------------------------
 Well, we actually didn't sell, we got bought. There is a pretty big difference actually. We're now looking that we got three incoming calls completely unsolicited, unrelated and so there were to back-up bids. And at the time we didn't want to sell, I didn't even actually respond to the first two calls from the buyer. And in the process, when we did engage, there was about a 90-day process, roughly, we got to pricing eight days before we made the announcement.

 The whole conversation was about culture and about where we would -- how it would work and how it would integrate or wouldn't integrate. And we put our employment contracts, staffing my cultural statements in the employment contracts. And I say that, to make the point there, the only reason that happen was actually not price because we didn't start there. It was because it seemed like the possibility. I remember it's Merrill Lynch, we bought back from BofA. The thought was that they wanted a high touch use stands and wore Stephanie bag to take care of their highest end clients. And we would only primarily relate to their big officers, which were their highest end offices of which there were about 13 or so in about four cities in the seven cities and we were in four of them already. That actually make some sense because CFAs in those offices I think totaled 800. It was not 1000. We could relate to that probably that might work. They would leave us alone, we keep the brand, we would keep separate accounts. They did pull this into the savings bank. That was a last-minute decision around all the bank holding company law, but they kept us separate.

 And that made some sense for our clients at that time particularly because we haven't really built our wealth management yet. We were trying and it was getting much better. Bob begun to get a hold of it, was making a lot of improvements when it was Merrill Lynch and they had a really good offering, and that made sense for our clients. Through that whole time, we lost five people, the whole time from when we went in to when we came out. And would we do it again, never say never, but I doubt it.

 Did it make sense at the time, if the world hadn't implode I think, it did. I think it would have worked for our people and for our clients and for Merrill. We went in delivering them X profits, by the time we came out it was 4X. We were making three or four times what we made, when we went in. And that was one of those times when things got bad and we turned -- the turned us lose because they didn't have anybody else doing anything good. And so we took share like crazy. And we had a feel to 2008 and 2009. And that was extraordinary. And then of course they mailed some of the BofA and the rest is history. So I don't know who it would make similar sense with today. We don't think about it very much on honestly. But I can't even come close to naming who that might be.

 I think independent also serves, we have multiple constituencies, clients first and I think independent serves them the best now because we have what they need. I think we heard that, doesn't mean we have everything, we improve every day, but we have pretty much what they need. And we can meet their size needs. Very seldom do they outlearn us now. And then for an employee in the colleague base, independence is probably better. And for the shareholders, there is a one-time check obviously, so we acknowledge that and we have an obligation to listen to good ideas come in and we will, I did before and we will again, because that's our obligation. But on the other hand, that's a one-time thing, but it's an important thing to the current shareholders, we get that. And then I think from the -- I don't have an opinion from a regulatory point of view, I don't know how they would view on merger actually. So I think if you analyze it, you have to have an open mind because we're a public Company and we do have an open mind. We've proven that from our theoretical conversation. But I -- right at this moment I don't know with whom that would make sense, to be honest with you.

 No domestic bank can buy us, deposit growth wouldn't allow, while I won't say any, the big ones, the biggest ones couldn't. They came down pretty quick from there. We're sitting on a $11 billion market cap, a strong transaction.



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Unidentified Audience Member   [146]
------------------------------
 Jim, I think you had said earlier that you were opposed initially to the score product sale in PLP. Can you talk a little bit more about what the internal debate there was? What you were worried about and then to the extent that you come around what changed your mind and what, they're fairly new still. So what you're still monitoring about them? And then my second question was, these products and Eagle investment, they seem to be more small balance, small customers, scaled out, products that are lower touch than what the Bank is known for. I was wondering if you trade cards once before, is cards a business like that or is there something different about cards?



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [147]
------------------------------
 Car loans? (multiple speakers) Let me start with the debate. I was supposed to automatic scoring, which is where we are originally coming from on any kind of lending. And the reason philosophically was that the second you build a block, you don't pay attention to exceptions enough, in our base since you kick out exceptions, but there's a lot that can get you over the edge. You can have a mix-up inside there.

 On the other hand what we've designed, and I'll turn it to David to describe how we do this, I became convinced that if you set the parameters tight enough you can do it quite satisfactorily. A lot of our larger home lending is done with this what we call single signature. And we have a (technical difficulty)



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 Mike Roffler,  First Republic Bank - EVP, CFO   [148]
------------------------------
 So I think, a couple of thoughts on the credit side and then sort of a little bit on the marketing side. It is a combination of scoring an individual credit input as well, made good educated decision client by client. So we look at, certainty of income, we look at balance sheet, management, we look at third party debt outside of loan. We look at ability to save, ability to have extra cash flow, have they pay down their student loan from the original balance, have they prepaid extra, we look at their credit history and we apply all of that information, it seems there's a lot in the world, to make good educated decisions.

 And the reason we're doing it is to get access to young up incoming professionals and as Jim had mentioned earlier, it had previously been solely a home loan as a primary driver. Now we have home loans and we have the partner loan program, and the all in one as an additional driver to find young professionals, 90% or 92% of the all in one borrowers have graduate degrees. So they're very employable whether they're in their current job or move elsewhere and they have proven success by getting through undergraduate school by getting in and out of graduate school, by getting a job with two years of seasoning whatever firm they're working at. And so we hope to establish that relationship and then grow from there.



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [149]
------------------------------
 If I could also just add, I would say both the AIO, the all in one and the professional loan program actually are a very high touch. Professional loan program Gayatri was speaking on the panel that Jason did yesterday, she partners with Kellie Abreu's clients on the firms that come in and oftentimes we will have Eagle lenders in an office or in a conference room as a firm meeting with their employees who are wanting to participate.

 So it is very high touch, it very still customer service focused obviously depending on the need of the program. And with all one, I just would want to be careful just to make sure that it's clear, we have very much enhanced the experience and ease of use of applying for the loan, but it is very much still hands on, whether it's Gayatri or an (inaudible) or someone, there is a banker that individual is in touch with, while they're completing the application and that borrower does come into one of our preferred banking offices and sits down with the banker when they open up a deposit account.



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [150]
------------------------------
 And the last thing I'll add about you mentioned Eagle Invest, Eagle Invest is a way, we serve our clients the way they need to have their needs met, just how we want to do. So, Eagle Invest is an online investment service, but it's one that has higher touch elements than your typical online investment advisors. And it's not only a way of working with clients, all-in-one clients that they have a smaller wealth management balances to start with but it's also a way for people who want to have that sort of relationship. Some people are just very comfortable online investment management relationship.



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 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [151]
------------------------------
 All right. The cost here says zero. That's probably indicative of something. We have a couple minutes?



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 Shannon Houston,  First Republic Bank - VP, Director of IR   [152]
------------------------------
 We do. We have time for a few more questions.



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [153]
------------------------------
 Okay. If there aren't other we all can go home early. Any other questions?



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Unidentified Audience Member   [154]
------------------------------
 Thanks. I had a question about the relationship managers. I think you mentioned you have about 150 relationship managers at this point. And I think the Bank has around 100,000 deposit relationships. So that's about over 650 clients per relationship manager. Is that consistent with the Bank's history, how you've been growing the RM count over time and are you encountering bandwidth issues at all with any relationship managers in terms of the number of clients that they're servicing?



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [155]
------------------------------
 Mike?



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 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [156]
------------------------------
 Yes, I'll take a stab at it. Keep in mind Bob touched on this, with this panel. It's not solely relationship managers that would always have their relationship. It could be with Gaye and the PBOs of the branches. They have relationships. Wealth Managers can have relationships, business bankers can have relationships, so it's spreads a little bit more broadly than the 150 that you're referencing. I don't know about the history. Jim can speak to that. But we think we still have enough of a model to deliver the high touch despite the numbers that your referencing.

 The other thing to keep in mind is there is a bit of an apprenticeship that goes on here. And so there is also the next generation of relationship managers -- advisors or managers of the branches. And so we're working on almost like a pyramid. If you looked at [Alice Wen] who you met last night, she has a support team and then she is working on the next generation of relationship managers that will help manage Alice's book one day if she retires. We hope it doesn't happen soon, but some day it could. And so at the end of the day, we think we still have the model right in terms of the numbers and the ability to deliver that high touch service.



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Unidentified Audience Member   [157]
------------------------------
 And what percentage of relationship managers are homegrown, if you will, at the Bank. Do you have a statistic on that versus hired from outside?



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 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [158]
------------------------------
 I don't have a statistic, but we did coming out of Bank of America hire, we did ramp up on relationship managers and we did hire from the outside and some worked out, some didn't. I don't have it off --



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 Jim Herbert,  First Republic Bank - Chairman & CEO   [159]
------------------------------
 I think that's easily answered by the comment made before that of the enormous volume of loans, 90% of the people that originates loans are here. I would regard those as home-grown. They spent their whole career here. Whether they joined 10 years or 15 years ago from XYZ bank, we consider them home grown.



------------------------------
 Scott Dufresne,  First Republic Bank - Regional MD-Boston   [160]
------------------------------
 I agree with that actually and when we hire a new relationship manager or anybody who can be client facing those people go through a huge slate of interviews. They meet with anywhere between probably 15 to 20 people before their interview processes is done. And we're looking for a cultural fit. I mean these may be people who are initially with another institution, but they are us. And when you go through a process like that and any one person can say, you know what, a person just who think is going to work here that's the most serious part of that integration process.



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 Hafize Gaye Erkan,  First Republic Bank - Chief Investment Officer, Chief Deposit Officer   [161]
------------------------------
 And maybe just one last point. Hearing all the questions, staying a step back, it's important to come back to where the growth is coming from most of the time because the growth of households or relationships versus the growth of asset size, it's not of the same magnitude because half of the growth is coming from the same clients doing more or it Scott or Margaret and so on. So the brand new growth to the Bank in terms of the balance is much smaller. And the number of households actually grow much less than the asset growth. So from that perspective -- and you haven't seen I realize that we also have a great group of people preferred banking and PBL client services team. So we are very closely with deposit services that reports to Jason. So we have a great group of people on the preferred banking and client services that also supports the relationship from a deposit perspective.



------------------------------
Unidentified Audience Member   [162]
------------------------------
 One quick question for Jason about the millennials. So we've heard about the programs the Bank has for those that are maybe in their 30s or 40s, 40 years old average age, but my understanding was the Bank really hasn't figured out millennials at this point, your kind of okay with that, just because the wealth necessarily isn't there? But can you talk about this millennials website that was a referenced yesterday? What does that look like and how is the Bank thinking about that in practice?



------------------------------
 Jason Bender,  First Republic Bank - EVP, COO   [163]
------------------------------
 Sure. I mean anybody can jump in here, but the millennials website, I think is one piece of a much broader strategy to Bank really the next generation First Republic clients. And so a lot of what you heard about over the last couple of days really fits within that strategy, whether it's the expansion of the AIO program or the PLP program, whether it's our investment in the next generation, consumer online banking technology, whether it's carving out a piece of the Bank's corporate website to make sure that we're communicating with the millennial, millennial segment, just as we would communicate with any other segment, whether it's doctors or lawyers or venture capitalists, all of those things are elements of our very conservative approach to trying to bank the next-generation of client with First Republic.



------------------------------
 Mike Selfridge,  First Republic Bank - SEVP, Chief Banking Officer   [164]
------------------------------
 I would say in terms of figuring out millennials, I have three kids at millennials. I haven't figured them out yet. So there is some assumptions we make about this demographic and some are correct and some are not correct. And I think our goal here is to have the digital and high touch. It was mentioned by Jason yesterday, we have a branch, the only branch for a bank on the Facebook campus. And when we do things they could normally be provided online like, how to buy your first home, we will provide seminars and it's amazing how it's almost a sold-out crowd. It becomes the social and personal contact. There's still a world for that. I believe millennial still desire that in addition to mobile banking Eagle invest and another digital products that would help them, further complement the banking relationship.



------------------------------
 Jim Herbert,  First Republic Bank - Chairman & CEO   [165]
------------------------------
 I think it's about time, right. I just want to say thank you very much for your support and for your interest. It took a lot of time to do this. We really appreciate it very much and we welcome your feedback on how this could be improved or was it useful et cetera hopefully. But safe trips home everybody and thank you for taking the time to be with us. And I got a say, Shannon thank you for a great job.



------------------------------
 Shannon Houston,  First Republic Bank - VP, Director of IR   [166]
------------------------------
 I do not want to get in between you all and lunch but this was a huge team effort, so we had an army of helpers helping us. Chris O'Brien, Erika Snider and Janisha Sabnani this couldn't have happened without our team effort here, our entire finance team [Emmy Kayano] and financial reporting, all of our helpers (inaudible) our marketing team. And then certainly last but not least my IR colleagues Kimberley Shannon (inaudible) who have worked tirelessly. So thank you everybody.




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