We never compromise on credit quality and have maintained our disciplined, conservative underwriting standards through varying economic conditions.
Credit risk management involves a partnership between our Relationship Managers and our credit approval team, who work closely to fully understand the borrower’s financial picture.
Each loan is underwritten to withstand potential economic downturns with stress testing performed at the individual loan level. For real estate secured loans, we place a strong emphasis on low loan-to-value ratios.
Our targeted markets and simple, consistent loan offerings have allowed us to build substantial local knowledge and lending expertise. Our Credit Officers, who approve loans, and Relationship Managers are located throughout our geographic footprint and are making decisions in areas and properties they know well. In fact, as of December 31, 2020, 90% of real estate secured loans are located within 20 miles of a First Republic office.
Our strong credit criteria make us a better partner to our clients by increasing the safety of the Bank and protecting clients from taking excessive risk. Over the past 21 years, the average annual net charge-offs of the Top 50 U.S. Banks have been nearly eight times higher than those of First Republic.1,2
We recognize that from time to time, clients may undergo hardship, often through no fault of their own. At such times, we work with our clients on a one-on-one basis to reach the best outcome.
Our compensation program reinforces responsible lending practices, with credit clawback provisions on all loan originations since 1986. This structure incentivizes bankers and approvers to provide loans that are well-suited to the client.
When credit issues do arise, bankers, in conjunction with credit administration, are responsible for resolving their own non-performing loans. This allows the banker to take a personalized approach with the client.
Weekly companywide meetings attended by nearly all of our senior management, bankers, credit and loan production colleagues provide meaningful learning opportunities and reinforce credit quality as a cultural cornerstone of the Bank.
1 Compares the average of the median annual net charge-offs for the top 50 U.S. Banks by asset size from 2000-2020 to the average annual net charge-offs of First Republic Bank from 2000-2020. Top 50 U.S. bank data sourced from S&P Global Market Intelligence.
2 Includes estimated charge-offs on divested loans retained by Bank of America for the period from July 1, 2010, to December 31, 2018. First Republic was sold to Merrill Lynch in September 2007; through the acquisition of Merrill Lynch it became part of Bank of America in January 2009; then it became independent again through a management-led buyback in July 2010.