Greetings, and welcome to First Republic Bank's Q2 2021 earnings conference call. Today's conference is being recorded. During today's call, the lines will be in a listen-only mode. Following the presentation, the conference will be open for questions. To join the queue, please press star one on your telephone keypad at any point during the call. I would now like to turn the call over to Mike Ioanilli, Vice President and Director of Investor Relations. Please go ahead. Thank you, and welcome to First Republic Bank's Q2 2021 conference call. Speaking today will be Jim Herbert, the bank's founder, chairman, and co-CEO. Hafize Gaye Erkan, co-CEO and president. Mike Roffler, chief financial officer. Before I hand the call over to Jim, please note that we may make forward-looking statements during today's call, which are subject to risks, uncertainties, and assumptions. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please see the bank's FDIC filings, including the Form 8-K filed today. All are available on the bank's website. Now I'd like to turn the call over to Jim Herbert. Thank you, Mike, and good morning, everyone. It was another very strong quarter with robust growth in loans, deposits, and wealth management assets. Our client-centric business model is continuing to perform very well across all of our segments and all of our geographic markets. Since 1985, First Republic's success has been grounded in colleague empowerment and a service culture of taking care of each client one at a time while operating in a very safe and sound manner. This straightforward and personal approach has led to very consistent organic growth for 36 years. The growth is not predicated on mergers or acquisitions. Let me review for a moment the results of the Q2. Total loans outstanding were up 18.9% year-to-date annualized. Total deposits have grown 37% year-over-year. Wealth management assets were up 55% year-over-year to a total of more than $240 billion. This across the board very organic growth drove our strong financial performance. Total revenue year-over-year has grown 34%, and net interest income was up 27%. Quite importantly, tangible book value per share increased 15.5% year-over-year. The safety and soundness of the First Republic franchise continues to reflect our strong credit quality. Net charge-offs for the quarter were only $1.2 million, just a fraction of a basis point. Non-performing assets at quarter end were only 8 basis points total assets. We remain, as always, focused on capital and liquidity. At quarter end, our Tier 1 leverage ratio was 8.05%, and our HQLA was 14.3% of total average assets during the Q2. This included higher than normal cash levels. Our clients remain very active as the reopening of our urban coastal markets takes hold. This is particularly evident in the strong growth of single-family home loans during the quarter and so far this year. This growth represented a substantial portion of the quarter's total loan activities, including both purchase and refinance. For some perspective on the long-term stability of First Republic's model, residential loans have remained steady at approximately 60% of our loan portfolio for the entire past two decades. This is a very safe asset class, particularly with our stringent underwriting standards, and is a key to us attracting new households. During the Q2, we opened our first banking offices in Hudson Yards. Clients are responding well to our presence in the area, and foot traffic has been actually quite good. Our other new markets, including Palm Beach and Jackson, Wyoming, continue to perform very well. Overall, it's been a strong and successful first half of 2021. Before turning the call to Gaye, I'd like to take a moment to congratulate her on her appointment as Co-CEO. Gaye's been an invaluable contributor to our performance, and I'm really delighted to continue our successful partnership at this new level. Working together, we intend to ensure the consistency of First Republic's culture, which is particularly important as we emerge from the pandemic. Let me turn the call over to Hafize Gaye Erkan, Co-CEO and President. Thank you very much, Jim. I'm honored to be appointed Co-CEO and continue to serve this truly special organization alongside you and our leadership team. We will work hard to keep scaling our people-first culture with an unwavering focus on safety and soundness and doing more of what we do best, delivering exceptional service to our clients. I'm excited about opportunities ahead and look forward to continue to work with all of our extraordinary colleagues at First Republic. Turning to our earnings results, it was a terrific quarter that reflects our continued focus on safe, sound, organic growth. Our top priority as an organization is taking care of our exceptional colleagues and empowering them to provide unparalleled client service. Our client satisfaction results in exceptionally low client attrition, which in turn fuels our growth through repeat business and client referrals. Happy people lead to happy clients, the more happy clients we have, the more repeat business we do, and the more client referrals we get. Each year, more than 75% of our safe organic growth comes from these sources. Over the past several years, we have continued to make strategic investments in technology and risk infrastructure. These investments allow us to scale our service model while keeping our bank safe and sound. Our digital and tech investments are geared towards minimizing transactional time to create more time to build further trust and deepen relationships with clients and to serve our communities. Let me now provide some additional comments about the quarter. Loan origination volume was $16.8 billion, our best quarter ever. I would note that the weighted average loan-to-value ratio for all real estate loans originated during the Q2 remained conservative at 58%. Single-family residential volume was $8.7 billion, also a record. Refinance accounted for 49% of single-family residential volume during the Q2. A large percentage of refinance activity continues to come from clients with loans at other institutions, which provides us with great opportunities for new client acquisition. For perspective, throughout the past 10 years across varying interest rate environments, refinance activity has always accounted for at least 40% of single-family volume. Turning to business banking, business loans and line commitments, excluding PPP loans, were up 27% year-over-year. Capital call outstanding balances were down quarter-over-quarter, driven mainly by a reduction in the utilization rate from 40%- 36%. This is in line with our historic utilization range of mid-30s to low 40s. In terms of funding, it was an exceptional quarter. Total deposits were up 37% from a year ago, supported by client activity as well as a very meaningful impact from both fiscal and monetary policy. We continue to maintain a diversified deposit funding base. Checking deposits increased by $5.3 billion in the Q2 and represented 68% of total deposits. Business deposits represented 61% of total deposits, up modestly from the prior quarter. The average rate paid on all deposits for the quarter was just 7 basis points, leading to a total funding cost of 20 basis points. Turning to wealth management, assets under management increased to $241 billion. This is an an increase of $46 billion year to date, of which more than half was from net client inflows. Year to date, wealth management fees were up 39% from the same period a year ago. During the quarter, we welcomed four new wealth management teams to First Republic. The strength of our integrated model continues to attract very high-quality teams. Our Q2 results demonstrate the power of our service model and the dedication of our exceptional colleagues. Now I would like to turn the call over to Mike Roffler, Chief Financial Officer. Thank you, Hafize Gaye Erkan. Our strong Q2 results reflect the consistency of our business model. Revenue growth for the quarter was exceptional, up 34% year-over-year. This was driven by strong organic growth across the franchise, including loans, deposits, and wealth management assets. Our net interest margin for the Q2 was 268. This includes the impact of our elevated cash position from fiscal and monetary policy, which has resulted in significant deposit growth. We continue to expect our net interest margin for the full year 2021 to be in the range of 265 to 275. Importantly, net interest income was up a very strong 27.5% year-over-year. This is due to the robust growth in earning assets and a stable net interest margin. We are pleased with our efficiency ratio, which was 62% for the Q2. Our expense growth remains proportionate to our revenue growth as we continue to invest in the franchise to deliver outstanding client service. I would note that our 2020 net promoter score actually increased from the prior year. We continue to expect our efficiency ratio for the full year 2021 to be in the range of 62%-64%. Let me talk for a moment about CECL, which has been in place for six quarters now. CECL's formulate guidelines take into account our loan growth, loan mix, and historic credit performance. In accordance with CECL, our provision for credit loss during the quarter was $16 million, reflecting our continued loan growth. Since CECL became effective at the start of 2020, we have added $160 million to our reserves while only experiencing $4 million of losses. Turning to the tax rate, our effective tax rate for the Q2 was 17.4%. The decline in the tax rate from the prior quarter was due to increased tax benefits resulting from stock awards vesting during the Q2. These tax benefits added $0.11 to earnings per share in the Q2. This compares to $0.03 in the same quarter last year. Under current tax law, we continue to expect our tax rate for the full year 2021 to be in the range of 20%-21%. Overall, this was a great quarter in the first half of the year. Thank you. Now I'll turn the call back over to Jim. Thank you, Hafize Gaye Erkan. Thank you, Mike Ioanilli. Our time-tested, quite straightforward business model remains very focused on delivering the highest possible level of client service, doing only what we do best, and operating very safely and soundly. It continues to work quite well. We'd be delighted to take any questions. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We start with our first question from Steve Alexopoulos. Please go ahead. Your line is open. To start on the loans side, one of the highlights of the quarter was the almost $9 billion of single-family originations. My question is, how did a lack of housing supply impact the spring selling season? With rates coming down a bit further here, should we expect another record quarter for originations in 3Q? Steve, let me take that question. First of all, the answer is that our rate locks are coming off of the peak levels that we have seen in the Q2. It has been an exceptionally strong quarter in the Q2 for sure. While our pipeline remains strong above the last year levels, we are seeing the rate locks coming off the peak levels. That reflects the limited inventory, the supply constraints in the purchase market, as well as the refi slowing down into the second half of the year. We do remain confident for the year with our mid-teens loan growth guidance. Okay. That's helpful. Maybe for you too, Gaye, on deposits, it looks like private bank deposits came down a bit as expected, but you saw a surge in business bank deposits. Checking accounts are almost 70%. Can you give some color? What drove, I think it was almost $8 billion this quarter, the sharp increase in business deposits, and is that strength continuing? Actually, on the business side, two-thirds of that business deposit growth came from non-financial, and it has been very diversified. No individual sector is over 10%-12% type of mix. We are also seeing that the consumer spending is also up on the consumer balances. When I look at the average business account balances versus average consumer, the average business checking accounts are higher compared to the pre-pandemic levels. Consumer is kind of plateauing a bit on the average account balances. That's also reflecting into that. The Fed stimulus is also playing a role, obviously, along with the yields in the market. That's also a lot of the business are keeping more cash on the sidelines. I would reiterate that as part of the model, we follow our private banking clients to their businesses. All in all, it's one client relationship that we continue to deepen. Okay. That's helpful. Final question, just on the management update that was announced. First, congratulations, Gaye, not a surprise. Thanks. Congratulations on the co-CEO. Maybe for Jim, could you walk us through what will now change in terms of responsibilities under this co-CEO structure? Thanks. Thanks, Steve. Actually initially, probably not very much. As you know well, actually, Gaye and I have been running this together along with the rest of the team for quite a while. The direct reports are pretty well aligned already. The substantial change really is the calmness of the transition. We're not out of the pandemic really yet. We're not back to the office yet. We have a core conversion going on. There's a lot happening. It seems to us, and it seems to the board, a very First Republic steady Eddie approach to transition. Mm-hmm. Okay. Terrific. Thanks for taking my questions. Our next question is from Ken Zerbe, Morgan Stanley. Your line is open. Please go ahead. All right. Great. Thank you. Good morning. I guess the first question I had, just in terms of expenses, you've talked about investing in the franchise a fair bit. If I look at where the expenses are coming from, it looks like a lot of that is compensation-related expenses, whereas sort of everything else is, I'm going to say growing probably far less. How much of the investment in the franchise is hiring people versus sort of non-people related items? Thanks, Ken. I think the one thing I'd first focus on when we look at compensation is there is a large portion that is variable based that's tied to our revenues. As checking balances grow, as investment management fees and wealth fees grow, the strong production volumes that Gaye talked about earlier, all those lead to greater incentives. The second part of your question is there is some people addition going on, especially to support those teams and the production levels that they're doing. We've always had a team-based approach, and so as you grow a book of business, we'll add additional support people and additional team members to help you deliver extraordinary client service. Also investing in the operational capacity of the bank because of the volumes, we've had to make sure loan operations, deposit services, investment management operations are all staffed accordingly. Making sure, again, you're giving great service all the way through the process. Got it. Okay. Maybe a different question, just in terms of wealth management, just trying to understand how to think about the fee income. I generally know that your fees are based off of 1 quarter lags. Whatever happened in Q1 affect the Q2 fees. With fees up 15% this quarter sequentially, AUM last quarter and Q1, I guess, was up 12.5%, is up 10% this quarter. It feels like maybe fees were sort of higher than they should be just based on the AUM fees. Can you just help us understand what the variables are that affect fees? Thanks. Ken, what you're describing is the largest component, which is investment management fees. Directionally, the way you described it is right. The assets under management number at June 30th will drive the third quarter revenues. At the end of the Q1, you also have the benefits of teams that maybe joined us late last year or early this year, where their assets came over during the Q1. Not only do you get the quarterly revenue, but you get a little bit from the, call it the stub period. If someone joined us February 1st, there'll be 5 months of revenue in this quarter versus 3 because we don't bill until you get through the quarter process. A little bit of that will happen, and so it's probably a little stronger than normal. Your general rule of thumb of the increase in AUM is a good one to use. Got it. Okay, perfect. Thank you very much. Our next question is from John Pancari, Evercore ISI. Your line is open. Please go ahead. Morning. Just have a question on the capital call line lending business. I know you had indicated that the utilization rate was down to about 36%, which is in line with your historical. What are your expectations there going forward? Do you think it remains around that historical level, or do you think it could decline below that level for the time being? Just want to get your thoughts there. Thanks. John, that's a great question, and it's one that is very hard to estimate because it is very much deal specific and deal dependent. It's the one variable that we really try to estimate it, but it's very much idiosyncratic. What we have seen is that the mid-30s and the low 40s has been pretty much the historical range. Right now, we have come from the 40s down to the 36%. The one variable that we always look at it is or metric is the commitment growth. The PE/VC activity continues to be strong, so we would expect the momentum in terms of the commitment growth to continue through the second half of the year. The markets remain very attractive for exits while the fundraising is going all above the pre-pandemic levels as well. For that reason, I would look at the commitment growth and then still try to expect it to be somewhere between mid-30s to high 30s probably. Got it. Okay. Thank you, Gaye. Then separately on the commercial real estate side, I wanted to see if you can talk a little bit about the trends in the CRE portfolio. Are you seeing any signs of stress there? I know your LTV at origination you indicate on slide 19 is 45% and also the current appears to be on slide 21 right at 45% as well. Do you expect migration higher in that origination LTV or new production LTV level? Just if you could talk about what factored in your reserve expectation on that front. Thanks. In terms of the credit underwriting standards, we will remain conservative when it comes to multifamily and CRE both. The commercial real estate picture is very much region and product specific. We don't do much office, but just as general markets color office remains soft in the city centers, and there'll be clear outlook later in the year as we see how companies are bringing people back to the offices. We have very limited exposure to CRE retail and hospitality. While we are seeing positive trends as hotel occupancy rates are rising, it's still uncertain and depends on the global tourism and business travel. We will continue to do safe deals which tend to be mostly refinance with experienced owner managers that value our service and holistic banking relationship. John, you mentioned reserves. One thing that you talked about and you highlighted in the slide deck there's not a large expected loss other than you might look at 1 loss here and there because of our LTV and our coverage ratios. If I step back on the reserve for a moment, about 65%, 60% of our reserve is tied to home loans. Sorry, 60% of our loan portfolio is tied to home loans, which have a pretty low reserve allocation. If you look at the rest of the loan portfolio, it's about a 1% reserve rate on it. Given the strength of our underwriting, we feel that's more than appropriate. Got it. That's helpful. Thanks. If I could ask just one more. Can you just give us a status update on the core systems replacement project, where you stand on that and what any are you on the project? Thank you. Sure. We are very pleased with the ongoing conversion of our core banking system. The development work is nearly complete. Also the third data migration is also complete along with the most of the data validation too. The next milestone for us is we're going to have multiple mock conversions planned throughout the summer and into the fall to do end-to-end testing. We are doing a lot of end user trainings as well across the bank. It's in line with our expected timeline and we intend to finalize it by end of the year. Great. All right. Thank you for taking all my questions. Thank you. Our next question comes from Bennett Carcachi, Wolfe Research. Your line is open. Thank you. Good morning. Can you discuss what kind of household formation trends you're seeing among your next generation customers? What's the trajectory of that growth outlook from here? More broadly if you could break down where the single family loan origination growth that you're seeing is coming from within your customer base. The household formation question, thanks, is hard to answer. We only have the same macro information I think everybody does. It is picking up, it seems to us undoubtedly. The other thing that's happening is that in our millennial client base since we shifted over to the PLOC, which is a personal line of credit lending a larger share of millennial households have homes already. That's almost doubled, in fact, from what we were doing before under the student loan refi. It's actually the quality of those households is higher than the prior business, and it was good even then. I think in terms of the growth rates the activity levels among the younger households, they're very high, actually. The hardest thing, quite frankly, is of course, finding the first home to buy the first condo, whatever it may be. I think the business is actually going very strongly. I would add, we are very pleased. Over 20% of our millennial clients are now mortgage clients, which is fantastic. The household acquisition for millennial households continues to be strong around 13% year-over-year. The new offerings across the lending deposits and wealth management coupled with the human trusted advisor resonates with our millennial clients. That's helpful. Thank you. If I can switch gears to wealth management, can you discuss your momentum in attracting new teams, how the pipeline is looking, and also maybe discuss some of the variables behind your success in retaining the teams that you've brought on board? We are very pleased that we are seeing great quality of teams joining us. We have welcomed four new PWM teams, private wealth management teams hired in the Q2 and year to date seven new private wealth management teams. We continue to have a strong pipeline of prospective wealth management team hires as long as they fit the culture and the holistic banking model. That continues to be really well. Also, I would note that year to date we have seen strong net client inflows that is both from existing clients deepening their relationships as well as new client inflows coming in with the new teams. One additional thing I'd add is the success of cross-selling to the new clients coming in with the wealth teams to our banking platform is accelerating very nicely. We've got that one down better now than we had before. Yeah. Referred deposits, for example, are up 6%-7% year-over-year. Very helpful. Thank you. If I can squeeze in one final macro question. How do you think about the performance outlook for the business in an environment where eventually perhaps we start to see short rates rise a little bit faster than the long end of the curve? If you could just frame how you think about that and whether it makes any kind of a difference operationally to how you run the business. It probably won't make much difference operationally as to how we run the business. We do run a very matched book, I think as Gaye referred to earlier. If you look at our simulation models, rising rate environment is not a particularly threatening thing. The inversion which you implied in your question I think is always a little problematic, but the real problem buried in an inversion is what it does to the economy generally, not so much what it does to us in the short run. Inversions don't last very long, so they generally don't mess with our balance sheet very much. The other thing that Gaye referred to which is very important and somewhat unique to us, almost all banks have repayment rates on their portfolio CPR. Ours is a little higher than most for various reasons, the nature of our mortgages primarily. What they don't have is the growth rate of 15% or so in the portfolio, which adds an additional priced to market of 15% per year, maybe 18%, whatever the growth rate is. Those two items together equal between 30% and 40% of the balance sheet. We reprice the balance sheet about 30%, 40% every year from repayments and growth to market. That allows us to keep up with the change in rates rather nicely. Thank you, Jim, and let me add my congratulations, Gaye. Thanks for taking my questions. Thank you. Our next question is coming from Casey Haire. Please go ahead. Your line is open. Thanks. Good morning all. Maybe just 2 follow-ups on the NIM guidance still intact, but just some color on where new money loan yields are and also for securities given a pretty volatile long end of the curve. Absolutely. On the single-family residential side we are seeing in 2.75%-3% type of range coming in mostly in the high 2s when we look at the rate locks. Multifamily about 3.25%-3.5% for safe deals and CRE mostly mid 3s, 3.5%. On the investment side, so on the muni side the tax equivalent yield is 2.75%-3%. On the government and agency HQLA which again Jim referred earlier to ALM matching from a duration management perspective, we have been doing some short-term barbell strategies there as well. The short-term agency HQLA is coming in around 7-5 basis points and the traditional agency HQLA is around 1.5%-2%. All in all we're seeing the additional marginal asset coming in in the high 2s more around the real estate assets coming in in the 295 type of range with a marginal funding cost about 20 basis points. You put in the elevated cash levels, that brings us to the lower half of the 265-275 as we have printed this quarter. Okay. All right, great. Pretty stable. On that cash position, I know timing in terms of working that down is a wild card, but what do you guys see as the ideal minimum cash position for this size balance sheet? If you thought 4%-5% of the balance sheet would be sort of like $6.5 billion-$8 billion, that feels like a pretty good place for us to run given the size of our overall balance sheet and sort of the deposit activity we see. I think our average in the Q2 was just over 11. You bring that down by $3 billion-$4 billion, your margin's going to be towards the top end of that guided range. Yep, understood. Mike, just on the efficiency ratio, I think you guys in the past have talked about in a remote work and not much client entertainment that the COVID benefit to the efficiency ratio is about 100 basis points. Can you just provide an update as to what that is today and is there a possibility that you could run a little lighter than where you were pre-pandemic based on what you've learned thus far? Yeah. We're definitely talking about the learnings we've had from the pandemic and what are things maybe we used to do that you don't have to do as much of, right? I think your estimate of the things that are running lower than they had or continuing to run lower around client events, travel, internal events, they're still running a bit lower and it's been a sort of a 1% little more benefit to our efficiency. We do anticipate those things starting to ramp up. They may not get to that full effect, but we do think we will have events later in the year. People are starting to travel and entertain clients a little bit more. I think you really start to see it probably more in the fourth quarter. Also as Gaye mentioned and talked about, we are deep into the core conversion process here for the next couple of quarters. Okay, great. Thanks for taking the questions. Hafize Gaye Erkan, congrats. Thank you very much. Our next question is coming from Chris McGratty, KBW. Please go ahead. Your line is open. Great morning. I want to follow up on Casey's question about efficiency and maybe ask a little bit different on just operating leverage. Maybe Mike, last year was a year of positive operating leverage in an industry that didn't have that. How are we thinking about the ability to generate revenue growth in excess of expense growth? Totally hear you on the COVID normalization, but even so with rates where they are, you're still at kind of where the efficiency ratio was when rates were up. That would to me suggest that maybe you do a little bit better the next tightening round. Thanks. I think one of the things that we are always focused on from a business model standpoint is client service and how that's delivered and the effectiveness of it. That other institutions don't have that revenue growth or revenue production. We're always supporting how do you deliver client service while continuing to grow. That has led to what we think is a very stable efficiency ratio in a pretty tight range while improving our net promoter score, expanding offices like Hudson Yards was mentioned earlier to deliver client service. I think we think more about it that revenue growth and expense growth are relatively matched in terms of how they're growing. It may not be your positive operating leverage that you mentioned, but it leads to a consistency and stability over a long period of time. I think we view that as very important. Let me just respond also in a slightly more philosophical way. This is a growth enterprise, and we're basically focused on the quality of delivery of service at the same time. Operating leverage can be achieved by cost cutting, which others do. We're not in that game. We're in this for the long haul. It's a very long game. Our approach has always been to maintain, as Mike just said so clearly, a balance of operating costs and invest continually in operating systems and procedures so that we have good backup and safety embedded. Operating leverage is on the table but it's not our primary objective. The quality of delivery of service is the primary objective. We grow, and we grow because the clients grow. As Gaye said, 75% of our growth is driven by our clients or their direct referrals. That's actually not something we're reaching for. That's just coming in. We have to respond to it with the level of service that they're used to or expect from us, or we'll have a diminishing franchise, and that we never intend to have. What we value above all else is stability, the predictability and stability of the model. That's a continual balance. I wouldn't actually look for the company to have a lot of operating leverage. That's great color. I appreciate that. Maybe just one final one, Mike, on the model. I know your BOLI income typically bumps up in the third quarter. It did so this quarter. I'm wondering, did you add more BOLI investments, and should we expect a ramp in Q3? We did add one additional purchase mid-quarter. We also from time to time have a claim, and there was a modest impact in the Q2 from that. I think from a range, I would think about $18 million-$20 million a quarter is sort of the new run rate after the purchase is factored in. Great. Thanks a lot. Our next question is coming from Andrew Liesch, Piper Sandler. Please go ahead. Your line is open. Hi. Good morning, everyone. Gaye, congratulations on the announcement. Great to see. Thank you. Got a question on just your capital position right now. Certainly regulatory ratios are solid and some of them are up year-over-year. With TCE to tangible assets now below 7% for the last couple of quarters, do you expect that to rise as liquidity leaves the balance sheet, as you see deposit levels normalize? I guess in general, how are you viewing where your capital stands today? Andrew, I think you bring up a good point that we talk about the sort of 11.5, the extra cash carrying impact in the margin. It also does have a little bit of an impact to our leverage ratio or our TCE, as you mentioned. I think our philosophy remains similar as it has. We were pleased the Q1 to raise some capital at attractive pricing. We keep an eye on the market. We think about what our future opportunity to serve clients and grow is. Then we remain opportunistic when appropriate. I think that philosophy has been here 36 years, I think, and will continue into the future. It's as much a view of our outlook of future growth as anything because we always want to fund that sort of in advance as we think about the future. Got it. You've covered all my other questions. I will step back. Thank you. Our next question is coming from David Chiaverini, Wedbush Securities. Your line is open. Please go ahead. Hi. Thanks. I had a follow-up question on loan pricing on resi mortgage. You mentioned about how you're getting a yield of 2.75%-3% is the range. When I look at the average balance sheet, it looks like the rate came down six basis points sequentially in the Q2. I was curious, is the downward pricing pressure subsiding here? Actually, it has been stabilizing. Just recently we have seen our rate locks to be just slightly higher priced than what's on the portfolio. Which is good news. That would plateau itself. I would say on the single-family, multifamily or real estate loans the six-week rate locks are coming in at 295 and above. Great. That's good to hear. On the net interest margin with the guidance staying the same, 2.65%-2.75% with, it sounds like stable in the near term, given that comment you just made where the rate locks are coming in slightly better, is there a directional bias one way or the other from where we were in the Q2? I would reinforce the 265, 275 because the deposit's coming in strong as well. The elevated cash flows have impact on the NIM too. I would be sticking to our guidance, mid to lower half of the range. The net interest income for us, given the strong earnings asset growth is really net interest income is the metric that pays the bills. Yep, that makes sense. One modeling question, shifting to expenses. Is the Hudson Yards expense sort of fully baked into the run rate now in the Q2? Or should we expect another step-up to come through either in the third quarter or fourth quarter? Yeah, it's pretty much fully in. The rent is fully in and most of the tenant improvement depreciation is in. Any step-up would be pretty modest at this point. Got it. Thanks very much. Our next question is from Jared Shaw, Wells Fargo. Hi, good morning. Thanks for the question. I guess, Mike, just first, was there any performance fee component to the wealth management revenue this quarter? No, there was not. Okay. I guess more generally, how sensitive do you think the purchase market is in your primary geographies to potentially higher rates? I would say it's not all that sensitive. The biggest problem is supply. That is improving a little bit. Listings are going up a little bit. The increase in prices has pulled sellers off the sidelines. It's getting slightly better. It's mostly a supply issue. New York is the exception. There's plenty of supply in New York, but everywhere else there's virtually nothing. Thanks for the color, and just want to give my congratulations to Gaye as well. Congratulations. Thank you, Jared Shaw. Our next question is from Tim Coffey from Janney. Please go ahead. Your line is open. Great, thank you. Good morning, and thank you for the time. First question is, if you look at the weighted average LTV on the residential mortgage production in the quarter, it seems like it ticked up a bit higher than we've seen in recent quarters. I'm wondering, is that a function of just competition or are there other circumstances such as borrowers having greater liquidity than they have before? That would be a quarter-over-quarter fluctuation. Our overall real estate lending, 80% of our lending is real estate loans with a weighted average in the mid-50s. The slight tick up is just a one-off. We will remain conservative in our underwriting standards. We won't compromise on credit at all. We will be fierce when it comes to relationship pricing, but we will not compromise on credit. Okay. My other question was, do you see any benefit to First Republic from Wells Fargo canceling their personal lines of credit? We think there may be actually significant opportunity. We focus mostly in the millennial with that product, but suddenly it might go up age depending on what they do. We're not upset that they've done that. I would think not. What percentage of your millennial clients would you say use a personal line of credit? Actually, a significant amount of the new millennial clients. Our personal line of credit product is only about a year old. It probably has 5,000 to 6,000 out of our 30,000 so far. Okay. Is a typical line amount $100,000 or greater? The typical commitment, this is quite important actually. The typical commitment is probably around $100,000, $110,000, something like that. The typical usage is about $30,000-$35,000. That product is 125% self-funded with checking. Great. Okay. Those are my questions. Thank you very much. Thank you. Our next question is coming from Brock Vandervliet, UBS. Your line is open. Please go ahead. Thanks for the question. Most of it's already covered at this point, but just in terms of the jumbo LTV, coming back to the earlier question, what's the average LTV just in the jumbo resi product? We are in the mid-50s, high-50s range, usually in the single-family residential mortgage. The uptick was just a couple of percentage points when you look at the recent originations. The mid-50s to high-50s is really the range that we have been operating at. We will remain conservative in that regard. Okay. We're seeing, especially among some of the independent residential originators, very intense competition. At least one of them has introduced a jumbo product. The LTVs are in some cases significantly higher than that level. Are you seeing any evidence of competition from new quarters around jumbo? Let me add. We've been doing jumbo mortgages since 1985. In fact, the bank that I started in 1980 before this was where we sort of stumbled into that product and realized how good it was. We did learn through almost 40 years of jumbo production how to do it. One of the number one things you do not want to do is to raise your LTV because they are larger, and if there's a problem, you need margin for error. Also it is almost axiomatic that the more someone puts down, the more liquid they are after the deal, which is quite interesting. We've maintained our sub 60, right around 60% or slightly sub 60, slightly over 60% LTV range for 3 decades at least. That won't vary. Got it. Okay. All right. Thanks very much. It appears there are no further questions. At this time, I'd like to turn the call back to Jim Herbert for any further remarks. Thank you very much, everyone, for your time this morning. We appreciate it. Have a good day. This concludes today's call. Thank you for your participation. You may now disconnect.