Related Party Transactions

3 Months Ended

Mar. 31, 2012

Note 4. Related Party Transactions

The Company’s related party transactions include the acquisition of mortgage loans from First Republic, loan servicing fees paid to First Republic and advisory fees paid to First Republic. The following tables present the Company’s related party transactions at the dates or for the periods indicated:



($ in thousands)	At March 31, 2012		At December 31, 2011
Cash and cash equivalents deposited with First Republic	$	30,553	$	62,050
Advisory fees payable to First Republic	$	25	$	25



	Three Months Ended March 31,
($ in thousands)	2012		2011
Mortgage loans acquired from First Republic
Gross principal	$	—	$	67,935
Net unearned premium	—		199
Total mortgage loans acquired	$	—	$	68,134

Interest income on deposit account with First Republic	$	21	$	95
Loan servicing fee expense	$	229	$	241
Advisory fee expense	$	25	$	25

Since inception, the Company has acquired all mortgage loans from First Republic at a price equal to First Republic’s carrying value of the loans, which approximated the fair value of the loans. In March 2011, the Company acquired mortgage loans with a carrying value of $68.1 million from First Republic.

First Republic retains loan servicing fees on the Company’s mortgage loans under a loan purchase and servicing agreement pursuant to which First Republic performs, among other things, servicing of loans held by the Company in accordance with normal industry practice. In its capacity as servicer, First Republic receives mortgage loan payments on behalf of the Company and holds the payments in custodial accounts at First Republic. Pursuant to the agreement, First Republic charges an annual servicing fee of 0.25% of the gross average outstanding principal balances of mortgage loans that First Republic services. The Company records these loan servicing fees as a reduction of interest income.

The Company pays advisory fees to First Republic under an advisory agreement pursuant to which First Republic administers the day-to-day operations of the Company. First Republic is responsible for: (i) monitoring the credit quality of the Mortgage Assets held by the Company; (ii) advising the Company with respect to the reinvestment of income from, and principal payments on, the Mortgage Assets, and with respect to the acquisition, management, financing and disposition of the Mortgage Assets; (iii) monitoring the Company’s compliance with the requirements necessary to qualify as a REIT and (iv) performing financial reporting and internal control duties required for all public companies. The advisory agreement is renewable on an annual basis. The advisory fees were $100,000 per annum for 2012 and 2011, payable in equal quarterly installments. The Company had advisory fees payable to First Republic of $25,000 at March 31, 2012 and December 31, 2011.

At December 31, 2011, First Republic owned 25,410 shares of the Company’s 10.50% Noncumulative Series A Preferred Stock, par value $0.01 per share (“Series A Preferred Stock”), with a liquidation preference value of $25.4 million. On February 28, 2012, the Company redeemed all of its outstanding shares of Series A Preferred Stock. The aggregate amount paid to First Republic in connection with the redemption of the Series A Preferred Stock was the sum of: (i) the liquidation preference of $25.4 million, (ii) the redemption premium of approximately $500,000, and (iii) the amount of accrued and unpaid dividends of approximately $400,000.

- Definition

The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

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Reference 6: http://www.xbrl.org/2003/role/presentationRef

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Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

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Reference 8: http://www.xbrl.org/2003/role/presentationRef

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Reference 9: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Standards Codification

-Topic 850

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+ Details

FIRST REPUBLIC PREFERRED CAPITAL CORP 10-Q