We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
First Republic (FRC) Q3 Earnings Beat on Higher Revenues
Read MoreHide Full Article
First Republic Bank’s adjusted earnings per share for third-quarter 2016 came in at $1.00, beating the Zacks Consensus Estimate of 99 cents. The figure also improved 22% from the year-ago tally.
A sizeable increase in net interest income and non-interest income during the quarter was primarily responsible for the bottom-line improvement. The top line also witnessed a decent upside on the back of a considerable rise in loans and deposit balances. Lower provisions also drove results. On the flip side, the quarter recorded higher expenses.
Net income available to common shareholders for the third quarter jumped 29.2% year over year to $154 million.
Revenue Up, Expenses Rise
Net revenue in the quarter was $557.9 million, up 19% year over year. The figure, however, lagged the Zacks Consensus Estimate of $571.0 million.
Specifically, First Republic’s net interest income soared 18.4% year over year to $460.6 million primarily backed by growth in average earnings assets. Moreover, core net interest margin, excluding the positive impact of purchase accounting, increased 2 basis points (bps) to 3.11%.
Non-interest income came in at $97.3 million, up 22% year over year. The rise was primarily driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 22.4% year over year to $337.7 million. An increase in salaries and benefits, which was an outcome of continued investments in the expansion of franchise and regulatory compliance activities, and growth across all business segments, primarily led to the upside.
The efficiency ratio was 60.5%, compared with 58.9% in the prior-year quarter. The rise was mainly a result of higher costs due to the new FDIC assessment rule and interest expense on subordinated notes issued during the quarter. Note that a rise in the efficiency ratio indicates deterioration in profitability.
Balance Sheet Still Healthy
As of Sep 30, 2016, loans increased 17.6% year over year to $49.9 billion, while total deposits were up 24.2% to $55.1 billion.
First Republic’s total wealth management assets were $80.2 billion as of Sep 30, 2016, reflecting a growth of 36.4% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario a Mixed Bag
On a year-over-year basis, total non-performing assets declined 1.1% to approximately $54.0 million. Further, as of Sep 30, 2016, the ratio of net loan charge-offs to average total loans was 0.01%, up 1 basis point.
On the other hand, the non-performing assets to total assets ratio declined 2 bps to 0.08%. Moreover, provision for loan losses decreased 58.5% to $18.0 million in the reported quarter.
Capital Position Deteriorates
As of Sep 30, 2016, the company’s Tier 1 leverage ratio was 9.26%, reflecting a decline of 12 bps from the prior-year quarter.
Tier 1 risk-based capital ratio was 12.89%, down 32 bps.
However, tangible book value per share increased 13.5% year over year to $33.41. Further, on Aug 1, the bank issued a 30-year, 4.375% fixed-rate unsecured subordinated notes, amounting to a total of $400 million. The issued notes qualify as Tier 2 capital.
We are encouraged by First Republic’s strong performance during the third quarter and expect the company to maintain its organic growth momentum backed by increase in loans and deposits.
Among other West banks, Zions Bancorporation (ZION - Free Report) and Bank of Hawaii Corporation (BOH - Free Report) are slated to release third-quarter 2016 results on Oct 24, while SVB Financial Group will report quarterly numbers on Oct 20.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
First Republic (FRC) Q3 Earnings Beat on Higher Revenues
First Republic Bank’s adjusted earnings per share for third-quarter 2016 came in at $1.00, beating the Zacks Consensus Estimate of 99 cents. The figure also improved 22% from the year-ago tally.
A sizeable increase in net interest income and non-interest income during the quarter was primarily responsible for the bottom-line improvement. The top line also witnessed a decent upside on the back of a considerable rise in loans and deposit balances. Lower provisions also drove results. On the flip side, the quarter recorded higher expenses.
Net income available to common shareholders for the third quarter jumped 29.2% year over year to $154 million.
Revenue Up, Expenses Rise
Net revenue in the quarter was $557.9 million, up 19% year over year. The figure, however, lagged the Zacks Consensus Estimate of $571.0 million.
Specifically, First Republic’s net interest income soared 18.4% year over year to $460.6 million primarily backed by growth in average earnings assets. Moreover, core net interest margin, excluding the positive impact of purchase accounting, increased 2 basis points (bps) to 3.11%.
Non-interest income came in at $97.3 million, up 22% year over year. The rise was primarily driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 22.4% year over year to $337.7 million. An increase in salaries and benefits, which was an outcome of continued investments in the expansion of franchise and regulatory compliance activities, and growth across all business segments, primarily led to the upside.
The efficiency ratio was 60.5%, compared with 58.9% in the prior-year quarter. The rise was mainly a result of higher costs due to the new FDIC assessment rule and interest expense on subordinated notes issued during the quarter. Note that a rise in the efficiency ratio indicates deterioration in profitability.
Balance Sheet Still Healthy
As of Sep 30, 2016, loans increased 17.6% year over year to $49.9 billion, while total deposits were up 24.2% to $55.1 billion.
First Republic’s total wealth management assets were $80.2 billion as of Sep 30, 2016, reflecting a growth of 36.4% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario a Mixed Bag
On a year-over-year basis, total non-performing assets declined 1.1% to approximately $54.0 million. Further, as of Sep 30, 2016, the ratio of net loan charge-offs to average total loans was 0.01%, up 1 basis point.
On the other hand, the non-performing assets to total assets ratio declined 2 bps to 0.08%. Moreover, provision for loan losses decreased 58.5% to $18.0 million in the reported quarter.
Capital Position Deteriorates
As of Sep 30, 2016, the company’s Tier 1 leverage ratio was 9.26%, reflecting a decline of 12 bps from the prior-year quarter.
Tier 1 risk-based capital ratio was 12.89%, down 32 bps.
However, tangible book value per share increased 13.5% year over year to $33.41. Further, on Aug 1, the bank issued a 30-year, 4.375% fixed-rate unsecured subordinated notes, amounting to a total of $400 million. The issued notes qualify as Tier 2 capital.
FIRST REP BK SF Price, Consensus and EPS Surprise
FIRST REP BK SF Price, Consensus and EPS Surprise | FIRST REP BK SF Quote
In Conclusion
We are encouraged by First Republic’s strong performance during the third quarter and expect the company to maintain its organic growth momentum backed by increase in loans and deposits.
First Republic currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other West banks, Zions Bancorporation (ZION - Free Report) and Bank of Hawaii Corporation (BOH - Free Report) are slated to release third-quarter 2016 results on Oct 24, while SVB Financial Group will report quarterly numbers on Oct 20.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>