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First Republic's (FRC) Q4 Earnings Beat, Shares Rise 1.2%
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Following First Republic Bank’s fourth-quarter 2016 earnings release, shares rose 1.2% to close at $92.95. The company’s earnings per share came in at $1.03, beating the Zacks Consensus Estimate by a penny. The figure also improved 22.6% from the year-ago tally.
Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. Moreover, considerable rise in loans and deposit balances were recorded. Credit quality also improved, reflecting lower provisions. On the flip side, higher expenses remained a headwind.
Net income available to common shareholders for the fourth quarter soared a whopping 87% year over year to $161.7 million.
For full-year 2016, net income was $673.4 million or $3.93 per share, up from $522.1 million or $3.18 per share in the prior year. Full-year earnings significantly surpassed the Zacks Consensus Estimate of $3.72.
Revenue as Expected, Expenses Flare Up
For 2016, net revenue was $2.2 billion, up 20.1% year over year. The top line was in line with the Zacks Consensus Estimate.
Net revenue in the quarter was $599.5 million, up 21.1% year over year. The figure was almost in line with the Zacks Consensus Estimate.
Specifically, First Republic’s net interest income surged 21.2% year over year to $490.6 million primarily supported by growth in average earnings assets. Moreover, core net interest margin, excluding the positive influence of purchase accounting, expanded 6 basis points (bps) to 3.08%. The net interest margin was 3.16%, up 6 (bps) year over year.
Non-interest income came in at $108.8 million, up 20.7% year over year. The rise was chiefly driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 19.7% year over year to $360.2 million. An increase in salaries and benefits, which came as an outcome of continued investments in the expansion of franchise and regulatory compliance activities, and growth across all business segments, mainly led to the upside.
The efficiency ratio was 60.1%, compared with 60.8% in the prior-year quarter. It should be noted that a fall in the efficiency ratio indicates improvement in profitability.
Balance Sheet Still Healthy
As of Dec 31, 2016, loans climbed 18% year over year to $51.7 billion, while total deposits were up 22.3% to $58.6 billion. Loan originations were a record $7.9 billion in the reported quarter compared with $4.7 billion in the year-ago quarter.
First Republic’s total wealth management assets were $83.6 billion as of Dec 31, 2016, indicating a growth of 15.6% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario Improved
On a year-over-year basis, total non-performing assets plummeted 33.3% year over year to approximately $49.0 million. The non-performing assets to total assets ratio contracted 5 bps to 0.07%. Moreover, provision for loan losses declined 12.5% to $10.5 million in the reported quarter.
Capital Position
As of Dec 31, 2016, the company’s Tier 1 leverage ratio was 9.37%, reflecting a decline of 16 bps from the prior-year quarter.
Tier 1 risk-based capital ratio was 12.97%, down 16 bps year over year.
However, tangible book value per share increased 17.2% year over year to $35.35.
In Conclusion
First Republic’s robust performance during the fourth quarter looks encouraging. The company’s efforts to maintain its organic growth momentum, backed by growth in loans and deposits and decent revenues, highlight optimism. Moreover, increase in net interest margin is another tailwind. However, higher expenses and regulatory restrictions remain concerns.
FIRST REPUBLIC BANK Price, Consensus and EPS Surprise
Among other West banks, Zions Bancorporation (ZION - Free Report) and Bank of Hawaii Corporation (BOH - Free Report) are slated to release fourth-quarter 2016 results on Jan 23, while SVB Financial Group will report its quarterly numbers on Jan 19.
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First Republic's (FRC) Q4 Earnings Beat, Shares Rise 1.2%
Following First Republic Bank’s fourth-quarter 2016 earnings release, shares rose 1.2% to close at $92.95. The company’s earnings per share came in at $1.03, beating the Zacks Consensus Estimate by a penny. The figure also improved 22.6% from the year-ago tally.
Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. Moreover, considerable rise in loans and deposit balances were recorded. Credit quality also improved, reflecting lower provisions. On the flip side, higher expenses remained a headwind.
Net income available to common shareholders for the fourth quarter soared a whopping 87% year over year to $161.7 million.
For full-year 2016, net income was $673.4 million or $3.93 per share, up from $522.1 million or $3.18 per share in the prior year. Full-year earnings significantly surpassed the Zacks Consensus Estimate of $3.72.
Revenue as Expected, Expenses Flare Up
For 2016, net revenue was $2.2 billion, up 20.1% year over year. The top line was in line with the Zacks Consensus Estimate.
Net revenue in the quarter was $599.5 million, up 21.1% year over year. The figure was almost in line with the Zacks Consensus Estimate.
Specifically, First Republic’s net interest income surged 21.2% year over year to $490.6 million primarily supported by growth in average earnings assets. Moreover, core net interest margin, excluding the positive influence of purchase accounting, expanded 6 basis points (bps) to 3.08%. The net interest margin was 3.16%, up 6 (bps) year over year.
Non-interest income came in at $108.8 million, up 20.7% year over year. The rise was chiefly driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 19.7% year over year to $360.2 million. An increase in salaries and benefits, which came as an outcome of continued investments in the expansion of franchise and regulatory compliance activities, and growth across all business segments, mainly led to the upside.
The efficiency ratio was 60.1%, compared with 60.8% in the prior-year quarter. It should be noted that a fall in the efficiency ratio indicates improvement in profitability.
Balance Sheet Still Healthy
As of Dec 31, 2016, loans climbed 18% year over year to $51.7 billion, while total deposits were up 22.3% to $58.6 billion. Loan originations were a record $7.9 billion in the reported quarter compared with $4.7 billion in the year-ago quarter.
First Republic’s total wealth management assets were $83.6 billion as of Dec 31, 2016, indicating a growth of 15.6% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario Improved
On a year-over-year basis, total non-performing assets plummeted 33.3% year over year to approximately $49.0 million. The non-performing assets to total assets ratio contracted 5 bps to 0.07%. Moreover, provision for loan losses declined 12.5% to $10.5 million in the reported quarter.
Capital Position
As of Dec 31, 2016, the company’s Tier 1 leverage ratio was 9.37%, reflecting a decline of 16 bps from the prior-year quarter.
Tier 1 risk-based capital ratio was 12.97%, down 16 bps year over year.
However, tangible book value per share increased 17.2% year over year to $35.35.
In Conclusion
First Republic’s robust performance during the fourth quarter looks encouraging. The company’s efforts to maintain its organic growth momentum, backed by growth in loans and deposits and decent revenues, highlight optimism. Moreover, increase in net interest margin is another tailwind. However, higher expenses and regulatory restrictions remain concerns.
FIRST REPUBLIC BANK Price, Consensus and EPS Surprise
FIRST REPUBLIC BANK Price, Consensus and EPS Surprise | FIRST REPUBLIC BANK Quote
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 fourth-quarter 2016 results on Jan 23, while SVB Financial Group will report its quarterly numbers on Jan 19.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>