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First Republic Bank Q3 profit rises 6.8%, but misses estimates

First Republic Bank (FRC) reported a 6.8% rise in earnings for the third quarter helped by higher average earning assets and an increase in wealth management revenues. However, the top and bottom line came in below analysts’ expectations.

Net income for the quarter increased by 6.8% to $213.5 million and earnings rose by 4.4% to $1.19 per share. Total revenues grew by 14.7% to $768.8 million.

Net interest income increased by 15.2% primarily from growth in average earning assets. Non-interest income rose by 12.6% primarily from growth in wealth management revenues.

Non-interest expense grew by 15.7% due to higher salaries and benefits and information systems costs from the continued investments in the expansion of the franchise. Effective tax rate rose to 19.8% from 17.3% a year ago, primarily the result of lower tax benefits from a decrease in both stock option exercises and vesting of stock awards.

Credit quality remained strong as non-performing assets were only 4 basis points of total assets at September 30, 2018. The Bank had net charge-offs for the quarter of $185,000 while adding $18.6 million to its allowance for loan losses due to continued loan growth.

Loan originations decreased by 3% year-over-year to $7 billion due to a decline in single-family refinance volume. Loans, excluding loans held for sale, rose 21.6% to $72.3 billion as of September 30, 2018, primarily due to increases in single family, business and multifamily loans.

Total deposits increased by 14.2% to $74.8 billion. Total investment securities at September 30, 2018, declined 6.9% to $16.3 billion. Total wealth management assets grew by 8.1% $131 billion at September 30, 2018, on net new assets from both existing and new clients.

High-quality liquid assets totaled $15 billion at September 30, 2018, and included $5 billion of municipal securities that qualify under the amended definition of high-quality liquid assets from a recent FDIC rule.

The bank declared a quarterly cash dividend of $0.18 per share of common stock. The dividend is payable on November 8, 2018, to shareholders of record as of October 25, 2018.

Shares of First Republic Bank ended Thursday’s regular session down 2.20% at $90.84 on the NYSE. The stock has fallen over 12% in the past year, while it has risen over 4% in the year so far.

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