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First Republic's (FRC) Q1 Earnings in Line, Dividend Up
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Following First Republic Bank’s first-quarter 2017 earnings release, shares declined 1.95% to close at $90.18. The company’s earnings per share came in at $1.01, in line with the Zacks Consensus Estimate. The figure improved 8.6% from the year-ago tally.
Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. In addition, considerable rise in loans and deposit balances were recorded. Non-performing assets also declined. On the other hand, higher expenses and provisions remained a headwind.
Net income available to common shareholders for the quarter jumped a whopping 14.6% year over year to $161.6 million.
Revenue Climbs, Expenses Flare Up
Net revenue in the quarter was $601.1 million, up 15.7% year over year. However, the figure missed the Zacks Consensus Estimate of $626.1 million.
Specifically, First Republic’s net interest income increased 17.8% year over year to $499.7 million, primarily supported by growth in average earnings assets. However, the net interest margin was 3.13%, down 7 basis points (bps) year over year.
Non-interest income came in at $101.5 million, up 6.5% year over year. The rise was chiefly driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 18.6% year over year to $378.5 million. An increase in salaries and benefits, information systems and occupancy costs, which came as an outcome of continued investments in the expansion of franchise, mainly led to the upside.
The efficiency ratio was 63.0% compared with 61.4% recorded in the prior-year quarter. It should be noted that a rise in the efficiency ratio indicates deterioration in profitability.
Balance Sheet Still Healthy
As of Mar 31, 2017, loans climbed 18.8% year over year to $53.9 billion, while total deposits were up 20.2% to $61.2 billion. Loan originations were a record $5.6 billion in the reported quarter compared with $4.8 billion in the year-ago quarter.
First Republic’s total wealth management assets were $90.1 billion as of Mar 31, 2017, indicating growth of 22.8% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario: A Concern?
On a year-over-year basis, total non-performing assets declined 14.7% year over year to approximately $51.7 million. The non-performing assets to total assets ratio contracted 3 bps to 0.07%.
However, provision for loan losses increased significantly on a year-over-year basis to $9.1 million in the reported quarter.
Capital Position
As of Mar 31, 2017, the company’s Tier 1 leverage ratio was 9.22%, reflecting a decline of 16 bps from the prior-year quarter.
Tier 1 capital to risk-weighted assets was 12.94%, down 30 bps year over year. Common equity Tier 1 ratio was 11.15% compared with 10.61% in the prior-year quarter.
Tangible book value per share increased 19.7% year over year to $37.16.
Increase in Dividend
First Republic announced a hike in its quarterly common stock dividend to 17 cents per share, up 6.25%. The new dividend will be paid on May 11 to shareholders as of Apr 27.
In Conclusion
First Republic’s decent performance during the first quarter looks encouraging. The company’s efforts to maintain its organic growth momentum, backed by growth in loans and deposits, which aided upswing in revenues, highlight optimism. Moreover, lower non-performing assets are another tailwind. However, higher expenses and provisions, decline in net interest margin, 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 first-quarter 2017 results on Apr 24, while SVB Financial Group will report its quarterly numbers on Apr 20.
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Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
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First Republic's (FRC) Q1 Earnings in Line, Dividend Up
Following First Republic Bank’s first-quarter 2017 earnings release, shares declined 1.95% to close at $90.18. The company’s earnings per share came in at $1.01, in line with the Zacks Consensus Estimate. The figure improved 8.6% from the year-ago tally.
Higher net interest income and non-interest income during the quarter were primarily responsible for the bottom-line improvement. In addition, considerable rise in loans and deposit balances were recorded. Non-performing assets also declined. On the other hand, higher expenses and provisions remained a headwind.
Net income available to common shareholders for the quarter jumped a whopping 14.6% year over year to $161.6 million.
Revenue Climbs, Expenses Flare Up
Net revenue in the quarter was $601.1 million, up 15.7% year over year. However, the figure missed the Zacks Consensus Estimate of $626.1 million.
Specifically, First Republic’s net interest income increased 17.8% year over year to $499.7 million, primarily supported by growth in average earnings assets. However, the net interest margin was 3.13%, down 7 basis points (bps) year over year.
Non-interest income came in at $101.5 million, up 6.5% year over year. The rise was chiefly driven by higher wealth management revenues.
On the other hand, non-interest expenses were up 18.6% year over year to $378.5 million. An increase in salaries and benefits, information systems and occupancy costs, which came as an outcome of continued investments in the expansion of franchise, mainly led to the upside.
The efficiency ratio was 63.0% compared with 61.4% recorded in the prior-year quarter. It should be noted that a rise in the efficiency ratio indicates deterioration in profitability.
Balance Sheet Still Healthy
As of Mar 31, 2017, loans climbed 18.8% year over year to $53.9 billion, while total deposits were up 20.2% to $61.2 billion. Loan originations were a record $5.6 billion in the reported quarter compared with $4.8 billion in the year-ago quarter.
First Republic’s total wealth management assets were $90.1 billion as of Mar 31, 2017, indicating growth of 22.8% year over year. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.
Credit Scenario: A Concern?
On a year-over-year basis, total non-performing assets declined 14.7% year over year to approximately $51.7 million. The non-performing assets to total assets ratio contracted 3 bps to 0.07%.
However, provision for loan losses increased significantly on a year-over-year basis to $9.1 million in the reported quarter.
Capital Position
As of Mar 31, 2017, the company’s Tier 1 leverage ratio was 9.22%, reflecting a decline of 16 bps from the prior-year quarter.
Tier 1 capital to risk-weighted assets was 12.94%, down 30 bps year over year. Common equity Tier 1 ratio was 11.15% compared with 10.61% in the prior-year quarter.
Tangible book value per share increased 19.7% year over year to $37.16.
Increase in Dividend
First Republic announced a hike in its quarterly common stock dividend to 17 cents per share, up 6.25%. The new dividend will be paid on May 11 to shareholders as of Apr 27.
In Conclusion
First Republic’s decent performance during the first quarter looks encouraging. The company’s efforts to maintain its organic growth momentum, backed by growth in loans and deposits, which aided upswing in revenues, highlight optimism. Moreover, lower non-performing assets are another tailwind. However, higher expenses and provisions, decline in net interest margin, 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 first-quarter 2017 results on Apr 24, while SVB Financial Group will report its quarterly numbers on Apr 20.
Sell These Stocks. Now.
Just released, today's 220 Zacks Rank #5 Strong Sells demand urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. These are sinister companies because many appear to be sound investments. However, from 1988 through 2016, stocks from our Strong Sell list have actually performed 6X worse than the S&P 500.
See today's Zacks "Strong Sells" absolutely free >>.