On Mar 4, 2014, we issued an updated research report on
First Republic Bank
). This West bank recently reported in-line fourth-quarter 2013
results. Results were aided by top-line growth and lower
provision for credit losses, which were partially offset by
higher operating expenses. Though the company shows stability in
its fundamentals, we remain cautious due to the macroeconomic
headwinds across the industry.
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First Republic reported fourth-quarter 2013 earnings of 66 cents
per share, in line with the Zacks Consensus Estimate. However,
this was higher than the earnings of 61 cents posted in the
First Republic's performance in 2013 was not remarkable but it
was decent as evident from its earnings history. In 2013, the
company posted in-line earnings in 2 quarters, delivered a
positive earnings surprise in 1 quarter and missed in the
First Republic's consistent efforts toward successfully executing
its organic growth strategy are commendable. Total deposits have
grown at a 5-year CAGR of 13% (2009-2013), while loan
originations increased at a 4-year CAGR (2010-2013) of 29%.
Further, amid a still low interest rate environment, First
Republic achieved growth in its net interest income (NII). NII
improved 4% year over year to $1.22 billion in 2013.
First Republic has adequate positives to improve its operating
efficiencies in the long run. However, we believe mounting
expenses and the stringent regulatory landscape may pose threats
to the company's financials in the near term. Further, the recent
downgrade of the company's outlook to 'Negative' from 'Stable' by
Moody's Investors Service, the ratings arm of
), has dampened investors' confidence in the stock.
The mixed opinion of analysts is evident from the movement of the
Zacks Consensus Estimate over the past 60 days. The Estimate for
2014 declined 1.4% to $2.82 per share. For 2015, it advanced
nearly 1% to $3.30 per share.
First Republic currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Stocks that are worth considering in the sector include
Central Valley Community Bancorp
). Both these stocks hold a Zacks Rank #1 (Strong Buy).