First Republic's (FRC) Q1 Earnings Beat, Revenues Increase
First Republic Bank FRC delivered a positive earnings surprise of 3.3% in first-quarter 2019, reflecting higher revenues. Earnings per share came in at $1.26, outpacing the Zacks Consensus Estimate of $1.22. Moreover, the bottom line improved 11.5% from the year-ago figure.
The company’s performance was supported by top-line strength. In addition, a considerable rise in loans and deposit balances was recorded. Strong capital position was another tailwind. However, higher provisions and expenses were the key undermining factors.
Net income available to common shareholders for the reported quarter jumped 14.4% year over year to $213.8 million.
Revenues and Expenses Increase
Net revenues in the quarter came in at $807.4 million, up 12% year over year. However, the figure lagged the Zacks Consensus Estimate of $814 million.
First Republic’s net interest income jumped 14.8% to $675 million, primarily supported by growth in average earnings assets. Nevertheless, net interest margin was 2.97%, stable year over year.
Non-interest income came in at $132.3 million, down marginally year over year. Prior-year quarter results had included a gain on investment securities, excluding which, higher investment management revenues were offset by lower brokerage fees.
Non-interest expenses for the reported quarter were up 13.7% year over year to $524.8 million. An increase in salaries and benefits, information systems and other costs, which was the outcome of continued investments in the expansion of franchise, led to the upsurge.
The efficiency ratio was 65% compared with 64% recorded in the prior-year quarter. It should be noted that a rise in the efficiency ratio indicates lower profitability.
Balance Sheet Remains Healthy
As of Mar 31, 2019, net loans climbed 1.8% sequentially to $76.8 billion, while total deposits were up 3.2% to $81.6 billion. However, loan originations were $6.7 billion in the reported quarter, down 19.7% sequentially, mainly due to fall in almost all types of lending including single family, multifamily and home equity lines of credit.
First Republic’s total wealth management assets were $139.9 billion as of Mar 31, 2019, indicating 10.8% sequential rise. Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets. Notably, net new assets from existing and new clients along with market appreciation led to higher level of assets.
Credit Quality: A Concern?
On a year-over-year basis, total non-performing assets increased 4.5% to approximately $51.1 million. The non-performing assets to total assets ratio remained stable at 0.05%.
Further, provision for loan losses jumped 9.2% on a year-over-year basis to $14.2 million in the quarter.
As of Mar 31, 2019, the company’s Tier 1 leverage ratio was 8.84%, indicating a rise of 20 basis points from the in the prior-year quarter.
Tier 1 capital to risk-weighted assets was 11.82%, up from 11.80%.
Common equity Tier 1 ratio was 10.54% compared with 10.47% a year ago.
Tangible book value per share increased 12.9% to $46.81.
First Republic’s board of directors raised quarterly common stock dividend to 19 cents per share, reflecting 5.6% hike from the previous payout. The dividend will be paid on May 9 to shareholders on record as of Apr 25, 2019.
First-quarter results of First Republic look decent. The company was able to sustain its organic growth momentum, reflected by higher loans and deposits. Further, capital position improved during the quarter. Nonetheless, higher expenses and provisions, and decline in fee income remain concerns.
First Republic Bank Price, Consensus and EPS Surprise
First Republic Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radical New Technology Creates $12.3 Trillion Opportunity
Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.
Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.
See the 7 breakthrough stocks now>>
Click to get this free report
First Republic Bank (FRC): Free Stock Analysis Report
Zions Bancorporation (ZION): Free Stock Analysis Report
SVB Financial Group (SIVB): Free Stock Analysis Report
East West Bancorp, Inc. (EWBC): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.