First Republic's Organic Growth Strategy on Track - Analyst Blog

On Jun 3, 2014, we issued an updated research report on First Republic Bank ( FRC ). This California based bank has exhibited efficient efforts in boosting its organic growth amid a competitive banking environment.

First Republic has been able to sustain growth in its deposit balances over the past few years. The company's total deposits have grown at a 5-year CAGR of 13% (2009-2013). Further, during first-quarter 2014, core deposit grew 5.2% sequentially.

Though loan origination volumes declined 8.6% year over year, net loans increased. Increased loan origination volumes enhanced the loan portfolio over the past couple of years. Loan origination volumes recorded a 3-year CAGR (2011-2013) of 32.1%. Given the ongoing recovery of the economic scenario, we expect growth in loan originations in the upcoming quarters.

First Republic's first-quarter 2014 earnings per share of 67 cents outpaced the Zacks Consensus Estimate by 4.7%. Results were aided by revenue growth, partially offset by higher expenses.

Additionally, analysts' bullish stance on the stock was reflected in the movement of the Zacks Consensus Estimate over the past 60 days. For 2014, the Zacks Consensus Estimate moved north 10.8% to $3.08 per share while it advanced 5.2% to $3.45 per share for 2015.

Despite the positives, we remain cautious owing to several issues faced by First Republic that pose a threat to the company's financials. These include a continuous decline in net interest margin amid a low interest rate environment, a persistent rise in operating expenses and the prevailing stringent regulatory landscape.

First Republic currently carries a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

BofI Holding, Inc. ( BOFI ), Central Pacific Financial Corp. ( CPF ) and Western Alliance Bancorporation ( WAL ) are among the better-ranked stocks in the Banks- West space. All these stocks hold a Zacks Rank #1 (Strong Buy).

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WESTERN ALLIANC (WAL): Free Stock Analysis Report

CENTRAL PAC FIN (CPF): Free Stock Analysis Report

FIRST REP BK SF (FRC): Free Stock Analysis Report

BOFI HLDG INC (BOFI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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