Profit rose at First Republic Bank in the second quarter as higher loan originations and fee-based business offset a spike in employee costs that was partly caused by an increase in the San Francisco bank's minimum wage.
The $65 billion-asset bank's net income rose 26% to $147.6 million from a year earlier, it said Thursday. Earnings per share rose 21% to 97 cents and revenue rose 17.5% to $535 million.
Salaries and employee-benefit costs rose 32% to $183 million, contributing to a 22% increase in noninterest expense to $320 million. First Republic raised its minimum wage to $20 an hour for all employees, including interns, part-time and temporary employees, on Jan. 1. The federal minimum wage is $7.25.
First Republic did not specify in its news release or in an earnings conference call how the wage hike affected salary expenses.
JPMorgan Chase this week said it will raise its minimum wage for about 18,000 workers; some workers, depending on their locations, will see their wages rise to as high as $16.50.
First Republic's net interest income after the loan-loss provision rose 19% to $427.4 million. Net loans rose 16% to $47.3 billion as First Republic originated $6.5 billion of loans in the quarter, including $2.9 billion of single-family residential mortgages.
First Republic's sales of mortgage loans rose 4% to $921 million, while its gain on loan sales was $822,000, down from $3.5 million. Residential mortgages make up more than half of First Republic's total loan book.
Noninterest income rose 16% to $93.5 million on higher fees from investment management, brokerage and trust services. First Republic also reported higher income from its life insurance investments.