Profits at First Republic Bank (FRC) fell slightly in the second quarter as the San Francisco company took a one-time charge related to a stock repurchase and added more staff and locations to support its growth.
Despite strong revenue and loan gains, the $31 billion-asset company said Wednesday that second-quarter net income available to shareholders dipped 5%, to $80.6 million, from the same period a year earlier. The bulk of the decline is a result of a $13.2 million charge it took relating to the repurchase of preferred stock.
Earnings were also affected by a 24% increase in overhead, including salaries. The bank has been aggressively opening new offices in its core markets on both coasts and as it seeks to grow market share.
Diluted earnings fell 6%, to 60 cents, but still beat consensus analysts' estimates by three cents, according to Thomson Reuters.
Higher expenses masked what was otherwise a strong quarter for First Republic, which caters largely to affluent households and growing businesses. Among its clients is Facebook founder Mark Zuckerberg, who has a low-rate mortgage with the bank.
Loans outstanding totaled $25.5 billion at June 30, up 10% from six months earlier, thanks to strong loan originations during the quarter. First Republic originated $4 billion of loans in the quarter, its most ever in a single three-month period, the bank said in a news release. The company reported particularly strong growth in single- and multi-family mortgages, as well as multi-family construction loans.
Net interest income climbed 13% year over year, to $322 million, but its net interest margin contracted by 40 basis points, to 4.27%, due to declining loan yields stemming from persistently low interest rates.
Noninterest income climbed 35%, to nearly $37 million, due primarily to a more then ten-fold increase in recorded gains on sales of single-family mortgages.
First Republic's shares were down 0.6% in early trading Wednesday, to $32.99.