First Republic Bank (FRC) in San Francisco reported higher earnings for the second quarter, as strong revenue growth helped offset a rise in compliance costs.
The $46 billion-asset bank reported second-quarter net income of $121 million, a 7% jump from the same period last year. Diluted earnings were 69 cents per common share, two cents better than estimates of analysts polled by Bloomberg.
Net income from interest-bearing assets increased 10%, to $333 million. Interest income was boosted by gains from investments, which increased by 32% from the previous year. By comparison, earnings from loans increased by 8%.
Loan activity declined in the second quarter, as originations fell by 12% from last year, to $4.7 billion. The net interest margin dropped 41 basis points, to 3.38%.
Fee-based income saw the largest increase, up by 23%, to $77 million, over the same period. The increase was primarily due to a gain in the sale of loans and investment advisory fees.
Revenue increases helped offset a rise in noninterest expenses, which increased by 18%, to $223 million. The bank attributed the jump in expenses to "substantially increased professional fees due to regulatory compliance activities, higher advertising and higher information systems costs."
First Republic's shares were trading at $54.09 early Wednesday, down 1.7% from Tuesday's close.