Strong commercial lending offsets margin pressure at First Republic

Strong lending spurred solid fourth-quarter results at First Republic Bank in San Francisco.

The $99 billion-asset bank said in a press release Tuesday that its profit increased by 19% from a year earlier, to $231.4 million. Earnings per share of $1.29 beat the mean estimate of analysts polled by FactSet Research Systems by 6 cents.

Total revenue rose by 16%, to $810.8 million.

“Organic growth continues to be strong across the franchise,” James Herbert, First Republic's chairman and CEO, said in the release. “Our client-focused business model is driving our growth and delivering consistent results in all types of economic conditions.”

Net interest income rose by 17.3%, to $667.2 million, led by a 12.2% increase in loan originations, which totaled $8.4 billion.

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Total multifamily loans rose by 21%, to $10.4 billion, while business loans increased by 32%, to $11 billion. Home equity lines of credit fell by 7%, to $2.5 billion. The bank also reported a decline in single-family refinance volume.

Total deposits increased by nearly 15%, to $79.1 billion. Checking accounts made up about 60% of total deposits at Dec. 31.

The net interest margin compressed by 10 basis points, to 2.98%. The average deposit rate rose by 23 basis points, to 0.51%.

Noninterest income rose by 10%, to $143.5 million. Wealth management revenue increased by 15.4%, to $119.6 million.

Noninterest expenses increased by about 12%, to $498.6 million, reflecting higher employee salaries and benefits. Costs tied to information systems also rose.

The efficiency ratio improved to 61.5% from 63.7% a year earlier.

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