Profit spiked at First Republic Bank in the third quarter as a result of record-setting loan originations and the ongoing expansion of its wealth management business, even as the bank swallowed higher costs related to employees and investments being made in a new subsidiary.

The $84.3 billion-asset bank on Friday reported net income of $200 million, an increase of 16.4% over the third quarter of 2016. Diluted earnings per share rose 14%, to $1.14, and total revenue was $670.3 million, up 20.1% from a year earlier.

Total deposits stood at $65.4 billion as of Sept. 30, up 18.8% from a year earlier. Checking account balances comprised 60.5% of all deposits.

For several quarters now, First Republic has been growing its fee-based business. Noninterest income soared by 22.7% from the third quarter of 2016 to $119.3 million. The bank attributed the growth mainly to an increase in wealth management revenue, which was $88.4 million for the quarter, up 22.9% from the prior year.

Wealth management assets reached a "significant milestone, now exceeding $100 billion," James Herbert, First Republic's chairman and CEO, said in a news release. The division's total assets under management ended the quarter at $101.3 billion, up 26.4% from the third quarter of 2016, as a result both of new client assets and of appreciation in the market value of prior assets.

Jim Herbert, CEO of First Republic
First Republic founder and CEO James Herbert said that loan volume was the third-highest for any quarter in the bank's hstory.

Herbert also described the San Francisco private bank's third-quarter loan origination volume as its best ever. First Republic originated $7.2 billion of loans, an increase of 11.9% from the prior-year quarter that the bank attributed primarily to growth in business, multifamily and single-family lending.

Total loans outstanding, excluding loans held for sale, increased by 19.3%, to $59.5 billion, from Sept. 30, 2016.

Net chargeoffs for the quarter were only $655,000 — less than one basis point of average loans — though the bank added $10.1 million to its allowance for loan losses to compensate for the loan growth.

Noninterest expenses increased 23.9%, to $418.4 million. Most of the increase was due to employee salaries and benefits as well as costs associated with investments in technology and in Gradifi, a Boston company specializing in student debt repayment plans that became a wholly owned subsidiary of the bank in the fourth quarter of 2016.

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