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First Republic Bank Reports Record Earnings

Stocks in this article: FRC

Excluding the impact of purchase accounting, revenues were $295.8 million for the third quarter of 2012, compared to $275.1 million for the prior quarter and $236.7 million for the third quarter of 2011, an 8% increase over the prior quarter and a 25% increase from a year ago. (1)

Net interest income growth

Net interest income was $298.8 million for the third quarter of 2012, compared to $290.6 million for the prior quarter and $268.9 million for the third quarter a year ago.

The strong increase in contractual net interest income was primarily due to increases in the average balances of loans and investment securities as well as lower deposit costs. Excluding the impact of purchase accounting, net interest income (contractual net interest income) was $252.2 million for the third quarter of 2012, compared to $238.4 million for the prior quarter and $206.6 million for the third quarter of 2011, up 6% over the prior quarter and up 22% from a year ago. (1)

Net interest margin

The Bank’s net interest margin was 4.13% for the third quarter of 2012, compared to 4.27% for the second quarter of 2012 and 4.48% for the third quarter a year ago.

Excluding the impact of purchase accounting, net interest margin (contractual net interest margin) was 3.47% for the third quarter of 2012, compared to 3.48% for the prior quarter and up from 3.41% for the third quarter a year ago. (1)

The contractual net interest margin remained stable compared to the prior quarter as lower deposit costs and the investment of more cash largely offset declines in contractual loan yields.

Noninterest income

Noninterest income for the third quarter of 2012 was $43.8 million, up 20% compared to $36.6 million for the prior quarter and up 45% compared to $30.3 million for the third quarter a year ago. For the nine months ended September 30, 2012, noninterest income was $113.1 million, up 28% compared to $88.5 million for the same period in 2011. These increases were primarily due to increases in investment advisory, trust and foreign exchange fees and gain on sale of loans, partially offset by a decline in net loan servicing fees.

Noninterest expense

Noninterest expense for the third quarter of 2012 was $178.4 million, compared to $171.6 million for the prior quarter and $144.8 million for the third quarter a year ago, a 4% increase over the prior quarter and a 23% increase year over year. Noninterest expense has grown primarily due to an increase in personnel to support loan, deposit and wealth management growth, increased occupancy costs as the Bank added both corporate office space and deposit offices, increased costs related to investments in technology and increased expenses related to tax credit investments.

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