First Republic Rises on Wealth Management Gains

First Republic Bank's (FRC) shares surged Thursday after the San Francisco lender reported a 16% rise in quarterly profit, driven by investment-advisor revenue.

The $37.3 billion-asset company on Wednesday reported earnings of $113.7 million in the second quarter, or 77 cents a share, which beat the estimates of analysts polled by Bloomberg by 3 cents. Its stock price had risen nearly 5% in trading early Thursday afternoon, to $43.88 a share.

Investment-advisory fees drove First Republic's second-quarter profit. Noninterest income rose 70%, to $62.3 million, as asset-management revenue grew 88%, to $27.5 million. Fees on brokerage services, foreign exchange trades and deposits also rose.

Net interest income increased 4%, to $303.1 million, despite a decrease in net interest margin to 3.79% from 4.27%. First Republic's loan portfolio expanded 8%, to $30.3 billion.

First Republic recorded a $12.7 million provision for loan losses, down 15% from a year earlier. But nonperforming loans rose 95%, to $62.8 million.

Noninterest expense rose 17%, to $200.1 million, as salary and benefit costs increased by 20%, to $98.2 million. The bank attributed the rise in costs to hiring and growth initiatives.

First Republic bought Luminous Capital Holdings, a Los Angeles wealth advisory firm, late last year.