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Interest-only home loans are viewed as somewhat risky by the Consumer Financial Protection Bureau, but that is unlikely to stop the San Francisco bank from making them, its CEO says.
February 12
Fees from advising wealthy households propelled First Republic Bank (FRC) in the first quarter.
Earnings at the $35.1 billion-asset bank rose 28% from a year earlier, to $114.5 million. Net interest income rose 5.8% from a year earlier, to $298 million. Net interest margin compressed 22 basis points compared to the first quarter of 2012, to 3.42%.
Noninterest income more than doubled from a year earlier, to $72.3 million, mostly because of investment advisory fees and a gain on loan sales. The higher fees reflected First Republic's December purchase of Luminous Capital Holdings, a Los Angeles firm that advises people who have significant assets to invest.
Noninterest expense rose 20% from a year earlier, to $197.4 million, because of higher personnel costs. The San Francisco company's efficiency ratio improved to 53.3% from 54.1% a year earlier.
First Republic's loan book grew 20%, from a year earlier, to $28 billion. Single-family home loans rose 18% from a year earlier, to $16.7 billion, and loans on multi-family residential buildings grew 27%, to $3.2 billion.
"We had an excellent first quarter," Jim Herbert, First Republic's chief executive, said in a press release. "Loan origination volume was our highest ever first quarter and earnings benefitted from a much higher-than-average level of loan sales and gains."
