Bank of the First Republic FRC announced certain preliminary unaudited financial information for the fourth quarter of 2021 and fiscal 2021. These results reflect another quarter of strong balance sheet growth and improved credit quality.
At the end of 2021, First Republic’s total loan growth was 20% and 5% compared to the previous year period and the end of the third quarter of 2021, respectively. In addition, total deposits increased 36% from the end of 2020 and 7.5% from the end of the third quarter. For the third quarter, the company recorded 22.5% and 39.2% year-over-year growth in loans and deposits, respectively.
First Republic’s exceptional credit quality is expected to strengthen further in the fourth quarter. The bank expects net charges to be $ 0.1 million for the fourth quarter of 2021 and $ 2 million for 2021, or less than 1 basis point of average lending for 2021. In addition, non-performing assets are expected. represent 8 basis points of total assets in 2021- finish.
For the third quarter of 2021, net loan write-offs were $ 0.3 million, down 83% year-over-year. In addition, the ratio of non-performing assets to total assets was 0.07%, down from 0.12% in the previous year’s quarter.
A strong balance sheet is likely to boost the company’s net interest income (NII) and net interest margin (NIM). Along with the third quarter 2021 results, First Republic announced a NIM 2021 forecast of 2.65 to 2.75% due to higher cash levels due to current economic conditions and government stimulus measures.
Despite encouraging preliminary results, this positive news failed to generate optimism among investors about the stock. In fact, the company’s shares fell 4.4% during yesterday’s trading hours. While FRC is already looking for its next CEO, Hafize Gaye Erkan has resigned as co-CEO. Such managerial transitions have fueled uncertainty and created a short-term headwind for the stock.
The company’s shares gained 32.7%, underperforming the industrys by 49.7% over the past year.
Image source: Zacks Investment Research
First Republic currently wears a Zacks Rank # 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Actions to consider
Some higher ranked stocks in the banking space include Cathay General Bancorp CATY, Bancorp East West EWBC and Bancorp Hope HOPE. Currently, all three stocks carry a Zacks Rank # 2 (Buy).
Over the past year, shares of Cathay General, East West Bancorp and Hope Bancorp have gained 35.2%, 55% and 35.3% respectively.
Over the past 30 days, Zacks’ consensus estimate for Cathay General’s 2022 earnings has been revised up slightly. The same for East West Bancorp remained unchanged.
The current-year profit estimates for Hope Bancorp have remained unchanged over the past month.
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