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First Republic stock jumps as bank reports record loan growth


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First Republic stock jumps as bank reports record loan growth

First Republic Bank shares shot up Jan. 15 as the company said it saw a record year in loan originations along with growth in its deposit base.

The San Francisco-based bank, whose net income rose to $215.2 million in the fourth quarter of 2018, had $8.4 billion in loan originations in the quarter, up 12.2% from the $7.4 billion in the year-ago quarter. The full-year figure rose 16% to $32.1 billion.

Its total loans, excluding loans held for sale, grew to $75.9 billion, a 20.7% increase.

"In short, it was a successful year, our best ever," Chairman and CEO James Herbert said on an earnings call.

The company's stock was up 11.81% to $94.30 as of 12:16 p.m. ET.

Hafize Gaye Erkan, the bank's president, attributed the loan increases partly to a strong year in business banking and companies using larger amounts of their lines of credit. The loan pipeline "remains strong" heading into 2019, Erkan added.

First Republic's total deposits were at $79.1 billion, a 14.7% increase from the previous year. The company has kept a steady deposit base and keeps deposit costs in check, Erkan said, noting that its average deposit rate rose by 23 basis points year over year even as the Federal Reserve hiked its benchmark rate by 100 basis points in 2018.

The "competition remains fierce" for depositors, but First Republic has been able to see lower deposit betas due to its stable relationships with customers, Erkan said. She also said she expects that "to stay as a tailwind going forward into 2019."

The bank's net interest margin also rose to 2.98% in the fourth quarter, up from 2.94% in the previous quarter, and executives are sticking with their NIM guidance of 2.85% to 2.95% for 2019.

Asked whether a flatter yield curve might throw off the NIM outlook, Herbert said flat yield curves are a challenge but are "not really that problematic" given First Republic's growth figures.