First Republic Bank (NYSE:FRC) Q4 2019 Earnings Conference Call - Final Transcript

Jan 14, 2020 • 10:00 am ET

Previous

First Republic Bank (NYSE:FRC) Q4 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

Thank you. [Operator Instructions] Our first question will be from Steven Alexopoulos with J.P. Morgan.

Analyst
Steven Alexopoulos

Hey, good morning, everybody.

Executive
James H. Herbert, II

Good morning, Steve.

Analyst
Steven Alexopoulos

My first question is for Mike on NIM. I appreciate the full year guidance. When we look at the quarter, loan yields were down 11 bps in the quarter and deposit costs were down only 6 bps. Mike, can you help us think about NIM dynamics over the near term and walk us through what the new money loan yields are and what -- where you see deposit cost headed?

Executive
Michael J. Roffler

Sure. So the fourth quarter NIM was 2.73%, which was pretty close to what we had expected from our last call. The loan yields, we did have a rate change in late September and also October. So the October rate change isn't quite fully reflected, and so you'll see a little bit of a down bias in the first quarter on loan yields, a few basis points, whereas our funding costs, all in, have been relatively stable, and it is reflective of making some changes with the Fed move. And so that's why we think a little bit lower from here as we sort of project into the first quarter. On loan yields, all in, was about 3.30% in the fourth quarter, which is slightly less than the third quarter, but it seems to have stabilized a bit and maybe even trending up slightly as we look at sort of locks-in [Phonetic] process.

Analyst
Steven Alexopoulos

Okay. That's helpful. And then on expenses, from a seasonal view, you started 2019 around 65% efficiency ratio. Do you think that's a rough good starting point? And can you help us think about expense growth in dollars, like percentage growth of expenses in 2020? What are your expectations there?

Executive
Michael J. Roffler

Sure. So I would say, on dollar growth, probably low-double digits. And then, you're right, the first quarter efficiency typically is above our top end of range at 64.5%, so I think it's been low-65% to mid-65% in the first quarter, and then it trends down after that.

Analyst
Steven Alexopoulos

Okay. And then just finally, another quarter, right, of record loan originations. If you look at the detail, loan growth actually accelerated each quarter through 2019. When you guys look at the drivers of growth, I get why you gave the mid-teens guidance where you want to be conservative, but is there any reason to think that well above that won't continue at least over the near term? Thanks.

Executive
James H. Herbert, II

I think Steve that '19 benefited from kind of a dual situation in the single-family refi and purchase area. It was a doubly good year. Both of those cylinders fired. That's pretty unusual. I think you're now more into a refinance market, and the short supply of available homes for sale and the stabilizing of price increases in our markets probably augurs for a okay year on purchase.

Analyst
Steven Alexopoulos

Okay, perfect. Thanks for taking my questions.

Operator
Operator

Thank you. Our next question will be from John Pancari with Evercore Partners.

Analyst
Rahul Patil

Hi.