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First Republic Bank Hikes Dividend 10% As Interest Rate Outlook Improves

First Republic Bank (FRC) is a California-chartered commercial bank that offers private banking, private business banking and private wealth management. The company has 92 offices across California, Oregon, Massachusetts, Florida, Connecticut, New York and Wyoming with $142.5 billion in total assets under management.

The company generated 84% of its interest income from loans, 15% from investments and the remainder from other sources in 2020. In terms of customer breakdown, the company had 57% business deposits and 43% consumer deposits with 63% of these deposits in checking, 15% in money market checking, 12% in CDs and 10% in money market savings.

Strong Q1 Financial Results

First Republic Bank reported first quarter revenue that rose 23.6% to $1.17 billion, beating consensus estimates by $80 million, with GAAP earnings of $1.79 per share, beating consensus estimates by 24 cents per share. The strong results were driven by growth in loans, deposits and wealth management assets, making a strong start to the year.

Analysts have been bullish on regional banks given the growing likelihood of interest rate hikes in 2022 and 2023 along with higher long-term interest rates. Higher interest rates translate to greater net interest income and better financial results for commercial banks.

The company raised its quarterly dividend by 10% to $0.22 per share, which represents a 0.5% forward yield and marked its tenth consecutive year of increases. The dividend is payable on May 13, 2021, to shareholders on record as of April 29, 2021.

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