What led to the First Republic Bank (NYSE: FRC) stock weakness?

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First Republic Bank (NYSE: FRC) stock fell over 2.5% in the pre-market session of January 15th, 2020 (Source: Google finance). For fiscal 2020, the company expects loan growth to be in the mid-teens. The net interest margin is expected to be in the range of 2.65% to 2.75%, which assumes an unchanged fed funds rate throughout 2020. The efficiency ratio is expected to be in the range of 63.5% to 64.5%.

For the fourth quarter of FY19, FRC’s net interest margin was 2.73% for the fourth quarter. During FY 19, net interest income increased 10.5% during 2019 as the result of the average earning assets being up a very strong 15%. The efficiency ratio was 63.7% for the fourth quarter.

Moreover, in October, the company had retired $190 million of the Series D 5.5% perpetual preferred stock. Then in December, the company had successfully raised $395 million of perpetual preferred stock at the historically attractive rate of 4.7%. As a result of these capital actions, the company now expects preferred stock dividends to be approximately $15 million beginning in the second quarter of 2020. The liquidity also remains strong with high-quality liquid assets being at 12.7% of average total assets in the fourth quarter. Further, the company had net recoveries of $1.1 million during the fourth quarter. And for the full year 2019, net charge-offs were only $4.6 million, less than 1 basis point of average loans. During 2019, the company had added $62 million to the loan loss reserves to support the strong loan growth. Loan originations for the fourth quarter were $11.2 billion.

FRC in the fourth quarter of FY19 has reported the adjusted earnings per share of $1.39, while the adjusted revenue of $877.46 million in the fourth quarter of FY19. Additionally, in the Business banking, the total business loans and lines outstanding were $11.6 billion at year-end, representing 13% of total loans outstanding. Business deposits rose up 15% for the year and represented 56% of total deposits at year-end.

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