Deutsche Bank Markets Research Rating Buy Nt.trth ;:km;n lcc United States Fitthnciai Banks Company First Republic Bank Alert FP.0 N FRC UN Twi.t; NYS FRC Core NIM Upside in FY14, Growth Normalizing But Still Strong Re:;torote Buy. IP t St. to $52. Core EPS to $2 SCPS2.70 $3.15 for FYI3/14/ I 5 We continue to view the stock as one of our top growth picks in the mid cap bank space. We raised our core EPS estimates by $0.03/$0.10 in FY14/FY15 to account for stronger earning asset growth and lower than expected expenses and tax rate, which more than offset a lower expected core NIM and mortgage banking. While FRC expects asset growth to slow to a rate more in line with recent levels prior to 2O13, given the lower loan pipeline heading into 4O13, we note this implied -20% annualized gr. rate remains strong and well above the industry, and should continue to be a solid driver of core NII gr. with the backdrop of a generally stable-to-expanding core NIM in FY14. With the variability of mortgage banking largely removed from core EPS trends going forward, we expect solid fee income growth in 4Q13/FY14 to further support strong core EPS trends. Rel-, out s(2is First Rt,ad Alec toi qua, lac iv tiendst Core NIM likely to expand in FY14 with stable Interest rates. Following a modest decline in 4Q13 NIM, we expect 6-7 bps of core NIM expansion through FY14. We expect some unwind in FY14 of the •14 bps NIM impact from excess deposit gr. in 3O13 (following what may also be a solid deposit growth quarter in 4O131, as FRC funds loan gr. with cash over time, supporting earning asset yields. While loan production yields are below book yields, they are only modestly so (3.44% book yield ex. prepayment penalty income vs. a -3.30% loan production yield), which should mean only modest loan yield pressure in FY14. Given the pull-back in deposit rates at the end of 3O13, core deposit costs should actually decline modestly in 4013. Mortgage banking l