Things are looking up for law firms in the Philadelphia region, if financial data from the first half of 2017 is any indicator.
Gross revenue at law firms in Pennsylvania and Delaware was up 4.4 percent compared to the first half of last year, according to data from a survey by Wells Fargo Private Bank. The region showed slightly less revenue growth than the 135 firms surveyed overall, among which revenue increased by 5.6 percent.
Still, the numbers for the region are encouraging, said Joe Mendola, a senior director with the Wells Fargo unit.
“I feel better about it than I have in the past couple of years at the midyear point,” he said.
Mendola pointed specifically to demand. Billable hours logged for all timekeepers were up 3.6 percent in the region, compared to just 1 percent overall, he said.
“That’s a good performance in today’s legal world,” Mendola said. “It’s suggesting that the services are wanted.”
Total revenue per lawyer was up 2.1 percent in the Pennsylvania-Delaware region. Meanwhile, net income to equity partners increased by 2.9 percent compared to the first half of 2016.
Total salaries were up in the region, as they were across the country, increasing by 5.8 percent in Pennsylvania and Delaware. Total salary costs per attorney were up 3.4 percent in the region, at $173,472. Total expenses increased by 4.9 percent for the region, slightly behind the overall numbers.
Rates were up 4.4 percent in Pennsylvania and Delaware, which was equal to the increases among all Am Law 100 firms that participated in the survey. Rate increases in the region had been lagging the national averages, Mendola said.
Another encouraging number, he said, is that inventory grew 4.1 percent in the region, and 4.4 percent nationally.
“It’s not like revenue was driven by firms drawing down on their inventory,” Mendola said.
Because of where the Pennsylvania and Delaware firms are at midyear, Mendola said the outlook for 2017 is positive. A lot could change in six months, he noted, but it seems unlikely that activity levels will “fall off a cliff.”
In the national survey, the Am Law 50 led the way with 7 percent revenue growth, compared to 6.6 percent for Am Law 100 firms and just under 3 percent for Am Law 200 firms included in the survey.
While they excelled in revenue growth, Am Law 50 firms saw smaller profit increases than their broader Am Law 100 peers due to associate salary increases costing more for the largest firms. The bottom line was up 8 percent for the Am Law 100 versus 6.8 percent for the Am Law 50.
The Philadelphia region’s slower revenue growth could be a result of midyear realization rates, which slipped in the Pennsylvania-Delaware region, Mendola said, while remaining flat elsewhere. The region’s tendency to lag behind on rate increases until now may also be a contributing factor, he said.