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Signature Bank's (SBNY) Q3 Earnings Top Estimates, Stock Up

Zacks Equity Research

Shares of Signature Bank SBNY have rallied 1.9%, following the release of third-quarter 2019 results. Earnings of $2.75 per share outpaced the Zacks Consensus Estimate of $2.70. However, the bottom-line figure decreased 3.2% from the prior-year quarter’s reported tally.

Results reflect growth in revenues, loan and deposit balances, supported by a significant decline in provisions. However, fall in net interest margin (NIM) and escalating expenses were major drags.

Net income for the third quarter came in at $148.7 million, down 4.3% compared with the previous-year quarter.

Revenues Rise, Loans & Deposits Increase, Expenses Escalate

Signature Bank’s total revenues inched up 1.4% from the prior-year quarter to $334 million. However, the top line missed the Zacks Consensus Estimate of $339.1 million.

Net interest income increased 1% year over year to $328 million, backed by rise in average interest earning assets. However, NIM contracted 20 basis points to 2.68%.

Non-interest income was $6 million, up nearly 33.3% year over year. This upside primarily stemmed from an increase in fees and services charges, along with rise in all the other components.

Non-interest expenses of $134.3 million flared up 14.6% from the prior-year quarter. This upsurge chiefly stemmed from rise in all components of expenses, partially offset by lower FDIC assessment fees.

Efficiency ratio was 40.2% as of Sep 30, 2019 compared with 35.6% reported as of Sep 30, 2018. Higher ratio indicates fall in profitability.

The company’s loans and leases, as of Sep 30, 2019, were $37.9 billion, rising marginally on a sequential basis. Further, total deposits rose 8.2% sequentially to $39.1 billion.

Credit Quality: Mixed Bag

The company recorded net charge offs of $2.9 million in the third quarter compared with the prior-year quarter’s $0.011million. In addition, provision for loan and lease losses plummeted 84.2% year over year to $1.2 million.

The ratio of non-accrual loans to total loans was 0.09%, down from the 0.38% recorded in the prior-year quarter.

Capital Ratios

As of Sep 30, 2019, Tier 1 risk-based capital ratio was 11.91% compared with 12.16% on Sep 30, 2018. In addition, total risk-based capital ratio was 13.16% compared with the prior-year quarter’s 13.47%. Tangible common equity ratio was 9.51% as of Sep 30, 2019, up from the 9.15% recorded at the end of September 2018.

Return on average assets was 1.19% in the reported quarter compared with the year-earlier quarter’s 1.36%. As of Sep 30, 2019, return on average common stockholders' equity was 12.55%, down from 14.71% recorded at the end of September 2018.

Capital Deployment

During the September-end quarter, the company repurchased 629,503 shares of common stock, at a total cost of $75 million.

Our Viewpoint

Steady growth in revenues, loan and deposit balances will further boost Signature Bank’s profitability. Moreover, capital-deployment actions reflect the bank’s solid balance-sheet position. Also, improved capital ratios are on the positive side for its financials. Nevertheless, rising expenses and contracting NIM are major near-term concerns.  

Signature Bank Price, Consensus and EPS Surprise

 

Signature Bank Price, Consensus and EPS Surprise

Signature Bank price-consensus-eps-surprise-chart | Signature Bank Quote


Currently, Signature Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Other Banks

Texas Capital Bancshares Inc. TCBI reported earnings per share of $1.70 in third-quarter 2019, beating the Zacks Consensus Estimate of $1.49. Further, results compare favorably with the prior-year quarter’s $1.65. Rise in revenues was a positive factor. Further, results reflect organic growth, with significant rise in loans and deposit balances. Nonetheless, elevated expenses were on the downside.

PNC Financial PNC reported positive earnings surprise of 5% in the third quarter. Earnings per share of $2.94 outpaced the Zacks Consensus Estimate of $2.80. The bottom line also reflected a 4.3% jump from the prior-year quarter’s reported figure. Higher revenues, driven by higher net interest income and escalating fee income, aided the company’s results. Nevertheless, rise in costs and provisions were headwinds.

Synovus Financial SNV is slated to report results on Oct 22.

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