Signature Bank (SBNY - Snapshot Report) reported fourth-quarter 2013 operating earnings of $1.34 per share, which beat the Zacks Consensus Estimate of $1.26. Further, the reported figure compared favorably with $1.05 in the year-ago quarter.
For 2013, the company reported earnings per share of $4.84, coming ahead of the Zacks Consensus Estimate of $4.69 and the prior-year figure of $3.98.
Results were driven by a rise in revenues on the back of increased net interest income. However, lower non-interest income and rise in expenses were headwinds for the quarter.
Net income was $64.3 million compared with $50.1 million in the prior-year quarter. For 2013, net income was at $228.7 million, up 23% year over year.
Performance in Detail
Total revenue came in at $212.6 million, up 50.0% from the prior-year quarter. Further, it surpassed the Zacks Consensus Estimate of $181.0 million.
For 2013, revenues were $787.1 million, up 13% year over year. Further, it surpassed the Zacks Consensus Estimate of $671.0 million.
Net interest income increased 21.0% year over year to $178.3 million, primarily attributable to growth in average interest-earning assets. However, net interest margin declined 21 basis points from the prior-year quarter to 3.32%.
Non-interest income decreased 33% on a year-over-year basis to $6.0 million. The decline was due to decrease in net gains on sales of SBA loans and rise in write-downs on other than temporary impairment of securities – an effect of the interim final Volcker rule.
Non-interest expense was $64.5 million, rising 11% from the prior-year quarter. The increase primarily resulted from the joining of new private client banking teams, addition of an asset-based lending team and the company’s continued investment in Signature Financial.
Asset quality was a mixed bag in the quarter. Allowance for loan and lease losses increased 26% year over year to $135.1 million. However, allowance for loan and lease losses to total loans was 1.00%, down from 1.10% in the year-earlier quarter.
Quarterly net charge offs as a percentage of average loans and leases on an annualized basis came in at 0.09%, decreasing from 0.25% in the year-ago period.
However, provision for credit losses increased 6.0% year over year to $11.0 million.
Loans and Deposits
As of Dec 31, 2013, Signature Bank’s total loans were $13.4 billion, up 38.0% from the previous-year quarter. As of Dec 31, 2013, total deposits were $17.1 billion, rising 21% on a year-over-year basis.
The company’s capital ratios were average in the quarter. As of Dec 31, 2013, Tier 1 risk-based ratio fell to 14.07% from 15.32% in the year-ago quarter. Tier 1 leverage was 8.54%, down from 9.51% at the end of the prior-year quarter.
Signature Bank’s steadily growing balance sheet and increase in top line are impressive. However, mounting expenses, the prevalent low interest rate environment and stringent regulations remain major near-term concerns.
Currently, Signature Bank carries a Zacks Rank #2 (Buy).
Some other Northeast banks that look promising include Fulton Financial Corp. (FULT - Snapshot Report), Boston Private Financial Holdings, Inc. (BPFH - Snapshot Report) and Community Bank System Inc. (CBU - Snapshot Report). All these have the same Zacks Rank as Signature Bank.