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Signature Bank (SBNY) Shares Climb 3% on Q3 Earnings Beat

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Shares of Signature Bank’s (SBNY - Free Report) have gained more than 3% following the release of third-quarter 2018 results. Earnings per share of $2.84 surpassed the Zacks Consensus Estimate by a penny. Further, it compares favorably with $2.29 earned in the prior-year quarter.

Results reflected overall growth in revenues. In addition, loan and deposit balances displayed continued improvement. Moreover, lower non-interest expenses and provisions acted as tailwinds.

Net income for the third quarter was $155.4 million compared with $124.5 million recorded in the year-ago quarter.

Revenues Rise & Expenses Decline

Signature Bank’s total revenues in the quarter rose 3.9% from the prior-year quarter to $329.3 million. However, the reported figure missed the Zacks Consensus Estimate of $332 million.

Net interest income increased 5.2% year over year to $324.8 million, with support from 11.3% rise in average interest earning assets. However, net interest margin contracted 17 basis points from the year-ago quarter to 2.88%.

Non-interest income was $4.5 million, down nearly 44.4% year over year. The decline was primarily on account of an increase in tax credit investment amortization.

Non-interest expenses of $117.2 million were up 11% from the prior-year quarter. The rise was primarily a result of the addition of private client banking teams, and an increase in costs in risk management and compliance-related activities.

Efficiency ratio was 35.6% compared with 33.3% reported as of Sep 30, 2017. Higher ratio indicates fall in profitability.

The company’s loans and leases, net as of Sep 30, 2018, were $34.9 billion, up 7.7% from Dec 31, 2017. Further, total deposits rose 7.9% from 2017 end to $36.1 billion.

Credit Quality: A Mixed Bag

The ratio of net charge-offs to annualized average loans were nil compared with 0.05% in the prior-year quarter. In addition, provision for loan and lease losses steeply declined to $7.4 million from the year-ago quarter tally of $14.3 million.

However, the allowance for loan losses represented 0.63% of total loans as of Sep 30, 2018, compared with 0.62% as of Sep 30, 2017.

Capital Ratios

As of Sep 30, 2018, Tier 1 risk-based capital ratio was 12.13% compared with 11.96% as of Sep 30, 2017. Further, total risk-based capital ratio was 13.44% compared with 13.32% in the prior-year quarter. Tangible common equity ratio was 9.15%, down from 9.44% as of Sep 30, 2017.

The return on average assets was 1.36% in the reported quarter compared with 1.21% in the prior-year quarter. As of Sep 30, 2018, return on average common stockholders' equity was 14.71%, up from 12.78% as of Sep 30, 2017.

Our Viewpoint

Signature Bank’s third-quarter results reflect solid capital position and robust balance sheet. The company remains focused on investing in infrastructure by enhancing payments platform and credit approval system. However, rising interest rates continue to impact net interest margin due to its liability sensitive balance sheet and remain a major concern.

Signature Bank Price, Consensus and EPS Surprise

 

 

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 of Other Banks

Texas Capital Bancshares Inc. (TCBI - Free Report) reported negative earnings surprise of 4.1% in third-quarter 2018. Earnings per share of $1.65 lagged the Zacks Consensus Estimate of $1.72. However, results compare favorably with $1.12 recorded in the prior-year quarter.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings of $3.56 per share in third-quarter 2018, surpassing the Zacks Consensus Estimate of $3.35. Moreover, the bottom line improved 59% year over year.

Reflecting high costs, Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2018 earnings per share of $1.58 missed the Zacks Consensus Estimate of $1.60. Earnings compared favorably with $1.20 recorded in the year-ago quarter.

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