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Signature Bank Beats Q4 Earnings on Higher Revs

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Signature Bank (SBNY - Free 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

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.

Capital Ratios

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.     

Our Viewpoint

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 - Free Report) , Boston Private Financial Holdings, Inc. (BPFH - Free Report) and Community Bank System Inc. (CBU - Free Report) . All these have the same Zacks Rank as Signature Bank.

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