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Signature Bank (SBNY) Q1 Earnings Beat on Higher Revenues

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Signature Bank (SBNY - Free Report) reported first-quarter 2022 earnings per share of $5.3, beating the Zacks Consensus Estimate of $4.31. Also, the bottom line substantially increased 63.6% from the prior-year quarter’s reported number.

Increase in revenues, supported by a rise in net interest income (“NII”), drove the results. Growth in loan and deposit balances reflects a strong balance sheet position. Decent credit quality supported the results as well. SBNY’s elevated expenses and weak capital position were negatives.

Net income in the quarter was $338.5 million, up from the previous-year quarter’s $190.5 million. Pre-tax pre-provision earnings came in at $414.6 million, up 52% year over year.

Revenues, Loans & Deposits Rise, Expenses Increase

Total income increased 35.8% from the prior-year quarter’s level to $608 million. The top line surpassed the Zacks Consensus Estimate of $606.9 million.

NII climbed 41.4% year over year to $573.6 million on higher average interest-earning assets. However, the net interest margin contracted 11 basis points to 1.98%.

Non-interest income was $34.4 million, up 5.2% from the year-ago quarter’s number. Growth in fees and service charges led to the increase, but was partially offset by a decrease in net gains on sales of securities and loans.

Non-interest expenses of $193.4 million rose 16.2%. The upsurge chiefly stemmed from the rise in salaries and benefits due to the massive hiring of private client banking teams and operational support.

The efficiency ratio was 31.8%, declining from 37.9% reported as of Mar 31, 2021. A lower ratio indicates a rise in profitability.

Loans, excluding loans held for sale, as of Mar 31, 2022, were $66.4 billion, increasing 2.4% sequentially. Total deposits rose 2.9% sequentially, to $109.2 billion.

Decent Credit Quality

Net charge-offs were $17.8 million in the March quarter, down from $17.9 million in the prior-year quarter. The allowance for credit losses for loans and leases was $461.3 million, down from $521.8 million in the prior-year quarter. Provision for credit losses declined to $2.7 million from $30.9 million in the prior-year quarter, driven primarily by improved macroeconomic conditions.

However, the ratio of non-accrual loans to total loans was 0.27%, up 1 bps year over year.

Capital Ratios Weak, Profitability Ratios Improve

As of Mar 31, 2022, Tier 1 risk-based capital ratio was 11.37%, down from 12.18% as of Mar 31, 2021. The total risk-based capital ratio was 12.58 % down from the prior-year quarter’s 14.41%.

Nonetheless, return on average total assets was 1.16% in the reported quarter, up from 0.97% in the year-earlier quarter. As of Mar 31, 2022, the return on average common stockholders' equity was 17.44%, up from 13.02% in the year-ago quarter.

Our Take

The bank’s better-than-expected earnings performance and an improving balance-sheet position are positives. Top-line strength on the rising NII and fee income is expected to continue supporting its profitability.

However, continued escalating expenses are downsides. Declining capital ratios is another negative.

Currently, Signature Bank carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Signature Bank Price, Consensus and EPS Surprise Signature Bank Price, Consensus and EPS Surprise

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

Performance of Other Banks

The PNC Financial Services Group, Inc. (PNC - Free Report) pulled off a first-quarter 2022 earnings surprise of 18.4% on substantial recapturing of credit losses. Earnings per share of $3.29, on an as-adjusted basis (excluding pre-tax integration costs related to the BBVA USA acquisition), surpassed the Zacks Consensus Estimate of $2.78. However, the bottom-line decreased 20% year over year.

Higher NII, driven by interest-earning assets and loan growth, were tailwinds for PNC Financial. However, higher expenses and a decline in deposits dragged results.

U.S. Bancorp (USB - Free Report) reported first-quarter 2022 earnings per share of 99 cents, which beat the Zacks Consensus Estimate of 93 cents. However, results do not compare favorably with the prior-year quarter’s figure of $1.45.

U.S. Bancorp’s results were supported by an increase in revenues, loan growth and lower non-performing assets. USB’s capital position was decent in the quarter. However, higher expenses and elevated provision for credit losses were the offsetting factors.

First Republic Bank’s (FRC - Free Report) first-quarter 2022 earnings per share of $2 have surpassed the Zacks Consensus Estimate of $1.90. Additionally, the bottom line improved 11.7% from the year-ago quarter.

FRC’s results were supported by an increase in NII and non-interest income. The company’s capital position was strong in the quarter. Higher expenses and elevated provision for credit losses were the offsetting factors.