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Signature Bank (SBNY) Q1 Earnings Miss on Lower Revenues

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Signature Bank (SBNY - Free Report) reported first-quarter 2019 adjusted earnings per share of $2.64, which lagged the Zacks Consensus Estimate of $2.76. Further, the bottom line fell from $2.69 earned in the prior-year quarter.

Results reflected growth in loan and deposit balances. Moreover, lower expenses and provisions acted as tailwinds. However, fall in fee income was a drag.

Net income for the first quarter was $144.1 million compared with $34.5 million a year ago.

Expenses Decline, Loans & Deposits Increase  

Signature Bank’s total revenues declined marginally from the prior-year quarter to $325.1 million. Also, the top line missed the Zacks Consensus Estimate of $332.4 million.

Net interest income increased slightly year over year to $319 million backed by rise in average interest earning assets. However, net interest margin contracted 26 basis points to 2.75%.

Non-interest income was $6.1 million, down nearly 15% year over year. The decline was primarily on account of an increase in tax credit investment amortization.

Non-interest expenses of $125.1 million were down 8.9% from the prior-year quarter. The decline was primarily due to the absence of write-downs on repossessed New York City taxi medallions that were taken in the prior-year quarter, partially offset higher salaries and equipment expenses.

Efficiency ratio was 38.5% compared with 42.2% reported as of Mar 31, 2018. Lower ratio indicates improvement in profitability.

The company’s loans and leases, as of Mar 31, 2019, were $37.2 billion, up 2.9% from Dec 31, 2018. Further, total deposits rose slightly sequentially to $36.6 billion.

Credit Quality Improves

The company recorded net charge-offs of $0.9 million in the quarter compared with $128.3 million in the prior-year quarter. In addition, provision for loan and lease losses declined significantly to $6.3 million.

The allowance for loan losses represented 0.63% of total loans as of Mar 31, 2019, stable year over year.

Capital Ratios

As of Mar 31, 2019, Tier 1 risk-based capital ratio was 11.97% compared with 12.09% on Mar 31, 2018. Further, total risk-based capital ratio was 13.24% compared with 13.45% in the prior-year quarter. Tangible common equity ratio was 9.29%, up from 8.95%.

Return on average assets was 1.22% in the reported quarter compared with 0.32% in the prior-year quarter. As of Mar 31, 2019, return on average common stockholders' equity was 13.04%, up from 3.48%.

Our Viewpoint

Signature Bank’s first-quarter results reflect solid capital position and robust balance sheet. The company remains focused on investing in technology by enhancing payments platform and credit approval system. However, lack of fee income growth and contracting net interest margin due to its liability sensitive balance sheet pose concerns.

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

Comerica (CMA - Free Report) pulled off a positive earnings surprise of 7.2% in first-quarter 2019 on high interest income. Adjusted earnings per share of $2.08 in the quarter surpassed the Zacks Consensus Estimate of $1.94. Further, earnings were up from the prior-year quarter adjusted figure of $1.54. Including certain non-recurring items, earnings came in at $2.11.

M&T Bank Corporation (MTB - Free Report) delivered a positive earnings surprise of 2.7% in first-quarter 2019 led by expansion of margins and improved cost management. Net operating earnings of $3.38 per share surpassed the Zacks Consensus Estimate of $3.29. Also, the bottom line improved 50% year over year.

PNC Financial (PNC - Free Report) came up with a positive earnings surprise of 0.8% in first-quarter 2019. Earnings per share of $2.61 surpassed the Zacks Consensus Estimate of $2.59. Further, the bottom line reflects a 7.4% jump from the prior-year quarter.

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