It has been about a month since the last earnings report for Signature Bank (SBNY - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Signature Bank due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Signature Bank's Q3 Earnings Beat Estimates on High Revenues
Signature Bank’s third-quarter 2019 earnings of $2.75 per share outpaced the Zacks Consensus Estimate of $2.70. However, the bottom-line figure decreased 3.2% from the prior-year quarter’s reported tally.
Results reflect growth in revenues, loan and deposit balances, supported by a significant decline in provisions. However, fall in NIM and escalating expenses were major drags.
Net income for the third quarter came in at $148.7 million, down 4.3% compared with the previous-year quarter.
Revenues Rise, Loans & Deposits Increase, Expenses Escalate
Signature Bank’s total revenues inched up 1.4% from the prior-year quarter to $334 million. However, the top line missed the Zacks Consensus Estimate of $339.1 million.
Net interest income increased 1% year over year to $328 million, backed by rise in average interest earning assets. However, NIM contracted 20 basis points to 2.68%.
Non-interest income was $6 million, up nearly 33.3% year over year. This upside primarily stemmed from an increase in fees and services charges, along with rise in all the other components.
Non-interest expenses of $134.3 million flared up 14.6% from the prior-year quarter. This upsurge chiefly stemmed from rise in all components of expenses, partially offset by lower FDIC assessment fees.
Efficiency ratio was 40.2% as of Sep 30, 2019 compared with 35.6% reported as of Sep 30, 2018. Higher ratio indicates fall in profitability.
The company’s loans and leases, as of Sep 30, 2019, were $37.9 billion, rising marginally on a sequential basis. Further, total deposits rose 8.2% sequentially to $39.1 billion.
Credit Quality: Mixed Bag
The company recorded net charge offs of $2.9 million in the third quarter compared with the prior-year quarter’s $0.011million. In addition, provision for loan and lease losses plummeted 84.2% year over year to $1.2 million.
The ratio of non-accrual loans to total loans was 0.09%, down from the 0.38% recorded in the prior-year quarter.
As of Sep 30, 2019, Tier 1 risk-based capital ratio was 11.91% compared with 12.16% on Sep 30, 2018. In addition, total risk-based capital ratio was 13.16% compared with the prior-year quarter’s 13.47%. Tangible common equity ratio was 9.51% as of Sep 30, 2019, up from the 9.15% recorded at the end of September 2018.
Return on average assets was 1.19% in the reported quarter compared with the year-earlier quarter’s 1.36%. As of Sep 30, 2019, return on average common stockholders' equity was 12.55%, down from 14.71% recorded at the end of September 2018.
During the September-end quarter, the company repurchased 629,503 shares of common stock, at a total cost of $75 million.
Management expects 12-16% expense rise in 2019. Further, NIM is expected to be stable in the fourth quarter.
Management anticipates deposits to be up near the higher end of the range $3-$5 billion in 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Signature Bank has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Signature Bank has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.