Signature Bank SBNY reported first-quarter 2020 earnings per share of $1.88, missing the Zacks Consensus Estimate of $2.19. Also, the bottom line decreased 28.5% from the prior-year quarter’s reported tally.
Results were adversely impacted by escalating expenses and higher provisions. However, growth in revenues, aided by increases in net interest and non-interest income, was a positive. Moreover, a rise in net interest margin acted as a tailwind. Also, higher loan and deposit balances display a strong capital position. Such positives boosted investors’ optimism, resulting in a 5.3% share-price appreciation, following the earnings release.
Net income for the first quarter was $99.6 million compared with the previous-year quarter’s $143.5 million. Pre-tax pre-provision earnings came in at $218.5 million, up 5.1% year over year.
Revenues Rise, Loans & Deposits Increase, Expenses Escalate
Signature Bank’s total revenues increased 8.9% from the prior-year quarter to $362.4 million. Also, the top line outpaced the Zacks Consensus Estimate of $344 million.
Net interest income climbed 9.2% year over year to $348.3 million, backed by a rise in average interest earning assets. Further, net interest margin expanded 4 basis points to 2.79%.
Non-interest income was $14.2 million, up 2.26% year over year. This upside primarily resulted from an increase in all components of income.
Non-interest expenses of $144 million flared up 15.1% from the prior-year quarter. This upsurge chiefly stemmed from rise in almost all components of expenses, partially offset by lower FDIC assessment fees, along with reductions in occupancy and equipment costs.
Efficiency ratio was 39.7% compared with the 37.6% reported as of Mar 31, 2019. A higher ratio indicates a fall in profitability.
The company’s loans and leases, as of Mar 30, 2020, were $40.6 billion, up 4.4% sequentially. Further, total deposits rose 4.5% sequentially to $42.2 billion.
Credit Quality: A Mixed Bag
The company recorded net charge-offs of $1.7 million in the March-end quarter compared with net charge offs of $0.88 million witnessed in the prior-year quarter. In addition, provision for loan and lease losses significantly increased year over year to $66.8 million on coronavirus concerns.
The ratio of non-accrual loans to total loans was 0.14%, significantly down from the 0.25% recorded in the prior-year quarter. Allowance for credit losses for loans and leases came in at $356.3 million, up 54.4% year over year.
Capital Ratios
As of Mar 31, 2020, Tier 1 risk-based capital ratio was 11.05% compared with 11.91% on Mar 31, 2019. Furthermore, total risk-based capital ratio was 12.77% compared with the prior-year quarter’s 13.19%. Tangible common equity ratio was 8.90%, down from 9.25%.
Return on average assets was 0.78% in the reported quarter compared with the year-earlier quarter’s 1.22%. As of Mar 31, 2020, return on average common stockholders' equity was 8.42%, down from 13.05%.
Capital Deployment
During the January-March quarter, the company repurchased 392,959 shares of common stock, at a total cost of $50 million. Notably, the bank has temporarily suspended share buybacks through the second quarter of 2020, following the “unprecedented challenge” from the coronavirus pandemic.
Our Viewpoint
Signature Bank’s first-quarter results reflect escalating expenses and provisions on the coronavirus scare. Nevertheless, top-line strength is a positive. Furthermore, the company displayed a solid capital position and a robust balance sheet. It is focused on investing in technology by enhancing its payments platform and credit approval system, which might further inflate costs.
Currently, Signature Bank carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other banks
Evercore EVR reported first-quarter 2020 adjusted earnings per share of $1.21, beating the Zacks Consensus Estimate of $1.03. However, results were down 27% from the prior-year quarter’s $1.66 per share.
PNC Financial PNC delivered first-quarter earnings per share of $1.95, surpassing the Zacks Consensus Estimate of $1.38 amid coronavirus concerns. The bottom line, however, reflected a 25.3% decline from the prior-year quarter’s reported figure.
Regions Financial RF recorded adjusted earnings of 15 cents per share in the March-end quarter, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5%, year over year.
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