Shares of Signature Bank (NASDAQ:SBNY) have rallied 6%, following the release of fourth-quarter 2019 results. Earnings of $2.78 per share outpaced the Zacks Consensus Estimate of $2.69. However, the bottom line decreased 5.4% from the prior-year quarter’s reported figure.
Results reflect growth in revenues, and loan and deposit balances. However, fall in net interest margin (NIM), and escalating expenses and provisions acted as major drags.
Net income for the quarter came in at $148.2 million, down 7.8% from the previous-year quarter.
For 2019, earnings were $10.87 per share compared with the prior-year figure of $9.23. The bottom line surpassed the consensus estimate of $10.82. Net income increased 16.5% to $588.9 million.
Revenues Rise, Loans & Deposits Increase, Expenses Escalate
Signature Bank’s total revenues improved 1.4% from the prior-year quarter to $345.6 million. Also, the top line beat the consensus estimate of $335.9 million.
For 2019, total revenues of $1.3 billion matched the consensus estimate. Also, the same increased 1.3% year over year.
Net interest income increased 1% year over year to $338.3 million, backed by rise in average interest earning assets. However, NIM contracted 18 basis points to 2.72%.
Non-interest income was $7.3 million, up 23.7% year over year. This upside primarily stemmed from an increase in fees and services charges.
Non-interest expenses of $138 million flared up 15.9% 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 39.94% as of Dec 31, 2019 compared with 34.94% as of Dec 31, 2018. Higher ratio indicates fall in profitability.
The company’s loans as of Dec 31, 2019, were $39.1 billion, rising 3.1% on a sequential basis. Further, total deposits increased 3.4% sequentially to $40.4 billion.
Credit Quality: Mixed Bag
The company recorded net charge offs of $2.5 million in the fourth quarter against the prior-year quarter’s net recoveries of $2.9 million. In addition, provision for loan and lease losses jumped 51.5% year over year to $9.8 million.
The ratio of non-accrual loans to total loans was 0.15%, down from 0.30% recorded in the prior-year quarter.
Capital Ratios
As of Dec 31, 2019, Tier 1 risk-based capital ratio was 11.62% compared with 12.11% on Dec 31, 2018. In addition, total risk-based capital ratio was 13.32% compared with the prior-year quarter’s 13.41%. However, tangible common equity ratio was 9.34% as of Dec 31, 2019, up from 9.21%.
Return on average assets was 1.17% in the quarter compared with the year-earlier quarter’s 1.37%. As of Dec 31, 2019, return on average common stockholders' equity was 12.36%, down from 14.76%.
Capital Deployment
During the December-ended quarter, the company repurchased 722,420 shares of common stock at a total cost of $89.4 million.
Our Viewpoint
Steady growth in revenues, and loan and deposit balances will continue to boost Signature Bank’s profitability. Moreover, decent capital-deployment actions reflect the bank’s solid balance sheet position. Also, improved capital ratios are likely to impact the company’s financials positively. Nevertheless, rising expenses and provisions along with contracting NIM are major near-term concerns.
Zacks Rank
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 & Earnings Release Dates of Other Banks
Riding on high revenues, PNC Financial (NYSE:PNC) delivered a positive earnings surprise of 1.7% in fourth-quarter 2019. Earnings per share of $2.97 surpassed the Zacks Consensus Estimate of $2.92. Further, the bottom line reflects an 8% jump from the prior-year quarter’s reported figure.
Synovus Financial (NYSE:SNV) is slated to report results on Jan 24.
Associated Banc-Corp (NYSE:ASB) is scheduled to announce the results on Jan 23.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report
Associated Banc-Corp (ASB): Free Stock Analysis Report
Signature Bank (SBNY): Free Stock Analysis Report
Synovus Financial Corp. (SNV): Free Stock Analysis Report
Original post
Zacks Investment Research