Signature Bank (SBNY) Up 9.1% as Q1 Earnings Beat Estimates
Shares of Signature Bank SBNY gained 9.1% in response to first-quarter 2021 results. Earnings of $3.24 per share easily beat the Zacks Consensus Estimate of $2.83. Also, the bottom line grew 72.3% year over year.
Higher loan and deposit balances supported net interest income (NII) growth. This, along with increase in non-interest income and lower provisions, were the tailwinds. However, rise in operating expenses and lower interest rates were the undermining factors.
Net income was $190.5 million, jumping 91.3% from the prior-year quarter. Also, pre-tax pre-provision earnings came in at $272.8 million, up 24.9%.
Revenues, Loans & Deposits Rise; Expenses Up
Total revenues jumped 21.2% from the prior-year quarter to $439.2 million. The top line, also, surpassed the Zacks Consensus Estimate of $427.1 million.
NII climbed 16.7% to $406.5 million on increase in average interest earning assets. However, net interest margin (on tax-equivalent basis) contracted 69 basis points (bps) to 2.10%.
Non-interest income was $32.7 million, up substantially from $14.2 million in the year-ago quarter. Growth in all the components led to the jump.
Non-interest expenses of $166.4 million rose 15.6%. This upsurge chiefly stemmed from rise in salaries and benefits due to massive hiring of private client banking teams.
Efficiency ratio was 37.88%, down from 39.72% reported as of Mar 31, 2020. A lower ratio indicates a rise in profitability.
Net loans and leases, as of Mar 31, 2021, were $50.4 billion, up 4.4% sequentially. Also, total deposits rose 16.8% to $74 billion.
Credit Quality: Mixed Bag
Net charge-offs were $17.9 million during the March quarter, up substantially from $1.7 million recorded in the prior-year quarter. Further, the ratio of non-accrual loans to total loans was 0.26%, up 11 bps.
Also, allowance for credit losses for loans and leases was $521.8 million, up 46.4%. However, provision for loan and lease losses plunged 53.8% to $30.9 million, mainly driven by improved macroeconomic conditions.
Capital & Profitability Ratios Improve
As of Mar 31, 2021, Tier 1 risk-based capital ratio was 12.18%, up from 11.05% on Mar 31, 2020. Furthermore, total risk-based capital ratio was 14.41% compared with the prior-year quarter’s 12.77%.
Return on average assets was 0.97% in the reported quarter compared with the year-earlier quarter’s 0.78%. As of Mar 31, 2021, return on average common stockholders' equity was 13.02%, up from 8.42%.
Our Take
Signature Bank’s first-quarter results reflect escalating expenses. It is focused on investing in technology by enhancing its payments platform and credit-approval system, which might further inflate costs. Nevertheless, the company has a robust balance sheet. Also, top-line strength on rising fee income and NII are expected to continue supporting profitability.
Signature Bank Price, Consensus and EPS Surprise
Signature Bank price-consensus-eps-surprise-chart | Signature Bank Quote
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
Washington Federal’s WAFD second-quarter fiscal 2021 (ended Mar 31) earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Further, the figure reflects a year-over-year rise of 19.1%.
Commerce Bancshares Inc.’s CBSH first-quarter 2021 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 96 cents. Also, the bottom line surged significantly from the 42 cents earned in the prior-year quarter.
Synovus Financial SNV reported first-quarter 2021 adjusted earnings of $1.21 per share, which handily beat the Zacks Consensus Estimate of 93 cents, aided by solid mortgage banking income. Also, the bottom line increased 17.4% from the prior-year quarter figure.
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