3. Signature Bank
(SBNY - Get Report)
of New York closed at $70.34 Wednesday, returning 17% year-to-date, following a 20% return during 2011. The five-year total return for the stock was 104%.
The shares trade for 2.1 times their reported Sept. 30 book value of $33.80, and for 16 times the consensus 2013 EPS estimate of $4.29. The consensus 2014 EPS estimate is $4.69.
Signature Bank had total assets of $16.5 billion as of Sept. 30. The bank reported third-quarter earnings of $47.7 million, or a dollar a share, increasing from $45.3 million, or 96 cents a share, in the second quarter, and $38.4 million, or 83 cents a share, in the third quarter of 2011. Total loans grew by 9% just in the third quarter, to $8.8 billion as of Sept. 30, growing by 28% from a year earlier.
Net interest income was up 6% sequentially and 20% year-over-year, to $141.7 million in the third quarter, and the company even bucked the industry trend, with its third-quarter net interest margin -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- widening to 3.56%, from 3.54% the previous quarter, and 3.51% a year earlier, however, the bank said that if loan prepayment income was excluded, the margin "decreased 3 Basis Points to 3.41 Percent, compared with 3.44 Percent for the 2012 second quarter."
Following the bank's earnings announcement, KBW analyst Christopher McGratty wrote that "in the world of modest economic growth, Signature continues to defy the banking odds, producing 36% [annualized] loan growth in what we had expected to be a seasonally slower growth quarter. Not only was the growth impressive, but we were particularly encouraged to see a 2-point improvement in efficiency (to 36.6%) as it appears that the company is already gaining operating leverage within Signature Financial."
The efficiency ratio is, essential, the number of pennies of overhead for each dollar of revenue. Most banks struggle to get the efficiency ratio down to 50%, and Signature Bank is one of the most efficient publicly traded banks in the country, according to data supplied by Thomson Reuters Bank Insight.
The bank reported a third-quarter return on average assets (ROA) of 1.18% and a return on average equity (ROE) of 12.24%.
McGratty rates Signature Bank "Market Perform," with a price target of $70, and sees great things ahead for the bank: "Loan growth occurred across all asset classes and we learned that SBNY has recently hired two additional teams. Looking ahead, we expect the growth momentum to continue and we are now looking for 30% loan growth in 2013 versus 27% previously as results are likely to continue to benefit from further momentum in its core lending franchise but also recent initiatives within Signature Financial," which is the bank's specialty finance subsidiary.
Jefferies analyst Casey Haire rates Signature Bank a "Buy," with a price target of $77, and said on Oct. 23 that the then consensus 2013 EPS estimate of $4.20 looked "conservative given the current EPS run-rate is already $4/share and the momentum within loan growth." Haire is out in front of the consensus, estimating the bank will earn $4.40 a share in 2013, followed by EPS of $4.85 in 2014.
Interested in more on Signature Bank? See TheStreet Ratings' report card for this stock.