3. Signature Bank
Shares of 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%
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2. SVB Financial
Shares of SVB Financial ( SIVB - Get Report) of Santa Clara, Calif., closed at $55.61 Wednesday, returning 17% year-to-date, after declining 10% during 2011. The five-year total return for the stock was 11%, through Wednesday's close. The shares trade for 1.4 times their reported Sept. 30 book value of $40.10, and for 15.5 times the consensus 2013 EPS estimate of $3.60 a share. The consensus 2014 EPS estimate is $3.80. SVB Financial is the holding company for Silicon Valley Bank, which has offices in the United Kingdom, Israel, China and India, in addition to 27 offices throughout the United States. The company focuses on lending to technology companies, providing multiple services to venture capital and private equity firms that invest in tech and biotech, and also on private banking services for high net worth individuals, in its home market in the Silicon Valley area. SVB Financial had $21.6 billion in total assets as of Sept. 30, and reported third-quarter net income available to common shareholders of $42.3 million, or 94 cents a share, declining from $47.6 million, or $1.06 a share, in the second quarter, but increasing from $37.6 million, or 86 cents a share, during the third quarter of 2011. Third-quarter net interest income was $154.4 million, increasing from $151.9 million the previous quarter, and $135.5 million, a year earlier. The third-quarter net interest margin was 3.12%, narrowing from 3.22% in the second quarter, but down only slightly from 3.13% in the third quarter of 2011. SVB said the margin narrowed mainly because of "a decrease in the overall yield of our loan and available-for-sale securities portfolios," and that "the decrease in yields was partially offset by growth in average loan balances, which has resulted in a favorable change in our mix of interest-earning assets." Third-quarter noninterest income declined to $69.1 million, from $80.4 million the previous quarter, and $95.6 million a year earlier, reflecting higher gains on securities and derivatives in the prior periods. The company's total loans grew 5% sequentially and 29% year-over-year, to $8.2 billion, as of Sept. 30. SVB Financial's third-quarter return on average assets was 0.77% and its return on average common equity was 9.44%. JPMorgan Chase analyst Steven Alexopoulos on Nov. 13 pointed out that "in the backdrop of a slowing economy and the fiscal cliff, as people and companies continue to innovate, we see SIVB as one of the few banks positioned to post strong loan growth, with a 3-year avg loan
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3. First Republic Bank
Shares of First Republic Bank ( FRC - Get Report) of San Francisco closed at $33.78 Wednesday, returning 11% year-to-date, following a 5% return in 2011. The shares trade for 1.7 times their reported Sept. 30 tangible book value of $20.37, and for 11.5 times the consensus 2013 EPS estimate of $2.93. The consensus 2014 EPS estimate is $2.96. First Republic had $32.6 billion in assets as of Sept. 30. The bank has offices in with offices in California, Oregon, Connecticut, Massachusetts and New York, focusing on private banking and jumbo mortgage lending. The bank on Nov. 2 announced a deal to acquire Luminous Capital of Los Angeles, which is an investment advisor with $5.5 billion in assets under management. The cost of the deal was not disclosed, but the First Republic reassured investors by saying that "the six partners of the firm will sign long-term employment contracts as part of the transaction," which is expected to close by the end of the year. First Republic reported third-quarter earnings available to common stockholders of $97.0 million, or 72 cents a share, increasing from $87.8 million, or 66 cents a share, in the third quarter of 2011. The company said that "Excluding the impact of purchase accounting, net income for the third quarter of 2012 was $78.7 million, up 43% from last year's third quarter. On this non-GAAP basis, the third quarter diluted EPS were $0.54, up 29% year over year." Third-quarter net interest income was $298.8 million, increasing 3% sequentially, and 11% year-over-year. On a non-GAAP basis, excluding accretion and amortization of fair value adjustments recorded in purchase accounting, the third-quarter net interest margin was 3.47%, expanding from 3.41% the previous quarter, but narrowing from 3.49% a year earlier. First Republic's total loans grew by 27% year-over-year, to $26.3 billion, as of Sept. 30. The Bank's operating return on assets was 1.27% and its return on average tangible common equity was 13.87% during the third quarter, according to Thomson Reuters Bank Insight. Jefferies analyst Casey Haire on Tuesday upgraded First Republic to a "Buy" rating from a "Hold" rating, while increasing his price target for the shares to $39 from $35, saying that the "the addition of Luminous is not only accretive to EPS (2% in our view) but also boosts FRC's fee contribution into the mid-teens (vs. 12% in 2011), & thus decreases the company's reliance on spread income." In light of disappointing cross-selling results from some of the largest U.S. banks, including Bank of America and Citigroup ( C), following major acquisitions, First Republic may be quite successful in its integration of Luminous Capital, because of its focus on high-net-worth clients and reputation for strong customer service. Haire said that "on the Luminous side, the firm can now recommend banking products to its clientele without worrying about tarnishing its brand due to poor service quality. For FRC, the addition of Luminous provides the company with a reputable & established team to extract more wealth management business from its borrower base, which is under-penetrated from a wealth management perspective (only 25% of FRC clients participate)." The analyst raised his 2013 earnings estimate for First Republic $2.26 a share from $2.21, while raising his 2014 EPS estimate to $2.49 from $3.27, saying that the benefit of the Luminous acquisition would be partially "offset by last week's
Interested in more on First Republic Bank? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn