Overlooked Bank Earnings From Last Week

Earnings season is here once again. Two weeks in, and the financial sector has started to transition away from banks and to REITs and other financial companies. But there are still a lot of banks with earnings left to report, and some that reported last week may have slipped through the cracks as we watched the other movements of the market.

With that in mind, there were many smaller banks that reported earnings last week. Though not the same size as the "too big to fail banks," they are all still important to the overall health of the banking sector. Here's how five such smaller banks did during the recently completed quarter:

Source: Yahoo! Finance.

Inside the earnings
Hudson City Bancorp released its earnings report, but its time as a public company will soon come to an end. This is due to its August acquisition by M&T Bank (MTB +0.85%), which Hudson City expects to close during the first quarter of 2013. Nevertheless, the quarter was relatively successful despite the earnings miss, with the bank's Tier 1 capital ratio increasing to 9.75%, which was up from 8.83% at the end of last year. This bodes well for M&T Bank and its investors as Hudson City increases the quality of its assets before the upcoming merger.

F.N.B. reported earnings this week as well, using the release to announce the purchase of microbank Annapolis Bancorp (NASDAQ: ANNB) for $51 million. The purchase, which should be completed by the second quarter of 2013, expands F.N.B.'s footprint beyond Pennsylvania and into the Baltimore and Washington, DC markets. President and CEO Vincent Delie seemed to indicate that the bank wasn't done acquiring smaller banks this year, with potential focus on expanding its new Maryland base, as well as further expansion into Ohio.

Washington-based Banner nearly tripled income from the same quarter last year, greatly exceeding expectations. This was driven by multiple factors on both the income statement and the balance sheet. Revenues from mortgage banking were up 142%, with deposit fees and other service charges up 10%. Nonperforming assets decreased 19% from the previous quarter and 61% from the third quarter last year. The bank also repurchased 40% of its preferred stock, which netted the bank $2.1 million in gains. Hopefully, this final step will soon help the bank increase its dividend on common shares, so that might be something to keep an eye on over the next quarter.

Zions Bank had a successful quarter and can finally move out from under the constraints of TARP after repurchasing its preferred shares from the U.S. Treasury for just under $1 billion. Total loans were up $351 million during the quarter, and total deposits increased $535 million. Nonperforming loans also declined during the quarter, down 11% from the end of the second quarter. The bank joins Banner in paying a nominal $0.01 per share in dividends each quarter, but I could easily see future increases if the bank continues along its performance track, especially considering that it no longer has TARP funds to worry about paying back.

Finally, FirstMerit met expectations but was also part of merger news, with Citizens Republic Bancorp (NASDAQ: CRBC) announcing a merger of the two banks with its earnings release during the week, with the merger expected to close in the second quarter of 2013. Nevertheless, it was the Ohio bank's 54th consecutive quarter of profitability, and the bank appears to be heading to the merger on solid financial footing. Despite a slight increase in nonperforming assets due to the reclassification of $10.6 million in loans during the quarter, nonperforming assets still only represent 0.77% of total loans, an impressive ratio for a bank of its size.