Repositioning of balance sheets leads to some swinging bank earnings

Securities sales led to some significant swings in earnings results for banks in the first quarter.

Los Angeles-based Banc of California Inc. recorded earnings-per-share growth of more than 100% quarter over quarter and year over year. The bank said it realized the benefits of the balance sheet repositioning executed following the completion of its deal with PacWest Bancorp on Nov. 30, 2023.

After closing on the PacWest deal, the company sold more than $6 billion of assets and paid down nearly $9 billion in borrowings. "This resulted in significantly higher levels of net interest income in Q1 and an expansion in our net interest margin," Banc of California President and CEO Jared Wolff said during an earnings call.

DeWitt, NY-based Community Bank System Inc. reported a 590.9% year-over-year increase in its first-quarter EPS. The company said the yearly increase was primarily reflective of the realized loss on investment security sales recognized in the 2023 first quarter, which led to an impact of 75 cents to the 2023 first-quarter EPS.

Boston-based Berkshire Hills Bancorp Inc. recorded a 1,467% quarterly decline and a 174.6% yearly EPS decline to a loss of 47 cents per share. The company announced a $362 million securities sale, which resulted in an after-tax $38.3 million net nonoperating loss, or 89 cents per share after tax, in the first quarter. The company executed the securities sales to offset a mismatch between the amount of deposits and loans it sold in branch deals announced in the first quarter. Berkshire expects branch sales to help improve its focus on profitability.

"We expect the branch sale, combined with this quarter's security sale, to be effectively neutral to 2024 earnings outlook," CFO David Rosato said during an earnings conference call.

Regional bank earnings overview

Most US regional banks that reported earnings for the three months ended March 31 posted weaker financial results on a year-over-year basis.

Of the 80 banks with total assets between $10 billion and $100 billion that reported first-quarter earnings between April 15 and April 26, 56 posted lower EPS on a yearly basis, while 49 posted higher EPS quarterly, according to S&P Global Market Intelligence data.

Sixteen banks in the analysis reported both quarterly and yearly EPS declines. Eleven recorded both quarterly and yearly increases in their earnings.

Banks with $10B-$25B in assets

Of the 46 banks with assets between $10 billion and $25 billion, 30 banks posted year-over-year EPS declines. Fourteen banks logged higher earnings than the 2023 first quarter.

Twenty-one banks reported sequential EPS increases, out of which 15 logged yearly EPS declines as well.

Five banks' first-quarter EPS remained unchanged from the linked quarter: CVB Financial Corp., Live Oak Bancshares Inc., First Busey Corp., Northwest Bancshares Inc. and Lakeland Bancorp Inc.

Banks with $25B-$100B in assets

Of the 34 larger regional banks, or those with assets between $25 billion and $100 billion, 28 banks logged quarterly increases in their first quarter EPS, while 26 banks reported yearly EPS declines.

Twenty-two banks reported quarterly increases, but yearly declines in their first-quarter earnings, including Dallas-based Comerica Inc., which recorded the highest quarterly growth in EPS, at 390%.

Six banks posted higher EPS on a quarter-over-quarter and year-over-year basis, including Columbia Banking System Inc., Ameris Bancorp, Banc of California, Western Alliance Bancorp., Wintrust Financial Corp. and Bank OZK.