Signature Bank SBNY +2.37%  ‘s pivot away from the cryptocurrency industry led to a sharp drop in deposits, the group revealed in its fourth-quarter earnings report Tuesday. Still, record annual net income and a big dividend increase may be helping investors see the upside.

Shares in Signature Bank (ticker: SBNY) gained 5% after the group reported fourth-quarter net income of $301 million, beating estimates among analysts surveyed by FactSet of net income just shy of $299 million. But on an earnings per share basis the results missed with profit of $4.65 a share falling short of the $4.82 expected by analysts.

Still, full-year net income of $1.34 billion, up from $918 million in 2021, isn’t too bad, especially since the past year has seen Signature Bank lose around 65% of its market value. The company positioned itself as a critical service provider to the digital asset industry and suffered because of its exposure to crypto as prices collapsed and many businesses in the industry went bankrupt, including some amid allegations of fraud.

Signature Bank telegraphed late last year that it was aiming to pivot away from the volatile digital asset space and would target reducing deposits from crypto customers to ideally less than 15% of total deposits, unloading as much as $10 billion. The bank once counted these customers for almost 25% of deposits, so the decision to walk away—while perhaps wise in the long term—meant it had to absorb short-term funding pressures. Analysts agree it was a tough move adding headwind to the stock price.

Results revealed that total deposits plunged by $14.2 billion in the fourth quarter to $88.6 billion, with crypto deposits down by $7.4 billion in the quarter and $12.4 billion across the whole year. It looks like much of the work to ditch crypto may already be done.

Investors are also likely celebrating news of a healthy dividend. Signature Bank said it would pay out a cash dividend of 70 cents a share, an increase of 14 cents, to common stockholders, with preferred shareholders receiving $12.50 a share.

Alexander Yokum, an analyst at CFRA, raised his 12-month target price on the stock to $127 from $125 in the wake of earnings. The shares opened at $126 on Tuesday and CFRA rates the stock at Hold.

“Given the tough environment, we expect Signature Bank’s net interest income to continue to fall over the next two quarters as a compression in net interest margin is met with further Digital Asset Banking deposit outflows,” Yokum wrote in a note. “Despite the collapse in crypto severely impacting results, we view Signature Bank as still worth holding as shares appear to already be pricing in a significant amount of negativity (shares are trading at nearly a 50% discount to historic averages).”

Write to Jack Denton at jack.denton@barrons.com