Technology

New York Community Bancorp (NYCB) Down 8.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for New York Community Bancorp (NYCB). Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is New York Community Bancorp due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

New York Community Q1 Earnings Beat on Solid Revenues

New York Community posted first-quarter 2021 earnings per share of 29 cents, which surpassed the Zacks Consensus Estimate of 27 cents. Also, the figure compared favorably with the prior-year quarter figure of 20 cents.

Higher revenues drove the company’s performance. Also, margin expansion and significant improvement in credit quality were tailwinds. The capital position remained strong. However, a rise in expenses and lower fee income negatively impacted the company.

The company reported net income available to common shareholders of $137.4 million compared with $92.1 million in the prior-year quarter.

Revenues and Expenses Jump, Loans and Deposits Rise

Total revenues were $332.1 million in the quarter, up 27.1% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $324.3 million.

Net interest income was up nearly 30% year over year to $317.7 million. The rise mainly resulted from lower interest expenses. Adjusted net interest margin of 2.48% rose 47 basis points (bps).

Non-interest income was $14.4 million, down 14.7% on a year-over-year basis. The fall was primarily due to loss on securities, lower fee income and bank-owned life insurance.

The company reported non-interest expenses of $125.5 million, up 5.5% from the year-earlier quarter. Higher occupancy and equipment, and general and administrative expenses, partially offset by lower compensation and benefits, chiefly resulted in the rise.

As of Mar 31, 2021, total deposits rose 5.4% sequentially to $34.2 billion. Total loans increased nearly 2% to $43.1 billion in the reported quarter.

During the first quarter, loan originations were $2.5 billion, down 34% sequentially. The company has $1.7 billion of loans in its current pipeline, including $1.3 billion of multi-family loans, $34 million of CRE loans, $202 million in specialty finance loans and $103 million in commercial and industrial loans.

Credit Quality Strengthens

Credit quality for New York Community Bancorp reflected improvement. Non-performing assets decreased 29.7% year over year to $41.3 million.

Furthermore, provision for loan losses was $3.6 million compared with $20.6 million in the prior-year quarter.

Net recoveries came in at $0.52 million against $10.2 million of net charge-offs in the prior-year quarter. Net charge-offs, as a percentage of average loans, declined 2 bps from 0.02% in the year-ago quarter.

Strong Profitability and Capital Ratio

New York Community Bancorp’s capital ratios remained strong. As of Mar 31, 2021, return on average assets and return on average common stockholders’ equity was 1.03% and 8.63% compared with 0.75% and 5.95%, respectively, in the year-ago quarter.

Common equity tier 1 ratio was 9.84% compared with 9.8% as of Mar 31, 2020. Total risk-based capital ratio was 13.09% compared with 13.16% in the year-ago quarter. Leverage capital ratio was 8.41%, down from 8.47%.

Outlook

Management anticipates 3-5% loan growth in 2021, especially driven byan extremely healthy multi-family loan demand.

Margin improvement of 3-5 bps is expected  in the first quarter. Overall cost of deposit is expected tofall below 40 bpsby the third quarter2021, dependent on how many customers opt for lower liability instruments.

The company expects non-interest expenses to be relatively stable on a sequential basis for the first quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, New York Community Bancorp has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise New York Community Bancorp has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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