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New York Community (NYCB) Q3 Earnings In Line, Expenses Fall

Zacks Equity Research

New York Community Bancorp, Inc. NYCB reported third-quarter 2019 earnings per share of 19 cents, in line with the Zacks Consensus Estimate. The figure, however, compares unfavorably with the prior-year quarter figure of 20 cents.

Lower expenses and higher fee income drove the company’s performance. However, lower deposit was a headwind. Also, fall in revenues remained on the downside. Decline in margin was another undermining factor.

The company reported net income available to common shareholders of $90.8 million compared with $98.6 million in the prior-year quarter.

Revenues Fall, Loans Stable and Expenses Decline

Total revenues came in at $260.3 million in the quarter, down 4.4% year over year. However, the top line surpassed the Zacks Consensus Estimate of $257 million.

Net interest income was down 5.4% year over year to $235.9 million. The fall mainly resulted from elevated interest expenses due to rise in cost of funds, partly muted by higher interest income. Adjusted net interest margin of 1.88% shrunk 20 basis points (bps) year over year.

Non-interest income came in at $24.4 million, up 6.4% on a year-over-year basis. The rise stemmed primarily due to higher fee and other income.

The company reported non-interest expenses of $123.3 million, down 8.3% from the year-earlier quarter. Lower compensation and benefits, along with occupancy and equipment and reduced general and administrative expenses, chiefly resulted in this fall.

As of Sep 30, 2019, total deposits declined nearly 2% sequentially to $31.6 billion. Total loans were almost flat sequentially at $40.7 billion in the reported quarter.

During the quarter, loan originations for investment came in at $2.3 billion, down 23% sequentially. The company has around $2.2 billion of loans in its current pipeline, including $1.3 billion of multi-family loans, $250 million of CRE loans and $540 million in specialty finance loans.

Credit Quality: A Mixed Bag

Credit quality for New York Community Bancorp reflected mixed credit metrics. Non-performing assets remained stable year over year at $67.9 million or 0.13% of total assets as of Sep 30, 2019.. Allowance for losses on loans to total loans was 0.37% compared with the year-ago quarter’s 0.4%.

Furthermore, provision for loan losses was $4.8 million compared with $1.2 million in the prior-year quarter. Net charge-offs escalated significantly to $6.5 million.  Net charge-offs, as a percentage of average loans, advanced 1 bp to 0.02%.

Capital Position

New York Community Bancorp’s capital ratios remained strong. As of Sep 30, 2019, return on average tangible assets and return on average tangible common stockholders’ equity was 0.80% and 9.62%, compared with 0.89% and 10.20%, respectively, as of Sep 30, 2018.

Common equity tier 1 ratio was 10.15% compared with 11.07% as of Sep 30, 2018. Total risk-based capital ratio was 13.61% compared with 13.90% as of Sep 30, 2018. Leverage capital ratio was 8.65%, down from 9.26%. Tier 1 risk-based capital ratio was 11.49%, down from 12.48% in prior-year quarter.

Our Viewpoint

New York Community Bancorp delivered a decent performance in the third quarter. Lower expenses reflect prudent expense management. In addition to this, we believe its efforts to originate loans for investment will augur well for earnings in the subsequent quarters. Moreover, steady improvement in the economy will support the company’s performance.

Nonetheless, we remain apprehensive due to several issues, including lower revenues and higher provisions.

New York Community Bancorp, Inc. Price, Consensus and EPS Surprise

New York Community Bancorp, Inc. Price, Consensus and EPS Surprise

New York Community Bancorp, Inc. price-consensus-eps-surprise-chart | New York Community Bancorp, Inc. Quote

New York Community Bancorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Bank of Hawaii Corporation BOH reported a negative earnings surprise of 6.5% in third-quarter 2019. Earnings per share of $1.29 lagged the Zacks Consensus Estimate of $1.38. Further, the reported figure compares unfavorably with $1.36 earned in the prior-year quarter.

Huntington Bancshares HBAN delivered third-quarter 2019 positive earnings surprise of 3%. Earnings per share of 34 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line also came in 10% higher than the prior-year quarter’s reported figure.

Reflecting top-line strength, Northern Trust Corporation’s NTRS third-quarter 2019 earnings per share of $1.69 outpaced the Zacks Consensus Estimate of $1.64. Also, the earnings figure compares favorably with the year-ago quarter’s $1.58.

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