New York Community (NYCB) Q2 Earnings In Line, Stock Down

New York Community Bancorp NYCB reported second-quarter 2018 earnings per share of 20 cents, in line with the Zacks Consensus Estimate. However, the bottom line compares unfavorably with 22 cents recorded in the prior-year quarter.

Shares of the company depreciated 7.8% in single-day trading following the earnings release on Jul 25. This is perhaps a reflection of investors’ bearish sentiment on revenue decline. However, lower expenses, and higher loans and deposit balances were the tailwinds. Also, capital position remained strong during the quarter.

The company reported net income available to common shareholders of $99.1 million compared with $107 million recorded in the prior-year quarter.

Decline in Expenses and Higher Loan Originations Offset Lower Revenues

Total revenues came in at $286.7 million in the second quarter, down 15.2% year over year. Further, the top line missed the Zacks Consensus Estimate of $287.9 million.

Net interest income was down 8.3% year over year to $264 million. The fall was mainly due to elevated interest expenses, resulting from rise in cost of funds. Adjusted net interest margin of 2.19% contracted 32 basis points (bps) year over year.

Non-interest income came in at $22.7 million, down 55% on a year-over-year basis. Fall in almost all components of income led to this decline.

New York Community Bancorp reported non-interest expenses of $138.1 million, down 15.6% from the year-earlier quarter. A plunge in compensation and benefits, along with general and administrative expenses, mainly led to this downside.

As of Jun 30, 2018, total deposits improved 1.1% sequentially to $29.6 billion. Additionally, total loans inched up 1.4% to $39.3 billion at the end of the reported quarter.

During the quarter, loan originations for investment came in at $2.9 billion, up 58% year over year. The company has around $1.8 billion of loans in its current pipeline, including $1.2 billion of multi-family loans, $254 million of CRE loans and $165 million in specialty finance loans.

Credit Quality Improves

Non-performing non-covered assets declined 23% to $70.7 million or 0.14% of total non-covered assets as of Jun 30, 2018, compared with $91.6 million or 0.20% of total non-covered assets as of Jun 30, 2017.

In addition, net charge-offs plunged 54.4% to $5.2 million on a year-over-year basis.  Net charge-offs, as a percentage of average loans, shrunk 2 bps to 0.01%.

Further, provisions for losses on non-covered loans were $4.7 million, down 59.5% from the year-ago quarter. Allowance for losses on non-covered loans to total non-covered loans was 0.41%, flat year over year.

Robust Capital Position

Common equity tier 1 ratio was 11.16%, in line with the ratio of the comparable period last year. Total risk-based capital ratio was 14.03% compared with 14.11% as of Jun 30, 2017. Also, leverage capital ratio was 9.41%, up from 9.23% as of Jun 30, 2017.

Our Viewpoint

New York Community Bancorp failed to put up an impressive performance in the April-June quarter. Lower revenues is particularly a concern. Furthermore, rising interest rates continue to hamper the top line owing to the company’s liability-sensitive balance sheet.

Nevertheless, lower expenses reflect prudent expense management. At the same time, a strengthening capital position is anticipated to favor the company’s near-term prospects. In addition, we believe its efforts to originate loans for investment will augur well for earnings in the subsequent quarters.

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. 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 Industry Participants

Fifth Third Bancorp FITB delivered a notable positive earnings surprise of 10.5% in second-quarter 2018. Adjusted earnings per share of 63 cents surpassed the Zacks Consensus Estimate of 57 cents. However, including certain one-time items, the bottom line came in at 80 cents, surging 78% year over year.

Navient Corporation’s NAVI second-quarter adjusted core earnings per share (EPS) of 49 cents surpassed the Zacks Consensus Estimate by a penny. The reported figure came in higher than the year-ago quarter tally of 43 cents.

Sallie Mae SLM delivered a positive earnings surprise of 8.7% in second-quarter 2018. The company reported core earnings of 25 cents per share, surpassing the Zacks Consensus Estimate of 23 cents. Moreover, the figure surged 56.3% from the prior-year quarter.

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