The stock is down almost 40% off it's highs. The Street has already priced in the bad news. The basher's will keep telling us the sky is still falling but if your short you only doing your job.
The bad news for shareholders at this point is that rates are headed up and that we will have to sit at this level for a while but as a RSLN shareholder I am used to it. As a Rsln shareholder it was like watching grass grow or paint dry.
Long Island doesn't need any new banks. If Washington Mutual wants to get into the Long Island market they need to buy NYB and it's 141 branches. I don't why Commerce is building branches on Long Island when they can buy a company like NYB.
I just bought back in today and a takeover is possible. I don't mind sitting with NYB beacause I know the dividend is safe. I can't see NYB buying anyone until they get their house in order and by the time they get their house in order they may be bought out.
BAC is cheap too, but my family is overweight in their stock now. No need to add more to it. BAC is still down from the fleet merger, which they over paid for Fleet.
If you both a PE of 13-15 on a bank stock, then BAC would get a lot more than $84. EPS of $7 would get you 91-105. Banks pay out a lot of EPS in div. You can be assured of high % of your earnings being paid out in cash and the rest being reinvested at good ROE rates.
I think the kicker for NYB is the ROE, but the draw back is the huge price/bv. Earnings/net tangible assets is out of this world. That is very nice. It is over stated due to nice bank enivornment of the past few years.
Things going for NYB
1. Nice div yield, which is safe in MHO 2. EPS will be $3ish after the MBS runs off. 3. Management is very shareholder friendly. Everyone is pissed about the 40% drop in stock price. Yet a lot of shareholder friendly stocks get punished with bad news. That doesnt mean management isnt fight for shareholder value. I seem to remember a bad time in early 2000 of a stock you know about, but management still returned value to holders. 4. The New York market is a nice market to be in and those branchs are worth money that isnt on the balance sheet. A buyout if it ever happened would get nice premium to IV assuming no MBS problems. MBS problems look to hurt bid to being around 90% IV, which sucks for control.
Basicly I dont see why market is doing what it is doing, but the market screws up a lot. I am heavy invested in NYB, and only Berkshire is larger.
One more thing. NYB was priced at forward PE of 18 earlier this year. Now it is priced at forward PE 10(that is with lower earnings est) So say it takes 5 years to run the MBS off. 3EPSX18 would be a $54 with div over those five years. That is a very rosy valuation, but unrosy valuations will still give a great return.
I keep looking at the data and dont see a long term problem save another large bad investment. On that note, I dont see where they have any funds to invest badly right now otherwise they would try to dilute the MBS damage to NIM.
They are not guarranteed therefore not safe. In NYB's case the div may be in place thru this year considering they just upped it. But in this coming environment where interest rates will eat up EPS going forward, NYB will not be smart to pay out more in Div's than it earns. Why? because if it does, all it's doing is reducing the price of the stock by what it paysout over what it earns. Another words it's smoke and mirrors not to mention poor business. If NYB is credible and wants to remain credible, at that juncture it will have to reduce div. And make no mistake the market will react positive to the news.
The reason the dividend is safe is the coverage of earnings is high enough to cover it. The paper loss on the MBS is just that a paper loss. The rates increase with the MBS postion is going to hurt NIM, yet the paper loss will workout to net zero. It is the same as if you had the MBS---you get the interest and your money back. The problem is that MBS bought them with borrowed money---borrowed at short term rates. So if short term rates go above 4% then MBS lose money. Profitablity is going to be hurt anyway since NIM and gains sales of loans(which also drops with rising rates) need to cover bank expense.
This company is always talking about shareholder value and as a RSLN shareholder they always stressed the importance of the dividend and stock buybacks. Rsln was so proud each quarter when they raised the dividend. I am sorry I have not run any number's on the company's losses but knowing the management of this company I just can't see them touching the dividend. They will try to save the dividend and a cut would be a last resort. I would be shocked if they cut the dividend and a dividend cut is not priced in the stock.