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New York Community Bancorp (NYCB) Up 3.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for New York Community Bancorp (NYCB). Shares have added about 3.3% in that time frame, outperforming the S&P 500.

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

New York Community Q1 Earnings Meet Mark, Revenues Up Y/Y

New York Community’s first-quarter 2022 earnings per share (non-GAAP) of 32 cents were in line with the Zacks Consensus Estimate. The bottom line rose 10% year over year.

Results excluded merger-related expenses pertaining to the agreement with Flagstar Bancorp.

New York Community’s results were supported by higher revenues, driven by an increase in net interest income (“NII”). Improvement in loans and deposits, and strong profitability ratios were other tailwinds. However, an increase in expenses and deteriorating credit quality were headwinds.

Net income available to common shareholders, $147 million, increased 7% from the prior-year quarter.

Revenues & Expenses Rise

Total revenues were $346 million, up 4% year over year. The top line beat the Zacks Consensus Estimate of $345.95 million.

NII grew 4% year over year to $332 million. The rise mainly resulted from lower interest expenses.

However, NIM of 2.43% was down 5 basis points.

Non-interest income of $14 million remained flat compared with the prior-year quarter.

Non-interest expenses of $141 million increased 7% from the first quarter of 2021. The rise was mainly due to higher compensation and benefits, occupancy and equipment expenses, and a $7-million merger-related expense. Total operating expenses (excluding merger-related expenses) increased 2% to $134 million.

The efficiency ratio was 38.65%, down from 39.87% in the year-ago quarter. A fall in efficiency ratio indicates improving profitability.

Loans & Deposit Balance Climb

As of Mar 31, 2022, total deposits jumped 33% sequentially to $38 billion. Total loans and leases held for investment rose 9% to $46.8 billion.

In the first quarter, total loans originated for investment were $3.5 billion, down 23% sequentially. The decline was mainly due to a 17% decrease in multi-family originations, 47% fall in specialty finance originations, and 33% plunge in other commercial and industrial originations.

The company has $2.5 billion of loans in its current pipeline, including $1.8 billion of multi-family loans, $275 million of commercial real estate loans, $487 million in specialty finance loans, and $31 million in commercial and industrial loans.

Credit Quality Deteriorates

Non-performing assets jumped 71% year over year to $70 million. Net charge-offs were $2 million against net recoveries of $1 million in the prior-year quarter.
Nonetheless, recovery of credit losses was $2 million against provisions of $4 million in the prior-year quarter.

Profitability Ratios Strong, Capital Ratios Weak

As of Mar 31, 2022, return on average assets and return on average common stockholders’ equity were 1.04% and 8.98%, up from 1.03% and 8.63%, respectively, in the year-ago quarter.

The common equity tier 1 ratio was 9.45%, down from 9.84% as of Mar 31, 2021. The total risk-based capital ratio was 12.39%, falling from 13.09% in the year-ago quarter. The leverage capital ratio was 8.33%, down from 8.41% in the year-ago quarter.

Outlook

Management anticipates upper-single-digit loan growth for 2022 on a standalone basis.

Management expects tangible book value accretion of 7-8% and double-digit earnings accretion at the close of the Flagstar merger and fully-phased in cost saves of $125 million.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, New York Community Bancorp has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise New York Community Bancorp has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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