New York Community (NYCB) Up 8% on Q2 Earnings & Revenue Beat
New York Community Bancorp, Inc.’s NYCB shares jumped 8% following the release of its second-quarter earnings. Earnings per share (non-GAAP) of 35 cents surpassed the Zacks Consensus Estimate of 32 cents. The bottom line rose 6% year over year. The reported figure included merger-related charges and other one-time items.
New York Community’s results were supported by higher revenues, driven by an increase in net interest income (NII) and non-interest income and a marginal fall in expenses. The company also witnessed significant growth in total deposits and loans and leases held for investment. However, higher provision for credit losses was an undermining factor.
Net income available to common shareholders (GAAP basis) of $163 million increased 13% from the prior-year quarter.
Revenues Increase & Expenses Down
Total revenues were $377 million, up 9% year over year. The top line also beat the Zacks Consensus Estimate of $350.3 million.
NII grew 8% year over year to $359 million. The rise mainly resulted from improvement in average loan balances and higher rates.
The net interest margin (NIM) of 2.52% was up 2 basis points (bps).
Non-interest income was $18 million, rising 13%.
Total non-interest expenses of $138 million decreased 1%. The fall was primarily due to lower merger-related expenses. Excluding this, total operating expenses were $134 million, up modestly.
The efficiency ratio was 35.57%, down from 37.11% in the year-ago quarter. A decline in efficiency ratio indicates improved profitability.
Loans & Deposit Balance Climb
As of Jun 30, 2022, total deposits increased 9% sequentially to $41.2 billion. The increase was mainly attributable to the ongoing growth in Baas business and a rise in loan-related deposits.
Total loans and leases held for investment rose 4% to $48.5 billion. In the second quarter, total loans originated for investment were $5.3 billion, up 49% sequentially. The increase was mainly driven by a 22% jump in multi-family originations and a 32% rise in one-to-four family residential. In addition, speciality finance grew to $1.88 billion from the prior quarter’s $634 million.
Further, NYCB has $2.8 billion of loans in its current pipeline, which exceeded the prior quarter’s pipeline of $2.5 billion.
Credit Quality: Mixed Bag
The company recorded net recovery of $7 million in the second quarter compared with $6 million in the prior-year quarter.
However, the provision for credit losses was $9 million in the reported quarter against recovery of credit losses of $4 million in the prior year quarter.
In addition, non-performing assets jumped 40% year over year to $56 million.
Profitability Ratios Improve, Capital Ratios Deteriorate
As of Jun 30, 2022, return on average assets and return on average common stockholders’ equity were 1.10% and 10.18%, up from 1.04% and 9%, respectively, in the year-ago quarter.
As of Jun 30, 2022, common equity tier 1 ratio was 9.16%, down from 9.84% as of Jun 30, 2021. The total risk-based capital ratio was 12%, falling from 13.05% in the year-ago quarter. The leverage capital ratio was 8.13%, down from 8.25% in the year-ago quarter.
Our View
The overall financial performance of New York Community appeared to be impressive. Further, a rise in NIM was an encouraging factor. However, the increase in non-performing assets and the weak capital position hurt the results to some extent.
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 currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
UMB Financial Corporation UMBF reported a second-quarter 2022 net operating income per share of $2.83, surpassing the Zacks Consensus Estimate of $1.88. The bottom line also compares favorably with the prior-year quarter’s earnings of $1.79.
UMBF’s results were supported by higher revenues, driven by increases in NII and fee income. A rise in average loans was another positive. Yet, increased expenses and deteriorating capital ratios were concerning.
Commerce Bancshares Inc.’s CBSH second-quarter 2022 earnings of 96 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, plunged 27.3% from the prior-year quarter.
Results benefited from an improvement in net interest income, a rise in loan balance and a modest increase in non-interest income. However, an increase in non-interest expenses and higher provisions were the major headwinds for CBSH.
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