New York Community (NYCB) Stock Dips Despite Q4 Earnings Meet
New York Community Bancorp, Inc.’s NYCB fourth-quarter 2021 earnings per share (non-GAAP) of 31 cents were in line with the Zacks Consensus Estimate. However, the bottom line rose 15% year over year.
Results excluded merger-related expenses pertaining to the agreement with Flagstar Bancorp, Inc. FBC.
NYCB’s results were supported by higher net interest income and non-interest income. Loans and deposits improvement, and lower provision were other tailwinds. A moderate increase in expenses and decrease in net interest margin were headwinds. Shares of the company were down 1.5% following the earnings release.
Net income available to common shareholders, $142 million, plunged 21.5% from the prior-year quarter.
In 2021, earnings per share (non-GAAP) of $1.24 matched the consensus estimate and increased 42.5% from 2020. Net income of $563 million was up 17.8% from 2020.
Revenues & Expenses Rise
Total revenues were $338 million, up 4.6% year over year. However, the top line lagged the Zacks Consensus Estimate of $339.15 million.
In 2021, total revenues increased 16.3% to $1.35 billion, matching the consensus estimate.
Net interest income grew 4.5% year over year to $322 million. The rise mainly resulted from lower interest expenses.
Net interest margin of 2.44% was down 3 basis points (bps).
Non-interest income was $16 million, up 6.7%. The rise was primarily driven by higher other income.
Non-interest expenses of $135 million increased marginally from $134 million in the fourth quarter of 2020. Higher compensation and benefits, and a $7-million merger-related expense resulted in the rise. This was partially offset by lower general and administrative expenses. Total operating expenses (excluding merger-related expenses) decreased 4.5% at $128 million.
The efficiency ratio was 37.70%, down from 41.36% in the year-ago quarter. A fall in efficiency ratio indicates improving profitability.
Loans & Deposit Balance Climb
As of Dec 31, 2021, total deposits improved 1.3% sequentially to $35.1 billion. Total loans rose 4.6% to $45.5 billion.
In the fourth quarter, loan originations were $4.6 billion, up 53.3% sequentially. The rise was driven by a 62% increase in multi-family originations, and a 52% rise in specialty finance originations.
The company has $2.2 billion of loans in its current pipeline, including $1.7 billion of multi-family loans, $129 million of commercial real estate loans, $251 million in specialty finance loans, and $42 million in commercial and industrial loans.
Credit Quality Improves
Non-performing assets plunged 10.9% year over year to $41 million. Provision for credit losses was $4 million compared with $11 million in the prior-year quarter.
Net charge-offs were $5 million compared with $6 million in the prior-year quarter.
Profitability and Capital Ratios Weak
As of Dec 31, 2021, return on average assets and return on average common stockholders’ equity was 1.03% and 8.71%, declining from 1.38% and 11.60%, respectively, in the year-ago quarter.
The common equity tier 1 ratio was 9.68%, down from 9.72% as of Dec 31, 2020.
The total risk-based capital ratio was 12.73%, falling from 12.97% in the year-ago quarter. The leverage capital ratio was 9.33%, down from 9.48%.
Our View
New York Community delivered an impressive performance in the fourth quarter. Higher revenues, lower provisions and a solid balance sheet position remain major tailwinds. In addition, the acquisition of Flagstar Bancorp will lead to improvement in deposits, and is also expected to be accretive to earnings and tangible book value per share.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Robust advisory business, reserve releases and a rise in loan demand drove JPMorgan’s JPM fourth-quarter 2021 earnings of $3.33 per share. The bottom line handily outpaced the Zacks Consensus Estimate of $3.01. Results included net credit reserve releases. Excluding this, earnings were $2.86 per share.
JPM’s equity markets’ revenues and fixed-income markets’ revenues fell 2% and 16%, respectively, on a year-over-year basis. Total markets revenues of $5.3 billion declined 11%. While lower rates continued to hurt JPMorgan’s interest income, it was more than offset by a rise in loan balances.
Wells Fargo’s WFC fourth-quarter 2021 earnings per share of $1.38 surpassed the Zacks Consensus Estimate of 1.09. Also, the bottom line improved 86% year over year. Results included certain non-recurring items.
Improved investment banking, and other asset-based fees and strong equity gains in WFC’s affiliated venture capital and private equity businesses, along with lower costs, supported the bank’s performance. Yet, a decline in net interest income due to low yields from earning assets and lower loans were the undermining factors.
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