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New York Community Bancorp, Inc. (NYCB - Snapshot Report) reported fourth-quarter 2013 cash earnings of 30 cents per share, which outpaced the Zacks Consensus of 27 cents. However, the reported figure was in line with the prior-year quarter earnings.

For 2013, cash earnings were $1.17, down from $1.24 in the prior year. However, earnings easily surpassed the Zacks Consensus Estimate of $1.07.

Better-than-expected results came on the back of lower-than-expected expenses. Improvement in credit quality was a positive. However, lower revenues remained a concern.

Considering certain one-time items, the company reported net income of $120.2 million or 27 cents per share. In the prior-year quarter, taking into account the impact of comparable items, earnings were $122.8 million or 28 cents per share.

For 2013, net income was $475.5 million or $1.08 per share, down from $501.1 million or $1.13 per share in 2012.

Quarter in Detail

Total revenue was $469.9 million, down 6% from the year-ago quarter. The decline was primarily due to fall in interest income as well as non-interest income. However revenues surpassed the Zacks Consensus Estimate of $343.0 million.

For 2013, revenues were $1.9 billion, down 10% year over year. However, revenues surpassed the Zacks Consensus Estimate of $1.4 billion.

New York Community Bancorp’s net interest income increased 2.5% year over year to $297.3 million, mainly due to a fall in interest expenses. However, net interest margin was 2.92% in the quarter, down 23 basis points year over year.

Non-interest income came in at $38.8 million, down 30% year over year. The decline was mainly due to a decrease in mortgage banking income, as refinancing activity in the residential housing market was significantly constrained by rising mortgage interest rates during the year.

Non-interest expense totaled $149.5 million, down 3% from the prior-year quarter. The decline stemmed from lower general and administrative costs, partly offset by rise in occupancy and equipment expenses.

Credit Quality

Credit quality continued to improve at New York Community Bancorp.

Nonperforming non-covered loans were 0.35% of total non-covered loans as of Dec 31, 2013, down from 0.96% as of Dec 31, 2012. At the end of Dec 2013, nonperforming non-covered assets to total non-covered assets was 0.40%, down 0.71% from the end of the prior-year quarter.

Allowance for losses on non-covered loans to total non-covered loans were 0.48%, decreasing from 0.52% at the end of the prior-year quarter.

The ratio of net charge-offs to average loans on a non-annualized basis was 0.01%, flat year over year. Provision for loan losses on non-covered loans was $3.0 million in the reported quarter, down from $5.0 million in the prior-year quarter. On the other hand, recovery of loan losses on covered loans was $5.8 million in the quarter, against $3.3 million in the year-ago quarter.

Capital Position

Capital ratios dipped in the said quarter. As of Dec 31, 2013, stockholders’ equity to total assets was 12.29%, down from 12.81% as of Dec 31, 2012. Moreover, tangible stockholders’ equity to tangible assets was 7.42%, declining from 7.65% from the prior year quarter.

However, book value per share increased to $13.01 as of Dec 31, 2013, compared with $12.88 in the prior-year quarter.

Performance of Industry Peers

Among other companies in the same industry, Washington Federal Inc.’s (WAFD - Analyst Report) fiscal first-quarter 2014 earnings beat the Zacks Consensus Estimate, while People's United Financial Inc. (PBCT - Analyst Report) and First Niagara Financial Group Inc. (FNFG - Snapshot Report) reported earnings that were in line with the Zacks Consensus Estimate.

Our Take

We believe that New York Community Bancorp’s diverse revenue stream and robust asset quality will benefit its financials, going forward. Further, strong liquidity and a sound dividend policy will boost investors’ confidence in the stock.

However, an unsettled economy, the persistent low interest rate environment and stringent regulations will continue to challenge the company’s growth.

Currently, New York Community Bancorp carries a Zacks Rank #3 (Hold).

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