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New York Community Bancorp (NYCB) Up 3.8% 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 - Free Report) . Shares have added about 3.8% 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 Q2 Earnings Beat Estimates on Solid Revenues

New York Community posted second-quarter 2021 adjusted earnings per share of 33 cents, surpassing the Zacks Consensus Estimate of 30 cents. The bottom line rose 57% year over year.

Higher net interest income and non-interest income supported the results. Margin expansion, higher loan balance and provision benefits were other tailwinds. However, a rise in expenses was a headwind.

Results excluded merger-related expenses pertaining to the agreement with Flagstar, Inc. and NYS tax changes. After considering these, net income available to common shareholders of $144 million jumped 48% from the prior-year quarter.

Revenues & Expenses Rise

Total revenues were $347 million, up 23% year over year. The top line beat the Zacks Consensus Estimate of $336 million.

Net interest income grew 24% year over year to $331 million. The rise mainly resulted from lower interest expenses.

Adjusted NIM of 2.38% rose 29 basis points (bps).

Non-interest income was $16 million, up 7%. The rise was primarily driven by to higher fee income.

Non-interest expenses of $139 million increased 13%. Higher occupancy and equipment, and general and administrative expenses, partially offset by lower compensation and benefits, chiefly resulted in the rise. Adjusted non-interest expenses rose 5% to $129 million.

Efficiency ratio was 37.11%, down from 43.94% in the year-ago quarter. A fall in efficiency ratio indicates improving profitability.

Solid Loans & Deposit Balance

As of Jun 30, 2021, total deposits were relatively stable sequentially at $34.2 billion. Total loans rose 1% to $43.4 billion.

During the second quarter, loan originations were $3.1 billion, soaring 21% sequentially. The improvement was driven by 42% increase in multi-family originations and a 12% rise in specialty finance loans and leases.

The company has $1.4 billion of loans in its current pipeline, including $884 million of multi-family loans, $105 million of commercial real estate loans, $377 million in specialty finance loans and $32 million in commercial and industrial loans.

Credit Quality Improves

Non-performing assets plunged 37% year over year to $40 million. Provision for loan losses was recovery of $4 million against a provision of $18 million in the prior-year quarter.

Net recoveries came in at $6 million against net charge-offs of $4 million in the prior-year quarter.

Strong Profitability and Capital Ratios

As of Jun 30, 2021, return on average assets and return on average common stockholders’ equity was 1.04% and 9% compared with 0.78% and 6.31%, respectively, in the year-ago quarter.

Common equity tier 1 ratio was 9.84% compared with 9.77% as of Jun 30, 2020. Total risk-based capital ratio was 13.05% compared with 13.13% in the year-ago quarter. Leverage capital ratio was 8.25%, down from 8.42%.

Outlook

NIM improvement of 3-5 bps is expected for the third quarter, excluding prepayment penalty income. In mortgage banking, gain on sale is anticipated to be $160-$180 million in the third quarter. Expenses are expected to be relatively stable in the third quarter at $130 million.    

Management anticipates loan growth in the mid-single-digit range for 2021, backed by an improvement in business activity and tax rate just under 26%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 5.42% due to these changes.

VGM Scores

At this time, New York Community Bancorp has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise New York Community Bancorp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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