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New York Community (NYCB) Down 2.2% on Q3 Earnings, Revenue Lag
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New York Community Bancorp, Inc.’s (NYCB - Free Report) shares have lost 2.2% since the release of its third-quarter results earlier this week. Earnings per share (non-GAAP) of 31 cents missed the Zacks Consensus Estimate of 32 cents. The bottom line matched the prior-year number.
New York Community’s results were hurt by higher provision for credit losses and a rise in expenses. However, higher revenues, driven by an increase in net interest income (NII) and non-interest income, acted as a tailwind. The company also witnessed growth in total deposits and loans and leases held for investment.
After considering merger-related expenses, net income available to common shareholders was $144 million, up 3% year over year.
Revenues Increase, Expenses Up
Total revenues were $343 million, up 3% year over year. The top line, however, lagged the Zacks Consensus Estimate of $355 million.
NII grew 3% to $326 million. The rise mainly resulted from improvement in average loan balances and higher rates.
The net interest margin (NIM) of 2.22% was down 22 basis points (bps). This was mainly due to liability-sensitive balance sheet.
Non-interest income was $17 million, rising 13%.
Total non-interest expenses of $136 million increased 1%. Excluding merger-related expenses, total operating expenses were $132 million, up 2%.
The efficiency ratio was 38.57%, down from 38.84% in the year-ago quarter. A decline in efficiency ratio indicates improved profitability.
Loans & Deposit Balance Climb
As of Sep 30, 2022, total deposits increased 1.2% sequentially to $41.7 billion. The increase was mainly attributable to the ongoing growth in the Banking-as-a-Service (BaaS) business and a rise in loan-related deposits.
Total loans and leases held for investment rose 1% to $49 billion. Loan rise continues to be driven by growth in both the multi-family and specialty finance portfolios.
In the third quarter, total loan originations were $3.8 billion, down 29% sequentially. This was due to seasonality. During the quarter, both multi-family originations and specialty finance loan originations declined.
Credit Quality: Mixed Bag
The company recorded net charge-offs of zero in the third quarter, on par with the prior-year quarter.
Provision for credit losses was $2 million in the reported quarter against recovery of credit losses of $1 million in the prior year quarter. In addition, non-performing assets jumped 37% year over year to $50 million.
Profitability & Capital Ratios Solid
As of Sep 30, 2022, return on average assets and return on average common stockholders’ equity were 0.96% and 9.01%, compared with 1.04% and 8.69%, respectively, in the year-ago quarter.
As of Sep 30, 2022, common equity tier 1 ratio was 9.24%, down from 9.92% as of Sep 30, 2021. The total risk-based capital ratio was 12.06%, falling from 13.11% in the year-ago quarter. The leverage capital ratio was 8.06%, down from 8.50% in the year-ago quarter.
Our View
New York Community’s efforts to expand into the BaaS space and robust loan demand will support financials. Also, the pending Flagstar Bancorp merger deal will be earnings accretive. Yet, its liability-sensitive balance sheet will hamper margin growth in the current rising rate environment.
New York Community Bancorp, Inc. Price, Consensus and EPS Surprise
Bank of Hawaii Corporation’s (BOH - Free Report) third-quarter 2022 earnings per share of $1.28 missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined 15.8% from the year-ago quarter.
The results were hurt by higher expenses and a decline in non-interest income. Also, the company’s capital and profitability ratios deteriorated. However, supported by higher interest rates and robust loan balance, BOH witnessed an increase in NII.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher NII, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.
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New York Community (NYCB) Down 2.2% on Q3 Earnings, Revenue Lag
New York Community Bancorp, Inc.’s (NYCB - Free Report) shares have lost 2.2% since the release of its third-quarter results earlier this week. Earnings per share (non-GAAP) of 31 cents missed the Zacks Consensus Estimate of 32 cents. The bottom line matched the prior-year number.
New York Community’s results were hurt by higher provision for credit losses and a rise in expenses. However, higher revenues, driven by an increase in net interest income (NII) and non-interest income, acted as a tailwind. The company also witnessed growth in total deposits and loans and leases held for investment.
After considering merger-related expenses, net income available to common shareholders was $144 million, up 3% year over year.
Revenues Increase, Expenses Up
Total revenues were $343 million, up 3% year over year. The top line, however, lagged the Zacks Consensus Estimate of $355 million.
NII grew 3% to $326 million. The rise mainly resulted from improvement in average loan balances and higher rates.
The net interest margin (NIM) of 2.22% was down 22 basis points (bps). This was mainly due to liability-sensitive balance sheet.
Non-interest income was $17 million, rising 13%.
Total non-interest expenses of $136 million increased 1%. Excluding merger-related expenses, total operating expenses were $132 million, up 2%.
The efficiency ratio was 38.57%, down from 38.84% in the year-ago quarter. A decline in efficiency ratio indicates improved profitability.
Loans & Deposit Balance Climb
As of Sep 30, 2022, total deposits increased 1.2% sequentially to $41.7 billion. The increase was mainly attributable to the ongoing growth in the Banking-as-a-Service (BaaS) business and a rise in loan-related deposits.
Total loans and leases held for investment rose 1% to $49 billion. Loan rise continues to be driven by growth in both the multi-family and specialty finance portfolios.
In the third quarter, total loan originations were $3.8 billion, down 29% sequentially. This was due to seasonality. During the quarter, both multi-family originations and specialty finance loan originations declined.
Credit Quality: Mixed Bag
The company recorded net charge-offs of zero in the third quarter, on par with the prior-year quarter.
Provision for credit losses was $2 million in the reported quarter against recovery of credit losses of $1 million in the prior year quarter. In addition, non-performing assets jumped 37% year over year to $50 million.
Profitability & Capital Ratios Solid
As of Sep 30, 2022, return on average assets and return on average common stockholders’ equity were 0.96% and 9.01%, compared with 1.04% and 8.69%, respectively, in the year-ago quarter.
As of Sep 30, 2022, common equity tier 1 ratio was 9.24%, down from 9.92% as of Sep 30, 2021. The total risk-based capital ratio was 12.06%, falling from 13.11% in the year-ago quarter. The leverage capital ratio was 8.06%, down from 8.50% in the year-ago quarter.
Our View
New York Community’s efforts to expand into the BaaS space and robust loan demand will support financials. Also, the pending Flagstar Bancorp merger deal will be earnings accretive. Yet, its liability-sensitive balance sheet will hamper margin growth in the current rising rate environment.
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
Bank of Hawaii Corporation’s (BOH - Free Report) third-quarter 2022 earnings per share of $1.28 missed the Zacks Consensus Estimate of $1.43. Also, the bottom line declined 15.8% from the year-ago quarter.
The results were hurt by higher expenses and a decline in non-interest income. Also, the company’s capital and profitability ratios deteriorated. However, supported by higher interest rates and robust loan balance, BOH witnessed an increase in NII.
BankUnited, Inc.’s (BKU - Free Report) third-quarter 2022 earnings per share of $1.12 outpaced the Zacks Consensus Estimate of $1.01. The bottom line also grew 19.1% from the prior-year quarter. We had projected earnings per share of $1.02.
Results benefited from higher NII, a decent rise in loan balance and increasing rates. However, subdued fee income performance, a rise in expenses and an increase in credit costs acted as headwinds for BKU.