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New York Community Bancorp (NYCB) Q1 Earnings Meet Estimates

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New York Community Bancorp (NYCB - Free Report) reported first-quarter 2018 earnings per share of 20 cents, in line with the Zacks Consensus Estimate. However, the bottom line compares unfavorably with 23 cents recorded in the prior-year quarter.

Shares of the company declined 7.1% in single-day trading following the earnings release on Apr 25, before the market opened, reflecting investors’ pessimistic reaction on lower revenues. Also, decline in margin and loans balance remained an undermining factor. However, lower expenses and higher deposit balances were the tailwinds. Also, capital position remained strong during the quarter.

The company reported net income available to common shareholders of $98.3 million compared with $104 million recorded in the prior-year quarter.

Decline in Expenses and Higher Loan Originations Offset Lower Revenues

Total revenues came in at $293.2 million in the quarter, down 10% year over year. However, the top line surpassed the Zacks Consensus Estimate of $292.8 million.

Net interest income was down 8% year over year to $270.3 million. The fall was mainly attributable to increased interest expenses aided by rise in cost of funds. Adjusted net interest margin of 2.29% contracted 31 basis points (bps) year over year.

Non-interest income came in at $25.3 million, down 29% on a year-over-year basis. Fall in almost all components of income led to this decline.

New York Community Bancorp reported non-interest expenses of $139.1 million, down 17% from the year-earlier quarter. Lower compensation and benefits, along with general and administrative expenses, mainly led to the fall.

As of Mar 31, 2018, total deposits improved 2% year over year to $29.2 billion. However, total loans declined 1% to $38.8 billion in the reported quarter.

During the quarter, loan originations for investment came in at $2.4 billion, up 46% year over year. The company has around $2 billion of loans in its current pipeline, including $1.3 billion of multi-family loans, $279 million of CRE loans and $319 million in specialty finance loans.

Credit Quality Worsens

Credit quality for New York Community Bancorp deteriorated during the quarter. Non-performing non-covered assets jumped 26% to $88.8 million or 0.18% of total non-covered assets as of Mar 31, 2018, compared with $70.4 million or 0.15% of total non-covered assets as of Mar 31, 2017.

Also, net charge-offs rose 15% to $6.5 million on a year-over-year basis.  Net charge-offs, as a percentage of average loans, expanded 1 bp to 0.02%.

Further, provisions for losses on non-covered loans were $9.6 million, up significantly from the year-ago quarter. Allowance for losses on non-covered loans to total non-covered loans was 0.41%, flat year over year.

Robust Capital Position

New York Community Bancorp’s capital ratios remained strong. Common equity tier 1 ratio was 11.44% compared with 10.79% as of Mar 31, 2017. Total risk-based capital ratio was 14.41% compared with 13.71% as of Mar 31, 2017. Also, leverage capital ratio was 9.49%, up from 9.24% as of Mar 31, 2017.

Our Viewpoint

New York Community Bancorp’s performance in the first quarter was not so impressive. We remain apprehensive owing to several issues, including lower revenues. Further, rising interest rates continue to hamper the top line owing to the company’s liability sensitive balance sheet. Also, significant increase in provisions during the quarter remains an added concern.

However, lower expenses reflect prudent expense management. At the same time, a strengthening capital position is anticipated to favor the company’s prospects for the near term. In addition, we believe its efforts to originate loans for investment will augur well for earnings in the subsequent quarters. Also, steady improvement in the economy will support the performance of the company.

New York Community Bancorp, Inc. Price, Consensus and EPS Surprise

New York Community Bancorp 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 Stocks

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2017 adjusted earnings per share of 57 cents beating the Zacks Consensus Estimate of 48 cents. The adjusted figure excludes the net positive impact of gains from the Vantiv merger with WorldPay and charges related to the valuation of the Visa total return swap and adjustment to litigation reserves.

Navient Corporation’s (NAVI - Free Report) first-quarter 2018 adjusted core earnings per share of 40 cents missed the Zacks Consensus Estimate by a penny. The reported figure came in higher than the year-ago quarter tally of 36 cents.

Sallie Mae (SLM - Free Report) delivered a positive earnings surprise of 12.5% in first-quarter 2018. The company reported core earnings of 27 cents per share, surpassing the Zacks Consensus Estimate of 24 cents. Moreover, the figure increased 28.6% from the prior-year quarter.

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