A month has gone by since the last earnings report for New York Community Bancorp (NYCB - Free Report) . Shares have added about 2.8% 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 its most recent earnings report in order to get a better handle on the important drivers.
New York Community’s Q2 Earnings In Line, Costs Down
New York Community reported second-quarter 2018 earnings per share of 20 cents, in line with the Zacks Consensus Estimate. However, the bottom line compares unfavorably with 22 cents recorded in the prior-year quarter.
Decline in revenues was a major headwind. However, lower expenses, and higher loans and deposit balances were the tailwinds. Also, capital position remained strong during the quarter.
The company reported net income available to common shareholders of $99.1 million compared with $107 million recorded in the prior-year quarter.
Decline in Expenses and Higher Loan Originations Offset Lower Revenues
Total revenues came in at $286.7 million in the second quarter, down 15.2% year over year. Further, the top line missed the Zacks Consensus Estimate of $287.9 million.
Net interest income was down 8.3% year over year to $264 million. The fall was mainly due to elevated interest expenses, resulting from rise in cost of funds. Adjusted net interest margin of 2.19% contracted 32 basis points (bps) year over year.
Non-interest income came in at $22.7 million, down 55% 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 $138.1 million, down 15.6% from the year-earlier quarter. A plunge in compensation and benefits, along with general and administrative expenses, mainly led to this downside.
As of Jun 30, 2018, total deposits improved 1.1% sequentially to $29.6 billion. Additionally, total loans inched up 1.4% to $39.3 billion at the end of the reported quarter.
During the quarter, loan originations for investment came in at $2.9 billion, up 58% year over year. The company has around $1.8 billion of loans in its current pipeline, including $1.2 billion of multi-family loans, $254 million of CRE loans and $165 million in specialty finance loans.
Credit Quality Improves
Non-performing non-covered assets declined 23% to $70.7 million or 0.14% of total non-covered assets as of Jun 30, 2018, compared with $91.6 million or 0.20% of total non-covered assets as of Jun 30, 2017.
In addition, net charge-offs plunged 54.4% to $5.2 million on a year-over-year basis. Net charge-offs, as a percentage of average loans, shrunk 2 bps to 0.01%.
Further, provisions for losses on non-covered loans were $4.7 million, down 59.5% 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
Common equity tier 1 ratio was 11.16%, in line year over year. Total risk-based capital ratio was 14.03% compared with 14.11% as of Jun 30, 2017. Also, leverage capital ratio was 9.41%, up from 9.23% as of Jun 30, 2017.
The company expects mid-single digit loan growth in 2018.
Management expects cost savings of more than $100 million in 2018.
Effective tax rate is expected to decline to 25.4% in 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, New York Community Bancorp has a poor Growth Score of F, however its momentum is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and momentum investors.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Interestingly, New York Community Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.