It has been about a month since the last earnings report for New York Community Bancorp (NYCB - Free Report) . Shares have lost about 9.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is New York Community Bancorp due for a breakout? 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 Q1 Earnings Meet Expectations
New York Community reported first-quarter 2019 earnings per share of 19 cents, in line with the Zacks Consensus Estimate. However, the bottom line compares unfavorably with the prior-year quarter figure of 20 cents.
Lower expenses and benefit in provisions drove the company’s performance. Moreover, higher deposit and loan balances were tailwinds. However, fall in revenues remained on the downside. Also, decline in margin was an undermining factor.
The company reported net income available to common shareholders of $89.4 million compared with $98.3 million recorded in the prior-year quarter.
Revenue Fall Offset by Lower Expenses
Total revenues came in at $266.1 million in the quarter, down 9.2% year over year. In addition, the top line lagged the Zacks Consensus Estimate of $267.2 million.
Net interest income was down 10.7% year over year to $241.3 million. The fall mainly resulted from elevated interest expense due to rise in cost of funds, partly offset by higher interest income. Adjusted NIM of 1.95% shrunk 34 basis points (bps) year over year.
Non-interest income came in at $24.8 million, up 8.3% on a year-over-year basis. Net gain on securities mainly led to this upsurge.
New York Community Bancorp reported non-interest expenses of $138.8 million, slightly down from the year-earlier quarter. Lower compensation and benefits along with occupancy and equipment expenses mainly led to this downside. However, elevated general and administrative expenses were headwinds.
As of Mar 31, 2019, total deposits improved nearly 3% sequentially to $31.6 billion. Total loans inched up 1% from the prior quarter to $40.4 billion.
During the quarter, loan originations for investment came in at $2 billion, down 6% sequentially. The company has around $1.5 billion of loans in its current pipeline, including $833 million of multi-family loans and $314 million of CRE loans.
Credit Quality: A Marked Improvement
Credit quality for New York Community Bancorp reflected mixed credit metrics. Non-performing assets declined 20% to $71.3 million, or 0.14%, of total assets as of Mar 31, 2019, compared with $88.8 million or 0.18% of total assets as of Mar 31, 2018.
Net charge-offs slumped 69.2% year over year to $2 million. Net charge-offs, as a percentage of average loans, contracted 2 bps year over year to 0.00%.
Further, provision for loan losses was a benefit of $1.2 million compared with provision of $9.6 million in the prior-year quarter. Allowance for losses on loans to total loans was 0.39% compared with 0.41% in the year-ago quarter.
Robust Capital Position
New York Community Bancorp’s capital ratios remained strong. As of Mar 31, 2019, return on average tangible assets and return on average tangible common stockholders’ equity was 0.79% and 9.74% compared with 0.92% and 10.21%, respectively, as of Mar 31, 2018.
Common equity tier 1 ratio was 10.27% compared with 11.46% as of Mar 31, 2019. Total risk-based capital ratio was 13.83% compared with 14.43% as of Mar 31, 2018. Tier 1 leverage capital ratio was 8.68%, down from 9.50% as of Mar 31, 2018. Tier 1 risk-based capital ratio was 11.64% down from 12.93% as of Mar 31, 2018.
The company expects mid-single digit loan growth in 2019.
Management expects expenses to be in the low $500 million level in 2019.
Effective tax rate is expected to be about 25% in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5% due to these changes.
Currently, New York Community Bancorp has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, New York Community Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.