A month has gone by since the last earnings report for New York Community Bancorp (NYCB - Free Report) . Shares have lost about 6.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
New York Community Q1 Earnings Beat on Lower Costs
New York Community reported first-quarter 2020 earnings per share of 20 cents surpassed the Zacks Consensus Estimate of 16 cents. Also, the figure compared favorably with the prior-year quarter figure of 19 cents.
Lower expenses and higher loan balance drove the company’s performance. Also, higher net interest income came as a tailwind. Capital position remained strong. However, a fall in revenues negatively impacted the company. Also, results were affected by a drastic rise in provisions due to the adoption of new accounting guidance and the impacts of the COVID-19 outbreak.
The company reported net income available to common shareholders of $92.1 million compared with $89.4 million in the prior-year quarter.
Revenues Fall, Loans Rise and Expenses Decline
Total revenues were $261.4 million in the quarter, down 1.8% year over year. Also, the top line lagged the Zacks Consensus Estimate of $262.5 million.
Net interest income was up 1.3% year over year to $244.5 million. The rise mainly resulted from lower interest expenses, partly muted by a fall in interest income. Adjusted net interest margin of 1.92% shrunk 3 basis points (bps).
Non-interest income was $16.9 million, down 31.8% on a year-over-year basis. The fall was primarily due to lower gain on securities.
The company reported non-interest expenses of $125.5 million, down 9.5% from the year-earlier quarter. Lower compensation and benefits along with occupancy and equipment and reduced general and administrative expenses chiefly resulted in the fall.
As of Mar 31, 2020, total deposits rose 1% sequentially to $32 billion. Total loans increased nearly 1% to $42.3 billion in the reported quarter.
During the first quarter, loan originations were $2.7 billion, down 18% sequentially. The company had $2.1 billion of loans in its current pipeline, including $1.6 billion of multi-family loans, $101 million of CRE loans and $379 million in specialty finance loans as of 2019 end.
Credit Quality Worsens
Credit quality for New York Community Bancorp reflected mixed credit metrics. Non-performing assets increased 18% year over year to $58.8 million. Furthermore, provision for loan losses was $20.6 million against recovery of $1.2 million in the prior-year quarter.
Net charge-offs escalated significantly to $10.2 million. Net charge-offs, as a percentage of average loans, climbed 2 bps to 0.02% from the year-ago quarter.
Strong Profitability and Capital Ratio
New York Community Bancorp’s capital ratios remained strong. As of Mar 31, 2020, return on average assets and return on average common stockholders’ equity was 0.75% and 5.95% compared with 0.76% and 5.86%, respectively, in the year-ago quarter.
Common equity tier 1 ratio was 9.81% compared with 10.27% as of Mar 31, 2019. Total risk-based capital ratio was 13.16% compared with 13.83% in the year-ago quarter. Leverage capital ratio was 8.47%, down from 8.68%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, New York Community Bancorp has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly 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 #2 (Buy). We expect an above average return from the stock in the next few months.