New York Community Bancorp (NYCB) Q2 Earnings As Expected

New York Community Bancorp, Inc. (NYSE:NYCB) reported second-quarter 2019 earnings per share of 19 cents, in line with the Zacks Consensus Estimate. The figure, however, compares unfavorably with the prior-year quarter figure of 20 cents.

Lower expenses and provisions drove the company’s performance. Moreover, higher deposit and loan balances were a tailwind. Nevertheless, 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 million compared with the $99.1 million recorded in the prior-year quarter.

Revenue Fall Offset by Lower Expenses, Loans Up

Total revenues came in at $255.3 million in the quarter, down 11% year over year. In addition, the top-line figure lagged the Zacks Consensus Estimate of $255.5 million.

Net interest income was down 10% year over year to $237.7 million. The fall mainly resulted from elevated interest expense due to rise in cost of funds, partly muted by higher interest income. Adjusted NIM of 1.89% shrunk 30 basis points (bps) year over year.

Non-interest income came in at $17.6 million, down 22.5% on a year-over-year basis. Lower other expenses mainly resulted in this downside.

New York Community Bancorp reported non-interest expenses of $123.1 million, down 10.9% from the year-earlier quarter. Lower compensation and benefits, along with occupancy and equipment and reduced general and administrative expenses, chiefly resulted in this downside.

As of Jun 30, 2019, total deposits improved nearly 2% sequentially to $32.3 billion. Total loans inched up 1% sequentially to $40.7 billion in the reported quarter.

During the quarter, loan originations for investment came in at $3 billion, up 47% sequentially. The company has around $2 billion of loans in its current pipeline, including $1.4 billion of multi-family loans, $302 million of CRE loans and $277 million in specialty finance loans.

Credit Quality: A Mixed Bag

Credit quality for New York Community Bancorp reflected mixed credit metrics. Non-performing assets declined 20% to $63.1 million, or 0.13%, of total assets as of Jun 30, 2019, compared with $70.7 million or 0.14% of total assets as of Jun 30, 2018.

Furthermore, provision for loan losses was $1.8 million compared with $4.7 million in the prior-year quarter. Allowance for losses on loans to total loans was 0.37% compared with the year-ago quarter’s 0.41%.

However, net charge-offs escalated 42.3% year over year to $7.4 million. Net charge-offs, as a percentage of average loans, advanced 1 basis point year over year to 0.02%.

Robust Capital Position

New York Community Bancorp’s capital ratios remained strong. As of Jun 30, 2019, return on average tangible assets and return on average tangible common stockholders’ equity was 0.78% and 9.57%, compared with 0.91% and 10.30%, respectively, as of Jun 30, 2018.

Common equity tier 1 ratio was 10.02% compared with 11.16% as of Jun 30, 2019. Total risk-based capital ratio was 13.46% compared with 14.03% as of Jun 30, 2018. Tier 1 leverage capital ratio was 8.64%, down from 9.41% as of Jun 30, 2018. Tier 1 risk-based capital ratio was 11.36% down from 12.59% as of Jun 30, 2018.

Our Viewpoint

New York Community Bancorp delivered a decent performance in the second quarter. Lower expenses reflect prudent expense management. At the same time, a strengthening capital position and lower provisions are anticipated to favor the company’s prospects for the near term. In addition to this, we believe its efforts to originate loans for investment will augur well for earnings in the subsequent quarters. Moreover, steady improvement in the economy will support the company’s future performance.

Nonetheless, we remain apprehensive due to several issues, including lower revenues.

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 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 Banks

UMB Financial (NASDAQ:UMBF) reported second-quarter 2019 net operating earnings of $1.17 per share, in line with the Zacks Consensus Estimate. The reported figure compared favorably with the prior-year quarter’s earnings of $1.12.

Bank of Hawaii Corporation (NYSE:BOH) delivered a positive earnings surprise of 2.2% in the April-June quarter, leading to an appreciation of 2.18% in shares, following the release. Earnings per share of $1.40 surpassed the Zacks Consensus Estimate of $1.37. Further, the reported figure compared favorably with $1.30 earned in the prior-year quarter.

Texas Capital Bancshares Inc. (NASDAQ:TCBI) posted earnings per share of $1.50 in the second quarter, lagging the Zacks Consensus Estimate of $1.53. Results, however, compared favorably with the prior-year quarter’s $1.38. Elevated expenses were on the downside. However, rise in revenues was a positive factor.

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