New York Community Bancorp (NYCB) down 4.3% since last earnings report: can it bounce back?

IIt has been about a month since the last earnings report from New York Community Bancorp (NYCB). Stocks lost about 4.3% during this period, underperforming the S&P 500.

Will the recent negative trend continue until its next earnings release, or should New York Community Bancorp experience a breakout? Before we dive into the reaction of investors and analysts lately, let’s take a look at the latest earnings report to better understand the important catalysts.

Q4 New York Community Earnings Meet, Revenue Lag Estimate

New York Community fourth-quarter 2021 earnings per share (non-GAAP) of 31 cents was in line with Zacks’ consensus estimate. Nevertheless, the net result increased by 15% year-on-year.

The results exclude merger-related expenses related to the agreement with Flagstar Bancorp.

New York Community results were supported by higher net interest income (NII) and non-interest income. Improved loans and deposits and lower provisions were other tailwinds. A moderate increase in expenses and a decline in net interest margin were headwinds.

Net income available to common shareholders, $142 million, fell 21.5% from the year-ago quarter.

In 2021, earnings per share (non-GAAP) of $1.24 met consensus estimate and increased 42.5% from 2020. Net income of $563 million increased 17.8% compared to 2020.

Increase in income and expenses

Total revenue for the fourth quarter was $338 million, up 4.6% year-over-year. However, the top line trailed Zacks’ consensus estimate of $339.2 million.

In 2021, total revenue increased 16.3% to $1.35 billion, matching the consensus estimate.

The NII rose 4.5% year over year to $322 million. The increase is mainly due to lower interest charges. The NIM of 2.44% was down 3 basis points (bps).

Non-interest income was $16 million, up 6.7%. This increase is mainly attributable to the increase in other income.

Non-interest expense of $135 million increased slightly from $134 million in the fourth quarter of 2020. Higher compensation and benefits, as well as merger-related expenses of $7 million , led to this increase. This was partially offset by lower general and administrative expenses. Total operating expenses (excluding merger-related expenses) decreased 4.5% to $128 million.

The efficiency ratio was 37.70% compared to 41.36% in the prior year quarter. A decline in the efficiency ratio indicates an improvement in profitability.

Increase in balance of loans and deposits

As of December 31, 2021, total deposits improved 1.3% sequentially to $35.1 billion. Total loans increased 4.6% to $45.5 billion.

In the fourth quarter, loan originations were $4.6 billion, up 53.3% sequentially. The rise was driven by a 62% increase in multi-family arrangements and a 52% increase in specialized financial arrangements.

The company has $2.2 billion in loans in its current pipeline, including $1.7 billion in multi-family loans, $129 million in commercial real estate loans, $251 million in specialty finance loans and $42 million commercial and industrial loans.

Credit quality is improving

Non-performing assets fell 10.9% year over year to $41 million. Provision for credit losses was $4 million, compared to $11 million in the prior year quarter. Net charges were $5 million compared to $6 million in the prior year quarter.

Low profitability and capital ratios

As of December 31, 2021, return on average assets and return on average common shareholders’ equity were 1.03% and 8.71%, down from 1.38% and 11.60%, respectively , in the quarter of the previous year.

Common Equity Tier 1 capital ratio was 9.68%, compared to 9.72% as of December 31, 2020. Total risk-based capital ratio was 12.73%, compared to 12.97% in the quarter of the previous year. The leverage ratio was 9.33%, down from 9.48%.

Outlook

Core NIM is expected to rise 3 basis points in the first quarter.

Management expects strong loan growth for 2022, given the amount of undrawn commitments and the ease of supply chain issues. It forecasts double-digit loan growth for the first quarter.

Non-interest expense is expected to be $540 million for 2022. It is expected to be higher for the first quarter at $135 million due to FICA and payroll taxes.

How have the estimates changed since then?

It turns out that the estimate revision has stalled over the past month.

VGM Scores

Currently, New York Community Bancorp has a growth score below D, a rating with the same score on the momentum front. Tracing a somewhat similar trajectory, the stock earned a C rating on the value side, placing it in the middle 20% for this investment strategy.

Overall, the title has an overall VGM score of D. If you’re not focused on a strategy, this score is the one you should be interested in.

Outlook

New York Community Bancorp has a Zacks rank of #3 (Hold). We expect the title to return online in the coming months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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