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New York Community (NYCB) Q3 Earnings In Line, Stock Down 3%

New York Community Bancorp, Inc. NYCB posted third-quarter 2020 earnings per share of 23 cents, in line with the Zacks Consensus Estimate. The figure compares favorably with the prior-year quarter figure of 19 cents.

Higher revenues drove the company’s performance. Also, the expansion of margin was a tailwind. Capital position remained strong. However, results were affected by rise in provisions due to the continued impact of the COVID-19 outbreak. Also, a rise in expenses and lower fee income hurt the company, disappointing investors which prompted a 3% share-price depreciation post earnings release.

The bank reported net income available to common shareholders of $107.6 million compared with the prior-year quarter’s $90.8 million.

Revenues Climb, Expenses Rise, Loans Increase

Total revenues were $295.7 million in the quarter, up 13.6% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $295.5 million.

Net interest income was up 19.5% year over year to $281.9 million. This rise was mainly aided by lower interest expenses, resulting from reduced funding costs. Adjusted net interest margin of 2.20% expanded 32 basis points (bps).

Non-interest income came in at $13.8 million, down 43.4% on a year-over-year basis. The fall was primarily due to lower fee-based and other income, along with net losses on securities.

The company reported non-interest expenses of $128.5 million, up 4.2% from the year-earlier quarter. Higher occupancy and equipment, along with general and administrative expenses, chiefly resulted in the upside, partly negated by lower compensation and benefits.

As of Sep 30, 2020, total deposits remained flat at $31.7 billion. Total loans inched up 1% sequentially to $42.8 billion in the reported quarter.

During the September-end quarter, loan originations (excluding PPP loan originations) were $3 billion, decreased 9% sequentially. The company had $1.8 billion of loans in its current pipeline, including $1.4 billion of multi-family loans, $199 million of CRE loans and $141 million in specialty finance loans.

Credit Quality: A Mixed Bag

Credit quality for New York Community Bancorp reflected mixed credit metrics. Provision for loan losses was $13 million compared with the prior-year quarter’s $4.8 million.

Non-performing assets slid 19% year over year to $54.9 million. Net recoveries were $0.9 million compared with net charge-offs of $6.5 million recorded in the prior-year quarter. Net charge-offs, as a percentage of average loans, shrunk 2 bps to 0.00% from the year-ago quarter.

Profitability and Capital Ratio Strong

New York Community Bancorp’s capital ratios remained strong. As of Sep 30, 2020, return on average assets and return on average common stockholders’ equity was 0.85% and 6.92% compared with the 0.76% and 5.86% recorded, respectively, in the year-ago quarter.

Common equity tier 1 ratio was 9.68% compared with 10.15% as of Sep 30, 2019. Total risk-based capital ratio was 13.00% compared with 13.61% in the year-ago quarter. Leverage capital ratio was 8.42%, down year over year from 8.65%.

Our Viewpoint

New York Community Bancorp delivered an impressive performance during the July-September quarter. Higher revenues, aided by the expansion of margin, and a solid capital position remain key tailwinds. Also, improvement in credit quality is a positive. In addition to this, we believe the bank’s efforts to originate loans for investment will augur well for earnings in the subsequent quarters.

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 UMBF reported third-quarter 2020 net operating income of $1.59 per share, surpassing the Zacks Consensus Estimate of $1.01. The reported figure also compared favorably with the prior-year quarter’s earnings of $1.27. Elevated revenues, aided by rising loans and deposit balances supported the company’s performance. However, higher provisions and expenses were major drags. Further, reduction in net interest margin was an undermining factor.

First Republic Bank FRC delivered a positive earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter. Results were supported by an increase in NII and fee income. Yet, higher expenses and elevated provisions were offsetting factors.

Regions Financial RF came up with third-quarter adjusted earnings of 49 cents per share, beating the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents. Results were driven by higher revenues on increases in both NII and fee income. Furthermore, rise in deposit balances provided some respite. Notably, mortgage income and capital markets income were on an upswing. Nevertheless, higher provisions for credit losses and rise in expenses were undermining factors.

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