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New York Community (NYCB) Reports Loss in Q2, Stock Tanks 3%
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New York Community Bancorp’s (NYCB - Free Report) shares dropped more than 3% as it reported a net loss in the second quarter of 2024 on higher-than-expected provisions for credit losses.
NYCB reported a second-quarter 2024 loss per share of $1.05, wider than the Zacks Consensus Estimate of a loss of 38 cents. It reported earnings of $1.41 in the year-ago quarter.
The results were primarily affected by a significant rise in provisions for credit losses and higher expenses. A substantial fall in non-interest income and lower net interest income (NII), as well as subdued loan demand, were additional concerns. However, growth in deposit balance offered some support.
The results excluded certain non-recurring items. After considering these, the net loss available to common shareholders was $333 million. The net income to common shareholders was $405 million in the prior-year quarter.
Revenues Decline, Expenses Rise
Quarterly revenues were $671 million, which declined 44.2% from the prior-year quarter. The top line also missed the Zacks Consensus Estimate of $701.4 million.
NII was $557 million, down 38.1% from the prior-year quarter. The net interest margin of 1.98% declined from 3.21% reported in the previous quarter.
Non-interest income was $114 million, which declined from $302 million reported in the year-ago quarter. The decrease was due to net loan administration income reductions, net gain on loan sales and securitizations, net return on mortgage servicing rights and lower fee income.
Non-interest expenses of $705 million increased 6.7% year over year. The increase in expenses stemmed from the impact of the late March 2023 Signature Bank transaction and higher professional fees.
The efficiency ratio was 95.05%, which increased from 48.26% reported in the year-ago quarter. A rise in the efficiency ratio indicates deteriorating profitability.
Total loans and leases held for investment declined 9.4% sequentially to $74.6 billion as of Jun 30, 2024. Nonetheless, as of the same date, total deposits increased 5.6% sequentially to $79 billion.
Credit Quality Deteriorates
Non-performing assets were $1.96 billion, which increased significantly from $246 million as of Jun 30, 2023.
Also, the provision for credit losses was $390 million, which increased substantially from $49 million in the prior-year quarter. Net charge-offs were $349 million, while the company recorded a net recovery of $1 million in the prior-year quarter.
Capital Ratios: Mixed Bag
As of Jun 30, 2024, the common equity tier 1 (CET1) ratio was 9.54%, which increased from 9.45% as of Mar 31, 2024. The total risk-based capital ratio was 12.78%, which declined from 13.09% in the prior quarter.
The leverage capital ratio was 7.53%, which decreased from 7.90%.
Recent Development
On Jul 25, 2024, NYCB's bank subsidiary, Flagstar Bank, N.A., announced that it is set to offload its residential mortgage servicing business to Mr. Cooper Group Inc. (COOP - Free Report) for $1.4 billion. This offloading will also include the sale of mortgage servicing rights and the third-party origination platform to COOP. The transaction is expected to close in the fourth quarter of 2024. After the completion, NYCB expects the CET1 ratio to increase by approximately 60 basis points.
Conclusion
Intending to simplify its business model, NYCB agreed to sell certain parts of its mortgage business, which is set to positively impact the company’s financials. However, its rising expense base on almost all components will likely hinder its bottom-line growth. Additionally, its deteriorating asset quality and geographic concentration might act as headwinds.
New York Community Bancorp, Inc. Price, Consensus and EPS Surprise
Citizens Financial Group (CFG - Free Report) has reported second-quarter 2024 earnings per share of 78 cents, missing the Zacks Consensus Estimate of 79 cents. The bottom line declined from 92 cents reported in the year-ago quarter.
CFG's results were adversely affected by lower NII and a rise in provisions. However, increased non-interest income and reduced expenses offered some support. Additionally, a strong capital position was a positive factor.
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New York Community (NYCB) Reports Loss in Q2, Stock Tanks 3%
New York Community Bancorp’s (NYCB - Free Report) shares dropped more than 3% as it reported a net loss in the second quarter of 2024 on higher-than-expected provisions for credit losses.
NYCB reported a second-quarter 2024 loss per share of $1.05, wider than the Zacks Consensus Estimate of a loss of 38 cents. It reported earnings of $1.41 in the year-ago quarter.
The results were primarily affected by a significant rise in provisions for credit losses and higher expenses. A substantial fall in non-interest income and lower net interest income (NII), as well as subdued loan demand, were additional concerns. However, growth in deposit balance offered some support.
The results excluded certain non-recurring items. After considering these, the net loss available to common shareholders was $333 million. The net income to common shareholders was $405 million in the prior-year quarter.
Revenues Decline, Expenses Rise
Quarterly revenues were $671 million, which declined 44.2% from the prior-year quarter. The top line also missed the Zacks Consensus Estimate of $701.4 million.
NII was $557 million, down 38.1% from the prior-year quarter. The net interest margin of 1.98% declined from 3.21% reported in the previous quarter.
Non-interest income was $114 million, which declined from $302 million reported in the year-ago quarter. The decrease was due to net loan administration income reductions, net gain on loan sales and securitizations, net return on mortgage servicing rights and lower fee income.
Non-interest expenses of $705 million increased 6.7% year over year. The increase in expenses stemmed from the impact of the late March 2023 Signature Bank transaction and higher professional fees.
The efficiency ratio was 95.05%, which increased from 48.26% reported in the year-ago quarter. A rise in the efficiency ratio indicates deteriorating profitability.
Total loans and leases held for investment declined 9.4% sequentially to $74.6 billion as of Jun 30, 2024. Nonetheless, as of the same date, total deposits increased 5.6% sequentially to $79 billion.
Credit Quality Deteriorates
Non-performing assets were $1.96 billion, which increased significantly from $246 million as of Jun 30, 2023.
Also, the provision for credit losses was $390 million, which increased substantially from $49 million in the prior-year quarter. Net charge-offs were $349 million, while the company recorded a net recovery of $1 million in the prior-year quarter.
Capital Ratios: Mixed Bag
As of Jun 30, 2024, the common equity tier 1 (CET1) ratio was 9.54%, which increased from 9.45% as of Mar 31, 2024. The total risk-based capital ratio was 12.78%, which declined from 13.09% in the prior quarter.
The leverage capital ratio was 7.53%, which decreased from 7.90%.
Recent Development
On Jul 25, 2024, NYCB's bank subsidiary, Flagstar Bank, N.A., announced that it is set to offload its residential mortgage servicing business to Mr. Cooper Group Inc. (COOP - Free Report) for $1.4 billion. This offloading will also include the sale of mortgage servicing rights and the third-party origination platform to COOP. The transaction is expected to close in the fourth quarter of 2024. After the completion, NYCB expects the CET1 ratio to increase by approximately 60 basis points.
Conclusion
Intending to simplify its business model, NYCB agreed to sell certain parts of its mortgage business, which is set to positively impact the company’s financials. However, its rising expense base on almost all components will likely hinder its bottom-line growth. Additionally, its deteriorating asset quality and geographic concentration might act as headwinds.
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
NYCB currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Peer Performance
Citizens Financial Group (CFG - Free Report) has reported second-quarter 2024 earnings per share of 78 cents, missing the Zacks Consensus Estimate of 79 cents. The bottom line declined from 92 cents reported in the year-ago quarter.
CFG's results were adversely affected by lower NII and a rise in provisions. However, increased non-interest income and reduced expenses offered some support. Additionally, a strong capital position was a positive factor.