AmTrust Bank of Cleveland. This was such a good deal for New York Community that the company booked an after-tax bargain purchase gain of $84.2 million, or 22 cents a share, during the fourth quarter of 2009. While taking on almost no credit risk when it acquired part of AmTrust's assets - because of a loss-sharing agreement with the FDIC - New York Community acquired the failed lender's mortgage banking business, which has turned into a major profit center. Income Statement Third-quarter net income was $135.6 million, or 31 cents a share, compared to $136.3 million, or 31 cents a share, in the second quarter and $98.6 million, 28 cents a share, during the third quarter of 2009. The third-quarter provision for loan loss reserves was $32 million, increasing from $22 million the previous quarter and $15 million in the third quarter of 2009. The third-quarter provision was nearly double the net loan charge-offs of $16.7 million. Pre-provision net revenue for the third quarter was $245.1 million, increasing 53% from a year earlier. Net Interest Income totaled $286.2 million during the third quarter, increasing 26% year-over-year. The net interest margin during the third quarter was 3.36%, compared to 3.42% the previous quarter and 3.17% in the third quarter of 2009. Noninterest Income was $107.9 million for the third quarter, increasing from $28.3 million a year earlier, reflecting $76.5 million in mortgage banking income. In the third quarter of 2009, the bank didn't book any revenue from mortgage banking. Noninterest Expense for the third quarter was $149 million, increasing 57% from a year earlier, but more than outweighed by the increase in noninterest expense. The company's ratio of noninterest income to noninterest expense for the third quarter was 62.88%, increasing from 28.54% a year earlier. Balance Sheet Total assets were $41.7 billion as of September 30 and the nonperforming assets ratio was 1.76%, rising from 1.68% the previous quarter and 1.44% a year earlier. The company's third-quarter net charge-off ratio was a low 0.27% and loan loss reserves covered 0.53% of total loans as of September 30, according to SNL Financial. New York Community Bancorp didn't participate in TARP. The company's Tier 1 leverage ratio was 8.87% and its total risk-based capital ratio was 14.35% as of September 30. According to SNL Financial, the tangible common equity ratio was 7.59%. New York Community's traditional focus for its loan portfolio has been apartment buildings in the New York City area that feature below-market average rents, with many of the buildings being rent-controlled or rent-stabilized. This focus has led to a very strong track record of minimal loan losses. Stock Ratios The shares trade for 2.4 times tangible book value according to SNL, and 12.4 times the consensus earnings estimate of $1.35 a share for 2011. The forward P/E declines to 11.1 when based on the consensus earnings estimate of $1.50 a share for 2012. Analyst Ratings Out of 17 analysts covering the company, nine rate New York Community Bancorp a buy, while seven recommend holding the shares and one analyst recommends investors sell the shares. New York Community's shareholders have benefited tremendously from the company's home-run acquisition of the most attractive parts of AmTrust's business. While it is not surprising that some analysts are cautious in light of the appreciation in the shares over the last year, new investors will still enjoy a well-supported dividend yield of close to 6%, a stable niche loan business with very strong credit quality, a mortgage banking business set to grow as the economy improves and a management team with an excellent track record.
Philip van Doorn. To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn. To submit a news tip, send an email to: email@example.com.