For investors, New York Community has been a fascinating play, not only because of the outsized dividend but because opinion is so divided about the company's ability to maintain the dividend since it pays out most of its earnings. Some analyst have been predicting a dividend for over five years but the company has managed to keep paying out 25 cents a share for 37 consecutive quarters. The bank focuses on multi-family lending in the New York City area, concentrating on apartment buildings with below-market rents, leading to a long-term record for very strong asset quality. New York Community Bancorp has also expanded over a long period by acquiring local competitors. The company expanded its regional footprint beyond New York and New Jersey to include Ohio, Florida and Arizona, through its last major acquisition of the failed AmTrust Bank of Cleveland, in December 2009. New York Community Bancorp on Wednesday reported first-quarter net income of $118.7 million, or 27 cents a share, compared to $122.8 million, or 28 cents a share, in the second quarter, and $118.3 million, or 27 cents a share, in the first quarter of 2012.
Net interest income declined to $275.2 million in the first quarter from $290.0 million the previous quarter and $288.4 million a year earlier. Net interest income was boosted by $19.9 million in loan prepayment penalty fees during the first quarter. Prepayment fees boosted net income by $39.3 million in the fourth quarter and $17.5 million during the first quarter of 2012. The company in the fourth quarter booked $17.9 million in prepayment fees on a single borrower relationship, with the prepayment of $545.5 million in multifamily mortgage loans.
The company's mortgage banking income declined to $26.1 million during the first quarter from $32.6 million in the fourth quarter and $35.2 million in the first quarter of 2012. Most regional banks saw a softening of mortgage revenue in the first quarter, as application volume declined and gain-on-sale spreads declined. The bank's first-quarter earnings were boosted by $16.6 million in gains on securities sales.
A Positive Take on New York Community Bancorp's StockKBW analyst Collyn Gilbert in March upgraded New York Community Bancorp to an "outperform" rating from "market perform," and raised her price target for the shares to $15 from $13, saying in a report that "an acquisition for NYCB could prove to be a positive catalyst for the shares." At a conference in March, Ficalora said "we are an acquirer of banks,
Gilbert in a note to clients on late on Wednesday wrote that "we like NYCB's risk/reward positioning with upside above $16 & downside of $12. The flexible business model remains well hedged to various interest rate scenarios, which differentiates the bank from peers who have struggled in the challenging operating environment." "While upside valuation reflects the inclusion of a large, transformational deal, those opportunities continue to exist," Gilbert wrote, adding that "downside reflects a 'worst case' independent operating environment that seems unlikely given increased stability over the last year or so." Gilbert reiterated her "outperform" rating for New York Community. She estimates the company will earn $1.04 a share for all of 2013, with EPS climbing to $1.10 in 2014.
A Negative Take on the StockCitigroup analyst Josh Levin on Thursday cheerfully reiterated his "sell" rating for New York Community Bancorp, with a price target of $11, saying in a note to clients that "in the words of Mr. T, we predict pain." "Our thesis remains that NYCB's dividend is not sustainable given the company's high payout ratio, weakening earnings profile, growing leverage and heightened regulatory scrutiny," Levin wrote, adding that "while NYCB may continue to look for ways to harvest non-recurring items to boost EPS, we view such activity as a bearish because it suggests that NYCB is running out of earnings levers to pull." Levin estimates New York Community's earnings for all of 2013 will come in at 95 cents a share, meaning the company will dip into capital to cover the dividend. His 2014 EPS estimate is just 94 cents.
A Neutral View, With a "Safe Dividend"BMO Capital Markets analyst Peter Winter has a neutral rating on New York Community Bancorp, and said in a report on Thursday that "we believe the dividend is safe given the strong capital ratios and solid credit trends." New York Community reported a March 31 tangible equity ratio of 7.61%, compared to 7.65% the previous quarter and 7.64% a year earlier. Winter's target price for New York Community is $13, and he estimates the company will earn $1.04 a share this year, with EPS declining slightly in 2014, to $1.02. NYCB data by YCharts
Interested in more on New York Community Bancorp? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn