New York Community falls to 2nd-cheapest US bank stock after Q4'23 loss

New York Community Bancorp Inc. shares tumbled after the Hicksville, NY-based bank announced a fourth-quarter net loss, pushing it to the second-lowest valued US bank stock at the end of January.

New York Community traded at 59.8% of adjusted tangible book value at month-end, down from 97.6% a month earlier.

New York Community reported negative $260.0 million in net income available to common shareholders in the fourth quarter. That marked its first loss in eight years, according to S&P Global Market Intelligence data. The red ink was mostly from the credit loss provision soaring to $552.0 million, which was higher than the previous 44 quarters combined.

Commercial real estate office, representing less than 4% of gross loans at New York Community, is a vulnerable sector. New York Community's nonperforming office loan ratio at year end 2023 was just 2.5%, comparable to Zions Bancorp. NA, but its criticized office loan ratio was a whopping 38%. The office reserve coverage was roughly 8%, in line with Wells Fargo & Co.

Sequential margin compression of 45 basis points to a reported 2.82% also contributed to the net loss in the fourth quarter of 2023. Executives on an earnings call projected a full-year 2024 margin of 2.40% to 2.50%.

New York Community's stock plunged 37.7% the day it announced its fourth-quarter 2023 results as investors questioned the bank's earnings power, credit risk and liquidity profile. The bank also slashed its quarterly dividend cut to 5 cents from 17 cents.

For January, New York Community's total return was negative 36.8%, marking the worst performance of the 210 banks in the S&P Global Market Intelligence analysis.

Still, the bank's long-term shareholders have outperformed the market. From the close on the day of its public debut, Nov. 23, 1993, New York Community's total return through Jan. 31 was 2,297%, much higher than 1,775% for the S&P 500 and 823% for the S&P US BMI Banks index.

S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of greater than $3 billion as of the most recent quarter. The analysis excludes banks in the mutual holding company ownership structure, other operating subsidiaries and banks that completed a mutual bank conversion after Sept. 30, 2023.

HTM and credit-adjusted TBV is calculated as the sum of tangible common equity; unrealized gain or loss from HTM securities, tax-adjusted at the 21% corporate rate; and loss reserves; less nonperforming assets and loans 90 or more days past due but still accruing interest; divided by common shares outstanding.

Least expensive banks

There was insufficient data to rank Charlottesville, Va.-based Blue Ridge Bankshares Inc., which was the cheapest bank as of December 2023, in the January 2024 analysis. Blue Ridge announced a $150 million capital raise on Dec. 22, 2023, which could drastically impact its valuation.

In Blue Ridge's absence, Seattle-based HomeStreet Inc. once again ranked as the cheapest publicly traded US bank, ending January at 52.9% of adjusted TBV. It had been the lowest-valued bank from April 2023 through November 2023, and ranked second at year end 2023.

HomeStreet announced a sale to Denver-based FirstSun Capital Bancorp on Jan. 16. Its shares reacted favorably to the news, closing the month up 33.6%, which was second-best in the analysis.

Fishers, Ind.-based First Internet Bancorp, which is quickly growing its Small Business Administration lending business, was the top market performer in January. Its return for the month of 36.3% followed a 10.5% return in December 2023. As of Jan. 31, First Internet ranked 19th for lowest valuation.

The 10th-ranked bank, Kearny Financial Corp., was the fourth-weakest market performer in January, returning negative 19.4%. Because of a preannounced investment securities transaction, the Fairfield, NJ-based bank reported a net in the final quarter of 2023.

Seattle-based WaFd Inc and the fifth lowest-valued bank, Santa Rosa, Calif.-based Luther Burbank Corp., on Jan. 30 disclosed that they finally received regulatory approvals for their pending deal. The companies expect the transaction, which initially was announced in November 2022, to close by the end of February.

Most expensive banks

Triumph Financial Inc. became the most-expensive bank in the analysis, ending January at 366.8% of adjusted TBV. On an as-reported basis, the Dallas-based bank's nonperforming loans to total loans ratio rose 43 basis points quarter over quarter to 1.65% at Dec. 31, 2023.

Honolulu-based Bank of Hawaii Corp., formerly the highest-valued bank, dropped to fifth. Its adjusted valuation declined to 336.1% at Jan. 31 from 568.2% at year end 2023 mostly due to a less severe fair value mark on its held-to-maturity securities.

Both Triumph Financial and Bank of Hawaii registered negative double-digit percentage total returns in January and have attracted a substantial amount of short interest. As of the end of 2023, Bank of Hawaii was the most-shorted US bank trading on a major exchange, while Triumph Financial ranked 13th.

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Ontario, Calif.-based CVB Financial Corp. was another substandard market performer in January, with a return of negative 16.1%. Total deposits at the 13th highest-valued bank fell 7.5% sequentially.

In a Jan. 25 earnings call, President and CEO Dave Brager said the bank generally experiences a fourth-quarter deposit outflow of about 4% to 6%.

"During the latter half of the fourth quarter, we experienced both the normal year-end seasonal deposit outflows as well as some unexpected deposit withdrawals that were directed to an external trust company for estate planning," he said.

City Holding Co., ranked eighth, announced a 1 million-share repurchase plan on Jan. 31. The Charleston, W.Va.-based bank bought back 667,000 shares in 2023.

The No. 11 bank, Truist Financial Corp., soon could be receiving a large stack of capital based on a potential sale of its majority stake in Truist Insurance Holdings LLC.