The 2 Definitive Reasons Why New York Community Bancorp Is a Great Buy

New York Community Bancorp  (NYSE: NYCB  ) is a community bank with a strong regional market position in multi-family loans. The community bank has consistently benefited from solid loan growth, has low net-charge offs indicating a conservative underwriting process and convinces with its resilient business model during the financial crisis.

New York Community Bancorp is a regional bank with over 270 community and commercial bank branches in New York, New Jersey, Ohio, Florida and Arizona. With its wide-ranging branch network, about $48 billion in assets and $27 billion in deposits at the end of the first quarter, New York Community Bancorp is one of the 25 largest bank holding companies in the country.

Low net charge-offs indicate top asset quality
The financial crisis has impressively shown, that disciplined underwriting and the acceptance of only good credit risks are instrumental in driving shareholder value, or more importantly, are instrumental in not destroying shareholder value.

The collapse of banking stocks in 2008 and 2009 was largely driven by investors doubting the underlying asset quality with respect to mortgages and loans, which in turn were backing publicly traded mortgage-backed securities, for instance.

Therefore, in order to determine a bank's underwriting discipline and general approach to credit risk selection, investors should take a close look at a bank's most recent net-charge off history.

Charge-offs and provision expenses went through the roof in 2008 and 2009 as a result of the financial crisis, but they clearly are normalizing now.

Two themes are important when it comes to the evaluation of New York Community Bancorp's net charge-offs: 1. Charge-offs have been consistently improving since they marked their peak in 2011 at 0.35%. 2. New York Community Bancorp's charge-offs, as the chart below indicates, are substantially lower than the respective charge-off ratios of the competition, and this has been true for a variety of crises periods.

These are clear signs that the community bank enacts top underwriting discipline which leads to the selection of superior credit risks.

Source: New York Community Bancorp, Morgan Stanley Financials Conference June 10, 2014

Solid loan growth in its core business
As opposed to large-cap bank holding companies, community banks really drive loan growth for small- and medium sized businesses and are truly the backbone of the economy.

While Wall Street institutions like to boost their earnings by leveraging their investment banking resources, community banks like New York Community Bancorp actually go out there and do the dirty work: financing small business and entrepreneurs and making mortgages available to average families.

Over the last five years, New York Community Bancorp actually has transformed itself in becoming a leading multi-family loan provider in its core market in New York. Its designated loan portfolio has increased strongly from $16.8 billion in 2010 to $20.7 billion in 2013 and reflects a compound annual growth rate of 7%.

New York Community Bancorp's first quarter results indicate that the community bank is keeping the foot on the gas and continues to step up its efforts in its core business segment.

Source: New York Community Bancorp, Morgan Stanley Financials Conference June 10, 2014

Final assessment
A well-run community bank like New York Community Bancorp with superior credit risk selection skills, a disciplined underwriting approach and strong loan growth in its core business segment makes an attractive value proposition. With a track record in navigating difficult economic environments, New York Community Bancorp is clearly an interesting community bank investment.

Dividend stocks even better than NYCB
Our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3020348, ~/Articles/ArticleHandler.aspx, 8/28/2015 3:19:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Kingkarn Amjaroen

Kingkarn Amjaroen is a financial analyst taking an interest in the basic materials, retail and financial sector.

Today's Market

updated Moments ago Sponsored by:
DOW 16,615.08 -39.69 -0.24%
S&P 500 1,985.56 -2.10 -0.11%
NASD 4,817.69 4.98 0.10%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 3:02 PM
NYCB $17.63 Up +0.07 +0.40%
New York Community… CAPS Rating: ****