The popular protesting that started last year haled from New York City. Thousands of people turned out to protest what they called the real criminals. Big banks like Bank of America (BAC) and Chase Bank, among others, were maligned as the evil corporations that crashed the economy and then got a huge bailout in tax dollars. As a result, in the New York area the popularity of other banks grew. The rally cry started with “move your money” in the hopes that enough people would ditch the bad-guy banks for local better-guys – banks that really cared about the people that they served.
Bank of America doesn’t want you to know this, but it worked. A lot of people closed their accounts with bigger banks, and the local banks around the tri-state area saw an up-tick in business. But it has to be a big secret – nobody wants you to think that those protesters have any power, especially not over the finances of too-big-to-fail banks like Bank of America and Chase Bank. And the protesting is not over. Big plans are in the works for this coming spring. When the weather gets better, we’re going to see more activity that will benefit New York Community Bank (HAVNP).
New York Community Bank bounced back from the 2008 downfall better than many of its competitors. Net income in 2007 was less than $300 million, in 2008 it dropped to less than $100 million. But in 2009, they recorded $400 million in net profits, almost $550 million in 2010, and just under $500 million in 2011. Not too shabby. They can demonstrate the kind of stability in earnings that serious investors look for, and they are getting some attention for their success.
New York Community Bank is not a huge company, and the history is fairly short. It was founded in 1993 but has grown quickly over the last two decades, numbering 241 branches in five states. They have branches all across the tri-state area, a total of 34 branches just in New York City, Westchester County, and on Long Island, and claim to be the 21st largest bank in the country. Atlantic Bank is one of their brands, as are local branch brands like Queens County Savings Bank, Richmond County Savings Bank and Garden State Community Bank. They even have branches in Ohio, Florida and Arizona.
Their size, location and politics lined them up perfectly to be a better alternative to the big bad banks. They specialize in multi-family loans in New York City, and they even claim to emphasize apartment buildings that feature below-market rents. Clearly, New York Community Bank is a good guy.
The top reasons to invest are obvious ones. First, New York Community Bank has demonstrated that they have consistent and resilient earnings power, as mentioned above. Second, they seem to have a competitive advantage in their ability to collect a respectable return on equity and debt.
They outperform their closest competitors in this particular category. Hudson City Bankcorp (HCBK) has seen a 15% negative return on equity with a 4% average return, with a 9.9 times leverage ratio, and their last quarter numbers are not encouraging at all. New York Community Bank has a five-year average return on equity of 7%, with a 9% return on equity, with just a 7.6 times leverage ratio. First Niagara Financial Group (FNFG) and People’s United Financial (PBCT) both show at 5% or less, with 6.8 times and 5.3 times leverage ratio, respectively. First Niagara has been showing some potential growth, but they’ve also been hit with forced sales due to the late 2011 anti-trust agreement with the U.S. Justice Dept. People’s is looking at dim performance relative to estimates, and their investment strategies do not hold up the way New York Community’s have.
And the last Buffett categories? Well, Buffett likes secure and dependable management, without a lot of shifting and posturing. The CEO of New York Community Bank has been in his position since 1993 when the bank was founded. Buffett is also wary of anything tech and has been in banks for some time. He is both a Wells Fargo and Bank of America preferred shares investor. Naturally, technology didn’t take them down – banking itself did the job.
New York Community Bank is a relatively safe and steady stock to buy. They are currently hovering between $12 and $13 per share, at almost 3.5 million shares. On the whole, they may look like any other medium-sized bank, chopping away and managing to convert their efforts into profits. But I think that they are poised to do especially well in 2012.
If the fall of 2011 was any indicator at all, we are going to see a fitful spring and summer in the world of the big banks, which means small and medium-sized banks, especially in the New York area, are going to benefit. New York Community Bank is a good investment, and the stock price is only going to go up over the next few months.
About the author:I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.