8 May, 2024
New York Community was cheapest US bank at end of April
By Robert Clark
For the second consecutive month, New York Community Bancorp Inc. was the least expensive bank in S&P Global Market Intelligence's analysis. As of April 30, it traded at 30.0% of adjusted tangible book value (TBV), nearly unchanged from 29.9% at the end of March.
Hicksville, NY-based New York Community reported a net loss to common shareholders of $335.0 million in the first quarter. The bank's new leadership team also looked ahead and disclosed financial goals for the next three years in a Form 8-K filing. The base forecast is a return to profitability for full year 2025, followed by an annualized run rate in the fourth quarter of 2026 of diluted EPS from 65 cents to 75 cents, net interest margin from 2.8% to 3.0% and return on average assets (ROAA) from 0.95% to 1.00%. Analyst reaction was mixed.
Like most of the industry, New York Community traded down in April, with a total return of negative 17.7%. Just 16 of the 206 banks in the analysis recorded a positive return in April, highlighted by two double-digit percentage gainers: Denver-based Heartland Financial USA Inc., up 19.8%, and Hammond, La.-based First Guaranty Bancshares Inc., up 10.6%. Kansas City, Mo.-based UMB Financial Corp. announced the acquisition of Heartland April 29.
S&P Global Market Intelligence analyzed US banks trading on the Nasdaq, NYSE or NYSE American with total assets of greater than $3 billion. The analysis excludes banks in the mutual holding company ownership structure, other operating subsidiaries and banks with unavailable data for price/HTM and credit adjusted TBV.
HTM and credit-adjusted TBV is calculated as the sum of tangible common equity, unrealized gain or loss from held-to-maturity 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
Blue Ridge Bankshares Inc., which had been ranked No. 2 by lowest valuation at the end of March, was not part of the April analysis because of unavailable financial data as of May 1. The Charlottesville, Va.-based bank completed a $150 million capital raise April 3.
First Foundation Inc., previously the third-cheapest bank, moved to the No. 2 position as of April 30. The Dallas-based bank was the worst market performer in the analysis, with a monthly return of negative 27.4%. Margin compression has crippled earnings, with First Foundation barely squeaking out a profit in the first quarter. The bank's reported NIM was 1.17%, down 19 basis points sequentially and 66 basis points year over year. In its first-quarter earnings call, First Foundation CFO James Britton said the bank is not prepared to provide NIM guidance but believes that net interest income has bottomed out.
Within the bottom-20 valuation group, other substandard market performers included McLean, Va.-based Primis Financial Corp., which is noncompliant with a Nasdaq listing rule; Topeka, Kan.-based Capitol Federal Financial Inc., which is one of the largest banks under $10 billion in total assets; and Bethesda, Md.-based Eagle Bancorp Inc., which reported a net loss in the first quarter because of a higher credit loss provision tied to commercial real estate (CRE) office loans. All three banks had a total return of approximately negative 20%.
The third-lowest valued bank, Seattle-based HomeStreet Inc., is in a pending merger with Denver-based FirstSun Capital Bancorp. The deal was announced Jan. 16, but on April 30 the companies disclosed an amended merger agreement, which includes a lower exchange ratio for HomeStreet shareholders.
Los Angeles-based Hope Bancorp Inc., ranked No. 13, announced the acquisition of Honolulu-based Territorial Bancorp Inc. April 29. The deal brings Hope Bancorp into a new market area and diversifies its loan portfolio.
The No. 20 bank, Miami Lakes, Fla.-based BankUnited Inc., reported a spike in criticized and classified CRE loans, much of it coming from the office sector. The proportion of total office loans that were criticized and classified rose to 16.3% March 31 from 8.3% at year-end 2023.
Most expensive banks
Abilene, Texas-based First Financial Bankshares Inc. traded at 343.4% of adjusted TBV as of April 30, representing the highest ratio in the analysis. Additionally, that valuation was 15.3 percentage points lower than the bank's basic TBV valuation because its loss reserve was more than twice as high as its nonperforming assets plus loans 90 or more days past due but still accruing interest. First Financial does not hold any held-to-maturity (HTM) securities, so there is no other adjustment to the valuation.
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– Access S&P Global Market Intelligence's calculations for price-to-adjusted tangible book value as of April 30, 2024 |
On the other hand, Honolulu-based Bank of Hawaii Corp. and Bank of America Corp. are carrying a substantial amount of underwater HTM securities. The tax-adjusted HTM fair value marks inflate their valuations by more than 100 percentage points. Other banks with large HTM marks include Houston-based Prosperity Bancshares Inc. and Honolulu-based First Hawaiian Inc.
The top two banks by return on average assets for the first quarter ranked in the top 20 by highest valuation: No. 5 was Pathward Financial Inc., based in Sioux Falls, SD, and No. 19 was The Bancorp Inc., based in Wilmington, Del. Both institutions are community banks that offer banking as a service.
