News Column

Hudson City earnings slip, but they beat estimates

July 24, 2014

By Richard Newman, The Record (Hackensack, N.J.)

July 24--Hudson City Bancorp Inc., the largest bank based in New Jersey, reported lower first-quarter earnings amid deliberate declines in lending and deposit gathering as it works on resolving problem loans and waits to be acquired by M&T Bank Corp.

The Paramus-based holding company for Hudson City Savings Bank reported net income of $39.2 million, or 8 cents a share, compared with $48.7 million, or 10 cents, in the year-earlier period. The results beat Wall Street's expectations by a cent, according to Seeking Alpha, a crowdsourced content service for financial markets.

Hudson City, which agreed in 2012 to be acquired by Buffalo-based M&T, by its own admission has not been competing very aggressively for home loans or deposits, preferring to reduce its size as well as its exposure to possible declines in the value of its assets, should interest rates rise rapidly.

Shares were unchanged Wednesday at $9.76, but the mortgage lender's earnings report shows the company continues to struggle with an elevated level of bad loans, more than six years after the housing market crash.

Non-performing loans, on which payments are 90 or more days past due or are no longer accruing interest, decreased in the second quarter but remain at a comparatively high level, at $1.01 billion as of the end of June 30, compared with $1.05 billion at the end of December.

Many of Hudson City's home loans are in New Jersey, which has the highest foreclosure rate in the country. The bank reported Wednesday having 228 repossessed properties on its books as of June 30, valued at $77.8 million, and more than a third were under contract for sale.

Hudson City, which did not respond to a request to comment for this article, seems optimistic about its prospects for avoiding serious losses on problem loans. No funds were added during the first half of the year to a reserve to cover future loan losses, the company said. That decision reflects "improving home prices and economic conditions and decreases in total delinquent loans and total loans," the lender said.

Nonetheless, the ratio of Hudson City's non-performing loans to total loans remained well above industry norms at 4.35 percent as of June 30, up from 4.32 percent at the end of March. Non-performing loans at all U.S. banks represented 2.46 percent of total loans as of March 31, the lowest percentage since the third quarter of 2008, according to the Federal Deposit Insurance Corp.

Industry observers have been saying that the M&T deal will likely be completed this year, based in part on the Federal Reserve Bank of New York's decision to impose a relatively mild enforcement action on M&T over its anti-money-laundering issues, a so-called written agreement instead of a more serious "consent order."

Analyst Bill Carcache, of Nomura Securities, which initiated coverage of M&T this week, agrees.

M&T "will receive regulatory approval to proceed with the acquisition by the end of this year," Carcache said.

Based in part on that belief, Carcache gave M&T a "buy" rating and a price target of $146 a share.

Hudson City said Wednesday it has scheduled its annual shareholders meeting for Dec. 16 to meet a Nasdaq requirement that the meeting be held before the end of the year _ in case the M&T deal does not close by then.

If the closing of the merger occurs before Dec. 16, the meeting will not be held.

M&T has said the merger will result in the elimination of 384 jobs, mostly at Hudson City's administration and operations offices in Paramus.

M&T, which has had a commercial-lending office in Saddle Brook for a number of years, has no retail bank branches in New Jersey, but will have 97 after the merger is completed, as well as 38 additional offices in New York and Connecticut.


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Source: Record (Hackensack, NJ)

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