Hudson City Bancorp, Inc.
) reported yet another impressive quarter as it came out with
first-quarter 2014 earnings of 9 cents per share, beating the
Zacks Consensus Estimate by a penny. However, this compares
unfavorably with the prior-year quarter figure of 10 cents.
Shares of Hudson City increased marginally in the morning trade,
indicating that investors have started considering the results
with optimism. However, the price reaction during the full
trading session will give a fair idea whether Hudson City has
been able to meet market expectations.
Results were primarily supported by increased non-interest
income, lower expenses and no provision for loan losses. A strong
capital position and credit quality were also the tailwinds for
the quarter. However, a decline in the top line due to lower net
interest income was on the flipside.
Hudson City's net income for the quarter came in at $42.5
million, compared with $47.9 million in the prior-year quarter.
Quarter in Detail
The company reported total revenue (net of interest expense) of
$150.1 million in the quarter, surpassing the Zacks Consensus
Estimate of $137.0 million. However, the reported figure was down
16.6% from the year-ago quarter.
Hudson City's net interest income decreased 25.4% year over year
to $132.3 million in the quarter. The fall was mainly due to the
overall decline in the average balance of interest-earning assets
and interest-bearing liabilities and the persistent low interest
rate environment. Net interest margin came in at 1.41%, down from
1.80% in the year-ago quarter.
Non-interest income came in at $17.8 million, including $15.9
million gain on the sale of mortgage-backed securities.
Non-interest income in the prior-year quarter stood at $2.5
million and there were no other gain to support.
Total non-interest expense waned 1.9% from the prior-year quarter
to $79.7 million. The decline was primarily due to lower federal
deposit insurance expense, partially offset by a rise in other
non-interest expense and compensation costs.
The efficiency ratio increased to 55.11% from 45.12% in the
year-ago quarter. An increase in the efficiency ratio indicates
decline in profitability.
Credit metrics continued to improve as reflected in the reported
quarter with allowance for loan losses declining 11.7% year over
year to $265.7 million. Nonperforming loans declined to $1.02
billion as of Mar 31, 2014, down 9.7% year over year.
Further, the reported quarter witnessed no provision for loan
losses similar to the prior quarter, but compared with $20.0
million in the year-ago quarter. The year-over-year change was
primarily due to a fall in total delinquent loans and total loans
and improving housing market.
Nonperforming assets decreased 7.9% year over year to $1.11
billion. Further, net charge-offs stood at $10.4 million,
significantly down 51.2% year over year.
Hudson City's capital ratios remained strong during the quarter.
The bank's Tier 1 leverage capital ratio advanced to 11.03% as of
Mar 31, 2014 from 10.20% as Mar 31, 2013. Equity to total assets
was 12.51%, up from 11.69% as of Mar 31, 2013. Total risk-based
capital ratio of the bank was 26.10%, up from 22.77% in the
Hudson City started 2014 on a positive note, reflecting its
efforts towards achieving growth and profitability. Though the
company has been struggling with its net interest income due to a
low interest rate environment, we remain encouraged owing to its
scope to capitalize on non-interest revenue sources.
Further, we expect continuation of balance sheet restructuring
and the gradual implementation of some initiatives of its
Strategic Plan (announced in 2012), particularly the ongoing
launch of commercial real estate lending and secondary mortgage
market operations, would favorably support its results in the
upcoming quarters to a great extent.
However, owing to an unfavorable interest-rate environment,
mounting levels of prepayments on mortgage assets, sluggish
economic recovery and uncertainty surrounding the new and
anticipated regulations are likely to be headwinds for Hudson
City. Also, we remain cautious over ambiguity regarding the
materialization of the proposed merger with
M&T Bank Corp.
Hudson City currently carries a Zacks Rank #3 (Hold).
Performance of Other Savings & Loan
First Niagara Financial Group Inc.
) reported first-quarter 2014 operating earnings of 17 cents per
share, in line with the Zacks Consensus Estimate as well as the
Washington Federal Inc.
) fiscal second-quarter 2014 earnings of 38 cents per share came
in line with the Zacks Consensus Estimate.
FIRST NIAGARA (FNFG): Free Stock Analysis
HUDSON CITY BCP (HCBK): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
WASH FEDL INC (WAFD): Free Stock Analysis
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