Hudson City Bancorp Inc.
) reported its first-quarter 2013 operating earnings of 10 cents
per share, a penny below the Zacks Consensus Estimate. Moreover,
this compares unfavorably with the year-ago earnings of 15 cents
AMER NATL BNKSH (AMNB): Free Stock Analysis
CRESCENT FINL (CRFN): Free Stock Analysis
HUDSON CITY BCP (HCBK): Free Stock Analysis
M&T BANK CORP (MTB): Free Stock Analysis
To read this article on Zacks.com click here.
The lower-than-expected results at Hudson City mainly came on the
back of a fall in revenue due to declining net interest and
non-interest income. However, lower expenses and a strong capital
position were the tailwinds for the quarter. Lower provision for
loan losses also came as a positive.
Hudson City's net income for the quarter came in at 47.9 million,
compared with $73.0 million in the prior-year quarter.
Quarter in Detail
Hudson City's total revenue was $179.9 million, down 24.1% from
the year-ago quarter. Further, revenues were lower than the Zacks
Consensus Estimate of $192.0 million.
Hudson City's net interest income decreased 24.2% year over year
to $177.4 million. The decrease in net interest income reflects
the decline in the average balance of interest-earning assets and
interest-bearing liabilities and the continued low interest-rate
environment. Net interest margin came in at 1.78%, down from
2.15% in the year-ago quarter.
Hudson City's non-interest income came in at $2.5 million, down
10.7% year over year, reflecting a decrease in service charges
and other income.
Moreover, total non-interest expense at Hudson City waned 11.3%
from the prior-year quarter to $81.3 million. The decline was
primarily driven by lower compensation and employee benefit
costs, partially mitigated by an increase in other expenses.
However, the efficiency ratio increased to 45.12% from 38.66% in
the year-ago quarter. The increase in efficiency ratio indicates
a decline in profitability.
Credit metrics displayed mixed results in the quarter.
Non-performing loans reached $1.14 billion as of Mar 31, 2013,
down 1.7% sequentially but up 27.3% year over year. The ratio of
non-performing loans to total loans was 4.35% as of Mar 31, 2013,
up from 4.29% in the prior quarter and 3.71% in the year-ago
The ratio of nonperforming assets to total assets stood at 2.98%
in the reported quarter, in line with the prior quarter and up
from 2.49% in the comparable quarter last year.
However, the ratio of net charge-offs to average loans came in at
0.32%, above 0.21% reported in the prior quarter and 0.25%
reported in the year-ago quarter.
Provision for loan losses amounted to $20 million, down 20.0%
both sequentially and on a year-over-year basis. The
year-over-year decrease in provision for loan losses was
primarily due to the stabilization of home prices, a smaller size
of the loan portfolio and a decline in the amount of total
Hudson City's capital ratios remained strong during the quarter.
The bank's Tier 1 leverage capital ratio advanced to 10.20% as of
Mar 31, 2013 from 9.17% as of Mar 31, 2012. Equity to total
assets was 11.69% compared with 10.46% as of Mar 31, 2012.
Concurrent with the earnings release, Hudson City declared a
quarterly cash dividend of 4 cents per share. The dividend will
be paid on May 30 to shareholders of record on May 14.
An unfavorable interest-rate environment, sluggish economic
recovery and uncertainty surrounding the new and anticipated
regulations are likely to be the headwinds for Hudson City.
However, in Aug 2012,
M&T Bank Corporation
) agreed to takeover Hudson City in a cash-and-stock deal. The
deal is expected to close upon the receipt of all essential
regulatory and shareholder approvals and satisfaction of all
Amid a low interest-rate environment and despite restructuring,
Hudson City's business model was encountering challenges in its
growth trajectory. Although it announced some initiatives to
diversify in 2012, it did not have adequate flexibility with
respect to its balance sheet. Hence, this deal is a strategic fit
for Hudson City.
The deal would combine Hudson City's retail network with M&T
Bank's full service commercial banking suite and help expand the
premier community banking franchise in eastern U.S. This will
also provide M&T bank the fourth-largest deposit share in
N.J. Hence, the shareholders can benefit from the enhanced scale
of business of the combined entity.
Hudson City currently carries a Zacks Rank #3 (Hold). Other
stocks in the same sector that are performing well and worth
American National Bankshares Inc.
Crescent Financial Bancshares, Inc.
). Both these stocks carry a Zacks Rank #1 (Strong Buy).