New Jersey’s largest home-grown savings bank continued to shed loans and deposits in the fourth quarter as it continues to wait and wait to be acquired by a commercial bank from upstate New York.
Paramus-based Hudson City Bancorp Inc., which has been under contract to be bought by M&T Bank Corp. for more than two years, said earnings declined to $39.1 million in the fourth quarter from $45.8 million in the year-earlier period.
According to market news site Seeking Alpha, the per-share earnings of 8 cents beat Wall Street’s forecasts by 3 cents, but revenue declined by more than a third, a bigger drop than expected, despite nearly $46 million in gains from securities sales.
Hudson City shares fell 2.6% to $9.01 Wednesday and are down 11% so far this year.
Hudson City Chief Executive Officer Denis J. Salamone, who did not respond Wednesday to a request for comment, said last month that the company is still committed to the M&T deal, which has been delayed amid a federal regulator’s concerns about the strength of Buffalo-based M&T’s anti-money-laundering defenses.
The companies are waiting for the Federal Reserve Board of Governors to approve M&T’s merger application. Shares of M&T, which said earlier this month that it earned $278 million, compared with $221 million in the year-earlier period, slipped 2.1% Wednesday to $113.72.
The deadline to complete the largest bank deal involving two U.S. institutions since the financial crisis has been pushed back three times by the banks’ mutual agreement as M&T has said it is continuing to sort out regulatory compliance issues. The transaction was valued at $3.7 billion when first announced in August 2012.
More than 300 jobs at Hudson City’s Paramus offices are expected to be jettisoned by M&T to cut costs once the merger is finalized. M&T agreed last year as part of the deadline extension agreement to offer Hudson City workers more severance pay than originally planned, although details of the plan were not revealed.
Rumors have circulated that surviving administration and operations jobs may be moved from Paramus to Saddle Brook, where M&T has a loan office.
During 2014, mortgage lender Hudson City purchased $86 million in commercial real estate loans including loan participations, part of a previously disclosed shift in strategy to diversify its lending business, the bank said. The strategy shift will likely be accelerated if the acquisition by the commercial lender is completed.
Meanwhile, Hudson City’s earnings report balance sheet keeps getting smaller and smaller.
The bank said Wednesday its deposits total was less than $20 billion. Deposits have not been that low since early in 2009.
The loan total of $21.56 billion was the lowest since March 2007.
The bank attributed the decline in deposits to a strategic decision to not try to match its more aggressive competitors’ rates, with profit margins as slim as they are. The bank’s net interest margin narrowed to 1.01% in the most recent quarter from 1.47% a year earlier
Hudson City attributed its decline in loans in part to its exit a year ago from the reduced documentation loan niche. Reduced documentation loans, sometimes called “low-doc,” or, more derisively, “liar” loans, had accounted for 22% of Hudson City’s loan production in 2013, the lender said. The exit was prompted by new mortgage lending rules set last year by the Consumer Financial Protection Bureau.
The agency’s qualified mortgage rules incentivized banks to make would-be borrowers show they have the ability to repay. The company said Wednesday in its earnings report that its low-doc loans were made to borrowers “with acceptable credit and larger down payments,” and that its low-doc loss ratios are “similar to our full documentation portfolio.”
Still, Hudson City, which has a high concentration of mortgage lending in New Jersey, a high-foreclosure state, has been dealing with more than its fair share of problem loans. The lender’s nonperforming loans did decline last year, however, by $197.2 million to $852 million.
The ratio of nonperforming, or long past due loans, to total loans was 4% at year-end, down from 4.4% a year earlier. The comparable rate for all U.S. banks and savings institutions combined was 2.11% as of Sept. 30, according to the Federal Deposit Insurance Corp.
Nonperformers are defined as loans which are no longer accruing interest plus loans still accruing interest but are past due by 90 days or more.
Part of the reason for Hudson City’s decline in problem loans was the sale in the third quarter of more than $112 million in nonperforming Federal Housing Administration-guaranteed loans.
©2015 The Record (Hackensack, N.J.). Distributed by Tribune Content Agency
