Hudson City Bancorp this week reported that net income fell 11% in the fourth quarter as record low interest rates cut into yields it earns on mortgage-related assets — a condition the lender anticipates will continue throughout 2011.
The Paramus, N.J., thrift, whose primary business is mortgage lending – including correspondent purchases -- reported net income of $121.2 million compared to $136.6 million in 4Q10.
During the fourth quarter, Hudson City originated $395.6 million of first mortgage loans, compared with $426.8 million a year earlier. Consumer and other loans dropped 11% to $4.5 million from $5 million.
For the full year, net loans decreased 3% to $30.8 billion, while total deposits rose 2% to $25.2 billion.
The $61.2 billion asset thrift said its loan portfolio decreased primarily due to a high level of loan repayments spurred by low interest rates. Additionally, Hudson City said some customers chose to refinance their mortgages with other banks. In total, there was $7.26 billion of principal repayments in 2010, compared with $6.77 billion in 2009.
Hudson City has historically been a big buyer of mortgage loans. But purchase activity in recent quarters has been stifled by Fannie Mae and Freddie Mac, which have been buying up the majority of mortgages loans made in an effort to prop up the housing market. So lenders that would normally sell their loans to Hudson City have been selling to Fannie and Freddie instead. The bank said it expects the amount of future loan purchases to remain at lower levels, at least in the near term.
