Hudson City Bancorp—a large correspondent buyer of loans in the New York/New Jersey area—intends to limit its mortgage lending this year as it looks to diversify its mortgage-heavy balance sheet and improve its regulatory capital ratios.
Denis Salamone, the company's acting chairman and chief executive, said Wednesday that the $44.1-billion-asset company has little appetite for mortgages these days because of their low yields. Limiting its lending now will give the thrift "more flexibility to deploy capital when growth becomes more prudent and profitable," he said in a statement announcing Hudson City's 1Q results.
Hudson City reported a first-quarter profit of $73 million and earnings per share of 15 cents, in line with analysts’ expectations.
In last year's first quarter Hudson City lost $556 million after it extinguished $12.5 billion in structured putable borrowings and restructured its balance sheet. This reduced after-tax earnings by $649 million.
Loan production fell 30%, to $1.1 billion, from a year earlier and net interest income fell more than 8%, to $234.1 million, from a year earlier, as interest-earning assets and interest-bearing liabilities decreased. This included declines in first mortgage loans, consumer loans and mortgage-backed securities held for maturity and available for sale.
Noninterest income totaled $2.8 million, down 97% from a year earlier, as the company recorded no securities sales during the quarter. During the first quarter of 2011, the bank recorded $105.2 million in gains from the sale of $9 billion of securities, which was used to pay off borrowings under the restructuring plan.
Among residential funders, Hudson City ranks 37th nationwide, according to figures compiled by National Mortgage News and the Quarterly Data Report.
The company's provision for loan losses dropped more than 37%, to $25 million, from a year earlier while net charge-offs totaled $18.1 million, down 15% year over year.
