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A run-in with the government has rattled Hudson City Bancorp — and Ronald Hermance's outlook on its bread-and-butter product: 30-year-fixed rate mortgages.
March 29 -
Hudson City Bancorp said it completed a "restructuring" of its balance sheet that reduced its high-cost borrowings and should allow for "increased future net interest income."
March 28 -
Two big questions face Hudson City Bancorp as it copes with a surprising wrist-slap from regulators: What will it cost to appease the OTS, and is its rich dividend threatened?
March 3 -
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April 29
At least part of the price tag is in for Hudson City Bancorp Inc.'s spat with regulators: 7 cents a share.
The bank holding company said Wednesday it lowered its quarterly dividend to 8 cents a share from 15 cents, which will save the company about $138.4 million a year, based on the quarter-end shares outstanding. That is a 47% reduction in the dividend.
"We are committed to shareholder value and believe that the current dividend level represents a prudent capital management decision," said Chairman and Chief Executive Ronald E. Hermance Jr.
The Paramus, N.J., thrift announced a costly overhaul of its balance sheet in March in response to pressure from regulators to lower interest rate risk. Hudson City disclosed earlier that month that it expected to receive a memorandum of understanding from the OTS. Analysts had predicted the company would cut its dividend as it sold securities and paid prepayment fees to reduce borrowings.
Also on Wednesday, Hudson City said it Hudson City Bancorp Inc. swung to a first-quarter loss on a 23% drop in net interest income.
Hudson City has continued to struggle with nonperforming loans and historically low interest rates. Unlike many banks, it hasn't been able to improve year-on-year results by setting aside less to cover potential credit losses.
The company reported a loss of $555.7 million, or $1.13 a share, compared with a profit of $148.9 million, or 30 cents, a year earlier. Analysts polled by Thomson Reuters had most recently forecast a loss of $1.14 a share.
Net interest income dropped to $256.4 million, primarily due to the low market-interest rates that resulted in lower yields on mortgage-related interest-earning assets as customers refinanced to lower mortgage rates and new loans and asset purchases were at the current low market interest rates.
The provision for loan losses was $40 million, down from $50 million a year earlier and $45 million in the prior quarter. Net charge-offs, loans on which banks don't expect to collect, were 0.28% of average loans, compared with 0.3% in the 2010 periods. Nonperforming loans, those expected to go bad, were 2.92% of total loans, down from 2.82% at Dec. 31.
