Hudson City Bancorp, Inc. (HCBK), the holding company for Hudson City Savings Bank, reported Wednesday a rise in third-quarter profit, helped by higher interest margins and a 27.6% growth in net interest income. On a per share basis, earnings came in above Street view. The board also declared a quarterly cash dividend.
The Paramus, New Jersey-based company's net income for the third quarter increased to $135.09 million or $0.27 per share from $121.91 million or $0.25 per share in the previous year. On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.26 per share for the quarter. Analysts' estimates typically exclude special items.
In its second quarter, the company's net income rose 15.5% to $127.92 million from $110.70 million in the same quarter a year ago. On a per share basis, second quarter earnings were up 18.2% at $0.26 per share, compared to $0.22 per share in the year-earlier quarter.
Net interest income for the third quarter grew 27.6% to $325.46 million from $255.08 million in the prior-year quarter. Total non-interest income was $2.51 million, compared to $2.18 million in the year earlier. Nine analysts had a consensus revenue estimate of $316.06 million for the quarter.
Net interest margin for the quarter increased 22 basis points to 2.3% from 2.08% in the prior-year quarter. During the period, net interest rate spread increased 32 basis points to 2.02%, compared to 1.7% in 2008.
Hudson said it continued to increase retail loan production during the quarter by originating $1.7 billion of mortgage loans. The company stated that much of this loan production is due to the refinancing of mortgages from other banks, which resulted in increased mortgage prepayments for Hudson. Subsequently, the company grew its loan portfolio by $385.8 million during the quarter.
According to the company, loan originations have increased primarily due to its competitive rates and an increase in mortgage refinancing caused by market interest rates that are at near-historic lows.
Total interest expense for the quarter decreased to $418.71 million from $426.24 million reported in 2008. The company attributes the decline in interest expense to a 61 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.19% for the quarter, compared with 3.80% in the preceding year.
Total non-interest expense was $62.92 million, up from $49.42 million in the prior year.
Charge-offs for the third quarter was $13.2 million, which consists of 148 loans. The company noted that these charge-offs include $12.5 million resulted from revaluation process on non-performing loans.
Provision for loan losses were $40 million, up from $5 million a year earlier, due primarily to an increase in non-performing loans and rising levels of unemployment.
For the nine-month period, the company's net income increased to $390.67 million or $0.80 per share from $321.28 million or $0.65 per share in the same period last year. Net interest income for the period grew to $911.68 million from $681.52 million a year ago. Total non-interest income surged to $31.39 million from $6.49 million in the preceding year.
Ronald Hermance, Jr., chairman, president and chief executive officer said, "These results are remarkable considering the economic and regulatory turmoil surrounding us and the headwinds provided by an $82.0 million increase in our provision for loan losses and a $21.1 million FDIC special assessment for the first nine months of 2009. We have consistently achieved earnings growth every quarter since the fourth quarter of 2006."
The company noted that housing prices have stabilized in many parts of the country, including in the New York metropolitan area, but anticipates that it will take some time for housing inventories, especially those that are the result of foreclosures, to decrease so that the housing markets can return to a more traditional state.
"We believe that Hudson City is well-positioned to navigate these difficult times. Economic conditions, legislative changes and the regulatory environment all pose significant challenges. However, our simple, consumer-oriented, common-sense approach to banking is the reason Hudson City continues to thrive," added Hermance.
In addition, the board declared a quarterly cash dividend of $0.15 per share, to shareholders of record on November 6, 2009, payable on November 27.
Amongst others in the industry, Bank of America Corp. (BAC), last Friday reported a loss for the third quarter, that reflected higher provision for credit losses and a charge to terminate the bank's asset guarantee term sheet with the U.S. government. However, the bank's revenues were higher than last year, driven by noninterest income growth. The company's third-quarter net loss was $1.00 billion, compared to net income of $1.18 billion in the same quarter last year. Net loss applicable to common shareholders for the quarter was $2.24 billion compared to net income of $704 million in the year-ago quarter. On a per-share basis, net loss was $0.26 compared to net earnings of $0.15 last year. The bank's total revenue, net of interest expense on a fully taxable-equivalent basis, rose 32% to $26.4 billion from $19.9 billion a year ago.
Another peer, Citigroup Inc. (C) last Thursday reported a third-quarter net profit of $101 million, compared to a net loss of $2.815 billion in the year ago-quarter. Net loss available to common shareholders widened to $3.242 billion from last year's $2.934 billion. Revenues for the third quarter were $20.39 billion, up from $16.258 billion in the prior year quarter.
JPMorgan Chase & Co. (JPM) reported third-quarter net earnings of $3.59 billion or $0.82 per share, compared with $527 million or $0.09 per share last year. Income before extraordinary gain was $3.51 billion, compared with a loss of $54 million in the third quarter of 2008. JPMorgan's quarterly revenues were $26.62 billion, up 81% from $14.74 billion in the prior-year quarter. On a managed basis, which is a non-GAAP measure, revenues grew to $28.78 billion from $16.09 billion last year.
HCBK is currently trading at $12.99, down $0.12 or 0.91%, on a volume of 4.51 million shares. In the past 52 weeks, the shares have been trading between $7.46 and $18.93 on the Nasdaq.
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