PARAMUS, N.J. ( TheStreet) -- Hudson City Bancorp (MI) on Wednesday reported third-quarter net income of $124.6 million, or 25 cents a share, missing the consensus earnings estimate of analysts polled by Thomson Reuters by a penny.
Shares were down 1% in early trading to $11.78.
Earnings declined from $142.6 million, or 29 cents a share, in the second quarter and $135.1 million, or 27 cents a share, during the third quarter of 2009. The thrift holding company's net interest margin - essentially the average yield on loans and investments less the average cost of deposits and borrowings - declined to 1.97% from 2.13% in the second quarter and 2.31% a year earlier, as it continued to suffer in the low interest rate environment.
CEO Ronald Hermance said the company believed "historically-low market interest rates coupled with the expected second round of quantitative easing by the Federal Reserve Board will continue to place pressure on our net interest margin for the remainder of 2010," adding that "Asset growth in this environment is just not prudent."Hudson City's net interest margin is low when compared to the second -quarter national aggregate margin of 3.76% reported by the Federal Deposit Insurance Corp., but the company's earnings have remained fairly strong, especially for the current environment. Hudson City's return on average assets (ROA) for the third quarter was 0.82%, declining from 0.93% for both the previous quarter and the third quarter of 2009. The return on average equity (ROE) was 8.86%, declining from 10.42% the previous quarter and 10.34% a year earlier. The efficiency ratio - noninterest expense divided by the sum of net interest income and noninterest income - was 20.27% for the third quarter. While third-quarter numbers weren't yet available for many of the largest bank and thrift holding companies, Hudson City's tax-adjusted second-quarter efficiency ratio of 20.13% was by far the lowest among the largest 50 U.S. bank and thrift holding companies. The next-best was Washington Federal (WFSL) with a second-quarter efficiency ratio of 31.48% followed by New York Community Bancorp (NYB) with a second-quarter efficiency ratio of 36.52%, according to SNL Financial. Hudson City Bancorp had total assets of $60.6 billion as of September 30. Nonperforming assets, including problem loans and repossessed real estate, totaled $877.7 million or 1.45% of total assets, increasing from 1.33% the previous quarter and 0.90% a year earlier. The third-quarter provision for loan losses was $50 million, the same level as the previous two quarters but increasing from $40 million in the third quarter of 2009. Loan loss reserves continued to increase, as net charge-offs - loan losses less recoveries - during the third quarter totaled $26.7 million.
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