This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Moody's Harshes M&T's Deal Mellow: Street Whispers

Stocks in this article: HCBK MTB

Taking a look at Hudson City's credit quality, since Moody's is questioning "M&T's estimated credit mark of 1.5%" on the acquired mortgage loans, Hudson City's June numbers make the case that M&T is being conservative in its loss estimate.

Hudson City reported $1.1 billion in total nonperforming loans as of June 30, or 3.88% of total loans. While that would appear to be a high number on the surface, Hudson City has had a very low rate of annualized net charge-offs (loan losses less recoveries) to average loans, ranging from 0.25% to 0.30% over the past five quarters. That is a key figure, and quite a low loss rate.

Another thing to keep in mind is that Hudson City's New Jersey and New York market footprint was less affected by the real estate bubble and collapse than other areas of the country. Considering Hudson City's low loss track record and the much smaller home price collapse in its market footprint, it would appear that M&T would have to really mess up Hudson City's loss mitigation efforts in order to see a 1.5% loss rate on the acquired mortgages.

Besides, the Office of the Comptroller of the Currency -- now the primary regulator of Hudson City's main subsidiary, Hudson City Savings Bank, after taking over from the old Office of Thrift Supervision -- is known for taking a particularly strict view on identifying problem credits and recognizing loan losses.

Moody's also said it would "consider M&T's capital management plans post-acquisition," as the acquiring bank's "capital position has traditionally been managed to lower levels than similarly-rated peers," which "has been a credit challenge especially considering M&T's sizable concentration in commercial real estate."

That's an interesting position for Moody's to take, because M&T said on Monday that the merger would be "accretive to the combined company's capital ratios, capital generation and tangible book value per share, as well as its GAAP and operating earnings per share."

During a conference call with analysts, M&T CFO Rene Jones said that for the combined companies "the pro forma tier 1 common ratio is estimated to improve by roughly 30 to 40 basis points compared to M&T's stand-alone levels that we would have experienced had we not announced the transaction with an estimated range of 8.25% to 8.50% at closing. This is some 115 to 135 basis points above the level in existence at the end of the most recent quarter ended the 6-30-2012."

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs