Hudson City Bancorp
The quarter in detail
The loss for this quarter was almost inevitable thanks to one-time balance sheet restructuring charges taken by the bank. This restructuring reduced the bank's after-tax earnings by $649.3 million. Net interest income decreased to $256.4 million in this quarter, compared to $331.1 million in the corresponding quarter last year.
Now I would like to pay attention to some metrics that remained upbeat and project a positive outlook.
The company's provision for loan losses improved to $40.0 million, from $45.0 million in the first quarter of 2010 -- a sign that credit quality is slowly recovering. Noninterest income amounted to $105.2 million in the quarter, as compared to $33.0 million in the year-ago period. Deposits increased by $288.0 million, while borrowings decreased $7.65 billion on a sequential-quarter basis. Hudson's Tier 1 leverage capital also increased to 8.12% in this quarter, as compared to 7.95% in the last quarter. Strong signals all around.
Low market interest rates fueled loan repayments as net loans decreased by $591.6 million during the quarter. Nonperforming loans increased, but by a declining growth rate of only 1.8% -- the smallest increase in almost three years. Charge-offs also declined, to $21.3 million from $24.7 million in the preceding quarter.
Credit quality is improving, albeit slowly, and this is a good sign for the bank. Improving credit quality seems to be the general trend during first-quarter results across banks. From small banks such as KeyCorp
The Foolish bottom line
As I mentioned in a prior article, the now-completed restructuring will reduce Hudson's high interest on borrowings. With lower interest expenses and no further restructuring expenses, Hudson should revert to its old habit of making profits within a quarter or two. In other words, Hudson entered the great recession as a caterpillar; it's now looking more and more like a butterfly emerging from a cocoon. Investors should pay attention.
To stay up-to-speed with Foolish commentary and analysis on Hudson City, or any other company that interests you, click here to add it to your watchlist.