Hudson City Scales Back Mortgage Lending

Hudson City Bancorp (HCBK) of Paramus, N.J., intends to limit its mortgage lending this year as it looks to diversify its mortgage-heavy balance sheet and improve its regulatory capital ratios.

Denis J. Salamone, the company's acting chairman and chief executive, said Wednesday that the $44.1 billion-asset company has little appetite for mortgages these days because of their low yields. Limiting its lending now will give the bank "more flexibility to deploy capital when growth becomes more prudent and profitable," he said in a news release announcing Hudson City's first quarter-earnings.

Hudson City reported a first-quarter profit of $73 million and earnings per share of 15 cents, in line with estimates of analysts polled by Thomson Reuters.

In last year's first quarter Hudson City lost $555.7 million after it extinguished $12.5 billion in structured putable borrowings and restructured its balance sheet. This reduced after-tax earnings by $649.3 million.

Loan production fell 30%, to $1.1 billion, from a year earlier and net interest income fell more than 8%, to $234.1 million, from a year earlier, as interest-earning assets and interest-bearing liabilities decreased. This included declines in first mortgage loans, consumer loans and mortgage-backed securities held for maturity and available for sale.

Noninterest income totaled $2.8 million, down 97% from a year earlier, as the company recorded no securities sales during the quarter. During the first quarter of 2011, the bank recorded $105.2 million in gains from the sale of $9 billion of securities, which was used to pay off borrowings under the restructuring plan.

The company's provision for loan losses dropped more than 37%, to $25 million, from a year earlier while net chargeoffs totaled $18.1 million, down 15% year over year.

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