Magazine article American Banker

After Three-Plus Years, Some Vindication for M&T's Hudson City Deal

Magazine article American Banker

After Three-Plus Years, Some Vindication for M&T's Hudson City Deal

Article excerpt

Byline: Andy Peters

Good things come to those who wait. In the case of M&T Bank's slow-motion acquisition of Hudson City Bancorp, the payoff has been a nice improvement on the expense side of the ledger.

Hudson City's yearly expenses were about $280 million before Buffalo, N.Y.-based M&T bought it last fall after waiting more than three years for regulatory approval. M&T trimmed the annual spending rate at the old Hudson City operation to $230 million as of March 31, M&T Chief Financial Officer Rene Jones said Monday. That number is expected fall to between $190 million and $200 million by yearend.

"We've kept expenses relatively stable while absorbing Hudson City as well as funding our technology and other initiatives," Jones said during a conference call with analysts.

As a result, the $125 billion-asset M&T's efficiency ratio improved by 446 basis points in the first quarter compared with a year earlier, to 57%. About 280 of those basis points are directly attributable to wringing costs out of Hudson City, Jones said.

The deal also transformed M&T's loan book. Before Hudson City, one- to four-family residential mortgages made up about 13% of M&T's loan portfolio. Now, residential mortgages are the second-largest category at about 29% of the loan book. That is because Hudson City, a thrift in Paramus, N.J., did nearly all of its lending in residential mortgages.

Unlike Hudson City, M&T plans to sell off the majority of the residential mortgages that it originates, Jones said.

Meanwhile, M&T is trying wean the old Hudson City operation from its reliance on home lending. As the deal gave M&T its first exposure to the New York City region, M&T wants to use Hudson City as a platform to do more commercial loans there.

"You actually are creating a commercial bank while you're rightsizing a thrift," Jones said. …

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