Hudson United Bancorp Acts to Restructure its Balance Sheet
MAHWAH, N.J.--(BUSINESS WIRE)--July 6, 2000--Hudson United Bancorp (NYSE: HU) today announced that its Board of Directors has approved a restructuring of its balance sheet designed to improve earnings per share, performance ratios and reduce the Company's sensitivity to rising interest rates. Excluding the charge associated with this restructuring (expected to be approximately $42 million after tax) the Company expects that its earnings per share for the second quarter will be within the range of analyst expectations which the Company believes range from $.61 to $.63.
The initiative involves the sale of approximately $2 billion of the Company's investment securities which have been carried as available for sale, with the majority of the proceeds to be used to pay down short-term borrowings. The Company expects to experience a loss in the second quarter of 2000 as these securities, which are predominantly mortgage related, will be transferred to the held for sale category effective June 30, 2000 with losses realized at that date. The previously unrealized losses were already reflected in the Company's capital under the caption. Accumulated other comprehensive income (loss).
The repositioning of Hudson's balance sheet is intended to enhance asset and liability mixes by divesting the Company of some of its lowest yielding assets and repaying some of its highest costing liabilities, which will increase the company's net interest margin, return on assets, return on equity and earnings per share while also reducing the Company's exposure to rising interest rates.
Hudson had delayed implementing a deleveraging strategy during the pendency of its now terminated agreement to merge with Dime Bancorp. Hudson's decision to implement the strategy at this time is based, in part, on a desire to increase capital ratios so that the Company can repurchase more of its shares, which the Hudson Board believes are currently undervalued by the market. The Board has authorized the repurchase of up to 20% of the Company's outstanding shares. This stock buyback authorization allows the Company to purchase up to 10 million shares (at March 31, 2000, there were 51 million shares outstanding). Purchases may be made from time to time through June 30, 2001 in the open market or in privately negotiated transactions. Excluding the one-time loss on the sale, and assuming share repurchases are made at the stock's current price levels, the buyback should modestly improve earnings per share, return on assets and return on equity in 2000 and have a more significant positive impact on the Company's results in 2001. The buyback program will be funded using general corporate funds and cash from the deleveraging strategy.
Kenneth T. Neilson, Chairman, President and CEO, commented that "considering the risk of additional increases in market interest rates and our depressed stock price, we believe this is a prudent time to execute this strategy. We expect this strategy will enhance shareholder value and allow more flexibility in positioning the Company for future growth."
The Company currently exceeds all requirements needed to be considered "well capitalized" and expects to continue to exceed these requirements following implementation of the deleveraging strategy and the buyback pro |
