Hudson United Bancorp Reports Earnings for the Third Quarter
MAHWAH, N.J.--(BUSINESS WIRE)--Oct. 19, 2000--Hudson United Bancorp (NYSE:HU) today reported third quarter net income of $24.5 million or $0.50 per share on a diluted basis, compared with net income of $29.1 million or $0.55 per diluted share for the same period in 1999. As announced earlier this month, the comparison with 1999 resulted from slower revenue growth and an increase in operating expenses associated with resolving problems arising during and after the implementation of new systems, further impacted by staff disruptions caused by the Dime Bancorp ("Dime") merger of equals and its subsequent termination. Despite these issues, the Company's return on average assets was 1.31% and return on average equity was 20.91% for the 2000 third quarter.
"During the third quarter we incurred substantial expenses to address issues arising from the system implementation last year and restaffing after a number of executives and staff left in the midst of the pending merger with Dime, which was later terminated", said Nicholas G. Hahn, Executive Vice President and Chief Financial Officer. "While we are disappointed by these operating results, we feel the additional expenses both allowed us to resolve operating issues and make necessary investments in our infrastructure to help position us as a more efficient provider of financial services and for further growth. The additional expenses were required to further customize systems and redesign some of our critical processes within banking operations. We expect that this unanticipated, but necessary, increase in operating expenses to address these system and staffing issues will better position the Company for the future. We believe additional expenses in the fourth quarter will continue to affect our operating results and we expect operating earnings will be approximately at this same level for the fourth quarter."
For the nine months ended September 30, 2000, operating earnings, which excludes the special charge for the balance sheet restructuring taken in the second quarter, were $86.2 million and diluted earnings per share was $1.70. Net income was $41.8 million, $0.82 per diluted share, for the nine months ended September 30, 2000, and $86.9 million, $1.62 per diluted share, for the comparative 1999 period. The increase in operating earnings per share was due mainly to synergies recognized from acquisitions made in 1999. For the nine month period ended September 30, 2000, excluding the special charge for the balance sheet restructuring, return on average assets was 1.32% and return on average equity was 23.29%.
Net interest income for the third quarter of 2000 was $75.8 million compared to $87.9 million for the third quarter of 1999. The majority of the decline in net interest income resulted from the rise in short-term interest rates over the last year. The net interest margin was 4.47% and 4.02% for the third quarter of 2000 and 1999, respectively. The increase in the net interest margin was mainly the result of the recently completed balance sheet restructuring that eliminated lower yielding interest-earning assets and higher-cost borrowings. The third quarter net interest margin does not reflect the full impact of the deleveraging and therefore the current net interest margin is higher than what is reported for the third quarter. For the nine months ended September 30, 2000, net interest income was $248.2 million and the net interest margin was 4.15%. For the same period in 1999, net interest income was $255.7 million and the net interest margin was 4.08%.
Total noninterest income was $25.7 million for the three-month period ended September 30, 2000 and $23.9 million for the same period in 1999. Service charges on deposit accounts increased 11% in the third quarter of 2000 compared to the third quarter of 1999, due mainly to recently implemented revenue initiatives. Noninterest income for the nine months ended September 30, 2000, excluding the second quarter special charge, was $72.3 million. Including the special charge, noninterest income for the first nine months of 2000 was $8.6 million. For the nine-month period ended September 30, 1999, noninterest income was $68.8 million. Service charges on deposit accounts and Shoppers Charge fees had the strongest growth compared to the 1999 period.
Noninterest expenses for the third quarter of 2000 were $58.7 million compared to $61.3 million in the third quarter of 1999. For the nine months ended September 30, 2000 and 1999, noninterest expenses were $172.7 million and $178.0 million, respectively. The decline in expenses for the comparative periods was primarily due to cost savings related to the JeffBanks, Inc. and Southern Jersey Bancorp acquisitions. The efficiency ratio for the third quarter and nine months ended September 30, 2000, excluding the impact of the special charge, was 53.6% and 50.3%, respectively. The efficiency ratio was 51.1% for the 1999 third quarter and 51.3% for the nine months ended September 30, 1999. "We expect to continue to implement programs that improve our efficiency ratio from the current level", said Mr. Hahn. In addition, the Company reached an agreement with outsource providers that incorporates new service level agreements and revised financial terms going forward. The agreement represents a beneficial contract modification which provides, among other things, for a multi-million dollar discount over the next 2 1/2 years, an extended term and a 2-year reduced termination fee.
At September 30, 2000, non-performing assets totaled $59.7 million (0.86% of total assets) compared to $53.1 million at December 31, 1999. The allowance for possible loan losses totaled $96.7 million at September 30, 2000 and represented 174% of non-performing loans and 1.81% of total loans. At December 31, 1999, the allowance for possible loan losses totaled $98.7 million and was 201% of non-performing loans and`1.74% of total loans. The provision for possible loan losses was $6.0 million and $18.0 million for the third quarter and first nine months of 2000, respectively. For the 1999 third quarter and first nine months, the provision for loan losses was $5.2 million and $14.3 million, respectively.
Hudson United Bancorp's total assets at September 30, 2000 were $6.9 billion compared to $9.7 billion at year-end 1999. The decline in total assets was due primarily to the completion of our balance sheet restructuring program. At September 30, 2000, total loans were $5.3 billion and total deposits were $5.7 billion. At December 31, 1999, total loans were $5.7 billion and total deposits were $6.5 billion. Total stockholders' equity was $467 million and book value per common share was $9.63 at September 30, 2000. All regulatory capital ratios exceed those necessary to be considered a well-capitalized institution. |
