Hudson City Bancorp, Inc.

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Hudson City Bancorp, Inc. Reports Quarterly Earnings Of $39.2 Million

PARAMUS, N.J., July 23, 2014 /PRNewswire/ -- Hudson City Bancorp, Inc. (NASDAQ: HCBK) (the "Company"), the holding company for Hudson City Savings Bank (the "Bank"), reported today net income of $39.2 million for the quarter ended June 30, 2014 as compared to net income of $48.7 million for the quarter ended June 30, 2013.  Diluted earnings per share amounted to $0.08 for the second quarter of 2014 as compared to diluted earnings per share of $0.10 for the second quarter of 2013.  For the six months ended June 30, 2014, the Company reported net income of $81.7 million as compared to net income of $96.7 million for the six months ended June 30, 2013.  Diluted earnings per share amounted to $0.16 for the six months ended June 30, 2014 as compared to diluted earnings per share of $0.19 for the six months ended June 30, 2013.

The Company also reported today that the Board of Directors declared a quarterly cash dividend of $0.04 per share payable on August 29, 2014 to shareholders of record on August 8, 2014.

Financial highlights for the second quarter of 2014 are as follows:

  • The Bank's Tier 1 leverage capital ratio increased to 11.26% at June 30, 2014 as compared to 10.82% at December 31, 2013.

  • Non-performing loans decreased $41.0 million to $1.01 billion at June 30, 2014 as compared to $1.05 billion at December 31, 2013.  Early stage loan delinquencies (defined as loans that are 30 to 89 days delinquent) decreased $62.0 million to $411.4 million at June 30, 2014 from $473.4 million at December 31, 2013. 

  • There was no provision for loan losses for the second quarter of 2014 and the linked first quarter of 2014 as compared to $12.5 million for the second quarter of 2013 reflecting improving home prices and economic conditions and decreases in total delinquent loans and total loans. 

  • Our interest rate spread and net interest margin were 1.00% and 1.29%, respectively, for the second quarter of 2014 as compared to 1.38% and 1.64%, respectively, for the second quarter of 2013.  For the linked first quarter of 2014, our interest rate spread and net interest margin were 1.12% and 1.41%, respectively.

  • Gains on the sales of mortgage-backed securities amounted to $19.5 million and $35.5 million for the quarter and six months ended June 30, 2014, respectively, as compared to $7.2 million for both the quarter and six months ended June 30, 2013.

  • FDIC expense decreased $6.5 million to $13.1 million for the second quarter of 2014 as compared to $19.6 million for the second quarter of 2013 and decreased $16.7 million to $27.0 million for the first six months of 2014 as compared to $43.7 million for the first six months of 2013 due to decreases in our assessment rate and a reduction in the size of our balance sheet. 

  • Federal funds sold and other overnight deposits increased $1.13 billion to $5.32 billion at June 30, 2014 from $4.19 billion at December 31, 2013. This increase is primarily due to repayments of mortgage-related assets and the lack of attractive reinvestment opportunities in the current low interest rate environment as available short term reinvestment opportunities continue to carry low yields, and medium and longer term opportunities available to us are creating more significant duration risk at relatively low yields.

  • Total deposits decreased $958.5 million, or 4.5%, to $20.51 billion at June 30, 2014 from $21.47 billion at December 31, 2013 due to our decision to maintain deposit rates that allow us to control deposit reductions at a time when there are limited investment opportunities with attractive yields to reinvest the funds received from payment activity on mortgage-related assets.

Statement of Financial Condition Summary

Total assets decreased $906.7 million, or 2.4%, to $37.70 billion at June 30, 2014 from $38.61 billion at December 31, 2013. The decrease in total assets reflected a $1.65 billion decrease in total mortgage-backed securities and a $937.9 million decrease in net loans, partially offset by a $1.13 billion increase in cash and cash equivalents and a $605.7 million increase in investment securities. 

Total cash and cash equivalents increased $1.13 billion to $5.45 billion at June 30, 2014 as compared to $4.32 billion at December 31, 2013.  This increase is primarily due to repayments on mortgage-related assets and the lack of attractive reinvestment opportunities in the current low interest rate environment as available short term reinvestment opportunities continue to carry low yields, and medium and longer term opportunities available to us are creating more significant duration risk at relatively low yields.  We have maintained lower deposit rates to allow a reduction in our deposits to help alleviate the pressure created by our increasing cash position.  Accordingly, we have used a portion of our excess cash inflows to fund these deposit reductions.    

Net loans decreased to $23.00 billion at June 30, 2014 as compared to $23.94 billion at December 31, 2013 due primarily to a decrease in loan production.  During the first six months of 2014, our loan production (origination and purchases) amounted to $813.4 million as compared to $1.73 billion for the same period in 2013.  Loan production was offset by principal repayments of $1.72 billion in the first six months of 2014, as compared to principal repayments of $3.55 billion for the first six months of 2013.  Loan production declined during the first six months of 2014 as compared to the same period in 2013 which reflects our limited appetite for adding long-term fixed-rate mortgage loans to our portfolio in the current low market interest rate environment. In addition, loan production has been impacted by the new qualified mortgage regulations issued by the Consumer Financial Protection Bureau (the "CFPB").   Effective in January 2014, we discontinued our reduced documentation loan program in order to comply with the new requirements to validate a borrower's ability to repay and the corresponding safe harbor for loans that meet the requirements for a "qualified mortgage."  During 2013, 22% of our total loan production consisted of reduced documentation loans to borrowers with acceptable credit and larger down payments resulting in loss ratios similar to our full documentation portfolio.        

Total mortgage-backed securities decreased $1.65 billion to $7.30 billion at June 30, 2014 from $8.95 billion at December 31, 2013.  The decrease was due primarily to security sales of $984.9 million and repayments of $769.0 million of mortgage-backed securities during the first six months of 2014.  We sold these mortgage-backed securities to take advantage of current market demand and prices in advance of an anticipated rising interest rate environment.  The proceeds from the sales have been invested primarily in short-term liquid assets with some invested in mortgage-backed securities.  While this further increases our levels of low-yielding liquid assets, we believe this positions our balance sheet for future strategic initiatives such as a potential balance sheet restructuring.

Total investment securities increased $605.7 million to $942.0 million at June 30, 2014 as compared to $336.3 million at December 31, 2013. The increase was due primarily to purchases of $600.8 million of U.S. Treasury securities with a remaining term to maturity of approximately 18 months. These securities were purchased to be used as collateral for our outstanding borrowings.

Total liabilities decreased $977.0 million, or 2.9%, to $32.89 billion at June 30, 2014 from $33.86 billion at December 31, 2013. The decrease in total liabilities primarily reflected a decrease in total deposits of $958.5 million, while total borrowed funds remained unchanged.

Total shareholders' equity increased $70.3 million to $4.81 billion at June 30, 2014 as compared to $4.74 billion at December 31, 2013. The increase was primarily due to net income of $81.7 million and a $19.2 million change in accumulated other comprehensive income, partially offset by cash dividends paid to common shareholders of $40.1 million.  At June 30, 2014, our consolidated shareholders' equity to asset ratio was 12.77%, and our tangible book value per share was $9.34.

Accumulated other comprehensive income amounted to $25.6 million at June 30, 2014 as compared to accumulated other comprehensive income of $6.3 million at December 31, 2013.   The $19.2 million change in accumulated other comprehensive income primarily reflects an increase in the net unrealized gain on securities available for sale at June 30, 2014 as compared to December 31, 2013.

Statement of Income Summary

The Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the "FOMC") noted that economic activity has improved in recent months.  The FOMC noted that, the unemployment rate though lower, remains elevated. Household spending and business fixed investment continue to advance, while the recovery in the housing sector remained slow. The national unemployment rate decreased to 6.1% in June 2014 from 6.7% in December 2013 and from 7.5% in June 2013. The FOMC decided to maintain the overnight lending target rate at zero to 0.25% during the second quarter of 2014.

Beginning in July 2014, the FOMC decided to reduce the rate of purchases of agency mortgage-backed securities to $15.0 billion per month from $20.0 billion per month and to reduce purchases of longer-term Treasury securities to $20.0 billion per month from $25.0 billion per month.  The FOMC noted that its sizeable and still increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets and help to make broader financial conditions more accommodative.

Net interest income decreased $42.2 million, or 26.4%, to $117.7 million for the second quarter of 2014 from $159.9 million for the second quarter of 2013 reflecting the overall decrease in the average balance of interest-earning assets and interest-bearing liabilities, the continued low interest rate environment and a continued increase in the average balance of short-term liquid assets, including U.S. Treasury securities and Federal funds sold and other overnight deposits.  Our interest rate spread decreased to 1.00% for the second quarter of 2014 as compared to 1.12% for the linked first quarter of 2014 and 1.38% for the second quarter of 2013.  Our net interest margin was 1.29% for the second quarter of 2014 as compared to 1.41% for the linked first quarter of 2014 and 1.64% for the second quarter of 2013.

Net interest income decreased $87.2 million, or 25.9%, to $250.0 million for the first six months of 2014 as compared to $337.2 million for the first six months of 2013.  Our interest rate spread decreased 39 basis points to 1.07% for the six months ended June 30, 2014 as compared to 1.46% for the six months ended June 30, 2013.  Our net interest margin decreased 36 basis points to 1.35% for the six months ended June 30, 2014 as compared to 1.71% for the six months ended June 30, 2013.  The decrease in our interest rate spread and net interest margin for the three and six months periods ended June 30, 2014 is primarily due to repayments of higher yielding assets due to the low interest rate environment and an increase in the average balance of Federal funds and other overnight deposits which yield 0.25%.

Total interest and dividend income for the second quarter of 2014 decreased $48.3 million, or 13.9%, to $299.2 million from $347.5 million for the second quarter of 2013. The decrease in total interest and dividend income was due to a $1.88 billion decrease in the average balance of total interest-earning assets during the second quarter of 2014 to $37.07 billion from $38.95 billion for the second quarter of 2013 as well as a decrease in the annualized weighted-average yield on total interest earning assets.  The decrease in the average balance of total interest-earning assets for the second quarter of 2014 as compared to the second quarter of 2013 was due primarily to repayments of mortgage-related assets as a result of the low interest rate environment and our decision not to reinvest in low yielding, long term assets. The annualized weighted-average yield on total interest-earning assets was 3.23% for the second quarter of 2014 as compared to 3.57% for the second quarter of 2013.  The decrease in the annualized weighted average yield of interest-earning assets was due to lower market interest rates earned on mortgage-related assets and a $2.31 billion increase in the average balance of Federal funds sold and other overnight deposits to $5.25 billion which had an average yield of 0.25% during the second quarter of 2014.

Total interest and dividend income for the six months ended June 30, 2014 decreased $101.9 million, or 14.3%, to $611.7 million from $713.6 million for the six months ended June 30, 2013. The decrease in total interest and dividend income was primarily due to a decrease in the average balance of total interest-earning assets of $1.80 billion, or 4.6%, to $37.28 billion for the six months ended June 30, 2014 from $39.08 billion for the six months ended June 30, 2013.  The decrease in total interest and dividend income was also due to a decrease of 37 basis points in the annualized weighted-average yield on total interest-earning assets to 3.28% for the six months ended June 30, 2014 from 3.65% for the six months ended June 30, 2013. 

Interest on first mortgage loans decreased $36.8 million, or 13.0%, to $247.1 million for the second quarter of 2014 from $283.9 million for the second quarter of 2013.  The decrease in interest on first mortgage loans was primarily due to a $2.13 billion decrease in the average balance of first mortgage loans to $23.08 billion for the second quarter of 2014 from $25.21 billion for the same quarter in 2013.  The decrease in interest income on first mortgage loans was also due to a 22 basis point decrease in the annualized weighted-average yield to 4.28% for the second quarter of 2014 from 4.50% for the second quarter of 2013. 

For the six months ended June 30, 2014, interest on first mortgage loans decreased $77.9 million, or 13.5%, to $500.3 million from $578.2 million for the six months ended June 30, 2013.  This was primarily due to a $2.38 billion decrease in the average balance of first mortgage loans to $23.31 billion for the six months ended June 30, 2014 from $25.69 billion for the six months ended June 30, 2013.  The decrease in interest income on mortgage loans was also due to a 21 basis point decrease in the annualized weighted-average yield to 4.29% for the six months ended June 30, 2014 from 4.50% for the six months ended June 30, 2013

The decrease in the annualized weighted-average yield earned on first mortgage loans during the three and six month periods ended June 30, 2014 was due to repayments of higher-yielding loans and the rates on newly originated mortgage loans which have been below the average yield on our portfolio, reflecting overall low market rates.  Consequently, the average yield on our loan portfolio continued to decline during the first six months of 2014.  In addition, our loan production decreased reflecting our low appetite for adding long-term fixed-rate mortgage loans to our portfolio in the current low interest rate environment and also the impact of the CFPB's new qualified mortgage regulations, which went into effect in January 2014.

Interest on mortgage-backed securities decreased $11.0 million to $41.7 million for the second quarter of 2014 from $52.7 million for the second quarter of 2013.  This decrease was due primarily to a $2.06 billion decrease in the average balance of mortgage-backed securities to $7.65 billion for the second quarter of 2014 from $9.71 billion for the second quarter of 2013. This was partially offset by an increase in the annualized weighted-average yield of mortgage-backed securities to 2.18% for the second quarter of 2014 as compared to 2.17% for second quarter of 2013.

Interest on mortgage-backed securities decreased $23.2 million to $90.4 million for the six months ended June 30, 2014 from $113.6 million for the six months ended June 30, 2013.  This decrease was due primarily to a $1.97 billion decrease in the average balance of mortgage-backed securities to $8.03 billion during the first six months of 2014 from $10.00 billion for the first six months of 2013.  The annualized weighted-average yield of mortgage-backed securities was 2.25% for the first six months of 2014 as compared to 2.27% for the first six months of 2013. 

The decrease in the average yield earned on mortgage-backed securities during the three and six month periods ended June 30, 2014 was a result of principal repayments on securities that have higher yields than the existing portfolio as well as the re-pricing of variable rate mortgage-backed securities in this low interest rate environment. The decrease in the average balance of mortgage-backed securities during this same period was due to sales of mortgage-backed securities and principal repayments.  During the first six months of 2014, we sold $984.9 million of mortgage-backed securities to realize gains that would decrease as market interest rates increase and as repayments reduced the outstanding principal balance on these securities.

Interest on investment securities decreased $1.4 million to $1.5 million for the second quarter of 2014 as compared to $2.9 million for the second quarter of 2013.  This decrease was due to a 110 basis point decrease in the annualized weighted-average yield to 1.12% for the second quarter of 2014 from 2.22% for the second quarter of 2013.  The decrease in the average yield earned reflects current market interest rates.  This effect of the decrease in the average yield earned was partially offset by a $17.2 million increase in the average balance of investment securities to $539.1 million for the second quarter of 2014 from $521.9 million for the second quarter of 2013.  The increase in the average balance of investment securities for the second quarter of 2014 was due to the purchase of $600.8 million of U.S. Treasury securities partially offset by the sale of corporate bonds with an amortized cost of $405.7 million in the second half of 2013.

For the six months ended June 30, 2014, interest on investment securities decreased $3.0 million to $2.9 million as compared to $5.9 million for the six months ended June 30, 2013. This decrease was due to a decrease of 111 basis points in the annualized weighted-average yield to 1.30% for the first six months of 2014 from 2.41% for the same period in 2013. This decrease was also due to a $45.0 million decrease in the average balance of investment securities to $442.3 million for the first six months of 2014 as compared to $487.3 million for the first six months of 2013.    The decrease in the average yield earned reflects current market interest rates.

Interest on Federal funds sold and other overnight deposits amounted to $3.3 million for the second quarter of 2014 as compared to $2.0 million for the second quarter of 2013.  The increase in interest income on Federal funds sold and other overnight deposits was primarily due to an increase in the average balance of Federal funds sold and other overnight deposits.  The average balance of Federal funds sold and other overnight deposits amounted to $5.25 billion for the second quarter of 2014 as compared to $2.94 billion for the second quarter of 2013.  The yield earned on Federal funds sold and other overnight deposits was 0.25% for the 2014 second quarter and 0.27% for the 2013 second quarter.

Interest on Federal funds sold and other overnight deposits amounted to $6.2 million for the six months ended June 30, 2014 as compared to $2.8 million for the six months ended June 30, 2013 due primarily to an increase in the average balance of Federal funds sold and other overnight deposits.  The average balance of Federal funds sold and other overnight deposits amounted to $4.94 billion for the first six months of 2014 as compared to $2.31 billion for the same period in 2013.  The yield earned on Federal funds and other overnight deposits was 0.25% for both the six months ended June 30, 2014 and 2013, respectively. 

The increase in the average balance of Federal funds sold and other overnight deposits for the three and six month periods ended June 30, 2014 was due primarily to repayments on mortgage-related assets and our low appetite for adding long-term fixed-rate mortgage loans to our portfolio in the current low interest rate environment. 

Total interest expense for the quarter ended June 30, 2014 decreased $6.2 million, or 3.3%, to $181.5 million from $187.7 million for the quarter ended June 30, 2013.  This decrease was primarily due to a $2.12 billion, or 6.2%, decrease in the average balance of total interest-bearing liabilities to $32.29 billion for the quarter ended June 30, 2014 from $34.41 billion for the quarter ended June 30, 2013.  This was offset by an increase in the annualized weighted-average cost of total interest-bearing liabilities which was 2.23% for the quarter ended June 30, 2014 as compared to 2.19% for the quarter ended June 30, 2013.  The decrease in the average balance of total interest-bearing liabilities was due to a $2.12 billion decrease in the average balance of total deposits.

For the six months ended June 30, 2014 total interest expense decreased $14.6 million, or 3.9%, to $361.7 million from $376.3 million for the six months ended June 30, 2013.  This decrease was primarily due to a $2.09 billion, or 6.0%, decrease in the average balance of total interest-bearing liabilities to $32.59 billion for the six months ended June 30, 2014 compared with $34.68 billion for the six months ended June 30, 2013. This was partially offset by an increase in the annualized weighted-average cost of total interest-bearing liabilities to 2.21% for the six months ended June 30, 2014 as compared to 2.19% for the six months ended June 30, 2013. The decrease in the average balance of total interest-bearing liabilities was due to a $2.09 billion decrease in the average balance of total deposits.

Interest expense on deposits decreased $6.4 million, or 13.7%, to $40.2 million for the second quarter of 2014 from $46.6 million for the second quarter of 2013.  The decrease is primarily due to a $2.13 billion decrease in the average balance of interest-bearing deposits to $20.11 billion for the second quarter of 2014 from $22.24 billion for the second quarter of 2013.  In addition, the average cost of interest-bearing deposits declined 4 basis points to 0.80% for the second quarter of 2014 from 0.84% for the second quarter of 2013.  

For the six months ended June 30, 2014, interest expense on deposits decreased $14.9 million, or 15.6%, to $80.8 million from $95.7 million for the six months ended June 30, 2013.  This decrease is due primarily to a decrease of $2.10 billion in the average balance of interest-bearing deposits to $20.41 billion during the first six months of 2014 from $22.51 billion for the first six months of 2013.  The decrease is also due to a decrease in the average cost of interest-bearing deposits of 6 basis points to 0.80% for the first six months of 2014 from 0.86% for the first six months of 2013.

The decrease in the average cost of deposits for 2014 reflected the low market interest rates and our decision to maintain lower deposit rates to continue our balance sheet reduction. 

Interest expense on borrowed funds increased slightly to $141.4 million for the second quarter of 2014 from $141.1 million for the second quarter of 2013.  For the six months ended June 30, 2014 interest expense on borrowed funds increased to $280.9 million as compared to $280.6 million for the six months ended June 30, 2013. The average cost of borrowed funds was 4.59% for both the three and six months ended June 30, 2014 as compared to 4.58% for both the three and six months ended June 30, 2013.  The average balance of borrowings was unchanged for both comparative periods.   

Borrowings amounted to $12.18 billion at June 30, 2014 with an average cost of 4.59%. There are no scheduled maturities for 2014.  During the first quarter of 2014, we modified $800.0 million of FHLB repurchase agreements to be FHLB advances.  This reduced our collateral requirements related to the repurchase agreements, which use securities as collateral. FHLB advances are secured by a blanket lien on our loan portfolio. The modification resulted in a slight increase in the weighted average cost of the borrowings that were modified.

There was no provision for loan losses for the quarter ended June 30, 2014 and for the linked first quarter of 2014 as compared to a $12.5 million provision for loan losses for the quarter ended June 30, 2013.  The decrease in our provision for loan losses was due primarily to improving home prices and economic conditions, a decrease in the size of the loan portfolio and a decrease in the amount of total delinquent loans.   

Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $1.01 billion at June 30, 2014 as compared to $1.03 billion at March 31, 2014, $1.05 billion at December 31, 2013 and $1.11 billion at June 30, 2013.  The ratio of non-performing loans to total loans was 4.35% at June 30, 2014 as compared to 4.32% at March 31, 2014, 4.35% at December 31, 2013 and 4.42% at June 30, 2013.  Notwithstanding the decrease in non-performing loans, the foreclosure process and the time to complete a foreclosure, while improving, continue to be prolonged, especially in New York and New Jersey where approximately 76% of our non-performing loans are located.  This protracted foreclosure process delays our ability to resolve non-performing loans through the sale of the underlying collateral and our ability to maximize any recoveries. 

Loans delinquent 30 to 59 days amounted to $274.9 million at June 30, 2014 as compared to $276.0 million at March 31, 2014, $311.9 million at December 31, 2013 and $334.4 million at June 30, 2013.  Loans delinquent 60 to 89 days amounted to $136.5 million at June 30, 2014 as compared to $157.1 million at March 31, 2014, $161.5 million at December 31, 2013 and $212.6 million at June 30, 2013. 

The allowance for loan losses amounted to $255.0 million at June 30, 2014 as compared to $276.1 million at December 31, 2013.  The allowance for loan losses as a percent of total loans and as a percent of non-performing loans was 1.10% and 25.29%, respectively, at June 30, 2014, as compared to 1.18% and 26.73%, respectively, at June 30, 2013 and 1.15% and 26.31%, respectively, at December 31, 2013. 

Net charge-offs amounted to $10.7 million for the second quarter of 2014 as compared to $16.3 million for the second quarter of 2013 and $10.4 million for the linked first quarter of 2014.  The ratio of net charge-offs to average loans was 0.18% for each of the second quarter of 2014 and the first quarter of 2014, as compared to 0.26% for the second quarter of 2013. 

Total non-interest income was $21.2 million for the second quarter of 2014 as compared to $9.6 million for the second quarter of 2013.  Included in non-interest income for the second quarter of 2014 were $19.5 million in gains from the sale of $565.6 million of mortgage-backed securities.  Gains on the sales of securities amounted to $7.2 million in the second quarter of 2013.  The remainder of non-interest income is primarily made up of service fees and charges on deposit and loan accounts.

Total non-interest income was $38.9 million for the first six months of 2014 as compared to $12.1 million for the same period in 2013. Included in non-interest income for the first six months 2014 were $35.5 million in gains from the sale of $984.9 million of mortgage-backed securities. Gains on the sales of securities amounted to $7.2 million for the six months ended June 30, 2013. 

We sold these mortgage-backed securities during 2014 to take advantage of current market demand and prices in advance of an anticipated rising interest rate environment.

Total non-interest expense decreased $3.5 million to $73.1 million for the second quarter of 2014 as compared to $76.6 million for the second quarter of 2013.  This decrease was due to a $6.5 million decrease in Federal deposit insurance expense partially offset by a $3.5 million increase in other non-interest expense.

Compensation and employee benefit costs decreased $208,000, or 0.6%, to $32.4 million for the second quarter of 2014 as compared to $32.6 million for the same period in 2013. The decrease in compensation and employee benefit costs is primarily due to a $2.3 million decrease in compensation expense and a $1.3 million decrease in postretirement benefit costs, partially offset by increases of $1.9 million in medical plan expenses and $1.2 million in stock benefit plan expense.  The increase in stock benefit plan expense was due primarily to an increase in the market price of our common stock. At June 30, 2014, we had 1,514 full-time equivalent employees as compared to 1,522 at June 30, 2013. 

For the quarter ended June 30, 2014, Federal deposit insurance expense decreased $6.5 million, or 33.2%, to $13.1 million from $19.6 million for the quarter ended June 30, 2013.  The decrease in Federal deposit insurance expense for the quarter ended June 31, 2014 is primarily due to a reduction in the size of our balance sheet and a decrease in our assessment rate. 

Other non-interest expense increased $3.5 million to $18.2 million for the quarter ended June 30, 2014 as compared to $14.7 million for the second quarter of 2013.  This increase was due primarily to an increase of $1.8 million in professional service fees and an increase of $691,000 in foreclosed real estate expenses.

The increase in professional service fees is due primarily to fees related to the use of consultants to assist the Company in preparing its capital stress tests and capital plan as well as the use of consultants to supplement staffing during the pendency of the merger with M&T Bank Corporation (the "Merger").

Included in other non-interest expense were write-downs on foreclosed real estate and net gains and losses on the sale of foreclosed real estate which amounted to a net gain of $592,000 for the second quarter of 2014 as compared to net gain of $803,000 for the second quarter of 2013.  We sold 70 properties during the second quarter of 2014 and had 228 properties in foreclosed real estate with a carrying value of $77.8 million, 85 of which were under contract to sell as of June 30, 2014.  For the second quarter of 2013, we sold 58 properties and had 149 properties in foreclosed real estate with a carrying value of $61.6 million, of which 35 were under contract to sell as of June 30, 2013.  

Total non-interest expense amounted to $152.8 million for the six months ended June 30, 2014 as compared to $157.9 million for the six months ended June 30, 2013. 

Compensation and employee benefit costs increased $1.8 million, or 2.8%, to $66.0 million for the first six months of 2014 as compared to $64.2 million for the same period in 2013. The increase in compensation costs is primarily due to increases of $3.1 million in stock benefit plan expense and $2.9 million in medical plan expenses.  The increases were partially offset by decreases of $2.9 million in pension plan expense and $1.9 million in compensation expense. 

For the six months ended June 30, 2014 Federal deposit insurance expense decreased $16.7 million, or 38.2%, to $27.0 million from $43.7 million for the six months ended June 30, 2013.  This decrease was due primarily to a reduction in the size of our balance sheet and a decrease in our assessment rate.

For the six months ended June 30, 2014, other non-interest expense increased $9.2 million to $40.7 million as compared to $31.5 million for the same period in 2013.  This increase was due to an increase of $2.2 million in foreclosed property expenses, a $4.0 million increase in professional fees and a $3.0 million increase in our reserve related to our claim against the Lehman Brothers, Inc. estate. 

The Bank had two collateralized borrowings in the form of repurchase agreements totaling $100.0 million with Lehman Brothers, Inc. that were secured by mortgage-backed securities with an amortized cost of approximately $114.1 million.  The trustee for the liquidation of Lehman Brothers, Inc. (the "Trustee") notified the Bank in the fourth quarter of 2011 that it considered our claim to be a non-customer claim, which has a lower payment preference than a customer claim and that the value of such claim is approximately $13.9 million representing the excess of the fair value of the collateral over the $100.0 million repurchase price.  At that time we established a reserve of $3.9 million against the receivable balance at December 31, 2011. On June 25, 2013, the Bankruptcy Court affirmed the Trustee's determination that the repurchase agreements did not entitle the Bank to customer status and on February 26, 2014, the U.S. District Court upheld the Bankruptcy Court's decision that our claim should be treated as a non-customer claim.  As a result, we increased our reserve by $3.0 million to $6.9 million against the receivable balance during the first quarter of 2014.

Included in other non-interest expense were write-downs on foreclosed real estate and net gains and losses on the sale of foreclosed real estate which amounted to a net gain of $670,000 for the six months ended June 30, 2014 as compared to a net gain of $407,000 for the comparable period in 2013.  We sold 116 properties during the first six months of 2014 as compared to 91 properties for the same period in 2013.  Expenses associated with foreclosed real estate were $8.4 million and $6.2 million for the six months ended June 30, 2014 and 2013, respectively.

Our efficiency ratio was 52.65% for the 2014 second quarter as compared to 45.22% for the 2013 second quarter.  For the six months ended June 30, 2014, our efficiency ratio was 51.85% compared with 45.19% for the corresponding 2013 period.  The calculation of the efficiency ratio is included in a table contained in this press release.  Our return on average assets was 0.41% for the 2014 second quarter as compared to 0.49% for the 2013 second quarter.  Our annualized ratio of non-interest expense to average total assets for the second quarter of 2014 was 0.77% as compared to 0.76% for the second quarter of 2013.  Our annualized ratio of non-interest expense to average total assets for the six months ended June 30, 2014 was 0.80% compared with 0.78% for the corresponding period of 2013.

Income tax expense amounted to $26.6 million for the second quarter of 2014 as compared to income tax expense of $31.6 million for the corresponding period in 2013. Our effective tax rate for the second quarter of 2014 was 40.41% compared with 39.34% for the second quarter of 2013. Income tax expense amounted to $54.4 million for the six months ended June 30, 2014 compared with income tax expense of $62.3 million for the six months ended June 30, 2013. Our effective tax rate for the six months ended June 30, 2014 was 39.99% compared with 39.20% for the six months ended June 30, 2013.

Hudson City Bancorp, Inc. maintains its corporate offices in Paramus, New Jersey. Hudson City Savings Bank, a well-established community financial institution serving its customers since 1868, is the largest thrift institution headquartered in New Jersey.  Hudson City Savings Bank currently operates a total of 135 banking offices in the New York metropolitan and surrounding areas.

Annual Shareholders Meeting

The 2014 Annual Meeting of Shareholders will be held on Tuesday, December 16, 2014.  The voting record date will be October 21, 2014.

Given the extension of the Merger Agreement through December 31, 2014 agreed to with M&T Bank Corporation, we have decided to schedule the 2014 Annual Meeting of Shareholders to be held on December 16, 2014 in order to comply with the NASDAQ corporate governance requirements.  If the closing of the Merger occurs prior to December 16, 2014, the 2014 Annual Meeting of Shareholders will not be held.

Date for Submission of Shareholder Proposals

A shareholder that wishes to submit a shareholder proposal intended for inclusion in our proxy statement and proxy card relating to our 2014 Annual Meeting of Shareholders must submit the proposal to our Corporate Secretary by mail at Hudson City Bancorp, Inc., West 80 Century Road, Paramus, New Jersey 07652.  Any such shareholder proposal must be received by our Corporate Secretary no later than 4:00 pm on August 15, 2014.  A shareholder seeking to submit a shareholder proposal must be a shareholder of record and such proposal must set forth the information required by the bylaws of Hudson City Bancorp, Inc.  Nothing in this paragraph shall be deemed to require Hudson City Bancorp to include in its proxy statement and proxy card for such meeting any shareholder proposal which does not meet the requirements of the Securities and Exchange Commission in effect at the time such proposal is received.   Any such proposal will be subject to 17 C.F.R. § 240.14a-8 of the rules and regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

Forward-Looking Statements

This release may contain certain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on certain assumptions and describe future plans, strategies and expectations of Hudson City Bancorp, Inc.  Such forward-looking statements may be identified by the use of such words as "may," "believe," "expect," "anticipate," "should," "plan," "estimate," "predict," "continue," "probable," and "potential" or the negative of these terms or other comparable terminology.  Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Hudson City Bancorp, Inc.  and Hudson City Bancorp, Inc.'s strategies, plans, objectives, expectations, and intentions, including the Merger and the Strategic Plan, and other statements contained in this release that are not historical facts.  Hudson City Bancorp, Inc.'s ability to predict results or the actual effect of future plans or strategies, including the Merger and the implementation of the Strategic Plan, is inherently uncertain and actual results and performance could differ materially from those contemplated or implied by these forward-looking statements. They can be affected by inaccurate assumptions Hudson City Bancorp, Inc. might make or by known or unknown risks and uncertainties. Factors that could cause assumptions to be incorrect include, but are not limited to, changes in interest rates, general economic conditions, legislative, regulatory and public policy changes, Hudson City Bancorp Inc's ability to successfully implement the Strategic Plan initiatives, further delays in closing the Merger and the ability of Hudson City Bancorp, Inc. or M&T Bank Corporation to obtain regulatory approvals and meet other closing conditions to the Merger. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  For a summary of important factors that could affect Hudson City Bancorp, Inc.'s forward-looking statements, please refer to Hudson City Bancorp, Inc.'s filings with the Securities and Exchange Commission available at www.sec.gov.  Hudson City Bancorp, Inc. does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events.


 

Hudson City Bancorp, Inc. and Subsidiary


Consolidated Statements of Financial Condition












June 30,


December 31,





2014

2013


(In thousands, except share and per share amounts)

(unaudited)











Assets:






Cash and due from banks


$                   128,637


$                   133,665


Federal funds sold and other overnight deposits


5,322,044


4,190,809


          Total cash and cash equivalents


5,450,681


4,324,474









Securities available for sale:






   Mortgage-backed securities


5,781,024


7,167,555


   Investment securities 


903,003


297,283


Securities held to maturity:






   Mortgage-backed securities 


1,516,666


1,784,464


   Investment securities 


39,011


39,011



Total securities


8,239,704


9,288,313









Loans 



23,154,711


24,112,829


   Net deferred loan costs


104,597


105,480


   Allowance for loan losses


(255,011)


(276,097)



Net loans


23,004,297


23,942,212









Federal Home Loan Bank of New York stock


337,295


347,102


Foreclosed real estate, net


77,803


70,436


Accrued interest receivable


45,681


52,887


Banking premises and equipment, net


61,074


65,353


Goodwill


152,109


152,109


Other assets


332,001


364,468



          Total Assets


$              37,700,645


$              38,607,354









Liabilities and Shareholders' Equity:






Deposits:






          Interest-bearing


$              19,845,215


$              20,811,108


          Noninterest-bearing


668,620


661,221



Total deposits


20,513,835


21,472,329









Repurchase agreements


6,150,000


6,950,000


Federal Home Loan Bank of New York advances


6,025,000


5,225,000



Total borrowed funds


12,175,000


12,175,000









Accrued expenses and other liabilities


198,918


217,449



Total liabilities


32,887,753


33,864,778









Common stock, $0.01 par value, 3,200,000,000 shares authorized;







741,466,555 shares issued; 528,752,920 and 528,419,170 shares







outstanding each at June 30, 2014 and December 31, 2013


7,415


7,415


Additional paid-in capital 


4,747,434


4,743,388


Retained earnings


1,925,398


1,883,754


Treasury stock, at cost; 212,713,635 and 213,047,385 shares at 







June 30, 2014 and December 31, 2013


(1,709,727)


(1,712,107)


Unallocated common stock held by the employee stock ownership plan


(183,207)


(186,210)


Accumulated other comprehensive income, net of tax


25,579


6,336



Total shareholders' equity


4,812,892


4,742,576



          Total Liabilities and Shareholders' Equity


$              37,700,645


$              38,607,354








 

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)








For the Three Months


For the Six Months

Ended June 30,


Ended June 30,







2014


2013


2014


2013







(In thousands, except share data)

Interest and Dividend Income:










First mortgage loans


$      247,124


$      283,857


$      500,263


$      578,247


Consumer and other loans


2,199


2,611


4,477


5,316


Mortgage-backed securities held to maturity


10,128


20,614


21,339


44,610


Mortgage-backed securities available for sale


31,595


32,051


69,085


68,962


Investment securities held to maturity


585


586


1,170


1,171


Investment securities available for sale


920


2,305


1,714


4,703


Dividends on Federal Home Loan Bank of New York stock


3,338


3,516


7,494


7,724


Federal funds sold and other overnight deposits


3,316


1,969


6,202


2,841















     Total interest and dividend income


299,205


347,509


611,744


713,574














Interest Expense:










Deposits


40,173


46,604


80,811


95,743


Borrowed funds


141,350


141,052


280,915


280,595















     Total interest expense


181,523


187,656


361,726


376,338
















Net interest income


117,682


159,853


250,018


337,236














Provision for Loan Losses


-


12,500


-


32,500
















Net interest income after provision for loan losses


117,682


147,353


250,018


304,736














Non-Interest Income:










Service charges and other income


1,645


2,405


3,460


4,938


Gain on securities transactions, net


19,539


7,183


35,482


7,183


     Total non-interest income


21,184


9,588


38,942


12,121














Non-Interest Expense:










Compensation and employee benefits


32,405


32,613


66,016


64,214


Net occupancy expense


9,433


9,723


19,144


18,533


Federal deposit insurance assessment


13,086


19,600


27,010


43,675


Other expense


18,184


14,685


40,651


31,454


     Total non-interest expense


73,108


76,621


152,821


157,876
















Income before income tax expense


65,758


80,320


136,139


158,981














Income Tax Expense


26,576


31,598


54,436


62,328
















Net income


$        39,182


$        48,722


$        81,703


$        96,653














Basic Earnings Per Share


$            0.08


$            0.10


$            0.16


$            0.19














Diluted Earnings Per Share


$            0.08


$            0.10


$            0.16


$            0.19














Weighted Average Number of Common Shares Outstanding:











Basic




498,874,695


497,720,918


498,646,420


497,527,375
















Diluted




499,838,263


498,070,995


498,995,842


497,722,679














 

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)















For the Three Months Ended June 30,








2014


2013












Average






Average








Average




Yield/


Average




Yield/








Balance


Interest


Cost


Balance


Interest


Cost








(Dollars in thousands)























Assets:
















Interest-earnings assets:

















First mortgage loans, net (1)

$   23,083,914


$   247,124


4.28

%

$   25,206,816


$  283,857


4.50

%




Consumer and other loans

207,456


2,199


4.24


231,791


2,611


4.51






Federal funds sold and other overnight deposits

5,252,541


3,316


0.25


2,938,417


1,969


0.27






Mortgage-backed securities at amortized cost

7,646,018


41,723


2.18


9,706,470


52,665


2.17






Federal Home Loan Bank stock

337,942


3,338


3.95


347,822


3,516


4.04






Investment securities, at amortized cost

539,141


1,505


1.12


521,924


2,891


2.22







Total interest-earning assets

37,067,012


299,205


3.23


38,953,240


347,509


3.57





















Noninterest-earnings assets (4)

901,004






1,101,710











Total Assets

$   37,968,016






$   40,054,950

























Liabilities and Shareholders' Equity:
















Interest-bearing liabilities:

















Savings accounts

1,045,799


392


0.15


$        982,386


504


0.21






Interest-bearing transaction accounts

2,163,365


1,558


0.29


2,232,757


1,853


0.33






Money market accounts

4,788,273


2,366


0.20


6,078,945


3,967


0.26






Time deposits

12,112,789


35,857


1.19


12,940,974


40,280


1.25







Total interest-bearing deposits

20,110,226


40,173


0.80


22,235,062


46,604


0.84
























Repurchase agreements

6,150,000


69,083


4.44


6,950,000


78,283


4.46






Federal Home Loan Bank of New York advances

6,025,000


72,267


4.75


5,225,000


62,769


4.75







Total borrowed funds

12,175,000


141,350


4.59


12,175,000


141,052


4.58







Total interest-bearing liabilities

32,285,226


181,523


2.23


34,410,062


187,656


2.19























Noninterest-bearing liabilities:

















Noninterest-bearing deposits

659,994






644,520










Other noninterest-bearing liabilities

204,034






243,891











Total noninterest-bearing liabilities

864,028






888,411




























Total liabilities

33,149,254






35,298,473









Shareholders' equity

4,818,762






4,756,477











Total Liabilities and Shareholders' Equity

$   37,968,016






$   40,054,950



























Net interest income/net interest rate spread (2)



$   117,682


1.00




$  159,853


1.38












1.29











Net interest-earning assets/net interest margin (3)

$     4,781,786




1.29

%

$     4,543,178




1.64

%





















Ratio of interest-earning assets to

















interest-bearing liabilities





1.15

x





1.13

x




(1)

Amount includes deferred loan costs and non-performing loans and is net of the allowance for loan losses.





(2)

Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from the annualized weighted average yield on total interest-earning assets.





(3)

Determined by dividing annualized net interest income by total average interest-earning assets.





(4)

Includes the average balance of principal receivable related to FHLMC mortgage-backed securities of $42.5 million and $112.3 million








for the quarters ended June 30, 2014 and 2013, respectively.















 

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)










For the Six Months Ended June 30,






2014


2013










Average






Average






Average




Yield/


Average




Yield/






Balance


Interest


Cost


Balance


Interest


Cost






(Dollars in thousands)



















Assets:














Interest-earnings assets:















First mortgage loans, net (1)

$   23,309,914


$  500,263


4.29

%

$   25,692,014


$  578,247


4.50

%


Consumer and other loans

209,764


4,477


4.27


238,701


5,316


4.45




Federal funds sold and other overnight deposits

4,942,571


6,202


0.25


2,311,499


2,841


0.25




Mortgage-backed securities at amortized cost

8,034,614


90,424


2.25


9,997,654


113,572


2.27




Federal Home Loan Bank stock

342,496


7,494


4.38


352,121


7,724


4.39




Investment securities, at amortized cost

442,286


2,884


1.30


487,337


5,874


2.41





Total interest-earning assets

37,281,645


611,744


3.28


39,079,326


713,574


3.65

















Noninterest-earnings assets (4)

905,703






1,194,491









Total Assets

$   38,187,348






$   40,273,817





















Liabilities and Shareholders' Equity:














Interest-bearing liabilities:















Savings accounts

1,033,539


770


0.15


$        972,192


1,105


0.23




Interest-bearing transaction accounts

2,179,399


3,118


0.29


2,252,840


3,988


0.36




Money market accounts

4,985,144


4,839


0.20


6,330,416


9,553


0.30




Time deposits

12,212,864


72,084


1.19


12,950,186


81,097


1.26





Total interest-bearing deposits

20,410,946


80,811


0.80


22,505,634


95,743


0.86




















Repurchase agreements

6,401,934


142,730


4.43


6,950,000


155,337


4.45




Federal Home Loan Bank of New York advances

5,773,066


138,185


4.76


5,225,000


125,258


4.77





Total borrowed funds

12,175,000


280,915


4.59


12,175,000


280,595


4.58





Total interest-bearing liabilities

32,585,946


361,726


2.21


34,680,634


376,338


2.19



















Noninterest-bearing liabilities:















Noninterest-bearing deposits

591,218






576,235








Other noninterest-bearing liabilities

207,396






271,296









Total noninterest-bearing liabilities

798,614






847,531
























Total liabilities

33,384,560






35,528,165







Shareholders' equity

4,802,788






4,745,652









Total Liabilities and Shareholders' Equity

$   38,187,348






$   40,273,817























Net interest income/net interest rate spread (2)



$  250,018


1.07




$  337,236


1.46



















Net interest-earning assets/net interest margin (3)

$     4,695,699




1.35

%

$     4,398,692




1.71

%

















Ratio of interest-earning assets to















interest-bearing liabilities





1.14

x





1.13

x


(1)

Amount includes deferred loan costs and non-performing loans and is net of the allowance for loan losses.



(2)

Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from the annualized weighted average yield on total interest-earning assets.



(3)

Determined by dividing annualized net interest income by total average interest-earning assets.



(4)

Includes the average balance of principal receivable related to FHLMC mortgage-backed securities of $46.4 million and $112.8 million





for the six months ended June 30, 2014 and 2013, respectively.












 

Hudson City Bancorp, Inc. and Subsidiary
Calculation of Efficiency Ratio and Book Value Ratios
(Unaudited)

















At or for the Quarter Ended 





June 30, 2014


March 31, 2014


Dec. 31, 2013


Sept. 30, 2013


June 30, 2013



(In thousands, except share data)

Efficiency Ratio:

























Net interest income

$       117,682


$         132,336


$           135,864


$         139,413


$         159,853
















Total non-interest income

21,184


17,758


13,512


13,456


9,588
















   Total operating income

$       138,866


$         150,094


$           149,376


$         152,869


$         169,441
















Total non-interest expense

$         73,108


$           79,713


$             73,473


$           78,488


$           76,621



Less:













   Merger-related costs

-


-


(623)


-


-



   Valuation allowance related to 












      Lehman Brothers, Inc.

-


(3,000)


-


-


-
















   Total non-interest operating expense

$         73,108


$           76,713


$             72,850


$           78,488


$           76,621
















Efficiency ratio (1)

52.65%


51.11%


48.77%


51.34%


45.22%















Book Value Calculations:

























Shareholders' equity 

$    4,812,892


$      4,782,858


$        4,742,576


$      4,689,105


$      4,660,900



Goodwill and other intangible assets

(152,724)


(152,972)


(153,218)


(153,469)


(153,721)



Tangible shareholders' equity

$    4,660,168


$      4,629,886


$        4,589,358


$      4,535,636


$      4,507,179
















Book Value Share Computation:












     Issued


741,466,555


741,466,555


741,466,555


741,466,555


741,466,555



     Treasury shares

(212,713,635)


(213,019,266)


(213,047,385)


(213,047,385)


(213,047,385)



          Shares outstanding

528,752,920


528,447,289


528,419,170


528,419,170


528,419,170



     Unallocated ESOP shares

(29,346,631)


(29,587,177)


(29,827,724)


(30,068,270)


(30,308,816)



     Shares in trust

(429,657)


(427,916)


(426,103)


(396,754)


(396,906)



               Book value shares

498,976,632


498,432,196


498,165,343


497,954,146


497,713,448
















Book value per share

$             9.65


$               9.60


$                 9.52


$               9.42


$               9.36



Tangible book value per share

9.34


9.29


9.21


9.11


9.06




























(1)

Calculated by dividing total non-interest operating expense by total operating income. These measures are non-GAAP financial measures. 


We believe these measures, by excluding merger-related costs and the valuation allowance related to Lehman Brothers, provides a better 



measure of our non-interest income and expenses.




































 

Hudson City Bancorp, Inc.
Other Financial Data
(Unaudited)


Securities Portfolio at June 30, 2014:



Amortized


Estimated


Unrealized


Cost


Fair Value


Gain/(Loss)




(Dollars in thousands)



Held to Maturity:












Mortgage-backed securities:






    FHLMC

$       1,003,136


$               1,065,566


$                         62,430

    FNMA

345,832


369,828


23,996

    FHLMC and FNMA CMO's

109,202


115,169


5,967

    GNMA

58,496


60,254


1,758

       Total mortgage-backed securities

1,516,666


1,610,817


94,151







Investment securities:






     U.S. agency debt

39,011


42,350


3,339

       Total investment securities

39,011


42,350


3,339







Total held to maturity

$       1,555,677


$               1,653,167


$                         97,490













Available for sale:












Mortgage-backed securities:






    FHLMC

$       1,746,033


$               1,779,303


$                         33,270

    FNMA

3,230,646


3,266,886


36,240

    GNMA

712,480


734,834


22,354

       Total mortgage-backed securities

5,689,160


5,781,024


91,864







Investment securities:












     U.S. Treasury and agency securities

899,159


895,779


(3,380)

     Equity securities

6,873


7,224


351

       Total investment securities

906,032


903,003


(3,029)







 Total available for sale 

$       6,595,192


$               6,684,027


$                         88,835







 

Hudson City Bancorp, Inc.
Other Financial Data
(Unaudited)


Loan Data at June 30, 2014:




 Non-Performing Loans


 Total Loans



Loan




Percent of 


Loan



Percent of 



Balance


Number  


Total Loans


Balance


Number  

Total Loans







(Dollars in thousands)




First Mortgage Loans:












One- to four- family


$        858,236


2,411


3.70%


$     22,097,151


54,075

95.44%

FHA/VA


134,417


570


0.58%


740,159


3,789

3.20%

PMI


6,912


21


0.03%


93,712


320

0.40%

Construction


177


1


0.00%


177


1

0.00%

Commercial


1,044


3


0.00%


18,812


54

0.08%

   Total mortgage loans


1,000,786


3,006


4.31%


22,950,011


58,239

99.12%













Home equity loans


5,823


72


0.03%


185,124


5,195

0.80%

Other loans


1,644


3


0.01%


19,576


1,857

0.08%

    Total


$     1,008,253


3,081


4.35%


$     23,154,711


65,291

100.00%













 

Foreclosed real estate at June 30, 2014:















Carrying



Number Under




Number


Value



Contract of Sale






(Dollars in thousands)





Foreclosed real estate


228


$        77,803



85











 

Hudson City Bancorp, Inc. and Subsidiary

Other Financial Data

(Unaudited)


At or for the Quarter Ended


June 30, 2014


March 31, 2014


Dec. 31, 2013


Sept. 30, 2013


June 30, 2013


(Dollars in thousands, except per share data)

Net interest income 

$               117,682


$              132,336


$           135,864


$           139,413


$               159,853

Provision for loan losses 

-


-


-


4,000


12,500

Non-interest income 

21,184


17,758


13,512


13,456


9,588

Non-interest expense:










   Compensation and employee benefits

32,405


33,611


33,717


34,802


32,613

   FDIC insurance assessment

13,086


13,924


10,938


18,850


19,600

   Other non-interest expense 

27,617


32,178


28,818


24,836


24,408

 Total non-interest expense 

73,108


79,713


73,473


78,488


76,621

Income before income tax expense

65,758


70,381


75,903


70,381


80,320

Income tax expense

26,576


27,860


30,074


27,647


31,598

Net income

$                 39,182


$                42,521


$             45,829


$             42,734


$                 48,722

Total assets 

$          37,700,645


$         38,230,626


$      38,607,354


$      39,186,560


$          39,696,453

Loans, net 

23,004,297


23,578,711


23,942,212


24,362,961


24,977,668

Mortgage-backed securities

7,297,690


8,190,893


8,952,019


9,686,630


10,311,102

Other securities

942,014


338,037


336,294


337,656


336,165

Deposits 

20,513,835


21,065,582


21,472,329


22,079,731


22,619,271

Borrowings

12,175,000


12,175,000


12,175,000


12,175,000


12,175,000

Shareholders' equity 

4,812,892


4,782,858


4,742,576


4,689,105


4,660,900

Performance Data:










Return on average assets (1) 

0.41%


0.44%


0.47%


0.43%


0.49%

Return on average equity (1) 

3.25%


3.55%


3.87%


3.63%


4.10%

Net interest rate spread(1) 

1.00%


1.12%


1.20%


1.22%


1.38%

Net interest margin (1) 

1.29%


1.41%


1.47%


1.48%


1.64%

Non-interest expense to average assets (1) (4)

0.77%


0.83%


0.76%


0.80%


0.76%

Compensation and benefits to total revenue (5)

23.34%


22.39%


22.57%


22.77%


19.25%

Operating efficiency ratio (2)  

52.65%


51.11%


48.77%


51.34%


45.22%

Dividend payout ratio

50.00%


44.44%


44.44%


44.44%


40.00%

Per Common Share Data:










Basic earnings per common share 

$0.08


$0.09


$0.09


$0.09


$0.10

Diluted earnings per common share 

$0.08


$0.09


$0.09


$0.09


$0.10

Book value per share (3)

$9.65


$9.60


$9.52


$9.42


$9.36

Tangible book value per share (3)

$9.34


$9.29


$9.21


$9.11


$9.06

Dividends per share 

$0.04


$0.04


$0.04


$0.04


$0.04

Capital Ratios:










Equity to total assets (consolidated) 

12.77%


12.51%


12.28%


11.97%


11.74%

Tier 1 leverage capital (Bank) 

11.26%


11.03%


10.82%


10.57%


10.41%

Total risk-based capital (Bank)

26.91%


26.10%


25.31%


24.40%


23.78%

Other Data:










Full-time equivalent employees

1,514


1,535


1,520


1,525


1,522

Number of banking offices

135


135


135


135


135

Asset Quality Data:










Total non-performing loans 

$            1,008,253


$           1,026,591


$        1,049,244


$        1,071,196


$            1,112,206

Number of non-performing loans

3,081


3,185


3,233


3,288


3,414

Total number of loans

65,291


66,492


67,046


67,940


69,578

Total non-performing assets 

$            1,086,056


$           1,105,182


$        1,119,680


$        1,136,902


$            1,173,778

Non-performing loans to total loans

4.35%


4.32%


4.35%


4.36%


4.42%

Non-performing assets to total assets

2.88%


2.89%


2.90%


2.90%


2.96%

Allowance for loan losses

$               255,011


$              265,732


$           276,097


$           291,007


$               297,288

Allowance for loan losses to non-performing loans

25.29%


25.88%


26.31%


27.17%


26.73%

Allowance for loan losses to total loans

1.10%


1.12%


1.15%


1.19%


1.18%

Provision for loan losses 

$                           -


$                          -


$                       -


$               4,000


$                 12,500

Net charge-offs

$                 10,722


$                10,365


$             14,910


$             10,281


$                 16,305

Ratio of net charge-offs to average loans (1)

0.18%


0.18%


0.24%


0.17%


0.26%

Net gains (losses) on foreclosed real estate

$                      592


$                       78


$                  908


$                  346


$                      803

(1)  Ratios are annualized.










(2) See page 16 for a calculation of our Operating Efficiency Ratios.







(3) See page 16 for the Book Value Calculations for book value per share and tangible book value per share.







(4) Computed by dividing non-interest expense by average assets.






(5) Computed by dividing compensation and benefits by the sum of net interest income and non-interest income.













 

SOURCE Hudson City Bancorp, Inc.

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