HUDSON CITY BANCORP, INC. PARAMUS, N.J., April 29, 2015 /PRNewswire/ -- Hudson City Bancorp, Inc. (NASDAQ: HCBK) (the "Company"), the holding company for Hudson City Savings Bank (the "Bank"), reported today net income of $5.9 million for the quarter ended March 31, 2015 as compared to net income of $42.5 million for the quarter ended March 31, 2014. Diluted earnings per share amounted to $0.01 for the quarter ended March 31, 2015 as compared to diluted earnings per share of $0.09 for the quarter ended March 31, 2014.
The Company's Board of Directors (the "Board") did not declare a dividend for the first quarter of 2015. The Board made this decision after considering the level of earnings for the first quarter, the importance of paying dividends out of current earnings and the regulatory evaluation of any dividend request. The Company is required to seek regulatory approval prior to declaring a dividend.
Net income for the quarter reflects the continued decrease in the Company's net interest margin that is the result of our elevated level of low-yielding short-term liquid assets combined with our high-cost borrowings. Over the last several quarters, we have managed our balance sheet on a dual-track strategy which includes the implementation of our strategic plan initiatives and preparing for the completion of the merger (the "Merger") with M&T Bank Corporation. The operational core of the strategic plan includes the expansion of our loan and deposit product offerings over time and the diversification of our revenue sources. The strategic plan also includes a balance sheet restructuring transaction that would significantly increase our net interest margin and net income by extinguishing approximately $12 billion of borrowings that have a weighted average cost of 4.59%. We would extinguish these borrowings primarily with the short-term liquid assets that are currently on our balance sheet as well as new borrowings with significantly lower rates. At March 31, 2015, short-term liquid assets, consisting of overnight funds and U.S. Treasury securities, amounted to $10.2 billion with a weighted average yield of 0.26%. While we expect that the restructuring transaction would result in a material charge to earnings, we believe that the restructuring would increase our net interest margin by as much as 180 basis points depending on the timing of the execution and the prevailing rates at that time. The delay in the execution of the balance sheet restructuring and our continuing to carry an excess liquidity position is primarily due to the delay in completing the Merger, though a variety of factors are involved in the decision regarding any such restructuring.
During 2014, we supplemented our earnings with gains on the sales of securities. This strategy was key to maintaining earnings despite a decreasing net interest margin as rates remained low and we continued to carry excess liquidity with very little appetite for reinvesting this liquidity into longer-term investments or fixed-rate residential mortgage loans. In addition, the market demand and prices provided a strong opportunity for us to sell these securities. However, in anticipation of the closing of the Merger, which was expected to close on May 1, 2015, we suspended the sale of securities during the first quarter. Unfortunately, the unexpected news in early April that there would be a further delay in completing the Merger came too late for us to resume the sale of securities before the end of the first quarter and, as a result, our net income was adversely affected. As we enter the second quarter, we expect to resume our strategy of supplementing our earnings with securities sales. To facilitate these securities sales, in the second quarter of 2015 we transferred our held-to-maturity securities to available-for-sale.
Denis J. Salamone, Chairman and Chief Executive Officer, commented, "This has certainly been a challenging quarter for us. The latest unexpected delay in the Merger contributed to the first quarter's weak earnings. We believe future earnings can be improved significantly in the short-term by a balance sheet restructuring and in the longer-term by execution of the other strategic initiatives. However, both of these actions are complicated by the pendency of the Merger."
Mr. Salamone continued, "We firmly believe that the M&T transaction remains financially attractive to Hudson City's shareholders, and that continuing to pursue completion is in the best interest of Hudson City and the communities we serve. As a result, we remain committed to the Merger. Assuming market conditions remain stable, we anticipate additional margin compression during the pendency of the Merger, but securities gains that are more in-line with those of the fourth quarter of 2014."
Mr. Salamone concluded, "On a final note, we are very pleased that during the first quarter, the Office of the Comptroller of the Currency ("OCC") terminated the memorandum of understanding ("MOU") entered into with the Bank on March 30, 2012. In the course of satisfying the terms of the MOU, the Bank, among other things, developed an enterprise risk management department as part of a "three lines of defense" organizational structure and implemented enhanced risk management policies, procedures and systems. We believe these accomplishments, along with our strong ethical corporate culture, provide Hudson City with the necessary governance structure and risk management framework to meet the challenges facing all financial institutions in this current environment. I am particularly proud of the efforts of our employees to complete the work necessary to satisfy the requirements of the MOU during the pendency of the Merger."
Financial highlights for the first quarter of 2015 are as follows:
-- The Bank's Tier 1 leverage capital ratio was 11.83% at March 31, 2015.
The Bank's Tier 1 risk-based capital ratio and Common Equity Tier 1
risk-based capital ratio were both 30.00% at March 31, 2015. Effective
January 1, 2015, the Company also became subject to consolidated capital
requirements. At March 31, 2015, the Company's Tier 1 leverage capital
ratio was 12.79% and the Company's Tier 1 risk-based capital ratio and
Common Equity Tier 1 risk-based capital ratio were both 32.49%. The
risk-based capital ratios at March 31, 2015 are based on the
risk-weighting of assets calculated in accordance with the provisions of
BASEL III and the Dodd-Frank Act.
-- Our interest rate spread and net interest margin were 0.53% and 0.85%,
respectively, for the first quarter of 2015 as compared to 1.12% and
1.41%, respectively, for the first quarter of 2014. For the linked
fourth quarter of 2014, our interest rate spread and net interest margin
were 0.70% and 1.01%, respectively.
-- Non-performing loans decreased $7.4 million to $844.6 million at March
31, 2015 as compared to $852.0 million at December 31, 2014. Early stage
loan delinquencies (defined as loans that are 30 to 89 days delinquent)
decreased $72.5 million to $335.1 million at March 31, 2015 from $407.6
million at December 31, 2014.
-- Net charge-offs amounted to $4.8 million for the first quarter of 2015
as compared to $10.4 million for the first quarter of 2014. The ratio of
net charge-offs to average loans decreased to 0.09% for the quarter
ended March 31, 2015 as compared to 0.18% for the quarter ended March
31, 2014.
-- Gains on the sales of mortgage-backed securities amounted to $7.3
million for the quarter ended March 31, 2015 as compared to $15.9
million for the quarter ended March 31, 2014 and $45.9 million for the
linked fourth quarter of 2014.
-- FDIC expense decreased $3.0 million to $10.9 million for the quarter
ended March 31, 2015 as compared to $13.9 million for the quarter ended
March 31, 2014.
-- Federal funds sold and other overnight deposits and U.S. Treasury
securities amounted to $6.06 billion and $4.10 billion, respectively,
which represent 28% of total assets as of March 31, 2015.
-- Total deposits decreased $467.5 million, or 2.4%, to $18.91 billion at
March 31, 2015 from $19.38 billion at December 31, 2014 due to our
decision to maintain lower deposit rates. This allowed us to manage
deposit levels at a time when there are limited investment opportunities
with attractive yields to reinvest the funds received from payment
activity on mortgage-related assets as we continue to manage our excess
liquidity.
Statement of Financial Condition Summary
Total assets decreased $439.8 million, or 1.2%, to $36.13 billion at March 31, 2015 from $36.57 billion at December 31, 2014. The decrease in total assets reflected a $758.4 million decrease in net loans, a $399.1 million decrease in total mortgage-backed securities and a $113.0 million decrease in cash and cash equivalents, partially offset by an $807.8 million increase in investment securities.
Total cash and cash equivalents decreased $113.0 million to $6.17 billion at March 31, 2015 as compared to $6.29 billion at December 31, 2014. The high level of cash and cash equivalents is primarily due to repayments on mortgage-related assets and our limited appetite for reinvesting these funds in low-yielding longer-term assets. We have maintained lower deposit rates to allow a reduction in our deposits to help manage deposit levels at a time when there are limited investment opportunities and to prepare for a balance sheet restructuring during 2015. We have used a portion of our excess cash inflows to fund these deposit reductions.
Net loans decreased to $20.67 billion at March 31, 2015 as compared to $21.43 billion at December 31, 2014 due primarily to a decrease in loan production. During the first quarter of 2015, our loan production (originations and purchases) amounted to $184.5 million as compared to $298.3 million for the fourth quarter of 2014. Loan production was offset by principal repayments of $910.4 million during the first quarter of 2015, as compared to principal repayments of $872.0 million for the fourth quarter of 2014. Beginning in the fourth quarter of 2014, the Bank began to purchase commercial real estate loans and commercial real estate loan participations, which is one of the initiatives in the Company's Strategic Plan. During the first quarter of 2015, the Bank purchased $25 million of such loan participations as compared to $86.6 million for the fourth quarter of 2014, for an aggregate of $112 million.
The decline in loan production during the first quarter of 2015 as compared to the fourth quarter of 2014 reflects our limited appetite for adding long-term fixed-rate mortgage loans to our portfolio in the current low market interest rate environment.
Total mortgage-backed securities decreased $399.1 million to $3.84 billion at March 31, 2015 from $4.24 billion at December 31, 2014. The decrease was due primarily to securities sales of $218.6 million and repayments of $181.4 million of mortgage-backed securities during the first quarter of 2015. We sold mortgage-backed securities during 2014 and the first quarter of 2015 to take advantage of market demand and prices. The proceeds from the sales have been invested primarily in short-term liquid assets. While this further increases our levels of low-yielding liquid assets, we believe this positions our balance sheet for a potential balance sheet restructuring transaction.
Total investment securities increased $807.8 million to $4.46 billion at March 31, 2015 as compared to $3.65 billion at December 31, 2014. The increase was due primarily to purchases of $800.8 million of U.S. Treasury securities with an average life of 11 months which are used as collateral for our outstanding borrowings.
Total liabilities decreased $439.3 million, or 1.4%, to $31.35 billion at March 31, 2015 from $31.79 billion at December 31, 2014. The decrease in total liabilities reflected a decrease in total deposits while total borrowed funds remained unchanged.
Total shareholders' equity was $4.78 billion at both March 31, 2015 and December 31, 2014. Cash dividends paid to common shareholders during the first quarter of 2015 amounted to $20.0 million partially offset by a change in accumulated other comprehensive loss of $8.5 million and net income of $5.9 million. At March 31, 2015, our consolidated shareholders' equity to asset ratio was 13.23% and our tangible book value per share was $9.25.
Accumulated other comprehensive loss amounted to $41.9 million at March 31, 2015 and included a $67.6 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans partially offset by a $25.7 million after-tax net unrealized gain on securities available for sale ($43.4 million pre-tax). Accumulated other comprehensive loss amounted to $50.4 million at December 31, 2014 which included a $68.7 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans partially offset by a $18.3 million after-tax net unrealized gain on securities available for sale ($30.9 million pre-tax).
Statement of Income Summary
The Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the "FOMC") noted that economic growth has moderated somewhat during the first quarter of 2015. The FOMC noted that labor market conditions have improved further with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. The national unemployment rate decreased to 5.5% in March 2015 from 5.6% in December 2014 and from 6.6% in March 2014. The FOMC decided to maintain the overnight lending target rate at zero to 0.25% during the first quarter of 2015.
The FOMC stated that it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The FOMC believes this policy of keeping holdings of longer-term securities at sizable levels should help maintain accommodative financial conditions.
Net interest income decreased to $75.6 million for the first quarter of 2015 as compared to $87.2 million for the linked fourth quarter of 2014 and $132.3 million for the first quarter of 2014 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 0.53% for the first quarter of 2015 as compared to 0.70% for the linked fourth quarter of 2014 and 1.12% for the first quarter of 2014. Our net interest margin was 0.85% for the first quarter of 2015 as compared to 1.01% for the linked fourth quarter of 2014 and 1.41% for the first quarter of 2014.
Total interest and dividend income for the first quarter of 2015 decreased $61.6 million, or 19.7%, to $250.9 million from $312.5 million for the first quarter of 2014. The decrease in total interest and dividend income was due to a $1.98 billion decrease in the average balance of total interest-earning assets during the first quarter of 2015 to $35.52 billion from $37.50 billion for the first quarter of 2014 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 first quarter of 2015 as compared to the first quarter of 2014 was due primarily to repayments and sales 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 2.83% for the first quarter of 2015 as compared to 3.33% for the first quarter of 2014. The decrease in the annualized weighted-average yield of interest-earning assets was due to continued low market interest rates earned on mortgage-related assets and a $3.55 billion increase in investment securities with an annualized weighted-average yield of 0.41% and an increase of $1.51 billion in the average balance of Federal funds sold and other overnight deposits with an average yield of 0.25% for the quarter ended March 31, 2015.
Interest on first mortgage loans decreased $35.8 million, or 14.1%, to $217.3 million for the first quarter of 2015 from $253.1 million for the first quarter of 2014. The decrease in interest on first mortgage loans was primarily due to a $2.66 billion decrease in the average balance of first mortgage loans to $20.88 billion for the first quarter of 2015 from $23.54 billion for the first quarter in 2014. The decrease in interest on first mortgage loans was also due to a 14 basis point decrease in the annualized weighted-average yield to 4.16% for the first quarter of 2015 from 4.30% for the first quarter of 2014.
The decrease in the average yield earned on first mortgage loans during the first quarter of 2015 was due primarily to repayments of higher-yielding loans coupled with lower yields on new loan originations. Consequently, the average yield on our loan portfolio continued to decline during the first quarter of 2015.
Interest on mortgage-backed securities decreased $28.6 million to $20.1 million for the first quarter of 2015 from $48.7 million for the first quarter of 2014. This decrease was due primarily to a $4.34 billion decrease in the average balance of mortgage-backed securities to $4.09 billion for the first quarter of 2015 from $8.43 billion for the first quarter of 2014.
The decrease in the average balance of mortgage-backed securities during the first quarter of 2015 was due to sales of mortgage-backed securities and principal repayments. During 2014, we sold $3.31 billion of mortgage-backed securities to realize gains that otherwise would have decreased as repayments reduced the outstanding principal balance on these securities. During the first quarter of 2015, we sold $218.6 million of mortgage-backed securities. The decrease in interest on mortgage-backed securities was also due to a decrease of 34 basis points in the annualized weighted-average yield of mortgage-backed securities to 1.97% for the first quarter of 2015 as compared to 2.31% for first quarter of 2014.
Interest on investment securities increased $2.6 million to $4.0 million for the first quarter of 2015 as compared to $1.4 million for the first quarter of 2014. This increase was due primarily to a $3.55 billion increase in the average balance of investment securities to $3.89 billion for the first quarter of 2015 from $344.4 million for the first quarter of 2014.
The increase in the average balance was due primarily to the purchase of $3.30 billion of U.S. Treasury securities in 2014. In addition, we purchased $800.8 million of U.S. Treasury securities during the first quarter of 2015. This increase was partially offset by a decrease in the annualized weighted-average yield to 0.41% for the first quarter of 2015 from 1.60% for the first quarter of 2014. The decrease in the annualized weighted-average yield earned on investment securities during this same period is due to the average yield earned on the U.S. Treasury securities which was 0.28%.
Interest on Federal funds sold and other overnight deposits amounted to $3.8 million for the first quarter of 2015 as compared to $2.9 million for the first quarter of 2014. The increase in interest income on Federal funds sold and other overnight deposits was 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 $6.14 billion for the first quarter of 2015 as compared to $4.63 billion for the first quarter of 2014. The increase in the average balance was due primarily to repayments and sales of 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. The yield earned on Federal funds sold and other overnight deposits was 0.25% for the first quarters of both 2015 and 2014.
Total interest expense for the quarter ended March 31, 2015 decreased $4.9 million, or 2.7%, to $175.3 million from $180.2 million for the quarter ended March 31, 2014. This decrease was primarily due to a $2.13 billion decrease in the average balance of total interest-bearing liabilities to $30.63 billion for the quarter ended March 31, 2015 from $32.76 billion for the quarter ended March 31, 2014. This was partially offset by an increase in the annualized weighted-average cost of total interest-bearing liabilities to 2.30% for the quarter ended March 31, 2015 as compared to 2.21% for the quarter ended March 31, 2014. The decrease in the average balance of total interest-bearing liabilities was due entirely to a decrease in the average balance of total deposits.
The increase in the average cost of interest-bearing liabilities during the first quarter of 2015 was due to a decrease in the average balance of interest-bearing deposits, which have a lower weighted-average cost than our borrowed funds, the average balances of which remained unchanged. Interest-bearing deposits accounted for 60% of interest-bearing liabilities for the quarter ended March 31, 2015 as compared to 63% for the quarter ended March 31, 2014.
Interest expense on deposits decreased $5.1 million, or 12.6%, to $35.5 million for the first quarter of 2015 from $40.6 million for the first quarter of 2014. The decrease is primarily due to a $2.14 billion decrease in the average balance of interest-bearing deposits to $18.45 billion for the first quarter of 2015 from $20.59 billion for the first quarter of 2014. The decrease is also due to a decrease in the average cost of interest-bearing deposits of 2 basis points to 0.78% for the first quarter of 2015 from 0.80% for the first quarter of 2014. The decrease in the average cost of deposits for the first quarter of 2015 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 amounted to $139.8 million for the first quarter of 2015 as compared to $139.6 million for the first quarter of 2014. The average cost of borrowed funds was 4.59% for both the quarters ended March 31, 2015 and 2014. The average balance of borrowings was unchanged for both comparative periods. There is one borrowing scheduled to mature in the fourth quarter of 2015 for $75.0 million with an average cost of 4.62%.
There was no provision for loan losses for the first quarters of both 2015 and 2014. No provision was needed due to improving home prices and economic conditions, a continued decrease in total delinquent loans and a continued decrease in the size of the loan portfolio.
Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $844.6 million at March 31, 2015 as compared to $852.0 million at December 31, 2014 and $1.03 billion at March 31, 2014. The ratio of non-performing loans to total loans was 4.06% at March 31, 2015 as compared to 3.95% at December 31, 2014 and 4.32% at March 31, 2014. Notwithstanding the decrease in non-performing loans, the ratio of non-performing loans to total loans increased during the first quarter of 2015 as total loans decreased. The foreclosure process and the time to complete a foreclosure continue to be prolonged, especially in New York and New Jersey where approximately 79.0% 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 $223.7 million at March 31, 2015 as compared to $278.5 million at December 31, 2014 and $276.0 million at March 31, 2014. Loans delinquent 60 to 89 days amounted to $111.4 million at March 31, 2015 as compared to $129.1 million at December 31, 2014 and $157.1 million at March 31, 2014.
The allowance for loan losses amounted to $230.5 million at March 31, 2015 as compared to $235.3 million at December 31, 2014 and $265.7 million at March 31, 2014. The allowance for loan losses as a percent of total loans and as a percent of non-performing loans was 1.11% and 27.29%, respectively, at March 31, 2015, as compared to 1.09% and 27.62%, respectively, at December 31, 2014 and 1.12% and 25.88%, respectively, at March 31, 2014.
Net charge-offs amounted to $4.8 million for the first quarter of 2015 as compared to $10.4 million for the first quarter of 2014 and $6.9 million for the linked fourth quarter of 2014. The ratio of net charge-offs to average loans was 0.09% for the first quarter of 2015 as compared to 0.18% for the first quarter of 2014 and 0.13% for the linked fourth quarter of 2014.
Total non-interest income was $8.7 million for the first quarter of 2015 as compared to $47.5 million for the linked fourth quarter of 2014 and $17.8 million for the first quarter of 2014. Included in non-interest income for the first quarter of 2015 were $7.3 million in gains from the sale of $218.6 million of mortgage-backed securities. Gains on the sales of securities amounted to $45.9 million for the linked fourth quarter of 2014 and $15.9 million in the first quarter of 2014. Sales of securities in the first quarter of 2015 were significantly reduced as we planned for a targeted Merger closing. The remainder of non-interest income is primarily made up of service fees and charges on deposit and loan accounts.
Total non-interest expense decreased $4.9 million to $74.8 million for the first quarter of 2015 as compared to $79.7 million for the first quarter of 2014. This decrease was due primarily to a $3.0 million decrease in the FDIC assessment and a $2.7 million decrease in other non-interest expense. These decreases were partially offset by an $820,000 increase in compensation and employee benefit costs.
Compensation and employee benefit costs increased $820,000, or 2.4%, to $34.4 million for the first quarter of 2015 as compared to $33.6 million for the same period in 2014. The increase in compensation and employee benefit costs is comprised of a $1.6 million increase in postretirement benefit costs partially offset by decreases in medical plan expenses of $440,000 and $224,000 in compensation expense. At March 31, 2015, we had 1,498 full-time equivalent employees as compared to 1,507 at December 31, 2014.
For the three months ended March 31, 2015, Federal deposit insurance expense decreased $3.0 million, or 21.6%, to $10.9 million compared to $13.9 for the same period in 2014. This decrease was due primarily to a reduction in the size of our balance sheet and a decrease in our assessment rate.
Other non-interest expense decreased $2.7 million to $19.8 million for the quarter ended March 31, 2015 as compared to $22.5 million for the first quarter of 2014. This decrease was due primarily to a $3.0 million write-down in the receivable related to the Lehman Brothers, Inc. liquidation taken during the first quarter of 2014, partially offset by an increase of $501,000 in foreclosed real estate expenses.
Included in other non-interest expense were net gains of $348,000 resulting from foreclosed real estate transactions for the first quarter of 2015 as compared to a net gain of $78,000 for the same period in 2014. We sold 49 properties during the first quarter of 2015 as compared to 46 properties for the same period in 2014. Expenses associated with foreclosed real estate were $4.7 million and $4.2 million for the three months ended March 31, 2015 and 2014, respectively.
Our operating efficiency ratio was 87.97% for the 2015 first quarter as compared to 51.11% for the 2014 first quarter. The calculation of the operating efficiency ratio is included in a table contained in this press release. Our return on average assets was 0.06% for the 2015 first quarter as compared to 0.44% for the 2014 first quarter. Our annualized ratio of non-interest expense to average total assets for the first quarter of 2015 was 0.82% as compared to 0.83% for the first quarter of 2014.
Income tax expense amounted to $3.7 million for the first quarter of 2015 as compared to income tax expense of $27.9 million for the corresponding period in 2014. Our effective tax rate for the first quarter of 2015 was 38.71% compared with 39.58% for the first quarter of 2014.
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.
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 its 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.
TABLES FOLLOW
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
March 31, December 31,
2015 2014
---- ----
(In thousands, except share and per share amounts) (unaudited)
Assets:
-------
Cash and due from banks $114,521 $122,484
Federal funds sold and other overnight deposits 6,058,095 6,163,082
--------- ---------
Total cash and cash equivalents 6,172,616 6,285,566
Securities available for sale:
Mortgage-backed securities 2,631,582 2,963,304
Investment securities 4,418,802 3,611,045
Securities held to maturity:
Mortgage-backed securities 1,204,767 1,272,137
Investment securities 39,011 39,011
------ ------
Total securities 8,294,162 7,885,497
Loans 20,805,256 21,564,974
Net deferred loan costs 95,665 99,155
Allowance for loan losses (230,489) (235,317)
-------- --------
Net loans 20,670,432 21,428,812
Federal Home Loan Bank of New York stock 320,753 320,753
Foreclosed real estate, net 89,829 79,952
Accrued interest receivable 28,916 31,665
Banking premises and equipment, net 54,506 56,633
Goodwill 152,109 152,109
Other assets 345,967 328,095
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Total Assets $36,129,290 $36,569,082
Liabilities and Shareholders' Equity:
-------------------------------------
Deposits:
Interest-bearing $18,230,896 $18,711,444
Noninterest-bearing 678,125 665,100
------- -------
Total deposits 18,909,021 19,376,544
Repurchase agreements 6,150,000 6,150,000
Federal Home Loan Bank of New York advances 6,025,000 6,025,000
--------- ---------
Total borrowed funds 12,175,000 12,175,000
Accrued expenses and other liabilities 264,378 236,128
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Total liabilities 31,348,399 31,787,672
Common stock, $0.01 par value, 3,200,000,000 shares authorized;
741,466,555 shares issued; 528,961,889 and 528,908,735 shares
outstanding at March 31, 2015 and December 31, 2014 7,415 7,415
Additional paid-in capital 4,754,981 4,751,778
Retained earnings 1,947,410 1,961,531
Treasury stock, at cost; 212,504,666 and 212,557,820 shares at
March 31, 2015 and December 31, 2014 (1,708,295) (1,708,736)
Unallocated common stock held by the employee stock ownership plan (178,702) (180,204)
Accumulated other comprehensive loss, net of tax (41,918) (50,374)
------- -------
Total shareholders' equity 4,780,891 4,781,410
Total Liabilities and Shareholders' Equity $36,129,290 $36,569,082
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months
Ended March 31,
---------------
(In thousands, except share and per share amounts) 2015 2014
---- ----
Interest and Dividend Income:
First mortgage loans $217,288 $253,139
Consumer and other loans 2,041 2,278
Mortgage-backed securities held to maturity 7,602 11,211
Mortgage-backed securities available for sale 12,534 37,490
Investment securities held to maturity 585 585
Investment securities available for sale 3,371 794
Dividends on Federal Home Loan Bank of New York
stock 3,719 4,156
Federal funds sold 3,789 2,886
Total interest and dividend income 250,929 312,539
Interest Expense:
Deposits 35,539 40,638
Borrowed funds 139,762 139,565
Total interest expense 175,301 180,203
Net interest income 75,628 132,336
Provision for Loan Losses - -
--- ---
Net interest income after provision for
loan losses 75,628 132,336
------ -------
Non-Interest Income:
Service charges and other income 1,393 1,815
Gain on securities transactions, net 7,347 15,943
Total non-interest income 8,740 17,758
Non-Interest Expense:
Compensation and employee benefits 34,431 33,611
Net occupancy expense 9,551 9,711
Federal deposit insurance assessment 10,946 13,924
Other expense 19,830 22,467
Total non-interest expense 74,758 79,713
Income before income tax expense 9,610 70,381
Income Tax Expense 3,720 27,860
----- ------
Net income $5,890 $42,521
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Basic Earnings Per Share $0.01 $0.09
===== =====
Diluted Earnings Per Share $0.01 $0.09
===== =====
Weighted Average Number of Common Shares Outstanding:
Basic 500,085,913 498,409,428
Diluted 501,583,947 498,409,428
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)
For the Three Months Ended March 31,
------------------------------------
2015 2014
---- ----
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in thousands)
Assets:
-------
Interest-earnings assets:
First mortgage loans, net (1) $20,881,708 $217,288 4.16% $23,538,424 $253,139 4.30%
Consumer and other loans 191,180 2,041 4.27 212,098 2,278 4.30
Federal funds sold and other overnight
deposits 6,139,986 3,789 0.25 4,629,158 2,886 0.25
Mortgage-backed securities at amortized
cost 4,092,333 20,136 1.97 8,427,527 48,701 2.31
Federal Home Loan Bank stock 320,753 3,719 4.64 347,102 4,156 4.79
Investment securities, at amortized cost 3,894,283 3,956 0.41 344,351 1,379 1.60
---------------
Total interest-earning assets 35,520,243 250,929 2.83 37,498,660 312,539 3.33
------- ---------- -------
Noninterest-earnings assets 829,947 917,835
------- -------
Total Assets $36,350,190 $38,416,495
=========== ===========
Liabilities and Shareholders' Equity:
-------------------------------------
Interest-bearing liabilities:
Savings accounts 1,062,250 393 0.15 $1,021,143 378 0.15
Interest-bearing transaction accounts 2,091,951 1,375 0.27 2,195,612 1,560 0.29
Money market accounts 4,068,400 1,991 0.20 5,054,582 2,473 0.20
Time deposits 11,230,845 31,780 1.15 12,314,050 36,227 1.19
Total interest-bearing deposits 18,453,446 35,539 0.78 20,585,387 40,638 0.80
---------- ------ ---------- ------
Repurchase agreements 6,150,000 68,200 4.44 6,656,667 73,647 4.43
Federal Home Loan Bank of New York
advances 6,025,000 71,562 4.75 5,518,333 65,918 4.78
---------------
Total borrowed funds 12,175,000 139,762 4.59 12,175,000 139,565 4.59
---------- ------- ---------- -------
Total interest-bearing liabilities 30,628,446 175,301 2.30 32,760,387 180,203 2.21
---------- ------- ---------- -------
Noninterest-bearing liabilities:
Noninterest-bearing deposits 662,728 651,298
Other noninterest-bearing liabilities 264,513 218,175
---------------
Total noninterest-bearing liabilities 927,241 869,473
------- -------
Total liabilities 31,555,687 33,629,860
Shareholders' equity 4,794,503 4,786,635
--------- ---------
Total Liabilities and Shareholders' Equity $36,350,190 $38,416,495
=========== ===========
Net interest income/net interest rate spread (2) $75,628 0.53 $132,336 1.12
======= ========
Net interest-earning assets/net interest margin (3) $4,891,797 0.85% $4,738,273 1.41%
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities 1.16 x 1.14 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.
Hudson City Bancorp, Inc. and Subsidiary
Calculation of Efficiency Ratio and Book Value Ratios
(Unaudited)
At or for the Quarter Ended
March 31, 2015 Dec. 31, 2014 Sept. 30, 2014 June 30, 2014 March 31, 2014
-------------- ------------- -------------- ------------- --------------
(In thousands, except share data)
Operating Efficiency Ratio:
Net interest income $75,628 $87,181 $104,938 $117,682 $132,336
Total non-interest income 8,740 47,505 23,938 21,184 17,758
Total operating income $84,368 $134,686 $128,876 $138,866 $150,094
======================
Total non-interest expense $74,758 $70,163 $70,045 $73,108 $79,713
Less:
Merger-related costs (543) (671) - - -
Valuation allowance related to
Lehman Brothers, Inc. - - - - (3,000)
Total non-interest operating
expense (1) $74,215 $69,492 $70,045 $73,108 $76,713
==============================
Operating Efficiency ratio (2) 87.97% 51.60% 54.35% 52.65% 51.11%
Book Value Calculations:
Shareholders' equity $4,780,891 $4,781,410 $4,815,573 $4,812,892 $4,782,858
Goodwill and other intangible assets (152,348) (152,471) (152,597) (152,724) (152,972)
------------------------------------ -------- -------- -------- -------- --------
Tangible shareholders' equity (1) $4,628,543 $4,628,939 $4,662,976 $4,660,168 $4,629,886
================================
Book Value Share Computation:
Issued 741,466,555 741,466,555 741,466,555 741,466,555 741,466,555
Treasury shares (212,504,666) (212,557,820) (212,701,606) (212,713,635) (213,019,266)
---------------
Shares outstanding 528,961,889 528,908,735 528,764,949 528,752,920 528,447,289
Unallocated ESOP shares (28,624,992) (28,865,539) (29,106,085) (29,346,631) (29,587,177)
Shares in trust (22,759) (433,141) (431,384) (429,657) (427,916)
--------------- ------- -------- -------- -------- --------
Book value shares 500,314,138 499,610,055 499,227,480 498,976,632 498,432,196
===============
Book value per share $9.56 $9.57 $9.65 $9.65 $9.60
Tangible book value per share 9.25 9.27 9.34 9.34 9.29
(1) 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.
(2) Calculated by dividing total non-interest operating expense by total operating income.
Hudson City Bancorp, Inc.
Other Financial Data
(Unaudited)
Securities Portfolio at March 31, 2015:
Amortized Estimated Unrealized
Cost Fair Value Gain/(Loss)
---- ---------- -----------
(Dollars in thousands)
Held to Maturity (1):
Mortgage-backed securities:
FHLMC $827,252 $881,829 $54,577
FNMA 255,831 274,196 18,365
FHLMC and FNMA CMO's 69,678 74,066 4,388
GNMA 52,006 53,841 1,835
------ ------ -----
Total mortgage-backed securities 1,204,767 1,283,932 79,165
Investment securities:
U.S. agency debt 39,011 41,113 2,102
------ ------ -----
Total investment securities 39,011 41,113 2,102
Total held to maturity $1,243,778 $1,325,045 $81,267
========== ========== =======
Available for sale:
Mortgage-backed securities:
FHLMC $533,344 $544,875 $11,531
FNMA 1,453,658 1,467,486 13,828
GNMA 602,313 619,221 16,908
------- ------- ------
Total mortgage-backed securities 2,589,315 2,631,582 42,267
Investment securities:
U.S. Treasury and agency securities 4,400,577 4,401,315 738
Equity securities 17,077 17,487 410
------ ------ ---
Total investment securities 4,417,654 4,418,802 1,148
Total available for sale $7,006,969 $7,050,384 $43,415
========== ========== =======
(1) In the second quarter of 2015, all securities classified as held-to-maturity were transferred to available-for sale.
Hudson City Bancorp, Inc.
Other Financial Data
(Unaudited)
Loan Data at March 31, 2015:
Non-Performing Loans Total Loans
-------------------- -----------
Loan Number Percent of Loan Number Percent of
Balance Total Loans Balance Total Loans
------- ----------- ------- -----------
(Dollars in thousands)
First Mortgage Loans:
One- to four- family $792,619 2,222 3.81% $19,776,951 49,806 95.05%
FHA/VA 38,952 189 0.19% 642,102 3,407 3.09%
PMI 4,581 16 0.02% 72,225 260 0.35%
Construction 177 1 - 177 1 -
Commercial 2,015 5 0.01% 126,376 57 0.61%
----- --- ---- ------- --- ----
Total mortgage loans 838,344 2,433 4.03% 20,617,831 53,531 99.10%
Home equity loans 4,491 52 0.02% 170,339 4,849 0.82%
Other loans 1,760 5 0.01% 17,086 1,807 0.08%
Total $844,595 2,490 4.06% $20,805,256 60,187 100.00%
======== ===== ==== =========== ====== ======
Foreclosed real estate at March 31, 2015:
Carrying Number Under
Number Value Contract of Sale
------ ----- ----------------
(Dollars in thousands)
Foreclosed
real
estate 264 $89,829 50
Hudson City Bancorp, Inc. and Subsidiary
Other Financial Data
(Unaudited)
At or for the Quarter Ended
---------------------------
March 31, 2015 Dec. 31, 2014 Sept. 30, 2014 June 30, 2014 March 31, 2014
-------------- ------------- -------------- ------------- --------------
(Dollars in thousands, except per share data)
Net interest income $75,628 $87,181 $104,938 $117,682 $132,336
Provision for loan losses - - (3,500) - -
Non-interest income 8,740 47,505 23,938 21,184 17,758
Non-interest expense:
Compensation and employee benefits 34,431 30,645 32,669 32,405 33,611
Other non-interest expense 40,327 39,518 37,376 40,703 46,102
Total non-interest expense 74,758 70,163 70,045 73,108 79,713
------ ------ ------ ------ ------
Income before income tax expense 9,610 64,523 62,331 65,758 70,381
Income tax expense 3,720 25,387 25,205 26,576 27,860
Net income $5,890 $39,136 $37,126 $39,182 $42,521
====== ======= ======= ======= =======
Total assets $36,129,290 $36,569,082 $37,161,125 $37,700,645 $38,230,626
Loans, net 20,670,432 21,428,812 22,131,656 23,004,297 23,578,711
Mortgage-backed securities 3,836,349 4,235,441 6,228,575 7,297,690 8,190,893
Other securities 4,457,813 3,650,056 2,140,690 942,014 338,037
Deposits 18,909,021 19,376,544 19,973,147 20,513,835 21,065,582
Borrowings 12,175,000 12,175,000 12,175,000 12,175,000 12,175,000
Shareholders' equity 4,780,891 4,781,410 4,815,573 4,812,892 4,782,858
Performance Data:
Return on average assets (1) 0.06% 0.42% 0.40% 0.41% 0.44%
Return on average equity (1) 0.49% 3.24% 3.06% 3.25% 3.55%
Net interest rate spread (1) 0.53% 0.70% 0.88% 1.00% 1.12%
Net interest margin (1) 0.85% 1.01% 1.18% 1.29% 1.41%
Non-interest expense to average assets (1) (4) 0.82% 0.76% 0.75% 0.77% 0.83%
Compensation and benefits to total revenue (5) 40.81% 22.75% 25.35% 23.34% 22.39%
Operating efficiency ratio (2) 87.97% 51.60% 54.35% 52.65% 51.11%
Dividend payout ratio 400.00% 50.00% 57.14% 50.00% 44.44%
Per Common Share Data:
Basic earnings per common share $0.01 $0.08 $0.07 $0.08 $0.09
Diluted earnings per common share $0.01 $0.08 $0.07 $0.08 $0.09
Book value per share (3) $9.56 $9.57 $9.65 $9.65 $9.60
Tangible book value per share (3) $9.25 $9.27 $9.34 $9.34 $9.29
Dividends per share $0.04 $0.04 $0.04 $0.04 $0.04
Capital Ratios(6):
Bank:
Tier 1 leverage capital 11.83% 11.74% 11.48% 11.26% 11.03%
CET 1 risk-based capital 30.00% N/A N/A N/A N/A
Total risk-based capital 31.25% 28.75% 27.93% 26.91% 26.10%
Company:
Tier 1 leverage capital 12.79% N/A N/A N/A N/A
CET 1 risk-based capital 32.49% N/A N/A N/A N/A
Total risk-based capital 33.75% N/A N/A N/A N/A
------------------------ ----- --- --- --- ---
Other Data:
Full-time equivalent employees 1,498 1,507 1,515 1,514 1,535
Number of banking offices 135 135 135 135 135
Asset Quality Data:
Total non-performing loans $844,595 $852,013 $859,839 $1,008,253 $1,026,591
Number of non-performing loans 2,490 2,548 2,564 3,081 3,185
Total number of loans 60,187 61,784 63,308 65,291 66,492
Total non-performing assets $934,424 $931,965 $938,353 $1,086,056 $1,105,182
Non-performing loans to total loans 4.06% 3.95% 3.86% 4.35% 4.32%
Non-performing assets to total assets 2.59% 2.55% 2.53% 2.88% 2.89%
Allowance for loan losses $230,489 $235,317 $242,212 $255,011 $265,732
Allowance for loan losses to non-performing loans 27.29% 27.62% 28.17% 25.29% 25.88%
Allowance for loan losses to total loans 1.11% 1.09% 1.09% 1.10% 1.12%
Provision for loan losses $ - $ - $(3,500) $ - $ -
Net charge-offs $4,828 $6,895 $9,298 $10,722 $10,365
Ratio of net charge-offs to average loans (1) 0.09% 0.13% 0.17% 0.18% 0.18%
Net gains on foreclosed real estate $348 $484 $2,023 $592 $78
----------------------------------- ---- ---- ------ ---- ---
(1) Ratios are annualized.
(2) The calculation of our Operating Efficiency Ratio is located in a schedule included in this press release.
(3) The calculations of book value per share and tangible book value per share are located in a schedule included in this press release.
(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.
(6) The regulatory capital ratios presented as of March 31, 2015 represent calculations under the BASEL III guidelines, which became effective for the Company and the Bank on January 1, 2015, and the Dodd-Frank Act. The regulatory capital ratios presented for the quarters prior to March 31, 2015 were calculated under rules effective at that time. Prior to 2015, Hudson City Bancorp was not
subject to regulatory capital requirements.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hudson-city-bancorp-inc-reports-quarterly-earnings-of-59-million-300073913.html
SOURCE Hudson City Bancorp, Inc.
