HUDSON CITY BANCORP, INC. 
By PARAMUS, N.J., Jan. 25, 2012 /PRNewswire/ -- Hudson City Bancorp, Inc. (NASDAQ: HCBK), the holding company for Hudson City Savings Bank, reported a net loss of $360.5 million or $0.73 per share for the quarter ended December 31, 2011 as compared to net income of $121.2 million or $0.25 per diluted share for the quarter ended December 31, 2010. This loss was due to the previously announced debt extinguishments which resulted in an after-tax charge of $416.8 million. Operating earnings and diluted operating earnings per share (non-GAAP measures) were $58.6 million and $0.12, respectively, for the fourth quarter of 2011. Operating earnings were adversely affected during the fourth quarter by the elevated levels of liquidity that were held in overnight funds with an average yield of 0.28%. These funds were used to fund the debt extinguishments in December 2011. Please see the attached Reconciliation of GAAP and Operating Earnings for a reconciliation of operating earnings to the Company's earnings reported in accordance with U.S. generally accepted accounting principles.
Financial highlights for the fourth quarter of 2011 are as follows:
-- The Board of Directors declared a quarterly cash dividend of $0.08 per
share payable on February 28, 2012 to shareholders of record on February
10, 2012.
-- The Bank extinguished $4.3 billion of structured putable borrowings with
a weighted average cost of 4.21%. The extinguishment of the borrowings
was funded primarily by the Company's existing cash position. This cash
position was the result of the calls of investment securities and, to a
lesser extent, prepayments on mortgage-related assets. The debt
extinguishment reduced after-tax earnings by approximately $416.8
million for the fourth quarter of 2011.
-- Our net interest rate spread and net interest margin were 1.51% and
1.73%, respectively, for the fourth quarter of 2011 as compared to 1.76%
and 1.97%, respectively, for the linked third quarter of 2011. Net
interest income, the interest rate spread and net interest margin were
adversely affected during the fourth quarter by the elevated levels of
liquidity that were held in overnight funds with an average yield of
0.28%. These funds were used to fund the debt extinguishments in
December 2011.
-- For the year ended December 31, 2011 we had a net loss of $736.0 million
as compared to net income of $537.2 million for 2010. Operating
earnings amounted to $332.5 million, or $0.67 per diluted share, for
2011 as compared to $537.2 million, or $1.09 per diluted share, for
2010. Please see the attached Reconciliation of GAAP and Operating
Earnings for a reconciliation of operating earnings to the Company's
earnings reported in accordance with U.S. generally accepted accounting
principles.
-- The provision for loan losses amounted to $25.0 million for the fourth
quarter of 2011, unchanged from the linked third quarter of 2011.
Charge-offs amounted to $20.0 million for the fourth quarter of 2011 and
$18.6 million for the linked third quarter of 2011.
-- Borrowings amounted to $15.08 billion at December 31, 2011, a decrease
of $5.15 billion from September 30, 2011 and a decrease of $14.6 billion
from December 31, 2010. At December 31, 2011, structured borrowings
amounted to $7.93 billion and fixed-rate, fixed-maturity borrowings
amounted to $7.15 billion. Structured borrowings amounted to $29.08
billion at December 31, 2010.
-- The Bank's Tier 1 leverage capital ratio increased to 8.83% at December
31, 2011 from 8.77% at September 30, 2011. The ratio of shareholders'
equity to total assets was 10.05% at December 31, 2011 as compared to
9.01% at December 31, 2010.
Ronald E. Hermance, Jr., Chairman and Chief Executive Officer commented, "Our net loss for the quarter was a result of the previously announced extinguishment of structured borrowings. During the past year, the low interest rate environment resulted in elevated levels of liquidity as borrowers prepaid or refinanced their mortgage loans and we experienced a significant increase in the calls of our investment securities. Our options for reinvesting this excess liquidity were limited since the yields available on mortgage-related assets remained at or near historical low levels and we did not believe it would be prudent to put such long-term assets on our balance sheet. As we considered our options for this excess liquidity, we decided that the best long-term solution would be to reduce the amount of borrowings on our balance sheet and therefore we repaid $4.3 billion of structured borrowings. This reduced our total assets to $45.36 billion and reduced the amount of interest rate risk inherent in our balance sheet while having no significant effect on our regulatory capital ratios. The considerable difference in the interest rates we previously earned on the loans and securities that were prepaid compared to Federal funds and other overnight deposits that we held during the quarter and that were used to extinguish the borrowings in December 2011, also contributed to the decline in our operating earnings."
Mr. Hermance continued, "This extinguishment of debt in the fourth quarter and the restructuring transaction in the first quarter of 2011 were designed to strengthen our balance sheet for the future and improve our net interest margin. To that end, we made great strides in 2011 to meet the future head-on by shrinking our balance sheet, reducing our levels of interest rate risk, increasing our Tier 1 leverage capital ratio and increasing staffing levels in critical areas. We believe it is now critical for Hudson City to focus on the longer-term opportunities that will be available when economic conditions normalize. Patience will be rewarded. Our focus will remain on positioning our balance sheet and adjusting our business model for future growth. In the short term, the announced increase in government-sponsored enterprise ("GSE") fees in the second quarter of 2012 should make portfolio lenders more competitive in the marketplace. Longer term, an improved economy and a sensible resolution of the GSEs will provide Hudson City with significant opportunities to grow our residential business."
For the year ended December 31, 2011, the Bank reported a net loss of $736.0 million as compared to net income of $537.2 million for the year ended December 31, 2010. Net loss per share was $1.49 for the year ended December 31, 2011 as compared to diluted earnings per share of $1.09 for the same period in 2010. In addition to the debt extinguishments in the fourth quarter of 2011, the Bank completed a restructuring of its balance sheet (the "Restructuring Transaction") in the first quarter of 2011 which resulted in the extinguishment of $12.5 billion of structured putable borrowings with an average cost of 3.56%. The extinguishment of the borrowings in the Restructuring Transaction was funded by the sale of $8.66 billion of securities with an average yield of 3.20% and re-borrowing $5.00 billion of short-term fixed-maturity borrowings with an average cost of 0.66%. The Restructuring Transaction and the extinguishment of debt during the fourth quarter of 2011, (collectively referred to as the "Transactions"), reduced after-tax earnings by $1.07 billion. Operating earnings and diluted operating earnings per share were $332.5 million and $0.67, respectively, for the year ended December 31, 2011 as compared to $537.2 million and $1.09, respectively, for the same period in 2010. Please see the attached Reconciliation of GAAP and Operating Earnings for a reconciliation of operating earnings to the Company's earnings reported in accordance with U.S. generally accepted accounting principles.
Statement of Financial Condition Summary
Total assets decreased $15.81 billion, or 25.8%, to $45.36 billion at December 31, 2011 from $61.17 billion at December 31, 2010. The decrease in total assets reflected a $10.75 billion decrease in total mortgage-backed securities, a $3.48 billion decrease in total investment securities, a $1.64 billion decrease in net loans and a $454.9 million increase in other assets. The increase in other assets is due primarily to an increase in current and deferred tax assets related to tax benefits from the loss on the Transactions.
Our net loans decreased $1.64 billion during the year ended December 31, 2011 to $29.14 billion. The decrease in loans primarily reflects reduced levels of loan originations and purchases as well as elevated levels of loan repayments during 2011 as a result of continued low market interest rates. Historically our focus has been on loan portfolio growth through the origination of one- to four-family first mortgage loans in New Jersey, New York, Pennsylvania and Connecticut and, to a lesser extent, the purchases of mortgage loans. During 2011, we originated $4.93 billion and purchased $344.8 million of loans, compared to originations of $5.83 billion and purchases of $764.3 million for 2010. The originations and purchases of loans were offset by principal repayments of $6.71 billion in 2011, as compared to $7.26 billion for 2010.
Loan originations declined for the year ended December 31, 2011 as compared to the same period in 2010, reflecting reduced demand for mortgage loans as a result of the conditions in the housing market and the general economy. In addition, elevated levels of refinancing activity caused by low market interest rates have caused increased levels of repayments to continue during 2011. Our loan purchase activity has also declined as sellers from whom we have historically purchased loans are either retaining these loans in their own portfolios or selling them to the GSEs.
Total mortgage-backed securities decreased $10.75 billion during the year ended December 31, 2011 to $13.29 billion. The decrease was due primarily to the sale of $8.96 billion of securities, substantially all of which were sold as part of the Restructuring Transaction. The decrease in mortgage-backed securities also reflected repayments of $4.71 billion which were partially offset by purchases of $3.05 billion of mortgage-backed securities issued by GSEs.
Investment securities decreased $3.48 billion due to the calls of these securities during 2011. The proceeds from the calls were invested in Federal funds and other overnight deposits until they were used in December 2011 as part of our extinguishment transaction.
Total liabilities decreased $14.86 billion, or 26.7%, to $40.80 billion at December 31, 2011 from $55.66 billion at December 31, 2010. The decrease in total liabilities primarily reflected a $14.6 billion decrease in borrowed funds.
Borrowings amounted to $15.08 billion at December 31, 2011 as compared to $29.68 billion at December 31, 2010. The decrease in borrowed funds was primarily a result of the Transactions. As part of the Transactions, we paid off $16.8 billion of structured putable borrowings and re-borrowed $5.0 billion of new short-term fixed-maturity borrowings. In addition, approximately $4.20 billion of borrowings matured during 2011 and were repaid. The extinguishment of structured putable borrowings was a necessary step in our efforts to reduce our interest rate risk and eliminate some of the liquidity uncertainties of borrowings that are putable at the discretion of the lender.
At December 31, 2011 and 2010, borrowings consisted of the following:
December 31, 2011 December 31, 2010
----------------- -----------------
Weighted Weighted
Average Average
Principal Rate Principal Rate
--------- ---- --------- ----
(Dollars in thousands)
Structured
borrowings:
Quarterly
put
option $3,325,000 4.40% $24,125,000 3.94%
One-
time
put
option 4,600,000 4.52 4,950,000 4.44
--------- ---- --------- ----
7,925,000 4.47 29,075,000 4.03
Fixed-
rate/
fixed-
maturity
borrowings 7,150,000 3.21 600,000 3.47
--------- ---- ------- ----
Total
borrowed
funds $15,075,000 3.87% $29,675,000 4.02%
=========== ===========
The Company had two collateralized borrowings in the form of repurchase agreements totaling $100.0 million with Lehman Brothers, Inc. Lehman Brothers, Inc. is currently in liquidation under the Securities Industry Protection Act ("SIPA"). Mortgage-backed securities with an amortized cost of approximately $114.1 million were pledged as collateral for these borrowings and we demanded the return of this collateral. The trustee for the SIPA liquidation of Lehman Brothers, Inc. (the "Trustee") notified the Company in the fourth quarter of 2011 that it no longer holds these securities and considers our claim to be approximately $13.9 million representing the excess of the market value of the collateral over the $100 million repurchase price. While we dispute the Trustee's calculation of the claim, as a result of the Trustee's position, we removed the mortgage-backed securities and the borrowings from our balance sheet and recorded the net amount as a receivable included in other assets (the "Net Claim"). While we intend to pursue full recovery of our Net Claim, we established a reserve of $3.9 million against the receivable balance at December 31, 2011. There can be no assurances as to the amount of the final settlement of this transaction.
Total shareholders' equity decreased $949.8 million to $4.56 billion at December 31, 2011 from $5.51 billion at December 31, 2010. The decrease was primarily due to the net loss of $736.0 million for the year ended December 31, 2011. The decrease was also due to cash dividends paid to common shareholders of $192.7 million and a $45.7 million decrease in accumulated other comprehensive income to $39.7 million. At December 31, 2011, our shareholders' equity to asset ratio was 10.05% and our book value per share was $9.20.
The accumulated other comprehensive income of $39.7 million at December 31, 2011 included an $89.3 million after-tax net unrealized gain on securities available for sale ($150.9 million pre-tax) and a $49.6 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans. The accumulated other comprehensive income of $85.4 million at December 31, 2010 included a $117.3 million after-tax net unrealized gain on securities available for sale ($198.3 million pre-tax), partially offset by a $31.9 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans.
Statement of Income Summary
The Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the "FOMC") noted that the economy expanded moderately in 2011. The FOMC noted that recent indicators point to some improvement in overall labor market conditions, although the unemployment rate remains at elevated levels. The national unemployment rate decreased to 8.5% in December 2011 from 9.1% in September 2011 and from 9.4% in December 2010. The FOMC noted that household spending has continued to advance, but business fixed investment appears to be increasing at a slower pace and the housing sector continues to be depressed. As a result, the FOMC decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The FOMC also indicated in September 2011, that the overnight lending rate would remain at zero to 0.25% through at least mid-2013. The decision to leave the overnight lending rate unchanged has kept short-term market interest rates at low levels during 2011. The yields on mortgage-related assets have also remained at low levels during the same period. The actions commenced by the FOMC have placed additional downward pressure on our net interest margin as our interest-earning assets continue to re-price.
Net interest income decreased $44.8 million, or 17.8%, to $207.0 million for the fourth quarter of 2011 as compared to $251.8 million for the fourth quarter of 2010. Our net interest rate spread increased to 1.51% for the fourth quarter of 2011 as compared to 1.48% for the fourth quarter of 2010 but decreased 25 basis points from the linked third quarter of 2011. Our net interest margin remained unchanged at 1.73% for the both the fourth quarter of 2011 and 2010, respectively, but decreased 24 basis points from the linked third quarter of 2011.
Net interest income decreased $209.9 million, or 17.6%, to $980.9 million for 2011 as compared to $1.19 billion for 2010. During 2011, our net interest rate spread decreased 10 basis points to 1.67% and our net interest margin decreased 12 basis points to 1.89% as compared to 2010.
The decrease in our net interest margin during the fourth quarter of 2011 from the linked third quarter reflected the elevated levels of liquidity provided by the calls of investment securities and repayments of mortgage-related assets. These funds were invested in Federal funds and other overnight deposits with an average yield of 0.28% until they were used to extinguish borrowings with an average cost of 4.21% in December 2011. The average balance of Federal funds sold and other overnight deposits amounted to $3.44 billion during the fourth quarter of 2011 as compared to $1.20 billion for the linked third quarter. Our net interest margin decreased for the year ended 2011 as compared to the same period in 2010. This decrease was due primarily to the low market interest rates that resulted in lower yields on our mortgage-related interest-earning assets as customers refinanced to lower mortgage rates and our new loan production and asset purchases were at the current low market interest rates. Mortgage-related assets represented 89.0% of our average interest-earning assets during the 2011 fourth quarter.
Total interest and dividend income for the fourth quarter of 2011 decreased $170.4 million, or 26.5%, to $472.8 million from $643.2 million for the fourth quarter of 2010. The decrease in total interest and dividend income was due to a decrease in the average balance of total interest-earning assets of $10.87 billion, or 18.4%, to $48.23 billion for the fourth quarter of 2011 from $59.10 billion for the fourth quarter of 2010. The decrease in total interest and dividend income was also due to a decrease of 43 basis points in the annualized weighted-average yield on total interest-earning assets to 3.92% for the fourth quarter of 2011 from 4.35% for the quarter ended December 31, 2010, reflecting lower market interest rates. The decrease in the average balance of total interest-earning assets was due primarily to the Transactions.
Total interest and dividend income for the year ended December 31, 2011 decreased $616.9 million, or 22.2%, to $2.17 billion from $2.78 billion for the year ended December 31, 2010. The decrease in total interest and dividend income was primarily due to a decrease in the average balance of total interest-earning assets of $7.47 billion, or 12.6%, to $51.80 billion for the year ended December 31, 2011 from $59.27 billion for the same period in 2010. The decrease in total interest and dividend income was also due to a decrease of 52 basis points in the weighted-average yield on total interest-earning assets to 4.18% for the year ended December 31, 2011 from 4.70% for the year ended December 31, 2010. The decrease in the average balance of total interest-earning assets was due primarily to the effects of the Transactions.
Interest on first mortgage loans decreased $41.6 million to $354.0 million for the fourth quarter of 2011 from $395.6 million for the fourth quarter of 2010. This decrease was primarily due to a 28 basis point decrease in the weighted-average yield to 4.84% for the quarter ended December 31, 2011 from 5.12% for the quarter ended December 31, 2010. The decrease in interest income on mortgage loans was also due to a $1.67 billion decrease in the average balance of first mortgage loans to $29.24 billion for the fourth quarter of 2011 from $30.91 billion for the same quarter in 2010. The decrease in the average yield earned was due to lower market interest rates on mortgage products and also due to the continued mortgage refinancing activity. During the fourth quarter of 2011, existing mortgage customers refinanced or recast approximately $1.43 billion in mortgage loans with a weighted average rate of 5.19% to a new weighted average rate of 4.07%.
For the year ended December 31, 2011, interest on first mortgage loans decreased $174.0 million, or 10.4%, to $1.49 billion from $1.67 billion for the year ended December 31, 2010. This was primarily due to a 29 basis point decrease in the weighted-average yield to 5.02% for the year ended December 31, 2011 from 5.31% for the year ended December 31, 2010. The decrease in interest income on mortgage loans was also due to a $1.68 billion decrease in the average balance of first mortgage loans to $29.72 billion for the year ended December 31, 2011 from $31.40 billion for the same period in 2010. Refinancing activity, which resulted in continued elevated levels of loan repayments, also had an impact on the average balance of our first mortgage loans during the year ended December 31, 2011. During the year ended December 31, 2011, existing mortgage customers refinanced or recast approximately $3.52 billion in mortgage loans with a weighted average rate of 5.33% to a new weighted average rate of 4.25%.
Interest on mortgage-backed securities decreased $93.2 million to $97.9 million for the fourth quarter of 2011 from $191.1 million for the fourth quarter of 2010. This decrease was due to a $7.31 billion decrease in the average balance of mortgage-backed securities to $13.68 billion during the fourth quarter of 2011 from $20.99 billion during the fourth quarter of 2010. The decrease in interest on mortgage-backed securities was also due to a 78 basis point decrease in the weighted-average yield to 2.86% for the fourth quarter of 2011 from 3.64% for the fourth quarter of 2010. The decrease in the average balance of mortgage-backed securities was due primarily to the effects of the Restructuring Transaction as well as continued elevated levels of principal prepayments as market interest rates remained low.
Interest on mortgage-backed securities decreased $337.0 million to $514.6 million for the year ended December 31, 2011 from $851.6 million for the year ended December 31, 2010. This decrease was due primarily to a 98 basis point decrease in the weighted-average yield to 3.16% during 2011 from 4.14% for 2010. The decrease in interest income on mortgage-backed securities was also due to a $4.26 billion decrease in the average balance of mortgage-backed securities to $16.30 billion during 2011 from $20.56 billion for the same period in 2010. The decrease in the average balance of mortgage-backed securities was due primarily to the effects of the Restructuring Transaction as well as elevated levels of principal prepayments as market interest rates remained low.
The decrease in the weighted average yield on mortgage-backed securities is a result of lower yields on securities purchased during 2010 when market interest rates were lower than the yield earned on the existing portfolio.
Interest on investment securities decreased $29.4 million to $7.2 million for the fourth quarter of 2011 as compared to $36.6 million for the fourth quarter of 2010. This decrease was due to a $3.47 billion decrease in the average balance of investment securities to $894.4 million for the fourth quarter of 2011 from $4.37 billion for the fourth quarter of 2010. The decrease in the average balance was due to the calls of $3.4 billion of investment securities during 2011. In addition, the average yield earned on investment securities decreased 12 basis points to 3.24% for the fourth quarter of 2011 as compared to 3.36% for the fourth quarter of 2010 as the higher-yielding securities were called first.
For the year ended December 31, 2011, interest on investment securities decreased $97.6 million to $101.1 million as compared to $198.7 million for the year ended December 31, 2010. This decrease was due to a $1.97 billion decrease in the average balance of investment securities to $3.02 billion for 2011 from $4.99 billion for 2010. In addition, the average yield of investment securities decreased 63 basis points to 3.35% for 2011 as compared to 3.98% for the same period in 2010 as the higher-yielding securities were called first.
Dividends on FHLB stock decreased $6.9 million, or 47.9%, to $7.5 million for the fourth quarter of 2011 as compared to $14.4 million for the fourth quarter of 2010. This decrease was due primarily to a 215 basis point decrease in the average dividend yield earned to 4.45% as compared to 6.60% for the fourth quarter of 2010. The decrease in the dividends on FHLB stock was also due to a $198.0 million decrease in the average balance of FHLB stock to $677.7 million for the fourth quarter of 2011 from $875.7 million for the fourth quarter of 2010.
Dividends on FHLB stock decreased $7.3 million, or 15.8%, to $38.8 million for the year ended December 31, 2011 as compared to $46.1 million for the comparable period in 2010. This decrease was due primarily to a $108.4 million decrease in the average balance of FHLB stock to $770.3 million for 2011 from $878.7 million for the same period in 2010. In addition, the average dividend yield earned decreased to 5.04% for 2011 from 5.25% for 2010.
Interest on Federal funds sold amounted to $2.5 million for the fourth quarter of 2011 as compared to $985,000 for the fourth quarter of 2010. The average balance of Federal funds sold amounted to $3.44 billion for the fourth quarter of 2011 as compared to $1.62 billion for the fourth quarter of 2010. The yield earned on Federal funds sold was 0.28% for the 2011 fourth quarter and 0.24% for the 2010 fourth quarter.
Interest on Federal funds sold amounted to $4.4 million for the year ended December 31, 2011 as compared to $2.6 million for the year ended December 31, 2010. The average balance of Federal funds sold amounted to $1.67 billion for 2011 as compared to $1.10 billion for the same period in 2010. The yield earned on Federal funds sold was 0.26% for the year ended December 31, 2011 and 0.24% for the year ended December 31, 2010.
The increase in the average balance of Federal funds sold for the fourth quarter of 2011 and the year ended December 31, 2011 is primarily due to the timing of the extinguishment of borrowings in the Transactions relative to the timing of the receipt of the proceeds from securities sales, calls of investment securities and payments received on mortgage-related assets that were used to fund the extinguishments.
Total interest expense for the quarter ended December 31, 2011 decreased $125.5 million, or 32.1%, to $265.9 million from $391.4 million for the quarter ended December 31, 2010. This decrease was primarily due to a $10.25 billion, or 19.0%, decrease in the average balance of total interest-bearing liabilities to $43.83 billion for the quarter ended December 31, 2011 as compared with $54.08 billion for the quarter ended December 31, 2010. The decrease in the average balance of total interest-bearing liabilities was due to the reduction of total borrowings as part of the Transactions. The decrease in total interest expense was also due to a 46 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 2.41% for the quarter ended December 31, 2011 compared with 2.87% for the quarter ended December 31, 2010.
For the year ended December 31, 2011, total interest expense decreased $407.0 million, or 25.5%, to $1.19 billion from $1.59 billion for the year ended December 31, 2010. This decrease was primarily due to a $7.06 billion, or 13.0%, decrease in the average balance of total interest-bearing liabilities to $47.34 billion for the year ended December 31, 2011 from $54.40 billion for the year ended December 31, 2010. The decrease in the average balance of total interest-bearing liabilities was primarily due to the reduction of total borrowings as part of the Transactions. The decrease in total interest expense was also due to a 42 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 2.51% for the year ended December 31, 2011 compared with 2.93% for the year ended December 31, 2010.
Interest expense on deposits decreased $7.9 million, or 9.2%, to $78.3 million for the fourth quarter of 2011 from $86.2 million for the fourth quarter of 2010. This decrease is due to a decrease in the average cost of interest-bearing deposits of 16 basis points to 1.25% for the fourth quarter of 2011 as compared to 1.41% for the fourth quarter of 2010. The effect of the decrease in the average cost of deposits was partially offset by a $499.8 million increase in the average balance of interest-bearing deposits to $24.82 billion during the fourth quarter of 2011 as compared to $24.32 billion for the fourth quarter of 2010.
For the year ended December 31, 2011, interest expense on deposits decreased $47.8 million, or 12.7%, to $328.5 million from $376.3 million for the year ended December 31, 2010. This decrease is due to a decrease in the average cost of interest-bearing deposits of 22 basis points to 1.32% for the year ended December 31, 2011 as compared to 1.54% for 2010. The effect of the decrease in the average cost of deposits was partially offset by a $372.1 million increase in the average balance of interest-bearing deposits to $24.86 billion during 2011 as compared to $24.49 billion for 2010.
The decrease in the average cost of deposits during 2011 reflected lower market interest rates. At December 31, 2011, time deposits scheduled to mature within one year totaled $8.85 billion with an average cost of 1.24%. These time deposits are scheduled to mature as follows: $3.69 billion with an average cost of 1.15% in the first quarter of 2012, $2.10 billion with an average cost of 1.03% in the second quarter of 2012, $1.46 billion with an average cost of 1.39% in the third quarter of 2012 and $1.60 billion with an average cost of 1.55% in the fourth quarter of 2012. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with us as renewed time deposits or as transfers to other deposit products at the prevailing rate.
Interest expense on borrowed funds decreased $117.6 million to $187.6 million for the fourth quarter of 2011 from $305.2 million for the fourth quarter of 2010. This decrease was primarily due to a $10.75 billion decrease in the average balance of borrowed funds to $19.01 billion for the fourth quarter of 2011 as compared to $29.76 billion for the fourth quarter of 2010. This decrease was also due to a 15 basis point decrease in the weighted-average cost of borrowed funds to 3.92% for the fourth quarter of 2011 as compared to 4.07% for the fourth quarter of 2010. The decrease in the average balance and cost of our borrowings is due to the effects of the Transactions.
For the year ended December 31, 2011 interest expense on borrowed funds decreased $359.1 million to $858.2 million as compared to $1.22 billion for the year ended December 31, 2010. This decrease was primarily due to a $7.43 billion decrease in the average balance of borrowed funds to $22.48 billion for 2011 from $29.91 billion for 2010. This decrease was also due to a 25 basis point decrease in the weighted-average cost of borrowed funds to 3.82% for 2011 as compared to 4.07% for 2010. The decrease in the average balance and cost of our borrowings is due to the effects of the Transactions.
Borrowings amounted to $15.08 billion at December 31, 2011 with an average cost of 3.87%. Borrowings scheduled to mature over the next 12 months are as follows: $900.0 million with an average cost of 0.98% in the first quarter of 2012, $750.0 million with an average cost of 0.74% in the second quarter of 2012 and $750.0 million with an average cost of 0.85% in the third quarter of 2012 and $500.0 million with an average cost of 0.98% in the fourth quarter of 2012.
The provision for loan losses amounted to $25.0 million for the quarter ended December 31, 2011 as compared to $45.0 million for the quarter ended December 31, 2010. The decrease in our provision for loan losses during the fourth quarter of 2011 as compared to the same period in 2010 was a result of a stabilization in both the level of charge-offs and the growth rate of non-performing loans as well as a 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 $1.02 billion at December 31, 2011 compared with $871.3 million at December 31, 2010. The ratio of non-performing loans to total loans was 3.48% at December 31, 2011 compared with 2.82% at December 31, 2010. The highly publicized foreclosure issues that have recently affected the nation's largest mortgage loan servicers have resulted in greater bank regulatory, court and state attorney general scrutiny. As a result, our foreclosure process and the time to complete a foreclosure have continued to be extended. We continue to experience a time frame to repayment or foreclosure ranging from 30 to 36 months from the initial non-performing period. 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 $427.2 million at December 31, 2011 as compared to $418.9 million at December 31, 2010. Loans delinquent 60 to 89 days amounted to $187.4 million at December 31, 2011 as compared to $193.2 million at December 31, 2010. The allowance for loans losses amounted to $273.8 million at December 31, 2011 as compared to $236.6 million at December 31, 2010. The allowance for loan losses as a percent of total loans and as a percent of non-performing loans was 0.93% and 26.77% respectively at December 31, 2011, as compared to 0.77% and 27.15%, respectively at December 31, 2010.
Net charge-offs amounted to $20.0 million for the quarter ended December 31, 2011 as compared to net charge-offs of $24.7 million for the same quarter in 2010. The ratio of net charge-offs to average loans was 0.27% for the quarter ended December 31, 2011 as compared to 0.32% for the same period in 2010. For the year ended December 31, 2011, net charge-offs amounted to $82.8 million as compared to $98.5 million of net charge-offs for the same period in 2010.
Total non-interest income was $2.9 million for the fourth quarter 2011 as compared to $62.9 million for the same quarter in 2010. Included in non-interest income for the fourth quarter of 2010 were net gains on securities transactions of $60.2 million which resulted from the sale of $2.02 billion of mortgage-backed securities available-for-sale. There were no security sales during the three months ended December 31, 2011.
Total non-interest income was $113.9 million for the year ended December 31, 2011 as compared to $163.0 million for the same period in 2010. Included in non-interest income for the year ended December 31, 2011 were net gains on securities transactions of $102.5 million which resulted from the sale of $9.04 billion of securities available-for-sale. Substantially all of the proceeds from the sale of securities were used to repay borrowings as part of the Restructuring Transaction. Included in non-interest income for the year ended December 31, 2010 were net gains on securities transactions of $152.6 million which resulted from the sale of $3.92 billion of mortgage-backed securities available-for-sale.
Total non-interest expense increased $750.5 million to $820.1 million for the fourth quarter of 2011 as compared to $69.6 million for the fourth quarter of 2010. Included in total non-interest expense for the fourth quarter of 2011 was a $728.5 million loss on the extinguishment of debt completed in December 2011. The increase in total non-interest expense was also due to a $22.6 million increase in Federal deposit insurance assessments and an $8.6 million increase in other non-interest expense, partially offset by a $9.6 million decrease in compensation and employee benefits.
Compensation and employee benefit costs decreased $9.6 million, or 27.7%, to $25.2 million for the fourth quarter of 2011 as compared to $34.8 million for the same period in 2010. This decrease was primarily due to a $4.7 million decrease in expense related to our stock benefit plans due primarily to decreases in the market price of our common stock and a $4.3 million decrease in compensation costs. The decrease in compensation costs is due primarily to a decrease in incentive compensation expense for 2011. At December 31, 2011, we had 1,586 full-time equivalent employees as compared to 1,562 at December 31, 2010.
Federal deposit insurance expense increased $22.6 million, or 150.1%, to $37.6 million for the fourth quarter of 2011 from $15.0 million for the fourth quarter of 2010. This increase was due primarily to the new deposit assessment methodology adopted by the Federal Deposit Insurance Corporation that became effective on April 1, 2011 and which redefined the assessment base as average consolidated total assets minus average tangible equity. Previously, deposit insurance assessments were based on the amount of deposits.
Included in other expense for the fourth quarter of 2011 were write-downs and net losses on the sale of foreclosed real estate of $2.6 million as compared to $1.6 million for the fourth quarter of 2010. This increase was due primarily to increased activity in foreclosed real estate. We sold 43 properties during the fourth quarter of 2011 and had 134 properties in foreclosed real estate, 55 of which were under contract to sell as of December 31, 2011. For the fourth quarter of 2010, we sold 13 properties and had 127 properties in foreclosed real estate, of which 44 were under contract to sell as of December 31, 2010. Also included in other expense for the 2011 fourth quarter was a $3.9 million write-down of our Net Claim related to the SIPA liquidation of Lehman Brothers, Inc.
Total non-interest expense amounted to $2.23 billion for the year ended December 31, 2011 as compared to $266.4 million for the year ended December 31, 2010. Included in total non-interest expense for the year ended December 31, 2011 was a $1.9 billion loss on the extinguishment of debt related to the Transactions.
Compensation and employee benefit costs decreased $20.7 million, or 15.5%, to $113.1 million for 2011 as compared to $133.8 million for the same period in 2010. This decrease is primarily due to a $21.5 million decrease in expense related to our stock benefit plans primarily as a result of the decrease in the market price of our common stock and a $929,000 decrease in compensation costs. These decreases were partially offset by an increase of $984,000 increase in medical plan expense and an $872,000 increase in pension costs. The decrease in compensation costs is due to a decrease in incentive compensation expense for 2011.
For the year ended December 31, 2011 Federal deposit insurance increased $65.0 million, or 116.2%, to $121.0 million from $56.0 million for the year ended December 31, 2010.
Included in other non-interest expense for the year ended December 31, 2011 were write-downs and net losses on the sale of foreclosed real estate of $7.5 million as compared to $2.7 million for the comparable period in 2010. We sold 156 properties during the year of 2011 as compared to 71 properties for the same period in 2010.
Our efficiency ratio was 41.79% for the 2011 fourth quarter as compared to 22.10% for the 2010 fourth quarter. For the year ended December 31, 2011, our efficiency ratio was 32.68% compared with 19.68% for the year ended December 31, 2010. The efficiency ratio is calculated by dividing non-interest expense, excluding the loss from the Transactions, by the sum of net interest income and non-interest income, excluding net securities gains from the Restructuring Transaction. Our annualized ratio of non-interest expense to average total assets for the fourth quarter of 2011 was 6.62% as compared to 0.46% for the fourth quarter of 2010. Excluding the loss on the extinguishment of debt in December 2011, our annualized ratio of operating non-interest expense to average total assets was 0.71% for the quarter ended December 31, 2011. Our ratio of non-interest expense to average total assets for the year ended December 31, 2011 was 4.20% compared with 0.44% for the corresponding period in 2010. Excluding the loss on the Transactions, our ratio of operating non-interest expense to average total assets was 0.61% for the year ended December 31, 2011. Please see the attached Reconciliation of GAAP and Operating Earnings for a reconciliation of operating earnings to the Company's earnings reported in accordance with generally accepted accounting principles and a calculation of the efficiency ratio.
Income tax benefit amounted to $274.7 million for the fourth quarter of 2011 compared with income tax expense $79.0 million for the same quarter in 2010. Income tax benefit amounted to $519.3 million for the year ended December 31, 2011 compared with income tax expense $355.2 million for the year ended December 31, 2010.
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 branch offices in the New York metropolitan area.
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," 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., the characterization of the future effects of the Transactions on balance sheet strength, capital ratios, net interest margin and earnings prospects, and Hudson City Bancorp, Inc.'s plans, objectives, expectations and intentions, 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 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, and legislative, regulatory and public policy changes. 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's forward-looking statements, please refer to Hudson City's filings with the Securities and Exchange Commission available at www.sec.gov. Hudson City Bancorp 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
December 31, December 31,
2011 2010
(In thousands, except
share and per share
amounts) (unaudited)
Assets:
-------
Cash and due from banks $194,029 $175,769
Federal funds sold and
other overnight deposits 560,051 493,628
------- -------
Total cash and cash
equivalents 754,080 669,397
Securities available for
sale:
Mortgage-backed
securities 9,170,390 18,120,537
Investment securities 7,368 89,795
Securities held to
maturity:
Mortgage-backed
securities 4,115,523 5,914,372
Investment securities 539,011 3,939,006
------- ---------
Total securities 13,832,292 28,063,710
Loans 29,327,345 30,923,897
Net deferred loan costs 83,805 86,633
Allowance for loan losses (273,791) (236,574)
-------- --------
Net loans 29,137,359 30,773,956
Federal Home Loan Bank of
New York stock 510,564 871,940
Foreclosed real estate,
net 40,619 45,693
Accrued interest
receivable 129,088 245,546
Banking premises and
equipment, net 70,610 69,444
Goodwill 152,109 152,109
Other assets 729,164 274,238
------- -------
Total Assets 45,355,885 $61,166,033
Liabilities and
Shareholders' Equity:
----------------------
Deposits:
Interest-bearing $24,903,311 $24,605,896
Noninterest-bearing 604,449 567,230
------- -------
Total deposits 25,507,760 25,173,126
Repurchase agreements 6,950,000 14,800,000
Federal Home Loan Bank of
New York advances 8,125,000 14,875,000
--------- ----------
Total borrowed
funds 15,075,000 29,675,000
Due to brokers - 538,200
Accrued expenses and
other liabilities 212,685 269,469
------- -------
Total
liabilities 40,795,445 55,655,795
Common stock, $0.01 par
value, 3,200,000,000
shares authorized;
741,466,555
shares issued;
527,571,496 and
526,718,310
shares
outstanding at
December 31,
2011 and 2010,
respectively 7,415 7,415
Additional paid-in
capital 4,720,890 4,705,255
Retained earnings 1,709,821 2,642,338
Treasury stock, at cost;
213,895,059 and
214,748,245 shares at
December 31,
2011 and 2010,
respectively (1,719,114) (1,725,946)
Unallocated common stock
held by the employee
stock ownership plan (198,223) (204,230)
Accumulated other
comprehensive income,
net of tax 39,651 85,406
------ ------
Total
shareholders'
equity 4,560,440 5,510,238
Total
Liabilities and
Shareholders'
Equity $45,355,885 $61,166,033
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Operation
(Unaudited)
For the Three
Months For the Years
Ended December 31, Ended December 31,
------------------ ------------------
2011 2010 2011 2010
---- ---- ---- ----
(In thousands, except per share data)
Interest
and
Dividend
Income:
First
mortgage
loans $353,989 $395,551 $1,492,989 $1,667,027
Consumer
and
other
loans 3,723 4,471 15,740 18,409
Mortgage-
backed
securities
held
to
maturity 46,680 70,795 213,211 356,023
Mortgage-
backed
securities
available
for
sale 51,211 120,349 301,349 495,572
Investment
securities
held
to
maturity 7,187 35,526 100,196 179,632
Investment
securities
available
for
sale 53 1,120 940 19,112
Dividends
on
Federal
Home
Loan
Bank
of
New
York
stock 7,546 14,439 38,820 46,107
Federal
funds
sold 2,455 985 4,392 2,614
----- --- ----- -----
Total
interest
and
dividend
income 472,844 643,236 2,167,637 2,784,496
------- ------- --------- ---------
Interest
Expense:
Deposits 78,298 86,232 328,514 376,347
Borrowed
funds 187,565 305,170 858,189 1,217,322
------- ------- ------- ---------
Total
interest
expense 265,863 391,402 1,186,703 1,593,669
------- ------- --------- ---------
Net
interest
income 206,981 251,834 980,934 1,190,827
Provision
for
Loan
Losses 25,000 45,000 120,000 195,000
------ ------ ------- -------
Net
interest
income
after
provision
for
loan
losses 181,981 206,834 860,934 995,827
------- ------- ------- -------
Non-
Interest
Income:
Service
charges
and
other
income 2,884 2,713 11,449 10,369
Gain
on
securities
transactions,
net - 60,214 102,468 152,625
Total
non-
interest
income 2,884 62,927 113,917 162,994
----- ------ ------- -------
Non-
Interest
Expense:
Compensation
and
employee
benefits 25,155 34,798 113,129 133,803
Net
occupancy
expense 8,664 8,143 33,830 32,689
Federal
deposit
insurance
assessment 37,587 15,030 120,981 55,957
Loss
on
extinguishment
of
debt 728,499 - 1,900,591 -
Other
expense 20,189 11,584 61,629 43,939
------ ------ ------ ------
Total
non-
interest
expense 820,094 69,555 2,230,160 266,388
------- ------ --------- -------
(Loss)
income
before
income
tax
(benefit)
expense (635,229) 200,206 (1,255,309) 892,433
Income
Tax
(Benefit)
Expense (274,693) 79,045 (519,320) 355,227
-------- ------ -------- -------
Net
(loss)
income $(360,536) $121,161 $(735,989) $537,206
========= ======== ========= ========
Basic
(Loss)
Earnings
Per
Share $(0.73) $0.25 $(1.49) $1.09
====== ===== ====== =====
Diluted
(Loss)
Earnings
Per
Share $(0.73) $0.25 $(1.49) $1.09
====== ===== ====== =====
Weighted Average
Number of
Common Shares
Outstanding:
Basic 495,539,810 493,505,586 494,629,395 493,032,873
Diluted 495,539,810 494,146,907 494,629,395 494,314,390
Hudson City Bancorp, Inc. and Subsidiary
Reconciliation of GAAP and Operating Earnings
(Unaudited)
Operating earnings are not a measure of performance calculated in
accordance with U.S. generally accepted accounting principles
("GAAP"). However, we believe that operating earnings are an
important indication of earnings from our core banking operations.
Operating earnings typically exclude the effects of certain non-
recurring or unusual transactions, such as the Transactions. We
believe that our presentation of operating earnings provides
useful supplemental information to both management and investors
in evaluating the Company's financial results.
Operating earnings should not be considered a substitute for net
income, earnings per share or any other data prepared in
accordance with GAAP. In addition, we may calculate operating
earnings differently from other companies reporting data with
similar names. The following is a reconciliation of the Company's
GAAP and operating earnings for the periods presented:
For the Three Months Ended For the Years Ended
-------------------------- -------------------
December 31, March 31, December 31,
------------ --------- ------------
2011 2010 2011 2011 2010
---- ---- ---- ---- ----
GAAP
(Loss)
Earnings $(360,536) $121,161 $(555,664) $(735,989) $537,206
Adjustments
to GAAP
(loss)
earnings:
Loss on
extinguishment
of debt 728,499 - 1,172,092 1,900,591 -
Net gain
on
securities
sales
related
to
Restructuring
Transaction
(5) - - (98,278) (98,278) -
Valuation
allowance
related
to
Lehman
Brothers 3,900 - 3,900
Income
tax
effect (313,252) - (424,479) (737,731) -
Operating
earnings 58,611 121,161 93,671 332,493 537,206
====== ======= ====== ======= =======
Diluted
GAAP
(Loss)
Earnings
per
Share $(0.73) $0.25 $(1.13) $(1.49) $1.09
Adjustments
to GAAP
(loss)
earnings:
Loss on
extinguishment
of debt 1.47 - 2.37 3.84 -
Net gain
on
securities
sales
related
to
Restructuring
Transaction
(5) - - (0.20) (0.20) -
Valuation
allowance
related
to
Lehman
Brothers 0.01 0.01
Income
tax
effect (0.63) - (0.85) (1.49) -
Diluted
operating
earnings
per
share $0.12 $0.25 $0.19 $0.67 $1.09
===== ===== ===== ===== =====
Weighted
average
number
of
common
shares
outstanding:
Basic 495,539,810 493,505,586 493,843,304 494,629,395 493,032,873
Diluted 495,539,810 494,146,907 494,502,987 495,036,221 494,314,390
Operating
Efficiency
Ratio
Total
non-
interest
expense $820,094 $69,555 $1,240,568 $2,230,160 $266,388
Loss on
extinguishment
of debt (728,499) - (1,172,092) (1,900,591) -
Valuation
allowance
related
to
Lehman
Brothers (3,900) - - (3,900) -
Operating
non-
interest
expense $87,695 $69,555 $68,476 $325,669 $266,388
------- ------- ------- -------- --------
Net
interest
income 206,981 251,834 256,401 980,934 1,190,827
Total
non-
interest
income 2,884 62,927 105,207 113,917 162,994
Net
gains
on
securities
transactions
related
to - -
Restructuring
Transaction
(5) - - (98,278) (98,278)
--- ------- -------
Operating
non-
interest
income 2,884 62,927 6,929 15,639 162,994
----- ------ ----- ------ -------
Total
operating
income $209,865 $314,761 $263,330 $996,573 $1,353,821
======== ======== ======== ======== ==========
Operating
efficiency
ratio
(4) 41.79% 22.10% 26.00% 32.68% 19.68%
Ratio of
operating
earnings
to
average
assets
(1) (2) 0.47 0.80 0.63 0.63 0.88
Ratio of
operating
earnings
to
average
equity
(1) (3) 4.79 8.50 6.99 6.65 9.66
(1)
Ratios
are
annualized.
(2) Calculated by dividing operating earnings by average assets
(3) Calculated by dividing operating earnings by average
shareholders' equity
(4) Calculated by dividing operating non-interest expense by total
operating income
(5) Total net securities gains amounted to $102.5 million and
$152.6 million for the years ended December 31, 2011 and 2010,
respectively
Total net securities gains amounted to $102.5 million for the three
months ended March 31, 2011.
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)
For the Three Months Ended December 31,
---------------------------------------
2011 2010
---- ----
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in thousands)
Assets:
-------
Interest-earnings assets:
First mortgage
loans, net (1) $29,244,286 $353,989 4.84% $30,913,700 $395,551 5.12%
Consumer and other
loans 297,289 3,723 5.01 334,216 4,471 5.35
Federal funds sold
and other overnight
deposits 3,435,110 2,455 0.28 1,620,716 985 0.24
Mortgage-backed
securities at
amortized cost 13,678,456 97,891 2.86 20,988,617 191,144 3.64
Federal Home Loan
Bank stock 677,724 7,546 4.45 875,682 14,439 6.60
Investment
securities, at
amortized cost 894,352 7,240 3.24 4,368,329 36,646 3.36
------- ----- --------- ------
Total interest-
earning assets 48,227,217 472,844 3.92 59,101,260 643,236 4.35
Noninterest-
earnings assets (4) 1,319,350 1,541,372
--------- ---------
Total Assets $49,546,567 $60,642,632
=========== ===========
Liabilities and
Shareholders' Equity:
----------------------
Interest-bearing
liabilities:
Savings accounts $867,011 1,098 0.50 $862,473 1,407 0.65
Interest-bearing
transaction
accounts 1,964,963 3,742 0.76 2,283,511 4,547 0.79
Money market
accounts 8,325,595 18,198 0.87 5,498,997 13,573 0.98
Time deposits 13,664,784 55,260 1.60 15,677,530 66,705 1.69
---------- ------ ---------- ------
Total interest-
bearing deposits 24,822,353 78,298 1.25 24,322,511 86,232 1.41
---------- ------ ---------- ------
Repurchase
agreements 7,530,978 85,699 4.51 14,880,978 153,458 4.09
Federal Home Loan
Bank of New York
advances 11,476,087 101,866 3.52 14,875,000 151,712 4.05
---------- ------- ---------- -------
Total borrowed funds 19,007,065 187,565 3.92 29,755,978 305,170 4.07
---------- ------- ---------- -------
Total interest-
bearing liabilities 43,829,418 265,863 2.41 54,078,489 391,402 2.87
---------- ------- ---------- -------
Noninterest-bearing
liabilities:
Noninterest-bearing
deposits 598,832 593,393
Other noninterest-
bearing liabilities 228,889 268,040
------- -------
Total noninterest-
bearing liabilities 827,721 861,433
------- -------
Total liabilities 44,657,139 54,939,922
Shareholders' equity 4,889,428 5,702,710
--------- ---------
Total Liabilities
and Shareholders'
Equity $49,546,567 $60,642,632
=========== ===========
Net interest income/net
interest rate spread (2) 206,981 1.51 $251,834 1.48
======= ========
Net interest-
earning assets/net
interest margin (3) $4,397,799 1.73% $5,022,771 1.73%
========== ==========
Ratio of interest-earning
assets to
interest-bearing
liabilities 1.10 x 1.09 x
----------------
Amount includes deferred loan costs and non-performing loans and is
(1) net of the allowance for loan losses.
Determined by subtracting the annualized weighted average cost of
total interest-bearing liabilities from the annualized weighted
(2) average yield on total interest-earning assets.
Determined by dividing annualized net interest income by total average
(3) interest-earning assets.
Includes the average balance of principal receivable related to FHLMC
mortgage-backed securities of $135.6 million and $218.0 million for
(4) the quarters ended December 31, 2011 and 2010, respectively.
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)
For the Years Ended December 31,
--------------------------------
2011 2010
---- ----
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ---- ------- -------- ----
(Dollars in thousands)
Assets:
-------
Interest-earnings assets:
First mortgage loans,
net (1) $29,722,678 $1,492,989 5.02% $31,395,378 $1,667,027 5.31%
Consumer and other
loans 309,245 15,740 5.09 346,166 18,409 5.32
Federal funds sold and
other overnight
deposits 1,668,333 4,392 0.26 1,102,575 2,614 0.24
Mortgage-backed
securities at
amortized cost 16,304,890 514,560 3.16 20,557,582 851,595 4.14
Federal Home Loan Bank
stock 770,314 38,820 5.04 878,672 46,107 5.25
Investment securities,
at amortized cost 3,021,573 101,136 3.35 4,992,249 198,744 3.98
--------- ------- --------- -------
Total interest-
earning assets 51,797,033 2,167,637 4.18 59,272,622 2,784,496 4.70
---------- --------- ---------- ---------
Noninterest-earnings
assets (4) 1,361,057 1,560,439
--------- ---------
Total Assets $53,158,090 $60,833,061
=========== ===========
Liabilities and Shareholders'
Equity:
-----------------------------
Interest-bearing liabilities:
Savings accounts $866,029 5,071 0.59 $839,029 5,952 0.71
Interest-bearing
transaction accounts 2,015,019 15,698 0.78 2,323,618 23,996 1.03
Money market accounts 7,842,413 75,506 0.96 5,217,815 54,949 1.05
Time deposits 14,140,688 232,239 1.64 16,111,567 291,450 1.81
---------- ------- ---------- -------
Total interest-
bearing deposits 24,864,149 328,514 1.32 24,492,029 376,347 1.54
---------- ------- ---------- -------
Repurchase agreements 9,127,800 398,929 4.37 15,034,110 616,488 4.10
Federal Home Loan Bank
of New York advances 13,349,342 459,260 3.44 14,875,000 600,834 4.04
---------- ------- ---------- -------
Total borrowed funds 22,477,142 858,189 3.82 29,909,110 1,217,322 4.07
---------- ------- ---------- ---------
Total interest-
bearing liabilities 47,341,291 1,186,703 2.51 54,401,139 1,593,669 2.93
---------- --------- ---------- ---------
Noninterest-bearing liabilities:
Noninterest-bearing
deposits 583,257 588,150
Other noninterest-
bearing liabilities 232,617 284,335
------- -------
Total noninterest-
bearing liabilities 815,874 872,485
------- -------
Total liabilities 48,157,165 55,273,624
Shareholders' equity 5,000,925 5,559,437
--------- ---------
Total Liabilities and
Shareholders' Equity $53,158,090 $60,833,061
=========== ===========
Net interest income/net
interest rate spread (2) $980,934 1.67 $1,190,827 1.77
======== ==========
Net interest-earning
assets/net interest
margin (3) $4,455,742 1.89% $4,871,483 2.01%
========== ==========
Ratio of interest-earning
assets to
interest-bearing liabilities 1.09 x 1.09 x
----------------------------
Amount includes deferred loan costs and non-performing loans and is net of
(1) the allowance for loan losses.
Determined by subtracting the weighted average cost of total interest-
bearing liabilities from the annualized weighted average yield on total
(2) interest-earning assets.
Determined by dividing net interest income by total average interest-earning
(3) assets.
Includes the average balance of principal receivable related to FHLMC
mortgage-backed securities of $156.4 million and $297.1 million for the
(4) years ended December 30, 2011 and 2010, respectively.
Hudson City Bancorp, Inc. and Subsidiary
Book Value Calculations
December 31,
2011
----
(In thousands, except share and
per share amounts)
Shareholders' equity $4,560,440
Goodwill and other intangible
assets (155,217)
Tangible shareholders equity $4,405,223
----------
Book Value Share Computation:
Issued 741,466,555
Treasury shares (213,895,059)
------------
Shares outstanding 527,571,496
Unallocated ESOP shares (31,752,096)
Unvested RRP shares (6,000)
Shares in trust (269,325)
--------
Book value shares 495,544,075
===========
Book value per share $9.20
=====
Tangible book value per share $8.89
=====
Hudson City Bancorp, Inc.
Other Financial Data
Securities Portfolio at December 31, 2011
Amortized Estimated Unrealized
Cost Fair Value Gain/(Loss)
---- ---------- -----------
(Dollars in
thousands)
Held to Maturity:
Mortgage-backed securities:
FHLMC $2,132,408 $2,257,772 $125,364
FNMA 1,154,638 1,233,237 78,599
FHLMC and FNMA
CMO's 744,890 791,225 46,335
GNMA 83,587 86,189 2,602
------ ------ -----
Total mortgage-
backed
securities 4,115,523 4,368,423 252,900
Investment securities:
United States GSE
debt 539,011 545,761 6,750
------- ------- -----
Total investment
securities 539,011 545,761 6,750
Total held to
maturity $4,654,534 $4,914,184 $259,650
========== ========== ========
Available for sale:
Mortgage-backed securities:
FHLMC $3,390,467 $3,452,156 $61,689
FNMA 4,407,970 4,468,029 60,059
FHLMC and FNMA
CMO's 81,768 83,977 2,209
GNMA 1,139,894 1,166,228 26,334
--------- --------- ------
Total mortgage-
backed
securities 9,020,099 9,170,390 150,291
Investment securities:
Equity securities 6,767 7,368 601
----- ----- ---
Total investment
securities 6,767 7,368 601
Total available
for sale $9,026,866 $9,177,758 $150,892
========== ========== ========
Hudson City Bancorp, Inc.
Other Financial Data
Loan Data at December 31, 2011:
Non-Performing Loans Total Loans
-------------------- -----------
Percent
Loan Percent of Loan of
Total
Balance Number Total Loans Balance Number Loans
------- ------ ----------- ------- ------ ------
(Dollars in thousands)
First Mortgage
Loans:
One- to four-
family $903,019 2,516 3.08% $28,075,478 67,346 95.72%
FHA/VA 97,476 377 0.33% 734,781 3,608 2.51%
PMI 11,272 37 0.04% 185,294 592 0.63%
Construction 4,344 4 0.01% 4,929 5 0.02%
Commercial 2,223 4 0.01% 39,634 86 0.14%
----- --- ---- ------ --- ----
Total mortgage
loans 1,018,334 2,938 3.47% 29,040,116 71,637 99.02%
Home equity loans 4,333 46 0.01% 266,099 7,031 0.91%
Other loans 20 3 - 21,130 2,155 0.07%
Total $1,022,687 2,987 3.48% $29,327,345 80,823 100.00%
========== ===== ==== =========== ====== ======
-- Net charge-offs amounted to $20.0 million for the fourth quarter of 2011
and $82.8 million for the year ended December 31, 2011.
-- Updated valuations are received on or before the time a loan becomes 180
days past due. If necessary, we charge-off an amount to reduce the
loan's carrying value to the updated valuation less estimated selling
costs.
-- Based on the valuation indices, house prices have declined in the New
York metropolitan area, where 77.6% of our non-performing loans were
located at December 31, 2011, by approximately 23% from the peak of the
market in 2006 through October 2011 and by 33% nationwide during that
period. From October 2010 to October 2011, the house price indices
decreased by approximately 3% in the New York metropolitan area and 4%
nationwide.
-- Our quantitative and qualitative analysis of the allowance for loan
losses considers the results of the reappraisal process as well as the
results of our foreclosed property transactions which includes a further
evaluation of economic factors, such as trends in the unemployment rate,
ratio analysis to evaluate the overall measurement of the allowance for
loan losses, a review of delinquency ratios, house price indices, net
charge-off ratios and the ratio of the allowance for loan losses to both
non-performing loans and total loans.
Foreclosed real estate at December 31, 2011:
Number
Carrying Under
Contract of
Number Value Sale
------ ----- -----------
(dollars in
thousands)
Foreclosed real
estate 134 $40,619 55
-- During the year ended 2011, we sold 156 foreclosed properties.
Write-downs and net losses on the sale of foreclosed real estate
amounted to $7.5 million for the year ended December 31, 2011.
Hudson City Bancorp, Inc. and Subsidiary
Other Financial Data
(Unaudited)
At or for the Quarter Ended
---------------------------
Sept. 30, June 30, March 31, Dec. 31.
Dec. 31, 2011 2011 2011 2011 2010
------------- ---------- --------- ---------- ---------
(Dollars in thousands, except per share data)
Net interest
income $206,981 $244,643 $272,909 $256,401 $251,834
Provision for
loan losses 25,000 25,000 30,000 40,000 45,000
Non-interest
income 2,884 3,094 2,732 105,207 62,927
Non-interest
expense:
Compensation and
employee
benefits 25,155 27,201 29,889 30,884 34,798
Other non-
interest
expense 794,939 56,460 55,948 1,209,684 34,757
Total non-
interest
expense 820,094 83,661 85,837 1,240,568 69,555
------- ------ ------ --------- ------
Income (loss)
before income
tax (benefit)
expense (635,229) 139,076 159,804 (918,960) 200,206
Income tax
(benefit)
expense (274,693) 54,873 63,796 (363,296) 79,045
Net (loss)
income $(360,536) $84,203 $96,008 $(555,664) $121,161
========= ======= ======= ========= ========
Total assets $45,355,885 $50,850,815 $51,778,639 $52,429,066 $61,166,033
Loans, net 29,137,359 29,870,173 30,203,196 30,182,380 30,773,956
Mortgage-
backed
securities
Available for
sale 9,170,390 9,905,741 10,484,264 10,540,674 18,120,537
Held to maturity 4,115,523 4,533,557 4,896,216 5,304,263 5,914,372
Other
securities
Available for
sale 7,368 7,408 7,221 7,122 89,795
Held to maturity 539,011 1,638,954 3,638,950 3,938,950 3,939,006
Deposits 25,507,760 25,421,419 25,554,601 25,461,079 25,173,126
Borrowings 15,075,000 20,225,000 21,125,000 22,025,000 29,675,000
Shareholders'
equity 4,560,440 4,979,469 4,887,959 4,728,847 5,510,238
Performance
Data:
Return on
average assets
(1) -2.91% 0.65% 0.74% -3.73% 0.80%
Return on
average equity
(1) -29.50% 6.80% 8.00% -41.49% 8.50%
Net interest
rate spread (1) 1.51% 1.76% 1.94% 1.50% 1.48%
Net interest
margin (1) 1.73% 1.97% 2.14% 1.72% 1.73%
Non-interest
expense to
average assets
(1) (4) 6.62% 0.65% 0.67% 8.44% 0.46%
Compensation and
benefits to
total revenue
(5) 11.99% 10.98% 10.84% 8.54% 11.06%
Efficiency ratio
(2) 41.79% 33.77% 31.14% 26.00% 22.10%
Dividend payout
ratio NM 47.06% 42.11% NM 60.00%
Per Common
Share Data:
Basic (loss)
earnings per
common share ($0.73) $0.17 $0.19 ($1.13) $0.25
Diluted (loss)
earnings per
common share ($0.73) $0.17 $0.19 ($1.13) $0.25
Book value per
share (3) $9.20 $10.05 $9.89 $9.58 $11.16
Tangible book
value per share
(3) $8.89 $9.74 $9.58 $9.26 $10.85
Dividends per
share $0.08 $0.08 $0.08 $0.15 $0.15
Capital
Ratios:
Equity to total
assets
(consolidated) 10.05% 9.79% 9.44% 9.02% 9.01%
Tier 1 leverage
capital (Bank) 8.83% 8.77% 8.44% 8.12% 7.95%
Total risk-
based capital
(Bank) 20.00% 21.57% 20.27% 19.66% 23.04%
-------------- ----- ----- ----- ----- -----
Other Data:
Full-time
equivalent
employees 1,586 1,580 1,577 1,569 1,562
Number of branch
offices 135 135 135 135 135
Asset Quality
Data:
Total non-
performing
loans $1,022,687 $948,706 $914,239 $886,530 $871,259
Number of non-
performing
loans 2,987 2,759 2,627 2,524 2,430
Total number of
loans 80,823 82,662 83,332 82,976 83,929
Total non-
performing
assets $1,063,306 $989,682 $952,603 $930,541 $916,952
Non-performing
loans to total
loans 3.48% 3.16% 3.01% 2.92% 2.82%
Non-performing
assets to total
assets 2.34% 1.95% 1.84% 1.77% 1.50%
Allowance for
loan losses $273,791 $268,754 $262,306 $255,283 $236,574
Allowance for
loan losses to
non-performing
loans 26.77% 28.33% 28.69% 28.80% 27.15%
Allowance for
loan losses to
total loans 0.93% 0.89% 0.86% 0.84% 0.77%
Provision for
loan losses $25,000 $25,000 $30,000 $40,000 $45,000
Net charge-offs $19,963 $18,552 $22,977 $21,290 $24,709
Ratio of net
charge-offs to
average loans
(1) 0.27% 0.25% 0.30% 0.28% 0.32%
Net losses
(gains) on
foreclosed real
estate $2,552 $2,080 $2,053 $776 $1,585
---------------- ------ ------ ------ ---- ------
(4) Computed by dividing non-interest
(1) Ratios are annualized. expense by average assets.
(2) Computed by dividing non-
interest expense by the sum
of net interest income and
non-interest income. For
the March 31, 2011 and
December 31, 2011 quarters,
non-interest expense
excludes the loss on debt
extinguishments and non-
interest income excludes
securities gains from the
Transactions. See the
Reconciliation of GAAP and
Operating Earnings for a (5) Computed by dividing compensation and
calculation of the efficiency benefits by the sum of net interest
ratio. income and non-interest income
(3) Please see the attached
Book Value Calculations for a
calculation of book value per
share and tangible book value
per share. NM - not meaningful
------------------------------ -------------------
SOURCE Hudson City Bancorp, Inc.
