Hudson City Bancorp, Inc. Reports Record Quarterly Earnings of $135.1 Million
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PARAMUS, N.J., Oct. 21 /PRNewswire-FirstCall/ -- Hudson City Bancorp, Inc. (Nasdaq: HCBK), the holding company for Hudson City Savings Bank, reported today that net income for the third quarter of 2009 increased 10.8% to $135.1 million as compared to $121.9 million for the third quarter of 2008. Diluted earnings per share increased 8.0% to $0.27 for the third quarter of 2009 as compared to $0.25 for the third quarter of 2008. For the nine months ended September 30, 2009, net income increased 21.6% to $390.7 million as compared to $321.3 million for the same period in 2008. Diluted earnings per share increased 23.1% to $0.80 for the nine months ended September 30, 2009 as compared to $0.65 for the same period in 2008. Net interest margin widened to 2.30% for the third quarter of 2009 from 2.17% for the linked second quarter of 2009 and from 2.08% for the third quarter of 2008. The Board of Directors declared a quarterly cash dividend of $0.15 per share payable on November 27, 2009 to shareholders of record on November 6, 2009.
Ronald E. Hermance, Jr., Chairman, President and Chief Executive Officer commented, "As we all read the headlines describing an industry fraught with problems and reporting losses never thought possible, Hudson City has posted yet another quarterly earnings increase. These results are remarkable considering the economic and regulatory turmoil surrounding us and the headwinds provided by an $82.0 million increase in our provision for loan losses and a $21.1 million FDIC special assessment for the first nine months of 2009. We have consistently achieved earnings growth every quarter since the fourth quarter of 2006. In addition, we have rewarded our owners with a dividend every quarter since becoming a public company."
Mr. Hermance continued, "Our earnings growth was fueled by our net interest margin which expanded to 2.30% during the third quarter. Since short-term rates remained at very low levels, we were able to reprice our deposits to a lower cost. We grew our deposits 6.6% during the quarter which represents a 26% annualized growth rate. This growth is all in retail deposits as we do not accept brokered deposits or solicit municipal deposits."
Mr. Hermance further commented, "We also continued to increase our retail loan production by originating $1.7 billion of mortgage loans this quarter. Much of this loan production is due to the refinancing of mortgages from other banks. This same refinancing activity has resulted in increased mortgage prepayments for Hudson City. As a result, we grew our loan portfolio by $385.8 million during the quarter and $1.70 billion so far this year. However, our ability to handle the increased loan production is important to us because we believe that we are poised to capture additional market share as housing markets and the economy improve. Our non-performing loans increased to $517.6 million at September 30, 2009. We believe that our non-performing residential mortgage loans will continue to increase as long as unemployment levels continue to rise. It is important to remember that the primary driver of any loan charge-off is the value of the property. The average loan-to-value ratio of our loan portfolio was 61.8% and was 71.5% for our non-performing loans, using appraised values at the time of origination. These loan-to-value ratios have helped us to mitigate losses even as house prices declined. In addition, since we never originated riskier loan products such as loans with negative amortization, "teaser rate" ARM's and payment-option loans, our loss experience has been considerably less than the industry. While we are starting to observe that housing prices have stabilized in many parts of the country, including in the New York metropolitan area, it will take some time for housing inventories, especially those that are the result of foreclosures, to decrease so that the housing markets can return to a more traditional state."
Mr. Hermance concluded, "We believe that Hudson City is well-positioned to navigate these difficult times. Economic conditions, legislative changes and the regulatory environment all pose significant challenges. However, our simple, consumer-oriented, common-sense approach to banking is the reason Hudson City continues to thrive."
Financial highlights for the third quarter of 2009 are as follows:
-- Basic and diluted earnings per common share were $0.28 and $0.27,
respectively, for the third quarter of 2009 as compared to $0.25 for
both basic and diluted earnings per share for the third quarter of 2008.
Basic and diluted earnings per common share were both $0.80 for the
first nine months of 2009 as compared to $0.66 and $0.65, respectively,
for the same period in 2008.
-- The Board of Directors declared a quarterly cash dividend of $0.15 per
common share payable on November 27, 2009 to shareholders of record at
the close of business on November 6, 2009.
-- Net income amounted to $135.1 million for the third quarter of 2009, as
compared to $121.9 million for the third quarter of 2008, an increase of
10.8%. For the nine months ended September 30, 2009, net income
amounted to $390.7 million as compared to $321.3 million for the same
period in 2008, an increase of 21.6%.
-- Net interest income increased 27.6% to $325.5 million for the third
quarter of 2009 as compared to $255.1 million for the third quarter of
2008 and 33.8% to $911.7 million for the nine months ended September 30,
2009 as compared to $681.5 million for the same period in 2008.
-- Our annualized return on average assets and annualized return on average
shareholders' equity for the third quarter of 2009 were 0.93% and
10.34%, respectively. Our annualized return on average assets and
annualized return on average shareholders' equity for the nine months
ended September 30, 2009 were 0.92% and 10.17%, respectively.
-- Our net interest rate spread and net interest margin were 2.02% and
2.30%, respectively, for the third quarter of 2009 and 1.88% and 2.18%,
respectively, for the first nine months of 2009.
-- Our efficiency ratio was 19.18% for the third quarter of 2009 and 21.49%
for the first nine months of 2009.
-- Our loan production was $7.11 billion for the nine months ended
September 30, 2009, which resulted in a net increase of $1.70 billion in
total loans to $31.12 billion at September 30, 2009 from $29.42 billion
at December 31, 2008.
-- Deposits increased $4.65 billion, or 25.2%, to $23.11 billion at
September 30, 2009 from $18.46 billion at December 31, 2008.
-- Borrowed funds decreased $200.0 million to $30.03 billion at September
30, 2009 from $30.23 billion at December 31, 2008.
Statement of Financial Condition Summary
Total assets increased $4.73 billion, or 8.7%, to $58.88 billion at September 30, 2009 from $54.15 billion at December 31, 2008. The increase in total assets reflected a $1.65 billion increase in loans, a $1.89 billion increase in investment securities, and an $814.9 million increase in total mortgage-backed securities.
The increase in loans reflected our focus on loan portfolio growth through the origination of one- to four-family first mortgage loans in New Jersey, New York and Connecticut, as well as our continued loan purchase activity. For the first nine months of 2009, we originated $4.66 billion and purchased $2.45 billion of loans, compared to originations of $4.01 billion and purchases of $2.55 billion for the first nine months of 2008. The origination and purchases of loans were partially offset by principal repayments of $5.34 billion for the first nine months of 2009 as compared to $2.22 billion for the comparable period in 2008. Loan originations have increased primarily due to our competitive rates and an increase in mortgage refinancing caused by market interest rates that are at near-historic lows. The increase in refinancing activity occurring in the marketplace has also caused the increase in principal repayments during the first nine months of 2009.
Total investment securities increased $1.89 billion during the first nine months of 2009. The increase in investment securities is primarily due to purchases of $4.57 billion, partially offset by calls of investment securities of $2.68 billion. Total mortgage-backed securities increased $814.9 million during the first nine months of 2009, reflecting purchases of $4.77 billion which were primarily collateralized mortgage obligations ("CMOs"), all of which were issued by U.S. government-sponsored enterprises ("GSEs"). The increase was partially offset by repayments of $3.43 billion and sales of $761.6 million. The sales of the mortgage-backed securities resulted in a net gain of $24.0 million. We used the proceeds from the securities sales to fund the purchase of first mortgage loans. We decided to use securities sales as a funding source because the yields on the purchased loans were similar to those of the securities sold and we believe that if we held the securities, the unrealized gains would diminish since prepayment speeds are relatively high. There were no debt or equity securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the security.
Total liabilities increased $4.40 billion, or 8.9%, to $53.61 billion at September 30, 2009 from $49.21 billion at December 31, 2008. The increase in total liabilities primarily reflected a $4.65 billion increase in deposits, partially offset by a $200.0 million decrease in borrowed funds. The increase in total deposits reflected a $2.39 billion increase in our time deposits, a $1.84 billion increase in our money market checking accounts and a $337.6 million increase in our interest-bearing transaction accounts and savings accounts. The decrease in borrowed funds was the result of repayments of $950.0 million with a weighted average rate of 1.63% largely offset by $750.0 million of new borrowings at a weighted-average rate of 1.69%. During the first nine months of 2009, we modified $650.0 million of borrowings to extend the call dates of the borrowings by between two and four years. Due to brokers amounted to $200.0 million as compared to $239.1 million at December 31, 2008. Due to brokers at September 30, 2009 represents securities purchased in the third quarter of 2009 with settlement dates in the fourth quarter of 2009.
Total shareholders' equity increased $331.4 million to $5.27 billion at September 30, 2009 from $4.94 billion at December 31, 2008. The increase was primarily due to net income of $390.7 million for the nine months ended September 30, 2009 and a $148.6 million increase in accumulated other comprehensive income primarily due to an increase in the net unrealized gain on securities available-for-sale. These increases to shareholders' equity were partially offset by cash dividends paid to common shareholders of $214.9 million and repurchases of our common stock of $43.5 million. At September 30, 2009, our shareholders' equity to asset ratio was 8.95% and our tangible book value per share was $10.43.
The accumulated other comprehensive income of $196.3 million at September 30, 2009 includes a $223.9 million after-tax net unrealized gain on securities available for sale ($378.5 million pre-tax) partially offset by a $27.6 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 Federal Reserve Bank (the "FOMC") noted that there is evidence that the pace of economic contraction has slowed since April 2009. However, the national unemployment rate increased to 9.8% in September 2009 as compared to 9.5% in June 2009 and 8.5% in March 2009. Lower household wealth and tight credit conditions in addition to the increase in the national unemployment rate has resulted in the FOMC maintaining the overnight lending rate at zero to 0.25% during the third quarter of 2009. As a result, short-term market interest rates have remained at low levels during the third quarter of 2009. This allowed us to continue to re-price our short-term deposits thereby reducing our cost of funds. While longer-term market interest rates increased during the third quarter of 2009, rates on mortgage-related assets have declined slightly, although to a lesser extent than the decline in our cost of funds. As a result, our net interest rate spread and net interest margin increased from the second quarter of 2009 as well as from the third quarter of 2008.
Net interest income increased $70.4 million, or 27.6%, to $325.5 million for the third quarter of 2009 as compared to $255.1 million for the third quarter of 2008. During the third quarter of 2009, our net interest rate spread increased 32 basis points to 2.02%, as compared to 1.70% for the same quarter in 2008. Our net interest margin increased 22 basis points to 2.30% as compared to 2.08% for the third quarter of 2008. Net interest income increased $230.2 million, or 33.8%, to $911.7 million for the first nine months of 2009 as compared to $681.5 million for the first nine months of 2008. During the first nine months of 2009, our net interest rate spread increased 36 basis points to 1.88% and our net interest margin increased 25 basis points to 2.18% as compared to the same period in 2008.
Total interest and dividend income for the third quarter of 2009 increased $62.9 million, or 9.2%, to $744.2 million as compared to $681.3 million for the third quarter of 2008. The increase in total interest and dividend income was primarily due to a $7.59 billion, or 15.3%, increase in the average balance of total interest-earning assets to $57.11 billion for the third quarter of 2009 as compared to $49.52 billion for the third quarter of 2008. The increase in the average balance of total interest-earning assets was partially offset by a decrease of 29 basis points in the annualized weighted-average yield to 5.21% for the quarter ended September 30, 2009 from 5.50% for the same quarter in 2008.
Total interest and dividend income for the nine months ended September 30, 2009 increased $254.0 million, or 13.1%, to $2.20 billion as compared to $1.94 billion for the nine months ended September 30, 2008. The increase in total interest and dividend income was primarily due to an $8.62 billion, or 18.4%, increase in the average balance of total interest-earning assets to $55.59 billion for the nine months ended September 30, 2009 as compared to $46.97 billion for the same period in 2008. The increase in the average balance of total interest-earning assets was partially offset by a decrease of 24 basis points in the annualized weighted-average yield on total interest-earning assets to 5.27% for the nine months ended September 30, 2009 from 5.51% for the comparable period in 2008.
Interest and fees on mortgage loans increased $29.8 million to $424.5 million for the third quarter of 2009 as compared to $394.7 million for the same period in 2008. This was primarily due to a $3.01 billion increase in the average balance of first mortgage loans, reflecting our continued emphasis on the growth of our mortgage loan portfolio. The increase in the average balance of first mortgage loans was partially offset by an 18 basis point decrease in the weighted-average yield to 5.58% from 5.76% for the 2008 third quarter.
For the nine months ended September 30, 2009, interest and fees on mortgage loans increased $141.9 million to $1.25 billion as compared to $1.11 billion for the nine months ended September 30, 2008 primarily due to a $4.09 billion increase in the average balance of first mortgage loans to $29.83 billion as compared to $25.74 billion for the same period in 2008. The increase in the average balance of first mortgage loans was partially offset by a decrease of 15 basis points in the weighted-average yield to 5.60%.
Interest on mortgage-backed securities increased $18.5 million to $243.8 million for the third quarter of 2009 as compared to $225.3 million for the third quarter of 2008. This increase was due primarily to a $2.65 billion increase in the average balance of mortgage-backed securities to $19.94 billion during the third quarter of 2009 as compared to $17.29 billion for the third quarter of 2008, partially offset by a 32 basis point decrease in the weighted-average yield to 4.89%.
Interest on mortgage-backed securities increased $111.0 million to $743.2 million for the nine months ended September 30, 2009 as compared to $632.2 million for the nine months ended September 30, 2008. This increase was due primarily to a $3.63 billion increase in the average balance of mortgage-backed securities to $19.74 billion during the first nine months of 2009 as compared to $16.11 billion for the first nine months of 2008, partially offset by a 21 basis point decrease in the weighted-average yield to 5.02%.
The increases in the average balances of mortgage-backed securities provide us with a source of cash flow from monthly principal and interest payments. The decrease in the weighted average yield on mortgage-backed securities is a result of lower yields on securities purchased during the second half of 2008 and the first nine months of 2009 when market interest rates were lower than the yield earned on the existing portfolio.
Dividends on Federal Home Loan Bank of New York ("FHLB") stock decreased $229,000, or 1.8%, to $12.3 million for the third quarter of 2009 as compared to $12.5 million for the third quarter of 2008. This decrease was due primarily to a 46 basis point decrease in the average yield earned to 5.59% as compared to 6.05% for the third quarter of 2008. The decrease in the average yield earned was partially offset by a $51.4 million increase in the average balance to $878.8 million for the third quarter of 2009 as compared to $827.4 million for the same period in 2008.
Dividends on FHLB stock decreased $10.0 million, or 24.6%, to $30.7 million for the first nine months of 2009 as compared to $40.7 million for same period in 2008. This decrease was due primarily to a 234 basis point decrease in the average yield earned to 4.67% as compared to 7.01% for the nine months ended September 30, 2008. The decrease in the average yield earned was partially offset by a $102.1 million increase in the average balance to $876.8 million for the first nine months of 2009 as compared to $774.7 million for the same period in 2008. We cannot predict the future amount of dividends that the FHLB will pay or the timing of any changes in the dividend yield.
Total interest expense for the quarter ended September 30, 2009 decreased $7.5 million, or 1.8%, to $418.7 million as compared to $426.2 million for the quarter ended September 30, 2008. This decrease was primarily due to a 61 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.19% for the quarter ended September 30, 2009 compared with 3.80% for the quarter ended September 30, 2008. The decrease was partially offset by a $7.45 billion, or 16.7%, increase in the average balance of total interest-bearing liabilities to $52.08 billion for the quarter ended September 30, 2009 compared with $44.63 billion for the third quarter of 2008. This increase in interest-bearing liabilities was primarily used to fund asset growth.
Total interest expense for the nine months ended September 30, 2009 increased $23.8 million, or 1.9%, to $1.28 billion as compared to $1.26 billion for the nine months ended September 30, 2008. This increase was primarily due to an $8.45 billion, or 20.0%, increase in the average balance of total interest-bearing liabilities to $50.61 billion for the nine months ended September 30, 2009 as compared to $42.16 billion for the corresponding period in 2008. The increase in the average balance of total interest-bearing liabilities was partially offset by a 60 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.39% for the nine months ended September 30, 2009 as compared to 3.99% for the nine months ended September 30, 2008.
Interest expense on deposits decreased $21.1 million, or 15.7%, to $112.9 million for the third quarter of 2009 as compared to $134.0 million for the third quarter of 2008. This decrease is due primarily to a decrease in the average cost of interest-bearing deposits of 124 basis points to 2.04% for the 2009 quarter as compared to 3.28% for the 2008 quarter. The decrease was partially offset by a $5.75 billion increase in the average balance of interest-bearing deposits to $22.01 billion during the third quarter of 2009 as compared to $16.26 billion for the comparable period in 2008.
For the nine months ended September 30, 2009, interest expense on deposits decreased $58.4 million to $375.0 million as compared to $433.4 million for the nine months ended September 30, 2008. This decrease is due primarily to a 124 basis point decrease in the average cost of deposits to 2.45% for the nine months ended September 30, 2009 as compared to 3.69% for the same period in 2008. This decrease was partially offset by a $4.74 billion increase in the average balance of interest-bearing deposits to $20.44 billion during the third quarter of 2009 as compared to $15.70 billion for the comparable period in 2008.
The increases in the average balances of interest-bearing deposits reflect our plan to expand our branch network and to grow deposits in our existing branches by offering competitive rates. Also, in response to the economic recession, households have increased their personal savings. The U.S. household savings rate increased to an average of 4.10% for the first eight months of 2009 as compared to 2.25% for the same period in 2008. We believe that this increase in the household savings rate has contributed to our growth in deposits. The decrease in the average cost of deposits for the first nine months of 2009 reflected lower market interest rates. At September 30, 2009, time deposits scheduled to mature within one year totaled $13.93 billion with an average cost of 2.06%. These time deposits are scheduled to mature as follows: $5.22 billion with an average cost of 1.97% in the fourth quarter of 2009, $4.65 billion with an average cost of 2.07% in the first quarter of 2010, $2.63 billion with an average cost of 2.22% in the second quarter of 2010 and $1.43 billion with an average cost of 2.01% in the third quarter of 2010. The current rates for our six month and one year time deposits are 1.40% and 1.75%, respectively. 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 increased $13.5 million to $305.8 million for the third quarter of 2009 as compared to $292.3 million for the third quarter of 2008. This was primarily due to a $1.69 billion increase in the average balance of borrowed funds to $30.07 billion partially offset by a 6 basis point decrease in the weighted-average cost of borrowed funds to 4.04%.
Interest expense on borrowed funds increased $82.3 million to $908.6 million for the nine months ended September 30, 2009 as compared to $826.3 million for the nine months ended September 30, 2008. This was primarily due to a $3.72 billion increase in the average balance of borrowed funds partially offset by a 14 basis point decrease in the weighted-average cost of borrowed funds to 4.03%.
Borrowed funds were used to fund a significant portion of the growth in interest-earning assets during 2008. We have been able to fund substantially all of our 2009 growth with deposits. We anticipate that we will be able to continue to use deposit growth to fund our asset growth, however, we may use borrowings as a supplemental funding source if deposit growth decreases. The decrease in the average cost of borrowings for the first nine months of 2009 reflected new borrowings in 2009 and 2008, when market interest rates were lower than existing borrowings and borrowings that matured. Substantially all of our borrowings are callable quarterly at the discretion of the lender after an initial non-call period of one to five years with a final maturity of ten years. We anticipate that none of the borrowings will be called during the next twelve months assuming that market interest rates remain at current levels or increase modestly. During the first nine months of 2009, we modified $650.0 million of borrowings to extend the call dates of the borrowings by between two and four years.
The provision for loan losses amounted to $40.0 million for the quarter ended September 30, 2009 as compared to $5.0 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, the provision for loan losses amounted to $92.5 million as compared to $10.5 million for the nine months ended September 30, 2008. The increase in the provision for loan losses was due primarily to an increase in non-performing loans and rising levels of unemployment during the first nine months of 2009. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $517.6 million at September 30, 2009 compared with $217.6 million at December 31, 2008. The ratio of non-performing loans to total loans was 1.66% at September 30, 2009 compared with 0.74% at December 31, 2008. The allowance for loan losses amounted to $114.8 million and $49.8 million at September 30, 2009 and December 31, 2008, respectively. The allowance for loan losses as a percent of total loans and non-performing loans was 0.37% and 22.19%, respectively at September 30, 2009, as compared to 0.17% and 22.89%, respectively at December 31, 2008.
Net charge-offs amounted to $13.2 million for the quarter ended September 30, 2009 as compared to net charge-offs of $1.4 million for the same quarter in 2008. For the nine months ended September 30, 2009, net charge-offs amounted to $27.5 million as compared to $2.6 million of net charge-offs for the same period in 2008. These charge-offs were primarily due to the results of our reappraisal process for our non-performing residential first mortgage loans and include $1.1 million and $2.9 million in charge-offs for the quarter and nine months ended September 30, 2009, respectively, for loans that have been transferred to foreclosed real estate. We generally obtain new collateral values for loans on or before 180 days of delinquency. If the estimated fair value of the collateral (less estimated selling costs) is less than the recorded investment in the loan, we charge-off an amount to reduce the loan to the fair value of the collateral less estimated selling costs. As a result, certain losses inherent in our non-performing loans are being recognized as charge-offs which may result in a lower ratio of the allowance for loan losses to non-performing loans, particularly when accompanied by a concurrent increase in total non-performing loans (i.e. due to the addition of new non-performing loans).
Total non-interest income was $2.5 million for the third quarter 2009 as compared to $2.2 million for the same quarter in 2008. Total non-interest income for the nine months ended September 30, 2009 was $31.4 million compared with $6.5 million for the comparable period in 2008. Included in non-interest income for the nine months ended September 30, 2009 were net gains on securities transactions of $24.0 million which resulted from the sale of $761.6 million of mortgage-backed securities available-for-sale. Proceeds from the securities sale were primarily used to fund the purchase of first mortgage loans during the second quarter of 2009.
Total non-interest expense increased $13.5 million, or 27.3%, to $62.9 million for the third quarter of 2009 from $49.4 million for the third quarter of 2008. The increase is primarily due to increases of $10.0 million in Federal deposit insurance expense, $2.0 million in compensation and employee benefits expense and $1.2 million in other non-interest expense. The increase in Federal deposit insurance expense is due primarily to the increases in our deposit insurance assessment rate to 18 basis points of deposits. The increase in our deposit assessment rate was the result of a restoration plan implemented by the FDIC to recapitalize the Deposit Insurance Fund. The increase in compensation and employee benefits expense included a $2.3 million increase in compensation costs, due primarily to normal increases in salary as well as additional full time employees, a $759,000 increase in pension costs and a $282,000 increase in costs related to our health plan. These increases were partially offset by a $1.4 million decrease in expense related to our stock benefit plans. This decrease was due primarily to a decrease in ESOP expense as a result of changes in the price of our common stock during 2009. At September 30, 2009, we had 1,483 full-time equivalent employees as compared to 1,406 at September 30, 2008. Included in other non-interest expense for the third quarter of 2009 were write-downs on foreclosed real estate and net losses on the sale of foreclosed real estate of $481,000 as compared to $516,000 for the third quarter of 2008.
Total non-interest expense for the nine months ended September 30, 2009 was $202.7 million as compared to $145.8 million during the corresponding 2008 period. The increase is primarily due to the FDIC special assessment of $21.1 million, a $21.5 million increase in Federal deposit insurance expense, an $8.3 million increase in compensation and employee benefits expense, and a $4.1 increase in other non-interest expense. The special assessment and the increase in our deposit assessment rate were the result of a restoration plan implemented by the FDIC to recapitalize the Deposit Insurance Fund. The increase in compensation and employee benefits expense included a $6.1 million increase in compensation costs, due primarily to normal increases in salary as well as additional full time employees, a $2.6 million increase in pension costs and a $2.9 million increase in costs related to our health plan. These increases were partially offset by a $3.3 million decrease in expense related to our stock benefit plans. This decrease was due primarily to a decrease in ESOP expense as a result of changes in the price of our common stock during the first nine months of 2009. Included in other non-interest expense for the nine months ended September 30, 2009 were write-downs on foreclosed real estate and net losses on the sale of foreclosed real estate, of $2.0 million as compared to $1.1 million for the comparable period in 2008.
Our efficiency ratio was 19.18% for the 2009 third quarter as compared to 19.21% for the 2008 third quarter. For the nine months ended September 30, 2009, our efficiency ratio was 21.49% compared with 21.21% for the corresponding 2008 period. The efficiency ratio is calculated by dividing non-interest expense, by the sum of net interest income and non-interest income. Our annualized ratio of non-interest expense to average total assets for the third quarter of 2009 was 0.43% as compared to 0.39% for the third quarter of 2008. Our ratio of non-interest expense to average total assets for the nine months ended September 30, 2009 was 0.48% compared with 0.41% for the corresponding period in 2008.
Income tax expense amounted to $90.0 million for the three months ended September 30, 2009 compared with $80.9 million for the corresponding period in 2008. Our effective tax rate for the third quarter of 2009 was 39.98% compared with 39.90% for the third quarter of 2008. Income tax expense for the nine months ended September 30, 2009 was $257.2 million compared with $210.4 million for the corresponding 2008 period. Our effective tax rate for the nine months ended September 30, 2009 was 39.7% compared with 39.58% for the nine months ended September 30, 2008.
Hudson City Bancorp maintains its corporate offices in Paramus, New Jersey. Hudson City Savings Bank, a well-established community financial institution serving its customers since 1868, is ranked in the top twenty-five U.S. financial institutions by asset size and is the largest thrift institution headquartered in New Jersey. Hudson City Savings currently operates a total of 131 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, and 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. Any or all of the forward-looking statements in this release and in any other public statements made by Hudson City Bancorp may turn out to be wrong. They can be affected by inaccurate assumptions Hudson City Bancorp might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. 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
September 30, December 31,
2009 2008
------------ -----------
(In thousands, except share and per (unaudited)
share amounts)
Assets:
-------
Cash and due from banks $217,461 $184,915
Federal funds sold and other
overnight deposits 453,017 76,896
------- ------
Total cash and cash equivalents 670,478 261,811
Securities available for sale:
Mortgage-backed securities 9,550,806 9,915,554
Investment securities 2,117,664 3,413,633
Securities held to maturity:
Mortgage-backed securities 10,751,866 9,572,257
Investment securities 3,238,044 50,086
--------- ------
Total securities 25,658,380 22,951,530
Loans 31,122,330 29,418,888
Net deferred loan costs 80,649 71,670
Allowance for loan losses (114,833) (49,797)
-------- -------
Net loans 31,088,146 29,440,761
Federal Home Loan Bank of New York stock 877,017 865,570
Foreclosed real estate, net 12,777 15,532
Accrued interest receivable 310,520 299,045
Banking premises and equipment, net 71,110 73,502
Goodwill 152,109 152,109
Other assets 43,998 85,468
------ ------
Total Assets $58,884,535 $54,145,328
=========== ===========
Liabilities and Shareholders' Equity:
-------------------------------------
Deposits:
Interest-bearing $22,523,737 $17,949,846
Noninterest-bearing 590,212 514,196
------- -------
Total deposits 23,113,949 18,464,042
Repurchase agreements 15,100,000 15,100,000
Federal Home Loan Bank of New York advances 14,925,000 15,125,000
---------- ----------
Total borrowed funds 30,025,000 30,225,000
Due to brokers 200,000 239,100
Accrued expenses and other liabilities 275,405 278,390
------- -------
Total liabilities 53,614,354 49,206,532
---------- ----------
Common stock, $0.01 par value, 3,200,000,000
shares authorized; 741,466,555 shares issued;
524,889,925 shares outstanding at
September 30, 2009 and 523,770,617 shares
outstanding at December 31, 2008 7,415 7,415
Additional paid-in capital 4,670,808 4,641,571
Retained earnings 2,347,827 2,196,235
Treasury stock, at cost; 216,576,630 shares
at September 30, 2009 and 217,695,938 shares
at December 31, 2008 (1,740,467) (1,737,838)
Unallocated common stock held by the
employee stock ownership plan (211,738) (216,244)
Accumulated other comprehensive income,
net of tax 196,336 47,657
------- ------
Total shareholders' equity 5,270,181 4,938,796
--------- ---------
Total Liabilities and
Shareholders' Equity $58,884,535 $54,145,328
=========== ===========
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands, except per share data)
Interest and Dividend Income:
First mortgage loans $424,521 $394,748 $1,252,011 $1,110,121
Consumer and other loans 5,212 6,245 16,629 19,978
Mortgage-backed securities
held to maturity 128,996 123,890 368,212 372,354
Mortgage-backed securities
available for sale 114,821 101,410 374,995 259,872
Investment securities Held
to maturity 30,835 874 44,920 12,764
Investment securities
available for sale 27,155 40,825 107,074 121,354
Dividends on Federal Home
Loan Bank of New York stock 12,281 12,510 30,698 40,729
Federal funds sold and
other overnight deposits 344 815 707 4,093
--- --- --- -----
Total interest and
dividend income 744,165 681,317 2,195,246 1,941,265
------- ------- --------- ---------
Interest Expense:
Deposits 112,925 133,983 375,003 433,398
Borrowed funds 305,783 292,256 908,558 826,342
------- ------- ------- -------
Total interest expense 418,708 426,239 1,283,561 1,259,740
------- ------- --------- ---------
Net interest income 325,457 255,078 911,685 681,525
Provision for Loan Losses 40,000 5,000 92,500 10,500
------ ----- ------ ------
Net interest income
after provision for
loan losses 285,457 250,078 819,185 671,025
------- ------- ------- -------
Non-Interest Income:
Service charges and other
income 2,513 2,181 7,207 6,490
Gain on securities
transactions, net - - 24,185 -
- - ------ -
Total non-interest income 2,513 2,181 31,392 6,490
----- ----- ------ -----
Non-Interest Expense:
Compensation and employee
benefits 34,043 32,052 103,166 94,896
Net occupancy expense 7,965 7,633 24,260 22,437
Federal deposit insurance
assessment 10,930 945 23,294 1,784
FDIC special assessment - - 21,098 -
Other expense 9,982 8,793 30,843 26,695
----- ----- ------ ------
Total non-interest expense 62,920 49,423 202,661 145,812
------ ------ ------- -------
Income before income Tax
expense 225,050 202,836 647,916 531,703
Income tax expense 89,964 80,928 257,248 210,423
------ ------ ------- -------
Net income $135,086 $121,908 $390,668 $321,280
======== ======== ======== ========
Basic earnings per share $0.28 $0.25 $0.80 $0.66
===== ===== ===== =====
Diluted earnings per share $0.27 $0.25 $0.80 $0.65
===== ===== ===== =====
Weighted Average Number of
Common Shares
Outstanding:
Basic 489,545,739 484,759,567 488,048,312 483,915,018
Diluted 491,992,378 495,715,998 491,356,241 495,298,081
Hudson City Bancorp, Inc. and Subsidiary
Consolidated Average Balance Sheets
(Unaudited)
For the Three Months Ended September 30,
--------------------------------------------------------
2009 2008
---- ----
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------ ----------- -------- ------
(Dollars in thousands)
Assets:
-------
Interest-earnings
assets:
First mortgage
loans, net (1) $30,445,939 $424,521 5.58% $27,431,258 $394,748 5.76%
Consumer and
other loans 369,556 5,212 5.64 418,760 6,245 5.97
Federal funds sold
and other
overnight
deposits 475,094 344 0.29 181,122 815 1.79
Mortgage-backed
securities at
amortized cost 19,943,911 243,817 4.89 17,288,478 225,300 5.21
Federal Home Loan
Bank stock 878,827 12,281 5.59 827,393 12,510 6.05
Investment
securities, at
amortized cost 4,996,795 57,990 4.64 3,373,018 41,699 4.95
--------- ------ --------- ------
Total interest-
earning assets 57,110,122 744,165 5.21 49,520,029 681,317 5.50
---------- ------- ---------- -------
Noninterest-
earnings assets 1,068,045 769,038
--------- -------
Total Assets $58,178,167 $50,289,067
=========== ===========
Liabilities and
Shareholders'
Equity:
---------------
Interest-bearing
liabilities:
Savings accounts $759,757 1,437 0.75 $727,060 1,378 0.75
Interest-bearing
transaction
accounts 1,831,426 7,351 1.59 1,609,380 12,248 3.03
Money market
accounts 4,109,583 17,606 1.70 2,484,464 20,112 3.22
Time deposits 15,311,050 86,531 2.24 11,435,317 100,245 3.49
---------- ------ ---------- -------
Total interest-
bearing
deposits 22,011,816 112,925 2.04 16,256,221 133,983 3.28
---------- ------- ---------- -------
Repurchase
agreements 15,100,000 154,175 4.05 14,046,628 144,769 4.10
Federal Home Loan
Bank of New York
advances 14,965,217 151,608 4.02 14,326,630 147,487 4.10
---------- ------- ---------- -------
Total borrowed
funds 30,065,217 305,783 4.04 28,373,258 292,256 4.10
---------- ------- ---------- -------
Total interest-
bearing
liabilities 52,077,033 418,708 3.19 44,629,479 426,239 3.80
---------- ------- ---------- -------
Noninterest-bearing
liabilities:
Noninterest-bearing
deposits 542,273 587,553
Other noninterest-
bearing
liabilities 330,793 284,512
------- -------
Total noninterest-
bearing
liabilities 873,066 872,065
------- -------
Total liabilities 52,950,099 45,501,544
Shareholders'
equity 5,228,068 4,787,523
Total
Liabilities and
Shareholders'
Equity $58,178,167 $50,289,067
=========== ===========
Net interest
income/net
interest
rate spread (2) $325,457 2.02 $255,078 1.70
======== ========
Net interest-
earning assets/
net interest
margin (3) $5,033,089 2.30% $4,890,550 2.08%
========== ==========
Ratio of
interest-earning
assets to
interest-bearing
liabilities 1.10x 1.11x
----------------
(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
Consolidated Average Balance Sheets
(Unaudited)
For the Nine Months Ended September 30,
---------------------------------------------------------
2009 2008
---- ----
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------ ---------- -------- ------
(Dollars in thousands)
Assets:
-------
Interest-earnings
assets:
First mortgage
loans, net (1) $29,832,820 $1,252,011 5.60% $25,742,402 $1,110,121 5.75%
Consumer and
other loans 385,774 16,629 5.75 426,864 19,978 6.24
Federal funds
sold and other
overnight
deposits 460,265 707 0.21 236,479 4,093 2.31
Mortgage-backed
securities at
amortized cost 19,738,127 743,207 5.02 16,105,296 632,226 5.23
Federal Home
Loan Bank stock 876,773 30,698 4.67 774,729 40,729 7.01
Investment
securities, at
amortized cost 4,294,557 151,994 4.72 3,681,122 134,118 4.86
--------- ------- --------- -------
Total interest-
earning assets 55,588,316 2,195,246 5.27 46,966,892 1,941,265 5.51
---------- --------- ---------- ---------
Noninterest-
Earnings assets 1,006,991 775,956
--------- -------
Total Assets $56,595,307 $47,742,848
=========== ===========
Liabilities and
Shareholders'
Equity:
---------------
Interest-bearing
liabilities:
Savings accounts $740,889 4,179 0.75 $731,732 4,132 0.75
Interest-bearing
transaction
accounts 1,732,510 24,459 1.89 1,590,125 36,937 3.10
Money market
accounts 3,498,955 50,564 1.93 2,107,569 52,577 3.33
Time deposits 14,464,413 295,801 2.73 11,270,239 339,752 4.03
---------- ------- ---------- -------
Total interest-
bearing
deposits 20,436,767 375,003 2.45 15,699,665 433,398 3.69
---------- ------- ---------- -------
Repurchase
agreements 15,100,295 457,252 4.05 12,986,768 407,630 4.19
Federal Home Loan
Bank of New York
advances 15,076,250 451,306 4.00 13,468,861 418,712 4.15
---------- ------- ---------- -------
Total borrowed
funds 30,176,545 908,558 4.03 26,455,629 826,342 4.17
---------- ------- ---------- -------
Total interest-
bearing
liabilities 50,613,312 1,283,561 3.39 42,155,294 1,259,740 3.99
---------- --------- ---------- ---------
Noninterest-
bearing
liabilities:
Noninterest-
Bearing deposits 537,326 562,141
Other noninterest-
bearing
liabilities 324,534 281,212
------- -------
Total
noninterest-
bearing
liabilities 861,860 843,353
------- -------
Total
liabilities 51,475,172 42,998,647
Shareholders'
equity 5,120,135 4,744,201
Total
Liabilities
and
Shareholders'
Equity $56,595,307 $47,742,848
=========== ===========
Net interest
income/net
interest
rate spread (2) $911,685 1.88 $681,525 1.52
======== ========
Net interest-
Earning assets/
net interest
margin (3) $4,975,004 2.18% $4,811,598 1.93%
========== ==========
Ratio of
interest-earning
assets to
interest-
bearing
liabilities 1.10x 1.11x
-----------------
(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
Book Value Calculations
September 30,
2009
------------
(In thousands, except share and per share
amounts)
Shareholders' equity $5,270,181
Goodwill and other intangible assets (158,777)
--------
Tangible Shareholders' equity $5,111,404
----------
Book Value Share Computation:
Issued 741,466,555
Treasury shares (216,576,630)
-------------
Shares outstanding 524,889,925
Unallocated ESOP shares (33,917,010)
Unvested RRP shares (691,972)
Shares in trust (96,653)
-------
Book value shares 490,184,290
===========
Book value per share $10.75
======
Tangible book value per share $10.43
======
Hudson City Bancorp, Inc.
Other Financial Data
Securities Portfolio at September 30, 2009:
Amortized Estimated Unrealized
Cost Fair Value Gain/(Loss)
---------- ---------- -----------
(dollars in thousands)
Held to Maturity:
Mortgage-backed securities:
FHLMC 5,040,917 5,271,854 230,937
FNMA 2,675,147 2,790,388 115,241
FHLMC and FNMA CMO's 2,918,958 2,989,269 70,311
GNMA 116,844 119,208 2,364
------- ------- -----
Total mortgage-backed
securities 10,751,866 11,170,719 418,853
Investment securities:
United States GSE debt 3,237,939 3,217,038 (20,901)
Municipal bonds 105 105 -
--- --- -
Total investment
securities 3,238,044 3,217,143 (20,901)
Total held to maturity 13,989,910 14,387,862 397,952
========== ========== =======
Available for sale:
Mortgage-backed securities:
FHLMC 4,756,021 4,982,606 226,585
FNMA 2,936,703 3,062,941 126,238
FHLMC and FNMA CMO's 689,027 698,235 9,208
GNMA 796,969 807,024 10,055
------- ------- ------
Total mortgage-backed
securities 9,178,720 9,550,806 372,086
Investment securities:
United States GSE debt 2,104,510 2,110,486 5,976
Equity securities 6,770 7,178 408
----- ----- ---
Total investment
securities 2,111,280 2,117,664 6,384
Total available for sale 11,290,000 11,668,470 378,470
========== ========== =======
Hudson City Bancorp, Inc.
Other Financial Data
Loan Data as September 30, 2009:
Non-Performing Loans Total Loans
------------------------ -------------------------------
Percent Percent
Loan of Total Loan of Total
Balance Number Loans Balance Number Loans
------- ------ -------- ---------- ------ ---------
(dollars in thousands)
First Mortgage
Loans:
One- to four-
family $500,308 1,237 1.61% $30,267,338 72,886 97.25%
Commercial 3,169 3 0.01% 51,517 102 0.17%
FHA/VA 9,953 43 0.03% 198,434 779 0.64%
PMI 2,540 10 0.01% 253,459 780 0.81%
----- -- ---- ------- --- ----
Total mortgage
loans 515,970 1,293 1.66% 30,770,748 74,547 98.87%
0.00%
Home equity loans 1,355 18 0.00% 330,752 8,408 1.06%
Other loans 260 4 0.00% 20,830 2,407 0.07%
--- - ---- ------ ----- ----
Total $517,585 1,315 1.66% $31,122,330 85,362 100.00%
======== ===== ==== =========== ====== ======
-- Charge-offs amounted to $13.2 million for the third quarter of 2009,
consisting of 148 loans, and $27.5 million for the nine months ended
September 30, 2009, consisting of 330 loans. These charge-offs include
$12.5 million and $26.0 million for the same respective periods,
resulting from our revaluation process on non-performing loans.
-- 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. Our policy is that we receive an updated valuation for these
loans annually.
-- The average loan-to-value ratio, using appraised values at time of
origination, of our non-performing one- to four-family mortgage loans
and total one- to four-family mortgage loans was 71.5% and 61.8%,
respectively at September 30, 2009.
-- Based on the valuation indices, house prices have declined in the New
York metropolitan area, where 68% of our non-performing loans were
located at September 30, 2009, by approximately 20% from the peak of the
market in 2006 through July 2009 and by 30% nationwide during that
period. From April 2009 through July 2009, the house price indices
increased by 1.3% in the New York metropolitan area.
-- Of the $27.5 million in charge-offs, $22.7 million relate to loans that
are still in the loan portfolio at September 30, 2009 and are working
through the foreclosure process.
-- Our quantitative analysis of the allowance for loan losses considers the
results of the reappraisal process as well as the results of our
foreclosed property transactions.
-- Our qualitative analysis of the allowance for loan losses includes a
further evaluation of economic factors, such as trends in the
unemployment rate, as well as ratio analysis to evaluate the overall
measurement of the allowance for loan losses. This analysis includes 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 September 30, 2009:
Carrying Number Under
Number Value Contract of Sale
------- --------- ----------------
(dollars in thousands)
Foreclosed real estate 39 $12,777 9
-- Through the first nine months of 2009, we sold 40 foreclosed properties.
It is currently taking up to 30 months to foreclose on a loan once it
becomes non-performing. Write-downs and net losses on the sale of
foreclosed real estate are charged to operating expenses.
Hudson City Bancorp, Inc. and Subsidiary
Other Financial Data
(Unaudited)
At or for the Quarter Ended
---------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2009 2009 2009 2008 2008
--------- -------- --------- -------- --------
(Dollars in thousands, except per share data)
Net interest
Income $325,457 $302,397 $283,831 $260,452 $255,078
Provision for
loan losses 40,000 32,500 20,000 9,000 5,000
Non-interest
income 2,513 26,606 2,273 1,995
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