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


The following excerpt is from the company's SEC filing.

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

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

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

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

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

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

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

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

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

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

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

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

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

Total mortgage-backed securities decreased $1.65 billion to $7.30 billion at June 30, 2014 from $8.95 billion at December 31, 2013. The decrease was due primarily to security sales of $984.9 million and repayments of $769.0 million of mortgage-backed securities during the first six months of 2014. We sold

these mortgage-backed securities to take advantage of current market demand and prices in advance of an anticipated rising interest rate environment. The proceeds from the sales have been invested primarily in short-term liquid assets with some invested in mortgage-backed securities. While this further increases our levels of low-yielding liquid assets, we believe this positions our balance sheet for future strategic initiatives such as a potential balance sheet restructuring.

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

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

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

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

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

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

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

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

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

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

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

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

The decrease in the annualized weighted-average yield earned on first mortgage loans during the three and six month periods ended June 30, 2014 was due to repayments of higher-yielding loans and the rates

on newly originated mortgage loans which have been below the average yield on our portfolio, reflecting overall low market rates. Consequently, the average yield on our loan portfolio continued to decline during the first six months of 2014. In addition, our loan production decreased reflecting our low appetite for adding long-term fixed-rate mortgage loans to our portfolio in the current low interest rate environment and also the impact of the CFPB’s new qualified mortgage regulations, which went into effect in January 2014.

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

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

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

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

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

Interest on Federal funds sold and other overnight deposits amounted to $3.3 million for the second quarter of 2014 as compared to $2.0 million for the second quarter of 2013. The increase in interest

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

undue reliance should not be placed on such statements. For a summary of important factors that could affect Hudson City Bancorp, Inc.’s forward-looking statements, please refer to Hudson City Bancorp, Inc.’s filings with the Securities and Exchange Commission available at www.sec.gov. Hudson City Bancorp, Inc. does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events.

Common stock, $0.01 par value, 3,200,000,000 shares authorized; 741,466,555 shares issued; 528,752,920 and 528,419,170 shares outstanding each at June 30, 2014 and December 31, 2013      7,415        7,415   

(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.

(4) Includes the average balance of principal receivable related to FHLMC mortgage-backed securities of $42.5 million and $112.3 million for the quarters ended June 30, 2014 and 2013, respectively.

(4) Includes the average balance of principal receivable related to FHLMC mortgage-backed securities of $46.4 million and $112.8 million for the six months ended June 30, 2014 and 2013, respectively.

(1) Calculated by dividing total non-interest operating expense by total operating income. These measures are non-GAAP financial measures. We believe these measures, by excluding merger-related costs and the valuation allowance related to Lehman Brothers, provides a better measure of our non-interest income and expenses.

The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.

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Other recent filings from the company include the following:

Hudson City Bancorp Just Filed Its Quarterly Report: The amortized cos... - Nov. 7, 2014
Other definitive proxy statements - Nov. 5, 2014
Annual Report to Security Holders - Nov. 5, 2014

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