PARAMUS, N.J., Dec. 16, 2011 /PRNewswire/ -- Hudson City
Bancorp, Inc. (NASDAQ: HCBK), the holding company for Hudson City
Savings Bank (the "Bank"), announced today that it has extinguished
$4.3 billion of structured putable
borrowings that had a weighted-average cost of 4.21%. The
extinguishments were funded by the Company's existing cash
position.
The Bank's Tier I leverage capital ratio was substantially
unaffected by the extinguishments and Hudson City will continue to have a
significant cushion above the regulatory requirements to be
considered well capitalized. The extinguishment of high-cost
borrowings is expected to increase the Company's net interest
margin and net interest income compared to what we otherwise would
have experienced. The Company does not expect the loss for
the fourth quarter to affect its dividend strategy in light of the
improved earnings position.
This action will result in an after-tax charge of approximately
$440.7 million or $0.89 per share in in the fourth quarter of
2011. This charge will offset the net income otherwise
expected for the quarter and, as a result, the Company expects to
report a net loss for the fourth quarter of 2011.
"We're doing just what our customers are doing: paying down
expensive debt in this prolonged period of depressed market
interest rates," said Ronald E.
Hermance, Chairman and Chief Executive Officer of Hudson
City. "Calls of securities in our investment portfolio and
mortgage pre-payments due to low interest rates have provided us
with excess liquidity. The interest rate environment and
regulatory climate have limited the options for redeploying this
excess liquidity. We now believe that a more normal interest
rate environment will not return before 2013. After reviewing
various options to redeploy our excess cash position, we determined
that the extinguishment of higher-cost debt was the best use of
that cash. This is a market-driven action on our part."
Mr. Hermance continued, "The extinguishment of this debt had no
significant effect on our regulatory capital ratios since we
reduced the size of our balance sheet proportionately with the
charge to earnings. More importantly, we expect this action
will increase our net interest margin by as much as 20 basis points
in the first quarter of 2012 as compared to the third quarter of
2011. In addition, we now have greater balance sheet
flexibility when growth becomes more profitable. We believe
that our ability to withstand the current 'low for long' interest
rate environment is a testament to the strength and quality of our
balance sheet. We remain committed to guiding Hudson City through the current business
environment and preparing for the eventual improvement in market
conditions."
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
debt extinguishments 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.
SOURCE Hudson City Bancorp, Inc.