Hudson City Bancorp is the holding company for Hudson City Savings Bank, one of the largest thrifts in the US. Founded in 1868, the bank has more than 130 branches in the New York City metropolitan area, including northern New Jersey; Long Island; and Fairfield County, Connecticut; as well as central New Jersey and that state's Philadelphia suburbs. Serving middle- to high-income consumers, it issues and purchases high-quality first residential mortgages, which account for about 99% of its loan portfolio. It originates loans at its branches, through mortgage bankers and brokers, and (to a lesser extent) on a wholesale basis nationwide. Acquisitive M&T Bank is buying Hudson City Bancorp for some $3.7 billion.
Hudson City Savings gathers funds for its lending and investment activities by offering checking and savings accounts, CDs, and IRAs. It also collects deposits from customers nationwide through its online banking service. The bank offers consumer loans, second mortgages, and home equity lines of credit. It does not offer investment services. Subsidiary HC Value Broker Services sells insurance products to bank customers.
Hudson City Savings requires a minimum down payment of 20% of a loan's value on all mortgages (though the average down payment hovers closer to 40%). The thrift does not originate subprime mortgages, option adjustable rate mortgage loans, or business loans. Its conservative lending and investment policies helped the company post record earnings each year for more than a decade.
However, Hudson City Bancorp has not been unscathed by the recessionary economy. Although it serves affluent clients that are less susceptible to swings in the financial climate, the company has seen an increase in nonperforming loans. And much like other banks, Hudson City has also been stung by low interest rates. Meanwhile, the company has seen yields on its investments in mortgage-backed securities decrease as the Federal Reserve ramped up its securities acquisition activity to provide liquidity in the marketplace. The company's sales slipped slightly in 2010, then fell 23% to $2.3 billion in 2011. That year the company ended up losing $736 billion, its first net loss in many years. The results were primarily attributed to balance sheet restructuring activities, in which the company reported a $1.9 billion loss on extinguishment of high-cost debt.
By strengthening its balance sheet, Hudson City Bancorp believes it has positioned itself for growth when the mortgage market picks back up. Furthermore, its banking operations have been performing in line with expectations.
The thrift's nationwide wholesale loan purchasing activities declined significantly in 2010 and 2011 as a result of fewer buying opportunities, so most of its recently acquired loans have been based in its local market areas. (Sellers have increasingly either held on to their loans rather than selling, or they are selling to government-sponsored entities as part of the government's involvement in providing liquidity to the financial sector.) Loan originations have also declined as a result of lower demand in the soft market. Combined with the sale of low-yielding assets as part of its restructuring, Hudson City Bancorp's assets decreased by about a quarter in 2011. – less