10-Q 1 e87105_10-q.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ----------------- Commission File Number 0-010699 HUDSON UNITED BANCORP ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-2405746 ----------------------------------- --------------------------------------- (State of other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1000 MacArthur Blvd, Mahwah, NJ 07430 --------------------------------------- ---------- (Address of principal executive office) (Zip Code) (201)-236-2600 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------------------------- Former name, former address, and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes __X__ No_____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date: 46,187,927 shares, no par value, outstanding as of November 1, 2001. HUDSON UNITED BANCORP INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Consolidated Balance Sheets At September 30, 2001 and December 31, 2000 ................... 2 Consolidated Statements of Income For the three-months ended September 30, 2001 and 2000.................................... 3 Consolidated Statements of Income For the nine-months ended September 30, 2001 and 2000.................................... 4 Consolidated Statements of Comprehensive Income For the three-months and nine-months ended September 30, 2001 and 2000.................................... 5 Consolidated Statements of Changes in Stockholders' Equity For the nine-months ended September 30, 2001 and for the Year ended December 31, 2000.... 6 Consolidated Statements of Cash Flows For the nine-months ended September 30, 2001 and 2000.................................... 7 Notes to Consolidated Financial Statements..................... 8-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 15-20 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders............ 21 Item 6. Exhibits and Reports on Form 8-K............................... 21 Signatures..................................................... 22 1
HUDSON UNITED BANCORP ---------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, (in thousands, except per share data) 2001 2000 ---------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks ................................................................... $ 204,726 $ 276,784 Federal funds sold and other .............................................................. 26,162 18,755 ------------- ------------- TOTAL CASH AND CASH EQUIVALENTS ..................................................... $ 230,888 $ 295,539 Investment securities available for sale, at market value ................................. 1,359,094 422,727 Investment securities held to maturity, at cost (market value of $513,410 for 2000) ....... -- 520,192 Loans and leases: Commercial and financial ............................................................... 1,832,662 1,891,171 Commercial real estate mortgages ....................................................... 820,829 920,397 Consumer ............................................................................... 938,667 873,336 Credit card ............................................................................ 285,091 158,922 ------------- ------------- Sub-total ........................................................................... $ 3,877,249 $ 3,843,826 Residential mortgages .................................................................. 934,269 1,433,697 ------------- ------------- TOTAL LOANS AND LEASES .............................................................. $ 4,811,518 $ 5,277,523 Less Allowance for possible loan and lease losses ...................................... (77,697) (95,180) ------------- ------------- NET LOANS AND LEASES ................................................................ $ 4,733,821 $ 5,182,343 Premises and equipment, net ............................................................... 118,298 124,821 Other real estate owned ................................................................... 6,061 4,318 Intangibles, net of amortization .......................................................... 89,946 100,760 Other assets .............................................................................. 271,657 166,526 ------------- ------------- TOTAL ASSETS ........................................................................ $ 6,809,765 $ 6,817,226 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Noninterest bearing .................................................................... $ 1,097,374 $ 1,162,677 Interest bearing ....................................................................... 4,804,578 4,650,590 ------------- ------------- TOTAL DEPOSITS ...................................................................... $ 5,901,952 $ 5,813,267 Borrowings ................................................................................ 212,054 358,861 Other liabilities ......................................................................... 52,915 28,325 Subordinated debt ......................................................................... 123,000 123,000 Company-obligated mandatory redeemable preferred capital securities of three subsidiary trusts holding solely junior subordinated debentures of the Company ............................................................................ 125,300 125,300 ------------- ------------- TOTAL LIABILITIES ................................................................... $ 6,415,221 $ 6,448,753 Stockholders' Equity: Common stock, no par value; authorized 103,000,000 shares; ............................. 92,762 92,762 52,171,701 shares issued and 46,175,958 shares outstanding in 2001 and 52,171,701 shares issued and 47,964,579 shares outstanding in 2000 Additional paid-in capital ............................................................. 320,744 322,131 Retained earnings ...................................................................... 90,882 56,759 Treasury stock, at cost, 5,995,743 shares in 2001 and 4,207,122 shares in 2000 ......... (135,897) (92,293) Restricted stock ....................................................................... (3,984) (5,759) Accumulated other comprehensive income (loss) .......................................... 30,037 (5,127) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY .......................................................... $ 394,544 $ 368,473 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................................... $ 6,809,765 $ 6,817,226 ============= ============= See Notes to Consolidated Financial Statements
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HUDSON UNITED BANCORP ------------------------------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, (in thousands, except per share data) 2001 2000 ---------------------------------------------------------------------------------------------------- INTEREST AND FEE INCOME: Loans and leases ...................................................... $ 94,012 $ 116,886 Investment securities ................................................. 17,708 21,996 Other ................................................................. 4,379 187 ----------- ----------- TOTAL INTEREST AND FEE INCOME ................................... $ 116,099 $ 139,069 ----------- ----------- INTEREST EXPENSE: Deposits .............................................................. $ 38,487 $ 43,487 Borrowings ............................................................ 1,742 14,442 Subordinated and other debt ........................................... 5,223 5,326 ----------- ----------- TOTAL INTEREST EXPENSE .......................................... $ 45,452 $ 63,255 ----------- ----------- NET INTEREST INCOME ............................................. $ 70,647 $ 75,814 PROVISION FOR POSSIBLE LOAN AND LEASE LOSSES .................... 6,000 6,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION ............................. $ 64,647 $ 69,814 ----------- ----------- NONINTEREST INCOME: Retail service fees ................................................... $ 8,944 $ 7,597 Credit card fee income ................................................ 6,013 5,337 Trust income .......................................................... 791 1,078 Other income .......................................................... 11,670 11,669 Securities gains ...................................................... 388 -- ----------- ----------- TOTAL NONINTEREST INCOME ....................................... $ 27,806 $ 25,681 ----------- ----------- NONINTEREST EXPENSE: Salaries and benefits ................................................. $ 20,258 $ 24,458 Occupancy expense ..................................................... 6,714 6,782 Equipment expense ..................................................... 4,692 4,778 Deposit and other insurance ........................................... 652 589 Outside services ...................................................... 13,269 10,427 Amortization of intangibles ........................................... 3,789 3,882 Other ................................................................. 9,397 7,774 ----------- ----------- TOTAL NONINTEREST EXPENSE ....................................... $ 58,771 $ 58,690 ----------- ----------- INCOME BEFORE INCOME TAXES ...................................... $ 33,682 $ 36,805 PROVISION FOR INCOME TAXES ...................................... 9,767 12,330 ----------- ----------- NET INCOME ...................................................... $ 23,915 $ 24,475 =========== =========== NET INCOME PER COMMON SHARE Basic ................................................................. $ 0.51 $ 0.46 Diluted ............................................................... $ 0.51 $ 0.45 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic ................................................................. 46,462 53,600 Diluted ............................................................... 46,836 54,008 See Notes to Consolidated Financial Statements
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HUDSON UNITED BANCORP ------------------------------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Nine Months Ended September 30, (in thousands, except per share data) 2001 2000 ------------------------------------------------------------------------------------------------------ INTEREST AND FEE INCOME: Loans and leases ........................................................ $ 299,757 $ 358,156 Investment securities ................................................... 52,313 120,296 Other ................................................................... 6,871 599 ----------- ----------- TOTAL INTEREST AND FEE INCOME ..................................... $ 358,941 $ 479,051 ----------- ----------- INTEREST EXPENSE: Deposits ................................................................ $ 122,899 $ 127,815 Borrowings .............................................................. 7,344 87,100 Subordinated and other debt ............................................. 15,663 15,970 ----------- ----------- TOTAL INTEREST EXPENSE ............................................ $ 145,906 $ 230,885 ----------- ----------- NET INTEREST INCOME ............................................... $ 213,035 $ 248,166 PROVISION FOR POSSIBLE LOAN AND LEASE LOSSES ...................... 18,000 18,000 ----------- ----------- NET INTEREST INCOME AFTER PROVISION ............................... $ 195,035 $ 230,166 ----------- ----------- NONINTEREST INCOME: Retail service fees ..................................................... $ 26,560 $ 21,466 Credit card fee income .................................................. 16,069 16,599 Trust income ............................................................ 2,605 2,847 Other income ............................................................ 26,668 27,100 Securities gains/(losses) ............................................... 805 (59,363) ----------- ----------- TOTAL NONINTEREST INCOME ......................................... 72,707 8,649 ----------- ----------- NONINTEREST EXPENSE: Salaries and benefits ................................................... $ 61,904 $ 71,161 Occupancy expense ....................................................... 21,190 19,152 Equipment expense ....................................................... 14,136 15,374 Deposit and other insurance ............................................. 1,860 1,916 Outside services ........................................................ 37,706 30,646 Amortization of intangibles ............................................. 11,262 11,647 Other ................................................................... 21,719 22,827 ----------- ----------- TOTAL NONINTEREST EXPENSE ......................................... $ 169,777 $ 172,723 ----------- ----------- INCOME BEFORE INCOME TAXES ........................................ $ 97,965 $ 66,092 PROVISION FOR INCOME TAXES ........................................ 28,723 24,311 ----------- ----------- NET INCOME ........................................................ $ 69,242 $ 41,781 =========== =========== NET INCOME PER COMMON SHARE Basic ................................................................... $ 1.47 $ 0.75 Diluted ................................................................. $ 1.46 $ 0.75 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic ................................................................... 47,083 55,465 Diluted ................................................................. 47,390 55,842 See Notes to Consolidated Financial Statements
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HUDSON UNITED BANCORP --------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30, ------------------------ (in thousands) 2001 2000 --------------------------------------------------------------------------------------------------------- NET INCOME ............................................................ $ 23,915 $ 24,475 OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized securities gains (losses) arising during period .................. $ 24,790 $ (249) Change in valuation of derivative contracts ................................. 7,356 -- Less: reclassification for gains included in net income ..................... 505 996 ---------- ---------- Other comprehensive income (loss) ........................................... $ 31,641 $ (1,245) ---------- ---------- COMPREHENSIVE INCOME ..................................................... $ 55,556 $ 23,230 ========== ========== Nine Months Ended September 30, ------------------------ (In thousands) 2001 2000 --------------------------------------------------------------------------------------------------------- NET INCOME .............................................................. $ 69,242 $ 41,781 OTHER COMPREHENSIVE INCOME, NET OF TAX: Unrealized securities gains (losses) arising during period .................. $ 32,498 $ (6,892) Unrealized holding loss from securities transferred from held to maturity to available for sale ............................................ (4,069) -- Change in valuation of derivative contracts ................................. 7,563 -- Less: reclassification for gains (losses) included in net income ............ 828 (38,522) ---------- ---------- Other comprehensive income .................................................. $ 35,164 $ 31,630 ---------- ---------- COMPREHENSIVE INCOME .................................................. $ 104,406 $ 73,411 ========== ========== See Notes to Consolidated Financial Statements
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HUDSON UNITED BANCORP ------------------------------------------------------------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (in thousands, except shares) Accumulated Common Stock Additional Other ------------------ Paid-in- Retained Treasury Restricted Comprehensive Shares Amount Capital Earnings Stock Stock Income (Loss) Total ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 .. 52,189,803 $92,794 $326,673 $152,591 $ (8,438) $(3,549) $(40,905) $ 519,166 ----------------------------------------------------------------------------------------------------------------------------------- Net income .................... -- -- -- 49,821 -- -- -- 49,821 Cash dividends-common ......... -- -- -- (49,319) -- -- -- (49,319) 10% stock dividend ............ 5,217,177 -- 771 (96,334) 95,563 -- -- -- Stock options exercised ....... -- -- (4,336) -- 8,426 -- -- 4,090 Cash in lieu of fractional shares ...................... -- -- (172) -- -- -- -- (172) Other transactions ............ (18,027) (32) 67 -- (35) -- -- -- Net issuance and purchase of treasury stock .............. (9,424,374) -- -- -- (193,271) -- -- (193,271) Effect of compensation plans .. -- -- (872) -- 5,462 (2,210) -- 2,380 Other comprehensive income .... -- -- -- -- -- -- 35,778 35,778 ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 .. 47,964,579 $92,762 $322,131 $ 56,759 $ (92,293) $(5,759) $ (5,127) $ 368,473 ----------------------------------------------------------------------------------------------------------------------------------- Net income .................... -- -- -- 69,242 -- -- -- 69,242 Cash dividends-common ......... -- -- -- (35,119) -- -- -- (35,119) Stock options exercised ....... -- -- (1,387) -- 3,250 -- -- 1,863 Net issuance and purchase of treasury stock .............. (1,788,621) -- -- -- (45,499) -- -- (45,499) Effect of compensation plans .. -- -- -- -- (1,355) 1,775 -- 420 Other comprehensive income-- effect of transfer of securities .................. -- -- -- -- -- -- (4,069) (4,069) Other comprehensive income .... -- -- -- -- -- -- 39,233 39,233 ----------------------------------------------------------------------------------------------------------------------------------- Balance at September 30, 2001 . 46,175,958 $92,762 $320,744 $ 90,882 $(135,897) $(3,984) $ 30,037 $ 394,544 =================================================================================================================================== See Notes to Consolidated Financial Statements
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HUDSON UNITED BANCORP ------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2001 2000 ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income ................................................................ $ 69,242 $ 41,781 Adjustments to reconcile net income to net cash provided by operating activities: Provision for possible loan and lease losses ........................ 18,000 18,000 Provision for depreciation and amortization ......................... 23,699 24,659 Amortization of investment security premiums, net ................... 2,199 372 Securities (gains) losses ........................................... (805) 59,363 Loss (gain) on sales of premises and equipment ...................... 76 (79) Gain on sale of loans ............................................... - (3,431) Loans originated for sale ........................................... - (22,487) Loans sold .......................................................... - 31,560 (Increase) decrease in other assets ................................. (119,160) 16,400 Increase (decrease) in other liabilities ............................ 24,590 (55,398) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES ........................... $ 17,841 $ 110,740 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investment securities: Available for sale ..................................................... $ 403,549 $ 2,044,383 Proceeds from repayments and maturities of investment securities: Available for sale ..................................................... 402,634 325,311 Held to maturity ....................................................... - 63,511 Purchases of investment securities: - Available for sale ..................................................... (1,174,559) (972) Held to maturity ....................................................... - (32,798) Net decrease in loans other than purchases and sales ...................... 590,864 270,054 Acquisition of credit card assets ......................................... (160,342) - Proceeds from sales of loans .............................................. - 38,434 Proceeds from sales of premises and equipment ............................. 1,464 9,382 Purchases of premises and equipment ....................................... (7,482) (19,308) Increase in other real estate ............................................. (1,743) (73) ----------- ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES ........................... $ 54,385 $ 2,697,924 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits ....................................... 88,685 (746,234) Net decrease in borrowed funds ............................................ (146,807) (1,914,992) Payment of subordinated debt securities ................................... - (9,000) Proceeds from issuance of common stock .................................... 1,863 4,090 Cash dividends ............................................................ (35,119) (37,497) Acquisition of treasury stock ............................................. (45,499) (93,486) ----------- ----------- NET CASH USED FOR FINANCING ACTIVITIES ................................. $ (136,877) $(2,797,119) ----------- ----------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....................... $ (64,651) $ 11,545 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 295,539 277,558 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $ 230,888 $ 289,103 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for- Interest .................................................................. 145,000 243,739 Taxes ..................................................................... 346 20,278 Additional Disclosures: Residential mortgage securitization ....................................... 335,676 Securities Transferred from Held to Maturity to Available for Sale ........ 520,192 - See Notes to Consolidated Financial Statements
7 HUDSON UNITED BANCORP -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (in thousands, except per share data) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements of Hudson United Bancorp and Subsidiaries ("Hudson United" or "the Company") include the accounts of the parent company, Hudson United Bancorp, and its wholly-owned subsidiaries: Hudson United Bank, HUBCO Capital Trust I, HUBCO Capital Trust II, and JBI Capital Trust I. All material intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the information presented includes all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the interim period results. The results of operations for periods of less than one year are not necessarily indicative of results for the full year. The consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 8 NOTE B -- EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares plus the number of shares issuable upon conversion of preferred stock (when outstanding) and the incremental number of shares issuable from the exercise of stock options, calculated using the treasury stock method. All per share amounts have been retroactively restated to reflect all stock splits and stock dividends, including the 10% stock dividend paid December 1, 2000. A reconciliation of weighted average common shares outstanding to weighted average shares outstanding assuming dilution follows (in thousands, except per share data): Three Months Ended September 30, ------------------- 2001 2000 ------------------------------------------------------------------------------- Basic Earnings Per Share ------------------------ Net Income .............................................. $ 23,915 $ 24,475 Weighted average common shares outstanding .............. 46,462 53,600 Basic earnings per share ................................ $ 0.51 $ 0.46 Diluted Earnings Per Share -------------------------- Net Income .............................................. $ 23,915 $ 24,475 Weighted average common shares outstanding .............. 46,462 53,600 Effect of dilutive securities: Stock options .......................................... 374 408 -------- -------- Weighted average common shares outstanding assuming dilution ...................................... 46,836 54,008 Diluted earnings per share .............................. $ 0.51 $ 0.45 Nine Months Ended September 30, ------------------- 2001 2000 ------------------------------------------------------------------------------- Basic Earnings Per Share ------------------------ Net Income .............................................. $ 69,242 $ 41,781 Weighted average common shares outstanding .............. 47,083 55,465 Basic earnings per share ................................ $ 1.47 $ 0.75 Diluted Earnings Per Share -------------------------- Net Income .............................................. $ 69,242 $ 41,781 Weighted average common shares outstanding .............. 47,083 55,465 Effect of dilutive securities: Stock options .......................................... 307 377 -------- -------- Weighted average common shares outstanding assuming dilution ...................................... 47,390 55,842 Diluted earnings per share .............................. $ 1.46 $ 0.75 9 NOTE C -- ACQUISITIONS In March 2001, the Company entered into agreements to purchase credit card assets from a subsidiary of Transamerica Finance Co. As of September 30, 2001, the Company had paid total consideration of $160.4 million for $157.0 million of these assets, with an associated premium of $3.4 million that will be amortized over five years. At September 30, 2001, the Company had no merger-related and restructuring reserves. In the fourth quarter of 2000, the Company established a $22.0 million reserve for merger-related and restructuring charges. At December 31, 2000, the amount remaining in the reserve was $6.4 million. During the first nine months of 2001, the Company paid $4.9 million for severance and related costs ("severance") and $1.5 million for the cost of consolidating operations ("consolidations") from this reserve. In addition, during the fourth quarter of 2000, the company paid $6.3 million for severance and $9.3 million for consolidations from this reserve. At September 30, 2001 and December 31, 2000, the Company had no other merger-related or restructuring reserves. In the second quarter of 2001, Washington Mutual Inc. and Dime Bancorp, Inc. announced a merger agreement. Pursuant to the termination agreement between Hudson United and Dime dated April 28, 2000, Dime will be required to pay Hudson $92 million in total upon the closing of Washington Mutual's acquisition of Dime. Of the $92 million, $15 million was paid to Hudson United on June 27, 2001, which represented the minimum amount Dime was required to pay. The income statement impact of the $15 million was recorded in 2000. The remaining $77 million is payable upon the closing of the merger, which is expected in the first quarter of 2002, and Hudson expects to recognize that amount as income when the merger closes. Hudson expects to incur expenses of approximately $12 million which are contingent upon the closing of the merger, which it plans to recognize at the time the final termination fee is paid. The net final payment of approximately $65 million represents about $45.5 million on an after tax basis. The funds received will supplement capital ratios and will be available to repurchase stock, retire debt or for other corporate purposes. 10 NOTE D -- INVESTMENT SECURITIES The following table presents the amortized cost and estimated market value of investment securities available for sale at the dates indicated: September 30, 2001 --------------------------------------------- Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------- ------- ------- ---------- AVAILABLE FOR SALE U.S. Government .................. $ 12,744 $ 195 $ - $ 12,939 U.S. Government agencies ......... 9,769 1,079 - 10,848 Mortgage-backed securities ....... 1,214,678 33,086 (522) 1,247,242 States and political subdivisions 30,516 553 (19) 31,050 Other debt securities ............ 11,481 336 - 11,817 FHLB stock ....................... 21,877 - - 21,877 Equity securities ................ 23,914 811 (1,404) 23,321 ---------- ------- ------- ---------- $1,324,979 $36,060 $(1,945) $1,359,094 ========== ======= ======= ========== The Company adopted SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities", effective January 1, 2001. At the same time, the Company decided to transfer the total held to maturity investment portfolio, at an amortized cost of $520,192, to the available for sale investment portfolio. At the time of transfer, the market value of these securities was $513,410 and the unrealized loss on these securities was $6,782. The increase in investment securities at September 30, 2001 compared to December 31, 2000 was due in part to the securitization of $335 million of residential mortgages, which resulted in the assets being transferred into the investment securities portfolio and out of the loan portfolio. December 31, 2000 --------------------------------------------- Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------- ------- ------- ---------- AVAILABLE FOR SALE U.S. Government .................. $ 31,839 $ 37 $ (48) $ 31,828 U.S. Government agencies ......... 3,500 - - 3,500 Mortgage-backed securities ....... 241,356 320 (3,642) 238,034 States and political subdivisions 1,516 41 - 1,557 Other debt securities ............ 3,754 - (193) 3,561 FHLB stock ....................... 105,924 - - 105,924 Equity securities ................ 43,092 279 (5,048) 38,323 ---------- ------- ------- ---------- $ 430,981 $ 677 $(8,931) $ 422,727 ========== ======= ======= ========== December 31, 2000 --------------------------------------------- Gross Unrealized Estimated Amortized ------------------ Market Cost Gains (Losses) Value ---------- ------- ------- ---------- HELD TO MATURITY U.S. Government .................. $ 24,199 $ - $ (69) $ 24,130 U.S. Government agencies ......... 38,229 488 (45) 38,672 Mortgage-backed securities ....... 406,518 543 (7,845) 399,216 States and political subdivisions 51,246 187 (41) 51,392 ---------- ------- ------- ---------- $ 520,192 $ 1,218 $(8,000) $ 513,410 ========== ======= ======= ========== 11 NOTE E -- COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED CAPITAL SECURITIES OF THREE SUBSIDIARY TRUSTS HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY On January 31, 1997, the Company placed $50.0 million in aggregate liquidation amount of 8.98% Capital Securities due February 2027, using HUBCO Capital Trust I, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the trust, which is the obligor on the Series B Capital Securities, is $51.5 million principal amount of 8.98% Junior Subordinated Debentures due 2027 of Hudson United Bancorp. The 8.98% Capital securities are redeemable by the Company on or after February 1, 2007, or earlier in the event the deduction of related interest for federal income tax is prohibited, treatment as Tier 1 capital is no longer permitted or certain other contingencies arise. On February 5, 1997, the Company placed $25.0 million aggregate liquidation amount of 9.25% Capital Securities due March 2027, using JBI Capital Trust I, a statutory business trust formed under the laws of the State of Delaware. The sole asset of the trust, which is the obligor on the Series B Capital Securities, is $25.3 million principal amount of 9.25% Junior Subordinated Deferrable Debentures due 2027 of the Company. The 9.25% Trust preferred securities are redeemable by the Company on or after March 31, 2002, or earlier in the event the deduction of related interest for federal income taxes is prohibited, treatment as Tier 1 capital is no longer permitted or certain other contingencies arise. On June 19, 1998, the Company placed $50.0 million in aggregate liquidation amount of 7.65% Capital Securities due June 2028, using HUBCO Capital Trust II, a statutory business trust formed under the laws of the State of Delaware. The sole asset for the trust, which is the obligor on the Series B Capital Securities, is $51.5 million principal amount of 7.65% Junior Subordinated Debentures due 2028 of the Company. The 7.65% Capital securities are redeemable by the Company on or after June 15, 2008, or earlier in the event the deduction of related interest for federal income taxes is prohibited, treatment as Tier 1 capital is no longer permitted or certain other contingencies arise. The three issues of capital securities have preference over the common securities under certain circumstances with respect to cash distributions and amounts payable on liquidation and are guaranteed by the Company. The net proceeds of the offerings are being used for general corporate purposes and to increase capital levels of the Company and its subsidiaries. Except for a minimal amount, the securities qualify as Tier 1 capital under the capital guidelines of the Federal Reserve. 12 NOTE F -- COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", which establishes standards for the reporting of comprehensive income and its components in a full set of general purpose financial statements. The Company has elected to display Consolidated Statements of Income and Consolidated Statements of Comprehensive Income separately for the disclosed periods. Comprehensive Income is displayed on the Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders' Equity as a separate item entitled Accumulated Other Comprehensive Income (Loss). The following is a reconciliation of the tax effect allocated to each component of comprehensive income for the periods presented.
Three-Months Ended September 30, 2001 --------------------------------------- Before tax Tax Benefit Net of Tax amount (Expense) Amount ---------- ----------- ---------- Unrealized security gains arising during the period ................... $ 42,047 $ (17,257) $ 24,790 Change in valuation of derivative contracts ........................... 12,436 (5,080) 7,356 Less: reclassification adjustment for gains realized in net income .............................................................. 854 (349) 505 --------- ----------- ---------- Net change during period .............................................. $ 53,629 $ (21,988) $ 31,641 ========= =========== ========== Three-Months Ended September 30, 2000 --------------------------------------- Before tax Tax Benefit Net of Tax amount (Expense) Amount ---------- ----------- ---------- Unrealized security gains arising during the period ................... $ 2,725 $ (2,974) $ (249) Less: reclassification adjustment for gains realized in net income .............................................................. 1,498 (502) 996 --------- ----------- ---------- Net change during period .............................................. $ 1,227 $ (2,472) $ (1,245) ========= =========== ========== Nine-Months Ended September 30, 2001 --------------------------------------- Before tax Tax Benefit Net of Tax amount (Expense) Amount ---------- ----------- ---------- Unrealized security gains arising during the period ................... $ 54,997 $ (22,499) $ 32,498 Unrealized security loss arising from securities transferred from held to maturity to available for sale ......................... (6,782) 2,713 (4,069) Change in valuation of derivative contracts ........................... 12,786 (5,223) 7,563 Less: reclassification adjustment for gains realized in net income .............................................................. 1,401 (573) 828 --------- ----------- ---------- Net change during period .............................................. $ 59,600 $ (24,436) $ 35,164 ========= =========== ========== Nine-Months Ended September 30, 2000 --------------------------------------- Before tax Tax Benefit Net of Tax amount (Expense) Amount ---------- ----------- ---------- Unrealized security losses arising during the period .................. $ (9,306) $ 2,414 $ (6,892) Less: reclassification adjustment for losses realized in net income ...................................................................... (59,363) 20,841 (38,522) --------- ----------- ---------- Net change during period .............................................. $ 50,057 $ (18,427) $ 31,630 ========= =========== ==========
13 NOTE G -- RECENT ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishing standards for the accounting and reporting of derivatives. The Company adopted SFAS No. 133 effective January 1, 2001. With the exception of the aforementioned transfer of securities from held to maturity to available for sale, the adoption of this statement did not have a material effect on the Company's financial position or results of operations. The FASB finalized SFAS No. 141 "Business Combinations" on June 30, 2001. The Company adopted SFAS No. 141 effective June 30, 2001. The adoption of SFAS No. 141 will not have a material effect on the Company's financial position or results of operations. The FASB finalized SFAS No. 142 "Goodwill and Other Intangible Assets" on June 30, 2001. Under this standard, core deposit intangibles must continue to be amortized, but goodwill is no longer amortized. Goodwill acquired prior to July 1, 2001 will cease being amortized on January 1, 2002. Goodwill acquired after June 30, 2001 will not be amortized in 2001 or beyond. Goodwill that is determined to be impaired must be written-off when that determination is made. The Company is currently in the process of evaluating the impact that this standard will have on its financial position and results of operations. The FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations" in June 2001. This statement will be effective for financial statements issued for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company expects that the adoption of this statement will have no material effect on its operations. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This financial review presents management's discussion and analysis of financial condition and results of operations. It should be read in conjunction with the Company's Consolidated Financial Statements and the accompanying notes. All dollar amounts, other than per share information, are presented in thousands unless otherwise noted. STATEMENTS REGARDING FORWARD-LOOKING INFORMATION This document, both in the Management Discussion & Analysis and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management's confidence and strategies and management's expectations about new and existing programs and products, relationships, opportunities, technology and market conditions. These statements may be identified by such forward-looking terminology as "expect", "look", "believe", "anticipate", "consider", "may", "will", or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. These include, but are not limited to, changes in interest rates, changes in economic conditions, especially as they have been affected by recent developments, deposit and loan volume trends, continued levels of loan quality, trends in loan loss provisions; changes in relationships with customers, failure to realize expected cost savings or revenue enhancements from changes in business models and acquisitions, and the effects of legal and regulatory provisions applicable to the Company and its competitors. Actual results may differ materially from the results discussed in these forward-looking statements. The Company assumes no obligation for updating any such forward-looking statements at any time. RESULTS OF OPERATIONS OVERVIEW Hudson United Bancorp reported net income of $23.9 million for the quarter ended September 30, 2001. In the corresponding 2000 period, the Company reported net income of $24.5 million. Fully diluted earnings per share increased 13% to $0.51 for the third quarter of 2001 compared to $0.45 for the third quarter of 2000. The Company had net income of $69.2 million, or $1.46 per diluted share, for the nine months ended September 30, 2001, compared to reported net income of $41.8 million, or $0.75 per diluted share, for the nine months ended September 30, 2000. The Company reported operating earnings of $84.4 million, or $1.51 per diluted share, for the first nine months of 2000, which have been adjusted for comparison purposes to reflect the $63.6 million pre-tax ($44.4 million after tax) charge resulting from the balance sheet restructuring initiatives and the $2.8 million pre-tax ($1.8 million after tax) gain on the sale of Dime Bancorp, Inc. common stock. The per share amounts for 2000 have been adjusted to reflect the 10% stock dividend paid in December 2000. The declines in operating earnings in the 2001 periods when compared to the same periods in 2000 were primarily due to lower net interest income, which decrease was mainly attributable to the Company's balance sheet restructuring program in 2000 and its stock repurchase program. The Company's return on average equity was 25.49% and return on average assets was 1.39% for the third quarter of 2001. Return on average equity was 25.11% and return on average assets was 1.39% for the nine months of 2001. DIME TERMINATION PAYMENT AND STOCK REPURCHASE PROGRAM In the second quarter of 2001, Washington Mutual Inc. and Dime Bancorp, Inc. announced a merger agreement. Pursuant to the termination agreement between Hudson United and Dime dated April 28, 2000, Dime will be required to pay Hudson United $92 million in total upon the closing of Washington Mutual's acquisition of Dime. Of the $92 million, $15 million was paid to Hudson United on June 27, 2001, which represented the minimum amount Dime was required to pay. The income statement impact of the $15 million was recorded in 2000. The remaining $77 million is payable upon the closing of the merger, which is expected in the first quarter of 2002, and Hudson United expects to recognize that amount as income when the merger closes. Hudson United expects to incur expenses of approximately $12 million, which are contingent upon the closing of the merger, which it plans to recognize at the time the final termination fee is paid. The net final payment of approximately $65 million represents about $45.5 million on an after tax basis. The funds received will supplement capital ratios and will be available to repurchase stock, retire debt or for other corporate purposes. 15 Hudson United Bancorp extended the Company's stock repurchase program in June of 2001 until December 31, 2002, and during such period authorized the repurchase of up to 4.7 million shares which represent approximately 10 percent of the Company's outstanding shares. Under the program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions at generally prevailing market prices and the shares may be used for stock dividends, employee stock programs and other corporate purposes. NET INTEREST INCOME Net interest income for the third quarter of 2001 was $70.6 million and the net interest margin was 4.57%. Net interest income was $213.0 million and net interest margin was 4.71% for the nine months ended September 2001. Net interest income was $75.8 million with a net interest margin of 4.47% for the comparable third quarter of 2000 and $248.2 million with a net interest margin of 4.17% for the same nine-month period in 2000. The net interest margin in the third quarter of 2001 reflected a temporary increased investment during the quarter in money market securities. This generated a positive net interest spread over certain short-term certificates of deposit acquired at a discount in the quarter from First International Bank. These securities and certificates of deposit matured before the end of the third quarter. The net interest income and net interest margin in the third quarter of 2001 also reflect the Company's investment of $125 million of interest earning assets in bank owned life insurance during June of 2001, which shifted revenue from a financial reporting standpoint from interest income into noninterest income. The changes in net interest income and net interest margin for the three quarters of 2001 compared to the comparable period in the prior year were primarily attributable to the Company's balance sheet restructuring program in 2000 and its stock repurchase program. NONINTEREST INCOME (excluding security gains (losses)) Noninterest income was $27.4 million for the third quarter of 2001 and $71.9 million for the nine-months ended September 30, 2001. Noninterest income was $25.7 million for the third quarter of 2000 and $68.0 million for the nine-month period ended September 30, 2000. The increase in the third quarter of 2001 was due primarily to the continuing increases in credit card fees, as a result of growth in the Company's private label credit card business, and increased retail service fees and the investment in bank owned life insurance. The increase for the nine months of 2001 compared to the same period last year was due mainly to higher retail service fees. Noninterest income was 28% of total revenue for the third quarter and 25% for the nine months ended September 30, 2001. NONINTEREST EXPENSE Noninterest expense was $58.8 million for the third quarter of 2001 compared to $58.7 million for the third quarter of 2000. Noninterest expense for the first nine months of 2001 was $169.8 million compared to $172.7 million in the comparable period of 2000. Noninterest expense in the third quarter of 2001 reflected an increase in non-payroll related expenses. These costs were for business development initiatives and expanded infrastructure to support business line opportunities. These expenses were partially offset by decreases in other expense categories. The decline in noninterest expenses for the nine months ended 2001 compared to the prior period of 2000 was due primarily to cost savings and efficiencies that resulted from consolidating acquisitions that were made in prior years. The efficiency ratios for the third quarter and first nine months of 2001 were 55.2% and 55.0%, respectively. INCOME TAXES During valuation reviews in 2000, the Company established a $2.9 million valuation allowance against capital losses resulting from the sale of securities in 2000. Primarily as a result of a reduction in the allowance due to gains from the sale of securities and a higher level of tax exempt income resulting from an investment in bank owned life insurance, the Company had a lower effective tax rate and a lower provision for income taxes in the third quarter and first nine months of 2001 compared to the comparable periods in 2000. The effective tax rate was 29.0% for the third quarter of 2001 and 29.3% for the first nine months of 2001. The effective tax rate on operating earnings was 33.5% for both the third quarter and first nine months of 2000. 16 PROVISION FOR POSSIBLE LOAN AND LEASE LOSSES AND ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES The provision for possible loan and lease losses was $18.0 million for both of the nine-month periods ended September 30, 2001 and 2000. The Allowance for Possible Loan and Lease Losses ("the Allowance") was $77.7 million at September 30, 2001 and $95.2 million at December 31, 2000. The Allowance at September 30, 2001 represented 158% of nonperforming loans and 1.62% of total loans. The Allowance at year-end 2000 represented 164 % of nonperforming loans and 1.80 % of total loans. The determination of the adequacy of the Allowance and the periodic provisioning for estimated losses included in the consolidated financial statements is the responsibility of management. The evaluation process is undertaken on a monthly basis. Methodology employed for assessing the adequacy of the Allowance consists of the following criteria: o the establishment of reserve amounts for all specifically identified criticized loans, including those acquired in business combinations, that have been designated as requiring attention by management's internal loan review program. o the establishment of reserves for pools of homogenous types of loans not subject to specific review, including 1-4 family residential mortgages, consumer loans, and credit card accounts, based upon historical loss rates. Consideration is also given to the changed risk profile brought about by the business combinations, knowledge about customers, the results of ongoing credit quality monitoring processes, the adequacy and expertise of the Company's lending staff, underwriting policies, loss histories, delinquency trends, the cyclical nature of economic and business conditions, and the concentration of real estate related loans located in the northeastern part of the United States. Since many of the loans depend upon the sufficiency of real estate collateral as a secondary source of repayment, any adverse trend in the real estate markets could affect underlying values available to protect the Company from loss. Other evidence used to determine the amount of the Allowance and its components are as follows: o regulatory and other examinations o the amount and trend of criticized loans o actual losses o peer comparisons with other financial institutions o economic data associated with the real estate market in the Company's area of operations o opportunities to dispose of marginally performing loans for cash consideration Based upon the process employed and giving recognition to all attendant factors associated with the loan portfolio, management considers the Allowance to be adequate at September 30, 2001. During the first nine months of 2001, the Company purchased $157 million in credit card assets from a subsidiary of Transamerica Finance Co. The acquired reserve associated with these assets was $4.3 million. At September 30, 2001, non-performing loans totaled $49.3 million, a decrease of $8.6 million when compared to $57.9 million at December 31, 2000. Non-performing assets were $ 55.3 million and $62.2 million at September 30, 2001 and December 31, 2000, respectively. 17 The following table presents the composition of non-performing assets and selected asset quality ratios at the dates indicated:(in thousands)
September 30, 2001 December 31, 2000 ------------------ ----------------- Nonaccrual Loans: Commercial ............................................... $18,736 $18,313 Real Estate .............................................. 29,178 38,793 Consumer ................................................. 1,361 792 ------- ------- Total Nonperforming Loans .............................. $49,275 $57,898 Other Real Estate Owned ..................................... 6,061 4,318 ------- ------- Total Nonperforming Assets ............................. $55,336 $62,216 ======= ======= Nonaccrual Loans to Total Loans and Leases ................. 1.02% 1.10% Nonperforming Assets to Total Assets ........................ 0.81% 0.91% Allowance for Loan and Lease Losses to Nonperforming Loans .. 158% 164% The following table shows loans past due 90 days or more and still accruing, along with applicable asset quality ratios (in thousands). September 30, 2001 December 31, 2000 ------------------ ----------------- Loans Past Due 90 Days or More and Accruing Commercial ............................................ $ 2,377 $ 4,293 Real Estate ........................................... 6,991 13,080 Consumer .............................................. 3,098 4,034 Credit card ........................................... 7,946 8,371 ------- ------- Total Past Due Loans .............................. $20,412 $29,778 ======= ======= As a percent of Total Loans and Leases ...................... 0.42% 0.56% As a percent of Total Assets ................................ 0.30% 0.44%
18 The following table presents the activity in the allowance for possible loan and lease losses for the periods indicated:
Summary of Activity in the Allowance By Loan Category ------------------------------------ Nine Months Ended Year Ended 9/30/01 12/31/00 ----------------- ---------- (Dollars in thousands) Amount of Loans and Leases Outstanding at Period End ............. $4,811,518 $5,277,523 ========== ========== Daily Average Amount of Loans and Leases Outstanding ............. $4,875,990 $5,470,763 ========== ========== Allowance for Loan Losses Balance at beginning of the period ............................... $ 95,180 $ 98,749 Loans charged off: Real estate mortgages ....................................... (3,318) (2,847) Commercial .................................................. (18,049) (8,778) Consumer .................................................... (24,364) (23,781) ---------- ---------- Total loans charged off ................................ $ (45,731) $ (35,406) ---------- ---------- Recoveries: Real estate mortgages ....................................... 884 772 Commercial .................................................. 1,042 1,822 Consumer .................................................... 4,056 5,243 ---------- ---------- Total recoveries ....................................... $ 5,982 $ 7,837 ---------- ---------- Net loans charged off * .......................................... $ (39,749) $ (27,569) Provision for possible loan and lease losses ..................... 18,000 24,000 Acquired reserves of credit card portfolios ...................... 4,266 - ---------- ---------- Balance at end of period ......................................... $ 77,697 $ 95,180 ========== ========== Allowance for Loan and Lease Losses to Total Loans and Leases .... 1.62% 1.80% ========== ========== Annualized provision for possible loan and lease losses as a percentage of average loans and leases outstanding ............ 0.49% 0.44% ========== ========== Annualized net loans charged off during period to average loans and leases outstanding ........................................ 1.09% 0.50% ========== ========== * Net charge-offs in excess of the current provision in 2001 were related to loans acquired with the Company's 1999 acquisitions. The Company had recorded a special provision of $25 million in the fourth quarter of 1999 to cover potential charge-offs from the 1999 acquisitions.
19 FINANCIAL CONDITION The Company's total assets were $6.8 billion at September 30, 2001, compared to $6.7 billion at June 30, 2001 and $6.8 billion at year-end 2000. Loan and lease categories consisting of commercial and financial; commercial real estate; consumer; and credit card loans totaled $3.9 billion at September 30, 2001, compared to $3.8 billion at both June 30, 2001 and December 31, 2000. These four categories represented 81% of loans and leases at September 30, 2001, an increase from 73% of loans and leases at December 31, 2000. The increase in loans in the third quarter of 2001 was primarily in consumer and credit card loans. Residential mortgage loans decreased by $499.4 million to $934.3 million at September 30, 2001, as compared to December 31, 2000. The decrease resulted from the securitization of loans during the first quarter of 2001, prepayments throughout the year to date and the Company's practice of selling all new originations in the secondary market. The decrease in residential mortgage loans was offset by increases in investment securities and related assets. In June 2001, the Company invested in separate account bank owned life insurance policies with a cash surrender value of $125 million to fund employee benefit costs. The cash surrender value of these policies is recorded on the Company's balance sheet in other assets and the change in cash surrender value is recorded as other income on the Company's income statement. Total deposits were $5.9 billion at September 30, 2001, compared to $5.8 billion at December 31, 2000. At September 30, 2001, borrowings amounted to $212.1 million, a decline from $358.9 million at December 31, 2000. Total stockholders' equity was $394.5 million at September 30, 2001 and $368.5 million at December 31, 2000. The change in stockholders' equity resulted primarily from $69.2 million of net income and a $35.2 million increase in accumulated other comprehensive income, offset by payment of cash dividends of $35.1 million and stock repurchases of $45.5 million. MARKET RISK The primary objectives of asset-liability management are to provide for the safety of depositor and investor funds, assure adequate liquidity, maintain an appropriate balance between interest-sensitive earning assets and interest-sensitive liabilities and enhance earnings. Interest rate sensitivity management ensures that the Company maintains acceptable levels of net interest income throughout a range of interest rate environments. The Company seeks to maintain its interest rate risk within a range that it believes is both manageable and prudent, given its capital and income generating capacity. In the second quarter of 2001 the Company entered into a series of interest rate swaps and floors (i.e., derivative contracts) to hedge the variability of the interest income of a pool of $600 million of its prime rate-based loans over a two year period. The notional amount of the derivative contracts totals $600 million. The purpose of these contracts is to limit the volatility in the Company's net interest income and net interest margin in the event of changes in interest rates. Management did not enter into these contracts for speculative purposes. Under SFAS No.133, the Company has adopted hedge accounting for these contracts. SFAS No.133 states that the net payments under the contract should be recorded in interest income and the change in valuation of the contracts should be recorded in "accumulated other comprehensive income (loss)" in total stockholders' equity. Changes in interest rates will impact the cash flows and valuation of the derivative contracts, but management does not expect the overall financial statement impact to be material under any interest rate scenario. The Company is not aware of any current recommendations by the regulatory authorities that would have a material adverse effect on the Company's capital resources or operations. The capital ratios for the Company at September 30, 2001 and the minimum regulatory guidelines for such capital ratios for qualification as a well-capitalized institution are as follows: Ratios at Minimum Regulatory September 30, 2001 Guidelines for Well-Capitalized ------------------ ------------------------------- Total Risk-Based Capital 10.53% 10.0% Tier 1 Risk-Based Capital 7.53% 6.0% Tier 1 Leverage Ratio 5.78% 4.0% 20 PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K - NONE 21 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Hudson United Bancorp November 13, 2001 /s/ Kenneth T. Neilson --------------------- ---------------------------------------------------- Date Kenneth T. Neilson Chairman, President and Chief Executive Officer November 13, 2001 /s/ William A. Houlihan --------------------- ---------------------------------------------------- Date William A. Houlihan Executive Vice President and Chief Financial Officer 22