Quarterly Cash Dividend Declared of $0.075 Per Common Share
PARAMUS, N.J., Oct. 18 /PRNewswire-FirstCall/ -- Hudson City
Bancorp, Inc. (NASDAQ:HCBK), the holding company for Hudson City
Savings Bank, reported today the results of its operations for the
three- and nine-month periods ended September 30, 2006. Financial
Highlights -- Net income increased 9.0% to $219.4 million for the
nine-month period ended September 30, 2006 and decreased 5.3% to
$71.0 million for the three months ended September 30, 2006. --
Basic and diluted earnings per common share were both $0.13 for the
third quarter of 2006. Basic and diluted earnings per common share
were $0.41 and $0.40, respectively, for the first nine months of
2006. -- At its meeting yesterday, the Board of Directors declared
a quarterly cash dividend of $0.075 per common share. The cash
dividend is payable on December 1, 2006 to stockholders of record
at the close of business on November 3, 2006. -- Net interest
income increased 0.6% to $153.1 million for the third quarter of
2006 and 13.4% to $464.4 million for the nine-month period ended
September 30, 2006. -- Our annualized return on average
stockholders' equity and annualized return on average assets for
the third quarter of 2006 were 5.69% and 0.87%, respectively. Our
annualized return on average stockholders' equity and annualized
return on average assets for the nine-month period ended September
30, 2006 were 5.75% and 0.95%. -- Our net interest rate margin and
net interest rate spread were 1.93% and 1.30%, respectively, for
the third quarter of 2006 and 2.03% and 1.37%, respectively, for
the first nine months of 2006. -- Our efficiency ratio was 26.22%
for the third quarter of 2006 and 25.04% for the first nine months
of 2006. -- Total loans increased $3.22 billion to $18.29 billion
at September 30, 2006 reflecting purchases and originations of
first mortgage loans of $1.91 billion and $1.67 billion,
respectively, during the first nine months of 2006, as well as the
acquisition of Sound Federal Bancorp, Inc. ("Sound Federal") during
the third quarter of 2006. -- Borrowed funds increased $4.30
billion to $15.65 billion at September 30, 2006. The funds borrowed
during the first nine months of 2006 amounted to $6.03 billion and
have maturities of ten years and initial call dates ranging from
one to three years. "During the third quarter, we completed the
acquisition of Sound Federal, expanding our franchise and our
product line into new markets," said Ronald E. Hermance, Jr.,
Chairman, President and Chief Executive Officer. "During the
quarter, we also saw a pause in the movement of short-term interest
rates, but continued to experience a flat to inverted yield curve,
which has placed considerable pressure on our net interest margin
and net interest spread. We continued to grow our assets through
the third quarter, at an annualized internally generated growth
rate in excess of 20%, and have maintained our efficient
operations, even with the additional expenses related to the
acquisition of Sound Federal, thus mitigating the effects of the
shrinking net interest margin. We intend to continue our capital
management strategy of asset growth, payment of dividends and stock
repurchases, even during this current rate environment, as we feel
this strategy will best leverage our capital base and provide
additional value to our stockholders," added Mr. Hermance. Sound
Federal Acquisition On July 14, 2006, we completed the acquisition
of Sound Federal for $20.75 per share in cash, representing an
aggregate transaction value of approximately $265 million. As a
result of the acquisition, we added approximately $1.21 billion in
assets, including a preliminary estimate of $145 million in
goodwill, and approximately $1.06 billion in deposits. The
acquisition of Sound Federal will further enhance the already
attractive demographics of our existing branch network and
complements our organic branch growth strategy, adding 14 branches
in New York's Westchester, Rockland, and Putnam Counties as well as
Fairfield County, Connecticut. The full data integration of Sound
Federal was completed in September 2006. Statement of Income
Summary Our results of operations depend primarily on net interest
income, which, in part, is a direct result of the market interest
rate environment. Net interest income is the difference between the
interest income we earn on our interest-earning assets, primarily
mortgage loans, mortgage-backed securities and investment
securities, and the interest we pay on our interest-bearing
liabilities, primarily time deposits, interest-bearing transaction
deposits and borrowed funds. Net interest income is affected by the
shape of the market yield curve, the timing of the placement and
repricing of interest-earning assets and interest-bearing
liabilities on our balance sheet, and the prepayment rate on our
mortgage-related assets. Our results of operations may also be
affected significantly by general and local economic and
competitive conditions, particularly those with respect to changes
in market interest rates, government policies and actions of
regulatory authorities. Our results are also affected by the market
price of our stock, as the expenses of our employee stock benefit
plans are affected by the current price of our common stock. The
Federal Open Market Committee of the Federal Reserve Bank ("FOMC")
did not increase the overnight lending rate at their regularly
scheduled meetings during the third quarter of 2006, thus leaving
the rate at 5.25%. This pause followed 25 basis point increases at
each of the meetings beginning in June 2004. As a result,
short-term market interest rates decreased during the third quarter
of 2006 following increases during the entirety of 2005 and the
first six months of 2006. Intermediate-term market interest rates,
those with maturities of two to five years, and long-term market
interest rates, in particular the 10-year bond, also decreased
during the third quarter of 2006, but at a faster pace than the
short-term interest rates. The result of these market interest rate
changes was the inversion of the market yield curve during the
third quarter of 2006. This inversion followed a flat market yield
curve that existed during the first six months of 2006. This
environment has caused a flattening of the yield curve on our
incremental assets and liabilities, but we have been able to
maintain a slight positive spread on our incremental growth as our
primary investment has been in mortgage products. We have also
experienced higher deposit rates due to increases in short-term
market interest rates and the intense competitive pressure for
deposits in the New York metropolitan area. The $108.2 million and
$319.3 million increases in interest income for the three- and
nine-month periods ended September 30, 2006, respectively, when
compared to the prior year periods, was primarily derived from the
overall growth in our balance sheet. Our total average
interest-earning assets increased 24.4% and 32.6%, respectively,
for the three- and nine-month periods ended September 30, 2006,
while the yields over those same periods only increased 40 and 20
basis points, respectively. In contrast, the $107.3 million and
$264.6 million increases in interest expense for the three- and
nine-month periods ended September 30, 2006, respectively,
reflected both the growth in our interest-bearing liabilities and
increases in prevailing interest rates. Our total average
interest-bearing liabilities increased 33.5% and 27.2%,
respectively, for the three- and nine-month periods ended September
30, 2006 and the costs over both of those same periods increased 78
basis points. Our net interest margin decreased 44 basis points and
our net interest rate spread decreased 38 basis points, when
comparing the third quarter of 2006 with the corresponding period
in 2005. Our net interest margin decreased 35 basis points and our
net interest rate spread decreased 58 basis points, when comparing
the first nine months of 2006 with the comparable period in 2005.
Our interest income, in general, reflects movements in long-term
rates while our interest expense, in general, reflects movements in
short-term rates, which have increased over the past two years.
These decreases in the net interest margin and net interest rate
spread were also due, in part, to a shift in our interest-earning
asset mix to shorter-term investment securities and variable-rate
mortgage loans and mortgage-backed securities. In addition, our
interest-bearing liabilities reset to the current market interest
rates faster than our interest-earning assets as changes to
interest rates on our interest-bearing liabilities generally time
movements in market interest rates while changes to interest rates
on our interest-earning assets generally lag market interest rates
due to normal commitment periods of up to 90 days. Total interest
and dividend income for the three months ended September 30, 2006
increased $108.2 million, or 34.5%, to $422.0 million compared with
$313.8 million for the three months ended September 30, 2005. This
increase was primarily due to a $6.32 billion, or 24.4%, increase
in the average balance of interest-earning assets to $32.18 billion
for the three months ended September 30, 2006 from $25.86 billion
for the three months ended September 30, 2005, primarily reflecting
our internally generated balance sheet growth and the acquisition
of Sound Federal. The increase in interest and dividend income was
also due to a 40 basis point increase in the annualized
weighted-average yield on total average interest-earning assets to
5.25% for the third quarter of 2006 compared with 4.85% for the
third quarter of 2005. The $68.6 million increase in interest and
fees on mortgage loans was primarily due to the growth in the
average balance of $4.27 billion, reflecting increases in our core
investment of first mortgage loans. The $27.4 million increase in
interest on mortgage-backed securities was primarily due to a $1.62
billion increase in the average balance reflecting increased
purchases of variable-rate securities during 2005 and the first
nine months of 2006. Total interest and dividend income for the
nine months ended September 30, 2006 increased $319.3 million, or
37.7%, to $1.17 billion compared with $846.6 million for the nine
months ended September 30, 2005. This increase was primarily due to
a $7.45 billion, or 32.6%, increase in the average balance of
interest-earning assets to $30.32 billion for the nine months ended
September 30, 2006 from $22.87 billion for the nine months ended
September 30, 2005, primarily reflecting our internally generated
balance sheet growth, the investment of the net proceeds from the
second-step conversion and stock offering in June 2005 and the
acquisition of Sound Federal in July 2006. The increase in interest
and dividend income was also due to a 20 basis point increase in
the annualized weighted-average yield on total average interest-
earning assets to 5.13% for the first nine months of 2006 compared
with 4.93% for the comparable period in 2005. The $178.8 million
increase in interest and fees on mortgage loans was primarily due
to the growth in the average balance of $3.98 billion. The $54.8
million increase in interest and dividends on total investment
securities was primarily due to growth in the average balance of
$1.47 billion, which reflected the investment into short-term
securities of part of the net proceeds from the second-step
conversion and stock offering. The $74.6 million increase in
interest on mortgage-backed securities was primarily due to a $1.72
billion increase in the average balance reflecting increased
purchases of variable-rate securities during 2005 and the first
nine months of 2006. Total interest expense for the three months
ended September 30, 2006 increased $107.3 million, or 66.4%, to
$268.9 million compared with $161.6 million for the three months
ended September 30, 2005. This increase was partially due to a
$6.77 billion, or 33.5%, increase in the average balance of total
interest-bearing liabilities to $26.98 billion for the three months
ended September 30, 2006 compared with $20.20 billion for the
corresponding period in 2005. The increase in the average balance
of interest-bearing liabilities funded a portion of our asset
growth. The increase in total interest expense was also due to a 78
basis point increase in the annualized weighted-average cost of
total interest-bearing liabilities to 3.95% for the three-month
period ended September 30, 2006 compared with 3.17% for the three-
month period ended September 30, 2005, which reflected the growth
and repricing of our interest-bearing liabilities during the rising
short-term interest rate environment experienced during 2005 and
the first nine months of 2006. The $67.8 million increase in
interest expense on borrowed funds for the three months ended
September 30, 2006 was due to an increase in the average balance of
borrowed funds of $5.82 billion, which was primarily used to fund
loan growth, and a 39 basis point increase in the annualized
weighted-average cost, reflecting the rising market interest rate
environment. The $39.5 million increase in interest expense on
interest-bearing deposits was due to a 110 basis point increase in
the annualized weighted-average cost due to the rising market
interest rate environment, the competitive pricing of our deposit
products and a shift by our customers, during 2005 and the first
nine months of 2006, to higher costing short-term time deposits
from our High Value Checking product. The increase in interest
expense on interest-bearing deposits also was due to the growth in
the average balance of $948.3 million, reflecting growth in our
time deposits and the increase in deposits due to the acquisition
of Sound Federal. Total interest expense for the nine months ended
September 30, 2006 increased $264.6 million, or 60.6%, to $701.5
million compared with $436.9 million for the nine months ended
September 30, 2005. This increase was partially due to a $5.34
billion, or 27.2%, increase in the average balance of total
interest-bearing liabilities to $24.95 billion for the nine months
ended September 30, 2006 compared with $19.60 billion for the
corresponding period in 2005. The increase in the average balance
of interest-bearing liabilities funded a portion of our asset
growth. The increase in total interest expense was also due to a 78
basis point increase in the annualized weighted-average cost of
total interest-bearing liabilities to 3.76% for the nine-month
period ended September 30, 2006 compared with 2.98% for the
nine-month period ended September 30, 2005, which reflected the
growth and repricing of our interest- bearing liabilities during
the rising short-term interest rate environment experienced during
2005 and the first nine months of 2006. The $171.2 million increase
in interest expense on borrowed funds for the nine months ended
September 30, 2006 was due to an increase in the average balance of
borrowed funds of $5.22 billion, which was primarily used to fund
loan growth, and a 31 basis point increase in the annualized
weighted-average cost, reflecting the rising market interest rate
environment. The $93.4 million increase in interest expense on
interest-bearing deposits was due to a 107 basis point increase in
the annualized weighted-average cost due to the rising market
interest rate environment, the competitive pricing of our deposit
products and a shift by our customers, during 2005 and the first
nine months of 2006, to higher costing short-term time deposits
from our High Value Checking product. Net interest income for the
three months ended September 30, 2006 increased $900,000, or 0.6%,
to $153.1 million compared with $152.2 million for the
corresponding period in 2005. Our net interest rate spread,
determined by subtracting the annualized weighted-average cost of
total interest-bearing liabilities from the annualized
weighted-average yield on total interest- earning assets, was 1.30%
for the third quarter of 2006 compared with 1.68% for the
corresponding period in 2005. For the third quarter of 2006, our
net interest margin, determined by dividing annualized net interest
income by total average interest-earning assets, was 1.93% compared
with 2.37% for the corresponding 2005 period. Net interest income
for the nine months ended September 30, 2006 increased $54.7
million, or 13.4%, to $464.4 million compared with $409.7 million
for the corresponding period in 2005. Our net interest rate spread
was 1.37% for the first nine months of 2006 compared with 1.95% for
the first nine months of 2005. Our net interest margin was 2.03%
for the nine-month period ended September 30, 2006 compared with
2.38% for the comparable period in 2005. The slight increase in our
net interest income when comparing the third quarter of 2006 to the
third quarter of 2005 reflected our overall internally generated
balance sheet growth offset by the increases in short-term interest
rates and that impact on our interest expense. The increase in our
net interest income when comparing the nine-month period ended
September 30, 2006 to the comparable 2005 period reflected our
overall internally generated balance sheet growth and the
investment into short-term securities of the net proceeds from the
second-step conversion and stock offering, partially offset by the
increase in the costs of our deposits and borrowed funds due to the
rising short-term interest rate environment. The decrease in the
net interest rate spread and net interest margin was primarily due
to the increase in the weighted-average cost of interest-bearing
liabilities. This increase reflected the rising interest rate
environment, affecting both our deposits and borrowed funds, and
the shift within our deposits to higher costing short-term time
deposits. We did not provide for the allowance for loan losses
during the three- month periods ended September 30, 2006 and 2005,
nor did we provide for the allowance for loan losses during the
first nine months of 2006. We did provide $65,000 during the first
nine months of 2005. Net charge-offs for the first nine months of
2006 were $2,000 compared with net recoveries of $8,000 for the
corresponding 2005 period. The allowance for loan losses as a
percent of total loans was 0.15% at September 30, 2006 compared
with 0.18% at December 31, 2005. Non-performing loans at September
30, 2006 were $26.4 million compared with $19.3 million at December
31, 2005. The ratio of non-performing loans to total loans was
0.14% at September 30, 2006 compared with 0.13% at December 31,
2005. The ratio of allowance for loan losses to total
non-performing loans was 103.93% at September 30, 2006 compared
with 141.84% at December 31, 2005. Total non-interest income for
the three months ended September 30, 2006 was $1.7 million compared
with $1.4 million for the corresponding 2005 period. Total
non-interest income for the nine months ended September 30, 2006
was $4.4 million compared with $6.5 million for the comparable
period in 2005. The decrease in total non-interest income in the
nine-month period reflected decreases in gains on securities
transactions, net, as there were no realized gains/losses from
sales of securities that occurred during the first nine months of
2006. Total non-interest expense for the three months ended
September 30, 2006 was $40.6 million compared with $32.9 million
during the corresponding 2005 period. This increase reflected a
$5.1 million increase in compensation and employee benefits
primarily due to an increase in the expense related to our employee
stock ownership plan, reflecting increases in our stock price.
Expense related to stock options granted, due to the adoption of
SFAS No. 123(R), "Share Based Payment", amounted to $2.3 million
during the third quarter of 2006, primarily reflecting the initial
expensing of the options granted in July 2006. Total non-interest
expense for the nine months ended September 30, 2006 was $117.4
million compared with $93.9 million during the corresponding 2005
period. This increase reflected a $16.7 million increase in
compensation and employee benefits primarily due to an increase in
the expense related to our employee stock ownership plan. Expense
related to stock options granted amounted to $3.2 million during
the first nine months of 2006. Our efficiency ratio for the three
months ended September 30, 2006, determined by dividing total
non-interest expense by the sum of net interest income and total
non-interest income, was 26.22% compared with 21.44% for the
corresponding 2005 period. Our annualized ratio of non-interest
expense to average total assets for the three-month periods ended
September 30, 2006 and 2005 was 0.50%. Our efficiency ratio for the
nine months ended September 30, 2006 was 25.04% compared with
22.57% for the corresponding 2005 period. Our annualized ratio of
non-interest expense to average total assets for the nine months
ended September 30, 2006 was 0.51% compared with 0.54% for the
corresponding period in 2005. Income tax expense for the three
months ended September 30, 2006 was $43.2 million compared with
$45.6 million for the corresponding 2005 period. Our effective tax
rate for the three months ended September 30, 2006 was 37.86%
compared with 37.82% for the corresponding period in 2005. The 5.3%
decrease in income tax expense reflected the 5.4% decrease in
income before income tax expense. Income tax expense for the nine
months ended September 30, 2006 was $132.0 million compared with
$121.0 million for the corresponding 2005 period. Our effective tax
rate for the nine months ended September 30, 2006 was 37.57%
compared with 37.55% for the corresponding period in 2005. The 9.1%
increase in income tax expense reflected the 9.0% increase in
income before income tax expense. Statement of Financial Condition
Summary Total assets increased $5.56 billion, or 19.8%, to $33.64
billion at September 30, 2006 from $28.08 billion at December 31,
2005, primarily due to our internally generated growth. The growth
also reflected the acquisition of Sound Federal, which added
approximately $1.21 billion of assets including approximately $145
million in goodwill. The increase in total assets reflected a $3.22
billion increase in loans and a $1.54 billion increase in total
mortgage-backed securities. The increase in loans reflected
purchases and originations of first mortgage loans of approximately
$1.91 billion and $1.67 billion, respectively, during the
nine-months ended September 30, 2006 compared with $2.62 billion
and $1.45 billion, respectively, for the corresponding period in
2005. The increase in loans also reflected the addition of
approximately $786.1 million of loans due to the acquisition of
Sound Federal. Loan originations and purchases were substantially
all in one- to four-family mortgage loans. Purchased mortgage loans
allow us to grow and geographically diversify our mortgage loan
portfolio at a relatively low overhead cost while maintaining our
traditional thrift business model. At September 30, 2006, we were
committed to purchase and originate $692.0 million and $167.5
million, respectively, of first mortgage loans, which are expected
to settle during the fourth quarter of 2006. The increase in total
mortgage-backed securities reflected purchases of approximately
$2.63 billion, approximately 98.6% of which were variable-rate
(adjustable annually) or hybrid (adjustable annually after fixed
periods of three to five years) instruments. All of our
mortgage-backed securities are directly or indirectly insured or
guaranteed by a U.S. government agency or a U.S.
government-sponsored enterprise. At September 30, 2006, we were
committed to purchase $581.6 million of mortgage-backed securities,
which are expected to settle during the fourth quarter of 2006.
Total liabilities increased $5.76 billion, or 25.2%, to $28.64
billion at September 30, 2006 from $22.87 billion at December 31,
2005. The increase in total liabilities primarily reflected a $4.30
billion increase in borrowed funds and a $1.42 billion increase in
deposits, including the $1.06 billion of deposits due to the
acquisition of Sound Federal. The increase in borrowed funds was
the result of securing $6.03 billion of new borrowings at a
weighted-average rate of 4.37%. These new borrowings have final
maturities of ten years and initial reprice dates ranging from one
to three years. Of total borrowed funds, $8.27 billion are pursuant
to repurchase agreements and $7.38 billion are advances from the
Federal Home Loan Bank. The increase in total deposits reflected a
$2.18 billion increase in our time deposits, including $780.0
million due to the acquisition of Sound Federal, and a $563.6
million increase in our money market checking accounts. These
increases were partially offset by a $1.33 billion decrease in our
interest-bearing transaction accounts, primarily from our High
Value Checking account product, due to customers shifting deposits
to short-term time deposits. We plan to grow our assets during the
remainder of 2006 and into 2007 primarily through the origination
and purchase of mortgage loans, while purchasing investment and
mortgage-backed securities as a supplement to our investments in
mortgage loans. We also plan to continue to have approximately half
of the growth in interest-earning assets to be short-term or
variable- rate in nature, in order to assist in the management of
our interest rate risk. We consider a loan or security to be
variable rate if there exists a contractual rate adjustment during
the life of the instrument, including those variable-rate
mortgage-related assets with three- to ten-year initial fixed- rate
periods. The primary funding for our asset growth is expected to
come from customer deposits and borrowed funds, using the funding
source that is most reasonably priced given the overall market
interest rate conditions. During the second half of 2005 and the
first nine months of 2006, we experienced extreme competitive
pricing of short-term deposits in the New York metropolitan market
causing higher than normal interest rates on deposit products.
During this period, wholesale borrowing costs were more economical
and reflective of current rates. We plan that the funds borrowed
will primarily have initial non-call periods of one to five years
and final maturities of ten years in order to extend the maturity
of our liabilities and assist in the management of our interest
rate risk. We intend to grow customer deposits by continuing to
offer desirable products at competitive, but prudent rates and by
opening new branch offices. During 2006 we opened six branch
offices and acquired 14 due to the acquisition of Sound Federal
expanding our branch network into five new counties and now giving
us access to deposits in eight of the top 50 counties in the United
States ranked by median household income. We will continue to
explore branch expansion opportunities in market areas that present
superior opportunities for our traditional thrift model. Total
stockholders' equity decreased $199.2 million to $5.00 billion at
September 30, 2006 from $5.20 billion at December 31, 2005. The
decrease was primarily due to repurchases of 25,432,243 shares of
outstanding common stock at an aggregate cost of $335.2 million and
cash dividends declared and paid to common stockholders of $121.9
million. These decreases to stockholders' equity were partially
offset by net income of $219.4 million for the first nine months of
2006. Further offsetting the decrease to stockholders' equity was
an $11.0 million decrease in our accumulated other comprehensive
loss primarily due to lower market interest rates increasing the
market value of our securities available for sale. As of September
30, 2006, 52,629,000 shares were available for repurchase under our
existing stock repurchase programs. At September 30, 2006, our
stockholders' equity to asset ratio was 14.87% and our year-to-date
average stockholders' equity to asset ratio was 16.58%. At
September 30, 2006, our stockholders' equity per common share,
using the period-end share count of outstanding shares, less
purchased but unallocated employee stock ownership plan shares and
less purchased but unvested management plan shares, was $9.47.
Hudson City Bancorp maintains its corporate offices in Paramus, New
Jersey. Hudson City Savings Bank, a well-established community
financial institution serving its customers since 1868, is ranked
in the top fifty U.S. financial institutions by asset size. Hudson
City Savings currently operates a total of 110 branch offices in
the New York metropolitan area. The Federal Deposit Insurance
Corporation insures Hudson City Savings' deposits. Forward-Looking
Statements This release may contain certain "forward looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995, and may be identified by the use of such words
as "may," "believe," "expect," "anticipate," "should," "plan,"
"estimate," "predict," "continue," and "potential" or the negative
of these terms or other comparable terminology. Examples of
forward-looking statements include, but are not limited to,
estimates with respect to the financial condition, results of
operations and business of Hudson City Bancorp and statements about
the benefits of the merger between Hudson City Bancorp and Sound
Federal Bancorp that are subject to various factors which could
cause actual results to differ materially from these estimates. Any
or all of the forward-looking statements in this release and in any
other public statements made by Hudson City may turn out to be
wrong. They can be affected by inaccurate assumptions Hudson City
might make or by known or unknown risks and uncertainties.
Consequently, no forward- looking statement can be guaranteed.
Hudson City 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. Hudson City Bancorp, Inc. and
Subsidiary Consolidated Statements of Financial Condition September
30, December 31, 2006 2005 (Unaudited) (In thousands) Assets: Cash
and due from banks $129,855 $97,672 Federal funds sold 146,275
4,587 Total cash and cash equivalents 276,130 102,259 Investment
securities held to maturity 1,533,971 1,534,216 Investment
securities available for sale 4,127,179 3,962,511 Federal Home Loan
Bank of New York stock 412,381 226,962 Mortgage-backed securities
held to maturity 5,873,952 4,389,864 Mortgage-backed securities
available for sale 2,575,038 2,520,633 Loans 18,285,946 15,062,449
Deferred loan costs 17,748 1,653 Allowance for loan losses (27,391)
(27,393) Net loans 18,276,303 15,036,709 Foreclosed real estate,
net 1,736 1,040 Accrued interest receivable 189,839 140,723 Banking
premises and equipment, net 73,587 49,132 Other assets 297,888
111,304 Total Assets $33,638,004 $28,075,353 Liabilities and
Stockholders' Equity: Deposits: Interest-bearing $12,320,119
$10,941,258 Noninterest-bearing 486,958 442,042 Total deposits
12,807,077 11,383,300 Repurchase agreements 8,273,000 7,900,000
Federal Home Loan Bank of New York advances 7,375,000 3,450,000
Total borrowed funds 15,648,000 11,350,000 Accrued expenses and
other liabilities 180,685 140,577 Total liabilities 28,635,762
22,873,877 Common stock, $0 01 par value, 3,200,000,000 shares
authorized; 741,466,555 shares issued; 565,714,563 shares
outstanding at September 30, 2006; 588,905,543 shares outstanding
at December 31, 2005 7,415 7,415 Additional paid-in capital
4,549,486 4,533,329 Retained earnings 1,849,846 1,759,492 Treasury
stock, at cost; 175,751,992 shares at September 30, 2006 and
152,561,012 shares at December 31, 2005 (1,120,319) (798,232)
Unallocated common stock held by the employee stock ownership plan
(229,759) (234,264) Unearned common stock held by the recognition
and retention plan (1,977) (2,815) Accumulated other comprehensive
loss, net of tax (52,450) (63,449) Total stockholders' equity
5,002,242 5,201,476 Total Liabilities and Stockholders' Equity
$33,638,004 $28,075,353 Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income (Unaudited) For the Three Months
Ended September 30, 2006 2005 (In thousands, except per share data)
Interest and Dividend Income: Interest and fees on first mortgage
loans $246,230 $177,562 Interest and fees on consumer and other
loans 5,425 2,795 Interest on mortgage-backed securities held to
maturity 68,249 45,865 Interest on mortgage-backed securities
available for sale 31,372 26,359 Interest on investment securities
held to maturity 18,673 18,634 Interest and dividends on investment
securities available for sale 45,233 39,720 Dividends on Federal
Home Loan Bank of New York stock 4,640 2,116 Interest on federal
funds sold 2,223 736 Total interest and dividend income 422,045
313,787 Interest Expense: Interest on deposits 115,894 76,446
Interest on borrowed funds 153,023 85,165 Total interest expense
268,917 161,611 Net interest income 153,128 152,176 Provision for
Loan Losses - - Net interest income after provision for loan losses
153,128 152,176 Non-Interest Income: Service charges and other
income 1,669 1,413 Gains on securities transactions, net - - Total
non-interest income 1,669 1,413 Non-Interest Expense: Compensation
and employee benefits 26,633 21,534 Net occupancy expense 6,519
5,681 Federal deposit insurance assessment 431 413 Computer and
related services 779 607 Other expense 6,226 4,688 Total
non-interest expense 40,588 32,923 Income before income tax expense
114,209 120,666 Income Tax Expense 43,238 45,635 Net income $70,971
$75,031 Basic Earnings Per Share $0.13 $0.13 Diluted Earnings Per
Share $0.13 $0.13 Weighted Average Number of Common Shares
Outstanding: Basic 531,129,380 566,667,689 Diluted 540,969,501
580,174,828 Hudson City Bancorp, Inc. and Subsidiary Consolidated
Statements of Income (Unaudited) For the Nine Months Ended
September 30, 2006 2005 (In thousands, except per share data)
Interest and Dividend Income: Interest and fees on first mortgage
loans $679,049 $500,218 Interest and fees on consumer and other
loans 12,822 7,561 Interest on mortgage-backed securities held to
maturity 182,034 133,210 Interest on mortgage-backed securities
available for sale 89,788 63,956 Interest on investment securities
held to maturity 55,936 53,950 Interest and dividends on investment
securities available for sale 130,631 77,863 Dividends on Federal
Home Loan Bank of New York stock 10,357 7,031 Interest on federal
funds sold 5,256 2,821 Total interest and dividend income 1,165,873
846,610 Interest Expense: Interest on deposits 303,666 210,264
Interest on borrowed funds 397,811 226,597 Total interest expense
701,477 436,861 Net interest income 464,396 409,749 Provision for
Loan Losses - 65 Net interest income after provision for loan
losses 464,396 409,684 Non-Interest Income: Service charges and
other income 4,384 3,791 Gains on securities transactions, net 4
2,740 Total non-interest income 4,388 6,531 Non-Interest Expense:
Compensation and employee benefits 78,376 61,739 Net occupancy
expense 17,629 14,729 Federal deposit insurance assessment 1,257
1,235 Computer and related services 2,078 1,835 Other expense
18,048 14,406 Total non-interest expense 117,388 93,944 Income
before income tax expense 351,396 322,271 Income Tax Expense
132,029 121,020 121,020 Net income $219,367 $201,251 Basic Earnings
Per Share $0.41 $0.35 Diluted Earnings Per Share $0.40 $0.34
Weighted Average Number of Common Shares Outstanding: Basic
539,843,240 571,809,470 Diluted 550,497,527 585,122,824 Hudson City
Bancorp, Inc. and Subsidiary Consolidated Average Balance Sheets
(Unaudited) For the Three Months Ended September 30, 2006 Average
Average Yield/ Balance Interest Cost (Dollars in thousands) Assets:
Interest-earnings assets: First mortgage loans, net (1) $17,355,122
$246,230 5.68 % Consumer and other loans 341,875 5,425 6.35 Federal
funds sold 166,404 2,223 5.30 Mortgage-backed securities at
amortized cost 8,257,035 99,621 4.83 Federal Home Loan Bank of New
York stock 388,951 4,640 4.77 Investment securities at amortized
cost 5,675,493 63,906 4.50 Total interest-earning assets 32,184,880
422,045 5.25 Noninterest-earnings assets 458,055 Total Assets
$32,642,935 Liabilities and Stockholders' Equity: Interest-bearing
liabilities: Savings accounts $809,278 1,989 0.98 Interest-bearing
transaction accounts 2,468,022 20,651 3.32 Money market accounts
805,105 6,592 3.25 Time deposits 7,742,845 86,662 4.44 Total
interest-bearing deposits 11,825,250 115,894 3.89 Repurchase
agreements 8,250,500 79,856 3.84 Federal Home Loan Bank of New York
advances 6,901,240 73,167 4.21 Total borrowed funds 15,151,740
153,023 4.01 Total interest-bearing liabilities 26,976,990 268,917
3.95 Noninterest-bearing liabilities: Noninterest-bearing deposits
466,906 Other noninterest-bearing liabilities 207,744 Total
noninterest-bearing liabilities 674,650 Total liabilities
27,651,640 Stockholders' equity 4,991,295 Total Liabilities and
Stockholders' Equity $32,642,935 Net interest income/net interest
rate spread (2) $153,128 1.30 % Net interest-earning assets/net
interest margin (3) $5,207,890 1.93 % Ratio of interest-earning
assets to interest-bearing liabilities 1.19 x For the Three Months
Ended September 30, 2005 Average Average Yield/ Balance Interest
Cost Assets: Interest-earnings assets: First mortgage loans, net
(1) $13,087,551 $177,562 5.43 % Consumer and other loans 191,038
2,795 5.85 Federal funds sold 85,983 736 3.40 Mortgage-backed
securities at amortized cost 6,640,580 72,224 4.35 Federal Home
Loan Bank of New York stock 178,657 2,116 4.74 Investment
securities at amortized cost 5,676,595 58,354 4.11 Total
interest-earning assets 25,860,404 313,787 4.85
Noninterest-earnings assets 346,613 Total Assets $26,207,017
Liabilities and Stockholders' Equity: Interest-bearing liabilities:
Savings accounts $859,240 2,141 0.99 Interest-bearing transaction
accounts 4,133,327 31,258 3.00 Money market accounts 386,599 1,167
1.20 Time deposits 5,497,737 41,880 3.02 Total interest-bearing
deposits 10,876,903 76,446 2.79 Repurchase agreements 6,606,625
58,563 3.52 Federal Home Loan Bank of New York advances 2,721,391
26,602 3.88 Total borrowed funds 9,328,016 85,165 3.62 Total
interest-bearing liabilities 20,204,919 161,611 3.17
Noninterest-bearing liabilities: Noninterest-bearing deposits
450,142 Other noninterest-bearing liabilities 153,184 Total
noninterest-bearing liabilities 603,326 Total liabilities
20,808,245 Stockholders' equity 5,398,772 Total Liabilities and
Stockholders' Equity $26,207,017 Net interest income/net interest
rate spread (2) $152,176 1.68 % Net interest-earning assets/net
interest margin (3) $5,655,485 2.37 % Ratio of interest-earning
assets to interest-bearing liabilities 1.28 x (1) Amount is net of
deferred loan fees and allowance for loan losses and includes
non-performing loans. (2) Determined by subtracting the annualized
weighted average cost of total interest-bearing liabilities from
the annualized weighted average yield on total interest-earning
assets. (3) Determined by dividing annualized net interest income
by total average interest-earning assets. Hudson City Bancorp, Inc.
and Subsidiary Consolidated Average Balance Sheets (Unaudited) For
the Nine Months Ended September 30, 2006 Average Average Yield/
Balance Interest Cost(4) (Dollars in thousands) Assets:
Interest-earnings assets: First mortgage loans, net (1) $16,220,800
$679,049 5.58 % Consumer and other loans 282,499 12,822 6.05
Federal funds sold 145,306 5,256 4.84 Mortgage-backed securities at
amortized cost 7,730,646 271,822 4.69 Federal Home Loan Bank of New
York stock 319,715 10,357 4.32 Investment securities at amortized
cost 5,624,061 186,567 4.42 Total interest-earning assets
30,323,027 1,165,873 5.13 Noninterest-earnings assets 358,978 Total
Assets $30,682,005 Liabilities and Stockholders' Equity:
Interest-bearing liabilities: Savings accounts $791,382 5,826 0.98
Interest-bearing transaction accounts 2,923,558 73,095 3.34 Money
market accounts 624,568 13,043 2.79 Time deposits 6,964,262 211,702
4.06 Total interest-bearing deposits 11,303,770 303,666 3.59
Repurchase agreements 8,220,132 230,258 3.75 Federal Home Loan Bank
of New York advances 5,423,550 167,553 4.13 Total borrowed funds
13,643,682 397,811 3.90 Total interest-bearing liabilities
24,947,452 701,477 3.76 Noninterest-bearing liabilities:
Noninterest-bearing deposits 454,587 Other noninterest-bearing
liabilities 192,587 Total noninterest-bearing liabilities 647,174
Total liabilities 25,594,626 Stockholders' equity 5,087,379 Total
Liabilities and Stockholders' Equity $30,682,005 Net interest
income/net interest rate spread (2) $464,396 1.37 % Net
interest-earning assets/net interest margin (3) $5,375,575 2.03 %
Ratio of interest-earning assets to interest-bearing liabilities
1.22 x For the Nine Months Ended September 30, 2005 Average Average
Yield/ Balance Interest Cost Assets: Interest-earnings assets:
First mortgage loans, net (1) $12,244,226 $500,218 5.45 % Consumer
and other loans 173,556 7,561 5.81 Federal funds sold 131,938 2,821
2.86 Mortgage-backed securities at amortized cost 6,010,245 197,166
4.37 Federal Home Loan Bank of New York stock 161,380 7,031 5.81
Investment securities at amortized cost 4,153,466 131,813 4.23
Total interest-earning assets 22,874,811 846,610 4.93
Noninterest-earnings assets 437,058 Total Assets $23,311,869
Liabilities and Stockholders' Equity: Interest-bearing liabilities:
Savings accounts $1,033,838 7,655 0.99 Interest-bearing transaction
accounts 4,233,540 89,216 2.82 Money market accounts 504,996 4,082
1.08 Time deposits 5,402,361 109,311 2.71 Total interest-bearing
deposits 11,174,735 210,264 2.52 Repurchase agreements 6,122,196
159,779 3.49 Federal Home Loan Bank of New York advances 2,306,073
66,818 3.87 Total borrowed funds 8,428,269 226,597 3.59 Total
interest-bearing liabilities 19,603,004 436,861 2.98
Noninterest-bearing liabilities: Noninterest-bearing deposits
436,163 Other noninterest-bearing liabilities 143,273 Total
noninterest-bearing liabilities 579,436 Total liabilities
20,182,440 Stockholders' equity 3,129,429 Total Liabilities and
Stockholders' Equity $23,311,869 Net interest income/net interest
rate spread (2) $409,749 1.95 % Net interest-earning assets/net
interest margin (3) $3,271,807 2.38 % Ratio of interest-earning
assets to interest-bearing liabilities 1.17 x (1) Amount is net of
deferred loan fees and allowance for loan losses and includes
non-performing loans. (2) Determined by subtracting the annualized
weighted average cost of total interest-bearing liabilities from
the annualized weighted average yield on total interest-earning
assets. (3) Determined by dividing annualized net interest income
by total average interest-earning assets. (4) At September 30,
2006, the weighted-average rate on our outstanding interest-earning
assets, other than our FHLB stock, was as follows: first mortgage
loans, 5.75%, consumer and other loans, 6.54%, federal funds sold,
5.25%, mortgage-backed securities, 5.09%, investment securities,
4.58%. At September 30, 2006, the weighted- average rate on our
outstanding interest-bearing liabilities was as follows: savings
accounts, 0.91%, interest-bearing transaction accounts, 3.31%,
money market accounts, 3.47%, time deposits, 4.60%, borrowed funds,
4.00%. Hudson City Bancorp, Inc. and Subsidiary Selected
Performance Ratios (1) For the Three Months Ended September 30,
2006 2005 Return on average assets 0.87 % 1.15 % Return on average
stockholders' equity 5.69 5.56 Net interest rate spread 1.30 1.68
Net interest margin 1.93 2.37 Non-interest expense to average
assets 0.50 0.50 Efficiency ratio (2) 26.22 21.44 Dividend payout
ratio 57.69 53.85 Cash dividends paid per common share $0.075 $0.07
(1) Ratios are annualized where appropriate. (2) Determined by
dividing total non-interest expense by the sum of net interest
income and total non-interest income. For the Nine Months Ended
September 30, 2006 2005 Return on average assets 0.95 % 1.15 %
Return on average stockholders' equity 5.75 8.57 Net interest rate
spread 1.37 1.95 Net interest margin 2.03 2.38 Non-interest expense
to average assets 0.51 0.54 Efficiency ratio (2) 25.04 22.57
Dividend payout ratio 54.88 56.57 Cash dividends paid per common
share $0.225 $0.198 (1) Ratios are annualized where appropriate.
(2) Determined by dividing total non-interest expense by the sum of
net interest income and total non-interest income. Hudson City
Bancorp, Inc. and Subsidiary Selected Financial Ratios and Other
Data At or For The At or For The Period Ended Period Ended
September 30, December 31, 2006 2005 Asset Quality Ratios:
Non-performing loans to total loans 0.14 % 0.13 % Non-performing
assets to total assets 0.08 0.07 Allowance for loan losses to
non-performing loans 103.93 141.84 Allowance for loan losses to
total loans 0.15 0.18 Capital Ratios: Average stockholders' equity
to average assets 16.58 % 15.10 % Stockholders' equity to assets
14.87 18.53 Book value per common share $9.47 $9.44 Regulatory
Capital Ratios: Bank: Tangible capital 11.92 % 14.68 % Leverage
(core) capital 11.92 14.68 Total risk-based capital 32.57 41.31
Other Data: Full-time equivalent employees 1,252 1,108 Hudson City
Bancorp, Inc. and Subsidiary Book Value Calculations September 30,
2006 Total stockholders' equity (thousands) $5,002,242 Book Value
Share Computation: Issued 741,466,555 Treasury shares (175,751,992)
Shares outstanding 565,714,563 Unallocated ESOP shares (36,803,565)
Unvested RRP shares (445,733) Book value shares 528,465,265 Book
value per share $9.47 DATASOURCE: Hudson City Bancorp, Inc.
CONTACT: Louis J. Beierle, First Vice President, Investor
Relations, Hudson City Bancorp, Inc., +1-201-967-8290, Web site:
http://www.hcbk.com/
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