HCBK (MM)

THIRD QUARTER EPS INCREASED 66.7% PARAMUS, N.J., Oct. 15 /PRNewswire-FirstCall/ -- Hudson City Bancorp, Inc. (NASDAQ:HCBK), the holding company for Hudson City Savings Bank, reported today that net income for the third quarter of 2008 increased 63.8% to $121.9 million as compared to $74.4 million for the third quarter of 2007. Diluted earnings per share increased 66.7% to $0.25 for the third quarter of 2008 as compared to $0.15 for the third quarter of 2007. For the nine months ended September 30, 2008, net income increased 47.1% to $321.3 million as compared to $218.4 million for the same period in 2007. Diluted earnings per share increased 54.8% to $0.65 for the nine months ended September 30, 2008 as compared to $0.42 for the same period in 2007. The Board of Directors declared a quarterly cash dividend of $0.13 per share, an increase of 62.5% from the quarterly cash dividend of $0.085 for third quarter of 2007. A statement from Ronald E. Hermance, Jr., Chairman, President and Chief Executive Officer, regarding the third quarter's results, is attached to this press release and is incorporated herein by reference. Financial highlights for the third quarter of 2008 are as follows: -- Basic and diluted earnings per common share were both $0.25 for the third quarter of 2008 as compared to $0.15 for both basic and diluted earnings per share for the third quarter of 2007. Basic and diluted earnings per common share were $0.66 and $0.65, respectively for the first nine months of 2008 compared to $0.43 and $0.42, respectively for the same period in 2007. -- The Board of Directors declared a quarterly cash dividend of $0.13 per common share payable on November 29, 2008 to stockholders of record at the close of business on November 10, 2008. -- Net income amounted to $121.9 million for the third quarter of 2008, as compared to $74.4 million for the third quarter of 2007. For the nine months ended September 30, 2008, net income amounted to $321.3 million as compared to $218.4 million for the same period in 2007. -- Net interest income increased 57.3% to $255.1 million for the third quarter of 2008 and 43.1% to $681.5 million for the nine months ended September 30, 2008. -- Our annualized return on average assets and annualized return on average shareholders' equity for the third quarter of 2008 were 0.97% and 10.19%, respectively. Our annualized return on average assets and annualized return on average shareholders' equity for the nine months ended September 30, 2008 were 0.90% and 9.03%, respectively. -- Our net interest rate spread and net interest margin were 1.70% and 2.08%, respectively, for the third quarter of 2008 and 1.52% and 1.93%, respectively, for the first nine months of 2008. -- Our efficiency ratio was 19.21% for the third quarter of 2008 and 21.21% for the first nine months of 2008. -- Net loans increased $4.32 billion to $28.52 billion at September 30, 2008 from $24.20 billion at December 31, 2007. -- Deposits increased $2.14 billion to $17.29 billion at September 30, 2008 from $15.15 billion at December 31, 2007. -- Borrowed funds increased $5.14 billion to $29.28 billion at September 30, 2008 from $24.14 billion at December 31, 2007. Statement of Financial Condition Summary Total assets increased $7.35 billion, or 16.5%, to $51.77 billion at September 30, 2008 from $44.42 billion at December 31, 2007. The increase in total assets reflected a $4.32 billion increase in loans and a $3.50 billion increase in total mortgage-backed securities, partially offset by an $865.3 million decrease in investment securities. The increase in loans reflected our focus on the origination of one- to four-family first mortgage loans in New Jersey, New York and Connecticut, as well as our continued loan purchase activity. For the first nine months of 2008, we originated $4.01 billion and purchased $2.55 billion of loans, compared to originations of $2.65 billion and purchases of $3.06 billion for the first nine months of 2007. While the residential real estate markets have weakened considerably during the past year, our competitive rates and the decreased mortgage lending competition have resulted in increased origination productivity for the first nine months of 2008. The $3.50 billion increase in total mortgage-backed securities reflected purchases of $5.34 billion, which were primarily variable-rate instruments, partially offset by repayments of $1.84 billion. Total investment securities decreased $865.3 million during the first nine months of 2008. Investment securities held to maturity decreased $1.36 billion partially offset by a $493.1 million increase in investment securities available for sale. The decrease was the result of calls of held to maturity and available for sale investment securities of $1.36 billion and $1.35 billion, respectively. The calls were partially offset by purchases of investment securities available for sale of $1.90 billion for the first nine months of 2008. Total liabilities increased $7.18 billion, or 18.0%, to $46.99 billion at September 30, 2008 from $39.81 billion at December 31, 2007. The increase in total liabilities primarily reflected a $5.14 billion increase in borrowed funds and a $2.14 billion increase in deposits. The increase in borrowed funds was the result of $5.50 billion of new borrowings at a weighted-average rate of 3.12%, partially offset by repayments of $366.0 million with a weighted average rate of 3.93%. The new borrowings have final maturities of ten years and initial reprice dates of one to three years. The increase in total deposits reflected a $1.17 billion increase in our time deposits, a $957.6 million increase in our money market checking accounts and a $40.8 million increase in our demand accounts. Total shareholders' equity increased $174.8 million to $4.79 billion at September 30, 2008 from $4.61 billion at December 31, 2007. The increase was primarily due to net income of $321.3 million for the nine months ended September 30, 2008. This increase to shareholders' equity was partially offset by cash dividends paid to common shareholders of $154.8 million and repurchases of our outstanding common stock at an aggregate cost of $3.6 million. At September 30, 2008, our shareholders' equity to asset ratio was 9.24% and our tangible book value per share was $9.52. The accumulated other comprehensive loss of $18.5 million at September 30, 2008 includes a $15.3 million after-tax net unrealized loss on securities available for sale ($25.9 million pre-tax). We invest primarily in mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, as well as other securities issued by U.S. government-sponsored enterprises. We do not purchase unrated or private label mortgage-backed securities or other higher risk securities such as those backed by sub-prime loans. In addition, we do not own any common or preferred stock issued by Fannie Mae or Freddie Mac. The unrealized loss in the available for sale portfolio at September 30, 2008 was caused by increases in market yields subsequent to purchase and is not attributable to credit quality concerns. There were no debt securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the security. Because the Company has the intent and the ability to hold securities with unrealized losses until a market price recovery (which, for debt securities may be until maturity), the Company did not consider these securities to be other-than-temporarily impaired at September 30, 2008. Statement of Income Summary The Federal Open Market Committee of the Federal Reserve Bank ("FOMC") decreased the overnight lending rate by 225 basis points during the first nine months of 2008 to 2.00%. This followed a 50 basis point reduction in the fourth quarter of 2007. In addition, the FOMC reduced the overnight lending rate in October 2008 by an additional 50 basis points to 1.50%. The large decrease in the overnight lending rate was in response to the continued liquidity crisis in the credit markets and recessionary concerns. As a result, short-term market interest rates decreased during the first nine months of 2008. Longer-term market interest rates also decreased during the first nine months of 2008, but at a slower pace than the short-term interest rates. As a result, the yield curve continued to steepen. Notwithstanding the decrease in long-term market interest rates noted above, mortgage rates have maintained a wider credit spread resulting in higher yields on mortgage loans relative to U.S. Treasury securities. However, the sharp decline of short-term interest rates during the first nine months of 2008 resulted in lower deposit costs. As a result, our net interest rate spread and net interest margin increased from both the third quarter and first nine months of 2007. Net interest income increased $92.9 million, or 57.3%, to $255.1 million for the third quarter of 2008 as compared to $162.2 million for the third quarter of 2007. Net interest income increased $205.2 million, or 43.1%, to $681.5 million for the nine months ended September 30, 2008 compared to $476.3 million for the corresponding period in 2007. During the third quarter of 2008, our net interest rate spread increased 56 basis points to 1.70% and our net interest margin increased 43 basis points to 2.08% as compared to the third quarter of 2007. During the first nine months of 2008, our net interest rate spread increased 41 basis points to 1.52% and our net interest margin increased 27 basis points to 1.93% as compared to the same period in 2007. Total interest and dividend income for the three months ended September 30, 2008 increased $133.1 million, or 24.3%, to $681.3 million as compared to $548.2 million for the three months ended September 30, 2007. The increase in total interest and dividend income was primarily due to a $9.41 billion, or 23.5%, increase in the average balance of total interest-earning assets to $49.52 billion for the third quarter of 2008 as compared to $40.11 billion for the third quarter of 2007. The increase in interest and dividend income was also partially due to an increase of 3 basis points in the annualized weighted-average yield on total interest-earning assets to 5.50% for the three month period ended September 30, 2008 from 5.47% for the comparable period in 2007. Total interest and dividend income for the nine months ended September 30, 2008 increased $401.9 million, or 26.1%, to $1.94 billion as compared to $1.54 billion for the nine months ended September 30, 2007. The increase in total interest and dividend income was primarily due to a $9.01 billion, or 23.7%, increase in the average balance of total interest-earning assets to $46.97 billion for the nine months ended September 30, 2008 as compared to $37.96 billion for the corresponding period in 2007. The increase in interest and dividend income was also partially due to an increase of 10 basis points in the annualized weighted-average yield on total interest-earning assets to 5.51% for the nine months ended September 30, 2008 from 5.41% for the comparable period in 2007. Interest and fees on mortgage loans increased $80.8 million to $394.7 million for the third quarter of 2008 as compared to $313.9 million for the same period in 2007 primarily due to a $5.44 billion increase in the average balance of first mortgage loans to $27.43 billion as compared to $21.99 billion for the second quarter of 2007, which reflected our continued emphasis on the growth of our mortgage loan portfolio. The increase in mortgage loan income was also due to a 5 basis point increase in the weighted-average yield to 5.76%. Notwithstanding the decrease in long-term market interest rates noted above, mortgage rates have maintained a wider credit spread resulting in higher yields on mortgage loans relative to U.S. Treasury securities. For the nine months ended September 30, 2008, interest and fees on mortgage loans increased $236.7 million to $1.11 billion as compared to $873.4 million for the nine months ended September 30, 2007 primarily due to a $5.25 billion increase in the average balance of first mortgage loans to $25.74 billion as compared to $20.49 billion for same period in 2007. The increase in interest income on mortgage loans was also due to a 7 basis point increase in the weighted-average yield to 5.75%. Interest on mortgage-backed securities increased $74.2 million to $225.3 million for the third quarter of 2008 as compared to $151.1 million for the third quarter of 2007. This increase was due primarily to a $5.67 billion increase in the average balance of mortgage-backed securities to $17.29 billion during the third quarter of 2008 as compared to $11.62 billion for the third quarter of 2007, and a 1 basis point increase in the weighted-average yield to 5.21%. Interest on mortgage-backed securities increased $220.9 million to $632.2 million for the nine months ended September 30, 2008 as compared to $411.3 million for the nine months ended September 30, 2007. This increase was due primarily to a $5.40 billion increase in the average balance of mortgage-backed securities to $16.11 billion during the first nine months of 2008 as compared to $10.70 billion for the same period in 2007, and an 11 basis point increase in the weighted-average yield to 5.23%. The increases in the average balances of mortgage-backed securities were due to purchases of variable-rate mortgage-backed securities as part of our interest rate risk management strategy. Since our primary lending activities are the origination and purchase of fixed-rate mortgage loans, the purchase of variable-rate mortgage-backed securities provides us with an asset that reduces our exposure to interest rate fluctuations while providing a source of cash flow from monthly principal and interest payments. The increase in the weighted average yields on mortgage-backed securities is a result of the purchase of new securities when market interest rates were higher than the yield earned on the existing portfolio. Total interest expense for the three months ended September 30, 2008 increased $40.2 million, or 10.4%, to $426.2 million as compared to $386.0 million for the three months ended September 30, 2007. This increase was primarily due to a $9.29 billion, or 26.3%, increase in the average balance of total interest-bearing liabilities to $44.63 billion for the quarter ended September 30, 2008 compared with $35.34 billion for the third quarter of 2007. This increase in interest-bearing liabilities was primarily used to fund asset growth. The increase in the average balance of total interest-bearing liabilities was partially offset by a 53 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.80% for the quarter ended September 30, 2008 compared with 4.33% for the quarter ended September 30, 2007. Total interest expense for the nine months ended September 30, 2008 increased $196.7 million, or 18.6%, to $1.26 billion as compared to $1.06 billion for the nine months ended September 30, 2007. This increase was primarily due to a $9.10 billion, or 27.5%, increase in the average balance of total interest-bearing liabilities to $42.16 billion for the nine months ended September 30, 2008 compared with $33.06 billion for the corresponding period in 2007. The increase in average balance of total interest-bearing liabilities was partially offset by a 31 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.99% for the nine months ended September 30, 2008 compared with 4.30% for the nine months ended September 30, 2007. The decrease in the average cost of interest-bearing liabilities for the three- and nine-month periods in 2008 reflected the decrease in market interest rates during the first nine months of 2008. Interest expense on deposits decreased $21.1 million to $134.0 million for the third quarter of 2008 as compared to $155.1 million for the third quarter of 2007. This decrease is due primarily to a 116 basis point decrease in the average cost of deposits to 3.28% for the 2008 quarter as compared to 4.44% for the 2007 quarter. This decrease was partially offset by a $2.41 billion increase in the average balance of interest-bearing deposits to $16.26 billion during the third quarter of 2008 quarter as compared to $13.85 billion for the comparable period in 2007. For the nine months ended September 30, 2008, interest expense on deposits decreased $10.1 million to $433.4 million as compared to $443.5 million for the nine months ended September 30, 2007. This decrease is due primarily to a 71 basis point decrease in the average cost of deposits to 3.69% for the nine months ended September 30, 2008 as compared to 4.40% for the comparable period in 2007. This decrease was partially offset by a $2.21 billion increase in the average balance of interest-bearing deposits to $15.70 billion for the nine months ended September 30, 2008 as compared to $13.49 billion for the comparable period in 2007. The increases in the average balance of interest-bearing deposits reflect our growth strategy. The decrease in the average cost of deposits for the three- and nine-month periods reflected lower market interest rates. Interest expense on borrowed funds increased $61.4 million to $292.3 million for the third quarter of 2008 as compared to $230.9 million for the third quarter of 2007 primarily due to a $6.87 billion increase in the average balance of borrowed funds to $28.37 billion. The weighted average cost of borrowed funds decreased 16 basis points to 4.10% for the third quarter of 2008 as compared to 4.26% for the third quarter of 2007. Interest expense on borrowed funds increased $206.7 million to $826.3 million for the nine months ended September 30, 2008 as compared to $619.6 million for the nine months ended September 30, 2007 primarily due to a $6.89 billion increase in the average balance of borrowed funds to $26.46 billion. The weighted average cost of borrowed funds decreased 6 basis points to 4.17% for the nine months ended September 30, 2008 as compared to 4.23% for the comparable period in 2007. Borrowed funds were primarily used to fund the growth in interest-earning assets. The decrease in the average cost of borrowings for the third quarter and first nine months of 2008 reflected new borrowings in 2008, when market interest rates were lower than existing borrowings, and borrowings that were called. Substantially all of our borrowings are callable quarterly at the discretion of the lender after an initial non-call period of one to five years with a final maturity of ten years. Based on the lower market interest rates as of September 30, 2008, we anticipate that none of the borrowings with call dates in 2008 will be called. The provision for loan losses amounted to $5.0 million for the quarter ended September 30, 2008 as compared to $2.0 million for the quarter ended September 30, 2007 and amounted to $10.5 million for the nine months ended September 30, 2008 as compared to $2.8 million for the nine months ended September 30, 2007. The provision for loan losses was $4.8 million for the full calendar year ended December 31, 2007. The increase in the provision for loan losses was due primarily to an increase in non-performing loans and growth in the loan portfolio. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $142.1 million at September 30, 2008 and $79.4 million at December 31, 2007. The ratio of non-performing loans to total loans was 0.50% at September 30, 2008 compared with 0.33% at December 31, 2007. The allowance for loan losses amounted to $42.6 million and $34.7 million at September 30, 2008 and December 31, 2007 respectively. The allowance for loan losses as a percent of total loans and non-performing loans was 0.15% and 29.99%, respectively at September 30, 2008 as compared to 0.14% and 43.75%, respectively at December 31, 2007. We recorded net charge-offs of $1.4 million for the three months ended September 30, 2008 as compared to net charge-offs of $606,000 for the same period in 2007. For the nine months ended September 30, 2008, net charge-offs amounted to $2.6 million as compared to net charge-offs of $575,000 for the same period in 2007. The increase in charge-offs was related primarily to non-performing residential mortgage loans for which appraised values indicated declines in the value of the underlying collateral. Total non-interest income was $2.2 million for the third quarter of 2008 compared with $2.0 million for the third quarter of 2007. Total non-interest income for the nine months ended September 30, 2008 was $6.5 million compared with $5.4 million for the comparable period in 2007. The increase in non-interest income is primarily due to an increase in service charges on deposits as a result of deposit account growth. Total non-interest expense increased $8.2 million, or 19.9%, to $49.4 million for the third quarter of 2008 from $41.2 million for the third quarter of 2007. The increase is primarily due to a $5.5 million increase in compensation and employee benefits expense, a $2.2 million increase in other non-interest expense and a $540,000 increase in Federal deposit insurance expense. The increase in compensation and employee benefits expense included a $1.9 million increase in expense related to our employee stock ownership plan primarily as a result of increases in our stock price and a $1.9 million increase in compensation costs. The increase in compensation costs was due primarily to normal salary increases and increased staffing related to our branch expansion strategy. Included in other non-interest expense for the third quarter of 2008 were write-downs and net losses on the sale of foreclosed real estate of $516,000 compared with net gains on the sale of foreclosed real estate of $31,000 for the comparable period in 2007. Total non-interest expense for the nine months ended September 30, 2008 was $145.8 million compared with $123.2 million during the corresponding 2007 period. The increase is primarily due to a $16.8 million increase in compensation and employee benefits expense and a $4.9 million increase in other non-interest expense. The increase in compensation and employee benefits expense reflected an $8.5 million increase in expense related to our employee stock ownership plan primarily as a result of increases in our stock price and a $4.8 million increase in compensation costs. The increase in compensation costs was due primarily to normal salary increases and increased staffing related to our branch expansion strategy. Included in other non-interest expense for the nine months ended September 30, 2008 were write-downs and net losses on the sale of foreclosed real estate of $1.1 million compared with net gains on the sale of foreclosed real estate of $6,000 for the comparable period in 2007. Our efficiency ratio was 19.21% for the three months ended September 30, 2008 as compared to 25.07% for the three months ended September 30, 2007. Our ratio of non-interest expense to average total assets for the third quarter of 2008 was 0.39% as compared to 0.40% for the third quarter of 2007. Our efficiency ratio for the nine months ended September 30, 2008 was 21.21% compared with 25.56% for the corresponding 2007 period. Our ratio of non-interest expense to average total assets for the nine months ended September 30, 2008 was 0.41% compared with 0.43% for the corresponding period in 2007. Income tax expense amounted to $80.9 million for the three months ended September 30, 2008 compared with $46.6 million for the corresponding period in 2007. Our effective tax rate for the three months ended September 30, 2008 was 39.90% compared with 38.52% for the corresponding period in 2007. Income tax expense for the nine months ended September 30, 2008 was $210.4 million compared with $137.4 million for the corresponding 2007 period. Our effective tax rate for the nine months ended September 30, 2008 was 39.58% compared with 38.63% for the nine months ended September 30, 2007. 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 and is the largest thrift institution headquartered in New Jersey. Hudson City Savings currently operates a total of 126 branch offices in the New York metropolitan area. 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. Any or all of the forward-looking statements in this release and in any other public statements made by Hudson City Bancorp may turn out to be wrong. They can be affected by inaccurate assumptions Hudson City Bancorp might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Hudson City Bancorp does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events. TABLES FOLLOW Hudson City Bancorp, Inc. and Subsidiary Consolidated Statements of Financial Condition September 30, December 31, 2008 2007 ---- ---- (In thousands except share and per share amounts) (unaudited) Assets: ------- Cash and due from banks $166,614 $111,245 Federal funds sold 218,358 106,299 Total cash and cash equivalents 384,972 217,544 Securities available for sale: Mortgage-backed securities 8,404,667 5,005,409 Investment securities 3,258,594 2,765,491 Securities held to maturity: Mortgage-backed securities 9,669,841 9,565,526 Investment securities 50,086 1,408,501 Total securities 21,383,188 18,744,927 Loans 28,498,201 24,192,281 Deferred loan costs 64,234 40,598 Allowance for loan losses (42,628) (34,741) Net loans 28,519,807 24,198,138 Federal Home Loan Bank of New York stock 831,820 695,351 Foreclosed real estate, net 9,462 4,055 Accrued interest receivable 281,570 245,113 Banking premises and equipment, net 74,266 75,094 Goodwill 152,109 152,109 Other assets 137,524 91,640 Total Assets $51,774,718 $44,423,971 Liabilities and Shareholders' Equity: ------------------------------------ Deposits: Interest-bearing $16,728,732 $14,635,412 Noninterest-bearing 558,731 517,970 Total deposits 17,287,463 15,153,382 Repurchase agreements 14,850,000 12,016,000 Federal Home Loan Bank of New York advances 14,425,000 12,125,000 Total borrowed funds 29,275,000 24,141,000 Due to brokers 158,601 281,853 Accrued expenses and other liabilities 267,522 236,429 Total liabilities 46,988,586 39,812,664 Common stock, $0.01 par value, 3,200,000,000 shares authorized; 741,466,555 shares issued; 520,862,291 and 518,569,602 shares outstanding at September 30, 2008 and December 31, 2007 7,415 7,415 Additional paid-in capital 4,613,018 4,578,578 Retained earnings 2,156,649 2,002,049 Treasury stock, at cost; 220,604,264 and 222,896,953 shares at September 30, 2008 and December 31, 2007 (1,754,688) (1,771,106) Unallocated common stock held by the employee stock ownership plan (217,745) (222,251) Accumulated other comprehensive (loss) income, net of tax (18,517) 16,622 Total shareholders' equity 4,786,132 4,611,307 Total Liabilities and Shareholders' Equity $51,774,718 $44,423,971 Hudson City Bancorp, Inc. and Subsidiary Consolidated Statements of Income (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2008 2007 2008 2007 (In thousands, except per share data) Interest and Dividend Income: First mortgage loans $394,748 $313,943 $1,110,121 $873,397 Consumer and Other loans 6,245 7,107 19,978 21,077 Mortgage-backed securities held to maturity 123,890 124,524 372,354 329,604 Mortgage-backed securities available for sale 101,410 26,620 259,872 81,716 Investment securities held to maturity 874 18,620 12,764 55,863 Investment securities available for sale 40,825 43,391 121,354 142,577 Dividends on Federal Home Loan Bank of New York stock 12,510 10,616 40,729 26,835 Federal Funds sold 815 3,382 4,093 8,275 Total interest and dividend income 681,317 548,203 1,941,265 1,539,344 Interest Expense: Deposits 133,983 155,055 433,398 443,450 Borrowed funds 292,256 230,932 826,342 619,566 Total interest expense 426,239 385,987 1,259,740 1,063,016 Net interest income 255,078 162,216 681,525 476,328 Provision for Loan Losses 5,000 2,000 10,500 2,800 Net interest income after provision for loan losses 250,078 160,216 671,025 473,528 Non-Interest Income: Service charges and other income 2,181 2,049 6,490 5,422 Non-Interest Expense: Compensation and Employee benefits 32,052 26,554 94,896 78,114 Net occupancy expense 7,633 7,718 22,437 21,997 Federal deposit Insurance assessment 945 405 1,784 1,293 Computer and Related services 657 633 2,044 2,014 Other expense 8,136 5,878 24,651 19,734 Total non-interest expense 49,423 41,188 145,812 123,152 Income before income tax expense 202,836 121,077 531,703 355,798 Income Tax Expense 80,928 46,634 210,423 137,448 Net income $121,908 $74,443 $321,280 $218,350 Basic Earnings Per Share $0.25 $0.15 $0.66 $0.43 Diluted Earnings Per Share $0.25 $0.15 $0.65 $0.42 Weighted Average Number of Common Shares Outstanding: Basic 484,759,567 491,331,210 483,491,345 504,784,333 Diluted 495,715,998 500,861,222 494,874,408 514,734,542 Hudson City Bancorp, Inc. and Subsidiary Consolidated Average Balance Sheets (Unaudited) For the Three Months Ended September 30, 2008 2007 Average Average Average Yield/ Average Yield/ Balance Interest Cost Balance Interest Cost (Dollars in thousands) Assets: ------- Interest-earnings assets: First mortgage loans, net (1) $27,431,258 $394,748 5.76% $21,990,493 $313,943 5.71% Consumer and other loans 418,760 6,245 5.97 432,061 7,107 6.58 Federal funds sold 181,122 815 1.79 271,404 3,382 4.94 Mortgage- backed securities at amortized cost 17,288,478 225,300 5.21 11,617,722 151,144 5.20 Federal Home Loan Bank stock 827,393 12,510 6.05 623,693 10,616 6.81 Investment securities, at amortized cost 3,373,018 41,699 4.95 5,179,482 62,011 4.79 Total interest- earning assets 49,520,029 681,317 5.50 40,114,855 548,203 5.47 Noninterest- Earnings assets 769,038 617,794 Total Assets $50,289,067 $40,732,649 Liabilities and Shareholders' Equity: ------------------------------------- Interest-bearing liabilities: Savings accounts $727,060 1,378 0.75 $766,928 1,457 0.75 Interest-bearing transaction accounts 1,609,380 12,248 3.03 1,715,934 14,538 3.36 Money market accounts 2,484,464 20,112 3.22 1,264,556 13,436 4.22 Time deposits 11,435,317 100,245 3.49 10,099,706 125,624 4.93 Total interest- bearing deposits 16,256,221 133,983 3.28 13,847,124 155,055 4.44 Repurchase agreements 14,046,628 144,769 4.10 10,948,609 116,888 4.24 Federal Home Loan Bank of New York advances 14,326,630 147,487 4.10 10,547,826 114,044 4.29 Total borrowed funds 28,373,258 292,256 4.10 21,496,435 230,932 4.26 Total interest- bearing liabilities 44,629,479 426,239 3.80 35,343,559 385,987 4.33 Noninterest- bearing liabilities: Noninterest- bearing deposits 587,553 529,775 Other noninterest- bearing liabilities 284,512 214,543 Total noninterest- bearing liabilities 872,065 744,318 Total liabilities 45,501,544 36,087,877 Shareholders' equity 4,787,523 4,644,772 Total Liabilities and Shareholders' Equity $50,289,067 $40,732,649 Net interest income/net interest rate spread (2) $255,078 1.70 $162,216 1.14 Net interest-earning assets/net interest margin (3) $4,890,550 2.08% $4,771,296 1.65% Ratio of interest-earning assets to interest-bearing liabilities 1.11x 1.13x (1) Amount includes deferred loan costs and non-performing loans and is net of the allowance for loan losses. (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, 2008 Average Average Yield/ Balance Interest Cost (Dollars in thousands) Assets: ------- Interest-earnings assets: First mortgage loans, net (1) $25,742,402 $1,110,121 5.75% Consumer and other loans 426,864 19,978 6.24 Federal funds sold 236,479 4,093 2.31 Mortgage-backed securities at amortized cost 16,105,296 632,226 5.23 Federal Home Loan Bank stock 774,729 40,729 7.01 Investment securities, at amortized cost 3,681,122 134,118 4.86 Total interest-earning assets 46,966,892 1,941,265 5.51 Noninterest-earnings assets 775,956 Total Assets $47,742,848 Liabilities and Shareholders' Equity: ------------------------------------- Interest-bearing liabilities: Savings accounts $731,732 4,132 0.75 Interest-bearing transaction accounts 1,590,125 36,937 3.10 Money market accounts 2,107,569 52,577 3.33 Time deposits 11,270,239 339,752 4.03 Total interest-bearing deposits 15,699,665 433,398 3.69 Repurchase agreements 12,986,768 407,630 4.19 Federal Home Loan Bank of New York advances 13,468,861 418,712 4.15 Total borrowed funds 26,455,629 826,342 4.17 Total interest-bearing liabilities 42,155,294 1,259,740 3.99 Noninterest-bearing liabilities: Noninterest-bearing deposits 562,141 Other noninterest-bearing liabilities 281,212 Total noninterest-bearing liabilities 843,353 Total liabilities 42,998,647 Shareholders' equity 4,744,201 Total Liabilities and Shareholders' Equity $47,742,848 Net interest income/net interest rate spread (2) $681,525 1.52 Net interest-earning assets/net interest margin (3) $4,811,598 1.93 Ratio of interest-earning assets to interest-bearing liabilities 1.11x For the Nine Months Ended September 30, 2007 Average Average Yield/ Balance Interest Cost (Dollars in thousands) Assets: ------- Interest-earnings assets: First mortgage loans, net (1) $20,492,465 $873,397 5.68% Consumer and other loans 428,054 21,077 6.57 Federal funds sold 215,706 8,275 5.13 Mortgage-backed securities at amortized cost 10,704,116 411,320 5.12 Federal Home Loan Bank stock 555,343 26,835 6.44 Investment securities, at amortized cost 5,567,410 198,440 4.75 Total interest-earning assets 37,963,094 1,539,344 5.41 Noninterest-earnings assets 603,535 Total Assets $38,566,629 Liabilities and Shareholders' Equity: ------------------------------------- Interest-bearing liabilities: Savings accounts $785,015 4,925 0.84 Interest-bearing transaction accounts 1,868,032 47,054 3.37 Money market accounts 1,074,245 31,428 3.91 Time deposits 9,758,275 360,043 4.93 Total interest-bearing deposits 13,485,567 443,450 4.40 Repurchase agreements 9,758,275 304,505 4.17 Federal Home Loan Bank of New York advances 9,811,172 315,061 4.29 Total borrowed funds 19,569,447 619,566 4.23 Total interest-bearing liabilities 33,055,014 1,063,016 4.30 Noninterest-bearing liabilities: Noninterest-bearing deposits 514,903 Other noninterest-bearing liabilities 213,546 Total noninterest-bearing liabilities 728,449 Total liabilities 33,783,463 Shareholders' equity 4,783,166 Total Liabilities and Shareholders' Equity $38,566,629 Net interest income/net interest rate spread (2) $476,328 1.11 Net interest-earning assets/net interest margin (3) $4,908,080 1.66% Ratio of interest-earning assets to interest-bearing liabilities 1.15x (1) Amount includes deferred loan costs and non-performing loans and is net of the allowance for loan losses. (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 Other Financial Data (Unaudited) At or for the Quarter Ended Sept. 30, 2008 June 30, 2008 March 31, 2008 (Dollars in thousands, except per share data) Net interest income $255,078 $233,132 $193,315 Provision for loan losses 5,000 3,000 2,500 Non-interest income 2,181 2,088 2,221 Non-interest expense: Compensation and employee benefits 32,052 31,299 31,545 Other non-interest expense 17,371 16,978 16,567 Total non-interest expense 49,423 48,277 48,112 Income before income tax expense 202,836 183,943 144,924 Income tax expense 80,928 73,240 56,255 Net income $121,908 $110,703 $88,669 Total assets $51,774,718 $49,161,986 $46,770,250 Loans, net 28,519,807 27,239,501 24,900,281 Mortgage-backed securities Available for sale 8,404,667 7,600,182 6,727,124 Held to maturity 9,669,841 9,336,644 9,676,864 Other securities Available for sale 3,258,594 3,287,143 3,717,331 Held to maturity 50,086 71,695 121,715 Deposits 17,287,463 16,719,345 16,077,113 Borrowings 29,275,000 27,475,000 25,225,000 Shareholders' equity 4,786,132 4,709,594 4,710,089 Performance Data: Return on average assets (1) 0.97% 0.93% 0.79% Return on average equity (1) 10.19% 9.27% 7.60% Net interest rate spread (1) 1.70 1.56 1.27 Net interest margin (1) 2.08% 1.97% 1.72% Non-interest expense to average assets (1) 0.39% 0.41% 0.43% Efficiency ratio (2) 19.21% 20.52% 24.66% Dividend payout ratio 48.00% 50.00% 50.00% Per Common Share Data: Basic earnings per common share $0.25 $0.23 $0.18 Diluted earnings per common share $0.25 $0.22 $0.18 Book value per share (3) $9.85 $9.73 $9.75 Tangible book value per share (3) $9.52 $9.40 $9.41 Dividends per share $0.120 $0.110 $0.090 Capital Ratios: Equity to total assets (consolidated) 9.24% 9.58% 10.07% Tier 1 leverage capital (Bank) 8.16% 8.41% 8.85% Total risk-based capital 21.87% 22.56% 24.07% Other Data: Full-time equivalent employees 1,406 1,391 1,355 Number of branch offices 125 121 119 Asset Quality Data: Total non-performing loans $142,141 $116,315 $102,256 Number of non-performing loans 386 328 283 Total number of loans 81,949 79,929 76,447 Total non-performing assets $151,602 $124,466 $107,146 Non-performing loans to total loans 0.50% 0.43% 0.41% Non-performing assets to total assets 0.29% 0.25% 0.23% Allowance for loan losses $42,628 $39,078 $36,772 Allowance for loan losses to non-performing loans 29.99% 33.60% 35.96% Allowance for loan losses to total loans 0.15% 0.14% 0.15% Provision for loan losses $5,000 $3,000 $2,500 Net charge-offs $1,449 $694 $469 At or for the Quarter Ended Dec. 31, 2007 Sept. 30, 2007 (Dollars in thousands, except per share data) Net interest income $170,855 $162,216 Provision for loan losses 2,000 2,000 Non-interest income 1,851 2,049 Non-interest expense: Compensation and employee benefits 28,516 26,554 Other non-interest expense 16,245 14,634 Total non-interest expense 44,761 41,188 Income before income tax expense 125,945 121,077 Income tax expense 48,437 46,634 Net income $77,508 $74,443 Total assets $44,423,971 $42,316,794 Loans, net 24,198,138 23,031,415 Mortgage-backed securities Available for sale 5,005,409 2,683,594 Held to maturity 9,565,526 9,837,898 Other securities Available for sale 2,765,491 3,663,715 Held to maturity 1,408,501 1,533,982 Deposits 15,153,382 14,625,726 Borrowings 24,141,000 22,891,000 Shareholders' equity 4,611,307 4,589,510 Performance Data: Return on average assets (1) 0.72% 0.73% Return on average equity (1) 6.73% 6.41% Net interest rate spread (1) 1.16 1.14 Net interest margin (1) 1.64% 1.65% Non-interest expense to average assets (1) 0.41% 0.40% Efficiency ratio (2) 25.92% 25.07% Dividend payout ratio 53.13% 56.67% Per Common Share Data: Basic earnings per common share $0.16 $0.15 Diluted earnings per common share $0.16 $0.15 Book value per share (3) $9.55 $9.44 Tangible book value per share (3) $9.22 $9.10 Dividends per share $0.085 $0.085 Capital Ratios: Equity to total assets (consolidated) 10.38% 10.85% Tier 1 leverage capital (Bank) 9.16% 9.59% Total risk-based capital 24.83% 25.99% Other Data: Full-time equivalent employees 1,307 1,321 Number of branch offices 119 118 Asset Quality Data: Total non-performing loans $79,402 $58,792 Number of non-performing loans 234 192 Total number of loans 75,857 73,682 Total non-performing assets $83,457 $62,197 Non-performing loans to total loans 0.33% 0.26% Non-performing assets to total assets 0.19% 0.15% Allowance for loan losses $34,741 $32,850 Allowance for loan losses to non-performing loans 43.75% 55.87% Allowance for loan losses to total loans 0.14% 0.14% Provision for loan losses $2,000 $2,000 Net charge-offs $109 $606 (1) Ratios are annualized. (2) Computed by dividing non-interest expense by the sum of net interest income and non-interest income. (3) Computed based on total common shares issued, less treasury shares, unallocated ESOP shares, unvested stock awards and shares held in trust. Tangible book value excludes goodwill and other intangible assets. Hudson City Bancorp, Inc. and Subsidiary Book Value Calculations September 30, 2008 (In thousands, except share and per share amounts) Shareholders' equity $4,786,132 Goodwill and other intangible assets (160,710) Tangible Shareholders' equity $4,625,422 Book Value Share Computation: Issued 741,466,555 Treasury shares (220,604,264) Shares outstanding 520,862,291 Unallocated ESOP shares (34,879,190) Unvested RRP shares (168,332) Shares in trust (57,524) Book value shares 485,757,245 Book value per share $9.85 Tangible book value per share $9.52 ABOUT OUR QUARTER AND OUR FINANCIAL STRENGTH After the worst week in history for the stock market, we decided to accelerate our earnings announcement in order to bring you some good news. Hudson City finished the third quarter with record earnings of $121.9 million or $0.25 per share versus last year's third quarter earnings of $74.4 million or $0.15 per share. In fact, our earnings per share for the first three quarters of the year of $0.65 per share surpasses our entire total for the year 2007 which was $0.58 per share. We are on pace to have our tenth straight record year of earnings against a backdrop of tremendous chaos in the financial world. It is evident that our conservative model that emphasizes the underwriting of each individual loan application and tremendous system-wide cost control, while averaging 20% annual average asset growth over the last ten years, has been successful. Performance Measures As you probably remember, we became a fully-public company in June 2005 when we issued the remaining 53% of our common stock and raised $3.9 billion of capital. During the third quarter of 2008, we were able to generate a 10.19% return on average equity and a 0.97% return on average assets. Both of these achievements occurred much sooner than we had forecast. Capital and Liquidity We remain well capitalized with an equity to asset ratio of 9.24% - among the highest in the industry for institutions over $50 billion in assets. Our risk-based capital is 21.87%. Our securities portfolio consists of either U.S. government-sponsored enterprises or mortgage-backed securities with an implied government guarantee which offer us, in addition to a mortgage portfolio, excellent collateral for liquidity. In addition, as a result of the turmoil affecting many of our competitors, we have added better than $2.1 billion in deposits through the first nine months of 2008, which is also a record. Loan Portfolio Through the first three quarters of 2008, our retail mortgage applications have surpassed the application volume for the full calendar year of 2007, which itself was a record year for us. About 54% of these applications were for home purchases in our primary market which is the New York metropolitan area. Our non-accrual loans went from 328 units as of June 30, 2008 to 386 units at September 30, 2008 out of 81,949 loans which represents 0.5% of total loans. We charged-off $1.4 million and recorded a provision for loan losses of $5.0 million for the quarter which we felt was prudent. During the last five quarters, we have provided $14.5 million to the loan loss reserve and charged-off $3.3 million. It is important to note that our loan portfolio still averages a 61% loan-to-value ratio based on appraised values at the time of origination. Growth and Overhead Before the end of the year we will have added eight new branches for a total of 127. At the same time, we have improved our efficiency ratio to 19.21% which is the best ratio among the top 50 banks in the country based on asset size. Objectives We believe we can continue to take market share and grow organically at a strong pace while not compromising asset quality. This growth will come in our traditional product offerings and with our strong commitment to asset quality. As always, we keep shareholder value as our highest objective. We are proud that we increased our quarterly cash dividend to $0.13 per share - this marks the 4th consecutive dividend increase at a time when other financial institutions are cutting dividends to survive. Our customers can remain confident in our financial strength and our commitment to our motto - "Bank on Better Values". This motto captures our philosophy of customer service. We look forward to serving our customers needs as they seek out a safe harbor from the turmoil in the financial marketplace. We are pleased with your commitment to ownership of Hudson City and will strive to honor your continued confidence in Hudson City Bancorp, Inc. Cordially, Ronald E. Hermance, Jr. Chairman, President & Chief Executive Officer Forward-Looking Statements This statement 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. Any or all of the forward-looking statements in this release and in any other public statements made by Hudson City Bancorp may turn out to be wrong. They can be affected by inaccurate assumptions Hudson City Bancorp might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Hudson City Bancorp does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events. DATASOURCE: Hudson City Bancorp, Inc. CONTACT: Susan Munhall, Investor Relations, Hudson City Bancorp, Inc., +1-201-967-8290,

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