HCBK (MM)

Hudson City Bancorp, Inc. Reports Record First Quarter Earnings 17th Consecutive Quarterly Dividend Increase to $0.17 Per Common Share PARAMUS, N.J., April 15 /PRNewswire-FirstCall/ -- Hudson City Bancorp, Inc. , the holding company for Hudson City Savings Bank, reported today net income of $56.2 million for the first quarter of 2004, an increase of $4.0 million, or 7.7%, compared with net income of $52.2 million for the first quarter of 2003. Basic and diluted earnings per common share were $0.31 and $0.30, respectively, for the first quarter of 2004 compared with basic and diluted earnings per common share of $0.29 and $0.28, respectively, for the first quarter of 2003. Hudson City Bancorp's annualized return on average stockholders' equity and annualized return on average assets for the first quarter of 2004 were 16.75% and 1.29%, respectively, compared with 15.66% and 1.44%, respectively, for the first quarter of 2003. "The first quarter of 2004 has seen a certain degree of stability in interest rates, resulting in a lower level of prepayment and re-pricing activity on our mortgage-related assets than we experienced during 2003," said Ronald E. Hermance, Jr., President and Chief Executive Officer. "The increase in earnings for the first quarter of 2004 resulted from the continued growth of our assets, which was at an annualized rate of over 20% for the quarter, and from our ability to achieve this growth while controlling operating expenses. The value generated from these outstanding results is being passed to our shareholders in the form of another dividend increase," added Mr. Hermance. Dividend Declared The Board of Directors declared a quarterly cash dividend of $0.17 per common share, representing an increase from the cash dividend of $0.16 per common share declared during the previous quarter. The cash dividend is payable on June 1, 2004 to stockholders of record at the close of business on May 7, 2004. Annual Meeting Hudson City Bancorp has scheduled May 21, 2004 as the date of its 2004 Annual Meeting of Stockholders. The voting record date for stockholders was April 2, 2004. Dividend Waiver During the first quarter of 2004, Hudson City, MHC, the majority owner of Hudson City Bancorp, Inc. common stock, applied for and received regulatory approval to waive receipt of dividend payments on the Hudson City Bancorp stock it owns. This waiver applies to any dividend declared during 2004. The additional operating capital remaining at Hudson City Bancorp will be used for general corporate purposes. Statement of Financial Condition Summary Total assets increased $886.6 million, or 5.2%, to $17.92 billion at March 31, 2004 from $17.03 billion at December 31, 2003. The increase in total assets reflected a $647.2 million increase in loans and a $562.4 million increase in investment securities held to maturity. These increases were partially offset by a $471.5 million decrease in investment securities available for sale due to calls during this low interest rate environment. Hudson City Bancorp originated and purchased first mortgage loans of approximately $247.3 million and $761.1 million, respectively, during the first quarter of 2004 compared with $387.6 million and $418.0 million, respectively, for the corresponding period in 2003. Loan originations and purchases were exclusively in one- to four-family mortgage loans. The larger volume of purchased mortgage loans, when compared to originated loans, allowed us to grow and diversify our mortgage loan portfolio at a relatively low overhead cost during a traditionally slow period for originating loans. Included in mortgage loan originations were refinanced mortgage loans of $30.9 million for the first quarter of 2004. Modifications of existing mortgage loans during the first three months of 2004, which are not included in mortgage loan originations, amounted to $62.7 million. During the first quarter of 2004 we began to classify certain government sponsored agency security purchases as held to maturity. Of the agency securities purchased and classified as held to maturity, $446.6 million have step-up features, where the interest rate is increased on scheduled future dates. These securities have call options that are generally effective prior to the initial rate increase but after an initial non-call period of three months to one year. The initial rate for the securities purchased was higher than interest rates on similar agency securities offered at the time of purchase without the step-up feature. The rate increases are at least one percent per adjustment and are fixed over the life of the security. Total liabilities increased $827.0 million, or 5.3%, to $16.53 billion at March 31, 2004 from $15.70 billion at December 31, 2003. The increase in total liabilities reflected a $306.2 million increase in total deposits and a $500.0 million increase in borrowed funds. The increase in total deposits reflected a $357.6 million increase in our interest-bearing High Value Checking account during the first quarter of 2004 to $3.01 billion. The increase in borrowed funds was the result of securing $650.0 million of new borrowings with initial reprice dates ranging from three months to three years, partially offset by calls of borrowed funds in an aggregate amount of $150.0 million. Total stockholders' equity increased $59.6 million, or 4.5%, to $1.39 billion at March 31, 2004 from $1.33 billion at December 31, 2003. The increase in stockholders' equity was primarily due to net income of $56.2 million for the first three months of 2004 and a $23.6 million increase in accumulated other comprehensive income, primarily due to an increase in the fair value of our available for sale investment portfolio, reflecting decreases in longer term interest rates during the first quarter. However, the increase in interest rates in April 2004 is expected to decrease the fair value of the available for sale portfolio, as the securities are primarily fixed rate. The increase in stockholders' equity also reflected a $3.3 million increase due to the exercise of 466,814 stock options, a $12.7 million permanent tax benefit due to the exercise of stock options and a $4.6 million increase due to the commitment of shares for our employee stock benefit plans. These increases in stockholders' equity were partially offset by repurchases of 700,000 shares of our common stock at an aggregate cost of $27.4 million, purchases of 100,000 shares of common stock for our recognition and retention plan at an aggregate cost of $3.9 million and cash dividends declared and paid to common stockholders of $9.6 million. The cash dividend paid to common stockholders reflected an approximate $20.0 million decrease from the previous quarter due to the waiver of the dividend payment to Hudson City, MHC. As of March 31, 2004 there remained approximately 7.0 million shares authorized to be purchased under our current stock repurchase program. Our stockholders' equity to asset ratio at March 31, 2004 was 7.75%. Statement of Income Summary Market interest rates, while still at historical lows, were generally stable during the second half of 2003 and the first quarter of 2004. Long-term interest rates declined slightly during the first quarter of 2004, but increased in April 2004 due to the release of economic data, which returned the rates to approximately the beginning of year levels. This relative stability during the first quarter followed general market interest rate declines during the first half of 2003. The stabilization of interest rates decreased the prepayment activity on our mortgage-related assets in the first quarter of 2004 from the high volume of prepayment activity experienced in the first three quarters of 2003. The decrease in the prepayment activity resulted in a decrease in the amortization of the net premiums on our mortgage-related assets, which increased the yield on these assets. This low interest rate environment also afforded us the opportunity to realize gains on the sale of certain of our mortgage-backed securities. Total interest and dividend income for the three months ended March 31, 2004 increased $14.5 million, or 7.3%, to $213.0 million compared with $198.5 million for the three months ended March 31, 2003. This increase was primarily due to a $2.94 billion, or 20.7%, increase in the average balance of interest- earning assets to $17.11 billion for the three months ended March 31, 2004 from $14.17 billion for the three months ended March 31, 2003, reflecting our planned balance sheet growth. Offsetting the effect of the increase in the average balance of interest-earning assets was a 63 basis point decrease in the annualized weighted average yield on total average interest-earning assets to 4.98% for the first quarter of 2004 compared with 5.61% for the first quarter of 2003. This decrease in yield reflected the overall decrease in long-term market interest rates experienced during 2003 and the first quarter of 2004, and the continued growth of our interest-earning assets during that period. The $16.4 million increase in interest and fees on mortgage loans was primarily due to the growth in the average balance of $2.11 billion. The $13.5 million increase in interest and dividends on total investment securities was primarily due to growth in the average balance of $1.42 billion, which reflected the investment of certain of the cash flows from the high level of prepayment activity on our mortgage-related assets in 2003 into investment securities, and the decision to shorten the overall weighted-average life of our assets by investing in callable securities with initial call dates of three months to one year. The $13.9 million decrease in interest on mortgage- backed securities was primarily due to a $563.8 million decrease in the average balance due to high levels of prepayment activity and sales, and a 50 basis point decrease in the annualized weighted average yield due to the low market interest rates. Total interest expense for the three months ended March 31, 2004 increased $1.5 million, or 1.6%, to $97.5 million compared with $96.0 million for the three months ended March 31, 2003. This increase was due to a $2.92 billion, or 23.1%, increase in the average balance of total interest-bearing liabilities to $15.57 billion for the three months ended March 31, 2004 compared with $12.65 billion for the corresponding period in 2003. The increase in the average balance was primarily used to fund our growth initiatives. Partially offsetting the effect of the increase in the average balance was a 56 basis point decrease in the annualized weighted-average cost of total interest-bearing liabilities to 2.52% for the three-month period ended March 31, 2004 compared with 3.08% for the three-month period ended March 31, 2003. The lower annualized weighted-average cost of total interest- bearing liabilities was primarily due to the growth of our interest-bearing liabilities during the low interest rate environment experienced during 2003 and the first quarter of 2004. The $7.4 million increase in interest expense on interest-bearing demand deposits was primarily due to a $1.69 billion increase in the average balance of interest-bearing demand deposits due to the growth of our High Value Checking account product, notwithstanding a 45 basis point decrease in the annualized weighted-average cost. The $7.4 million increase in interest expense on borrowed funds was primarily due to an increase in the average balance of borrowed funds of $1.70 billion, notwithstanding an 86 basis point decrease in the annualized weighted-average cost. The decrease in interest expense on time deposits of $11.9 million was primarily due to a decrease in the annualized weighted-average cost of 62 basis points, due to the low market interest rate environment, and a $498.2 million decrease in the average balance that we believe is primarily due to transfers of deposits to our High Value Checking product. Net interest income for the three months ended March 31, 2004 increased $12.9 million, or 12.6%, to $115.5 million compared with $102.6 million for the corresponding period in 2003. 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 2.46% for the first quarter of 2004 compared with 2.53% for the corresponding period in 2003. For the first quarter of 2004, our net interest margin, determined by dividing annualized net interest income by total average interest-earning assets, was 2.69% compared with 2.86% for the corresponding 2003 period. The increase in net interest income reflected the growth initiatives employed during 2003 and the first quarter of 2004. The decrease in the net interest rate spread and net interest margin reflected the general decline in long-term interest rates during 2003 and the first quarter of 2004, and the relative stability of short-term interest rates during that same period, as our interest-earning assets generally price off long-term market rates and our interest-bearing liabilities generally price off short-term market rates. However, the net interest rate spread and the net interest margin for both the first quarter of 2004 and the fourth quarter of 2003 increased when compared to the previous reported quarter, primarily due to the decrease in prepayment activity on our mortgage-related assets and the subsequent decrease in the amortization of the net premium. If market interest rates remain stable and the prepayment activity continues to decrease or stabilize, we expect this upward trend in the net interest rate spread and the net interest margin to continue. The provision for loan losses for the three-month periods ended March 31, 2004 and 2003 was $225,000. Net charge-offs for the first quarter of 2004 were $7,000 compared with net charge-offs of $2,000 for the first quarter of 2003. The allowance for loan losses increased $218,000 to $26.7 million at March 31, 2004 compared with $26.5 million at December 31, 2003. Non-performing loans at March 31, 2004 were $22.4 million compared with $20.3 million at December 31, 2003. The ratio of non-performing loans to total loans was 0.24% at March 31, 2004 compared with 0.23% at December 31, 2003. The ratio of allowance for loan losses to total non-performing loans was 119.32% at March 31, 2004 compared with 131.09% at December 31, 2003. Total non-interest income for the three months ended March 31, 2004 was $3.6 million compared with $5.5 million for the corresponding 2003 period. The decrease in total non-interest income reflected a $1.8 million decrease in gains on securities transactions, net, to $2.4 million for the first quarter of 2004 compared with $4.2 million for the first quarter of 2003. The gains on securities transactions, net, during the first quarter of 2004 resulted from an opportunity to realize gains from the sale of certain mortgage-backed securities prior to interest rate changes which would have adversely affected their fair market value. The historically low interest rate environment enabled us to realize these gains on the sales of securities, as the lower rates increased the fair value of the fixed-rate securities sold. The total cash flow from the sales of these securities was $126.4 million. Total non-interest expense for the three months ended March 31, 2004 and 2003 was $29.1 million and $25.5 million, respectively. Our efficiency ratio for the three months ended March 31, 2004, determined by dividing total non- interest expense by the sum of net interest income and total non-interest income, was 24.38% compared with 23.62% for the corresponding 2003 period. Our annualized ratio of non-interest expense to average total assets for the three months ended March 31, 2004 was 0.67% compared with 0.70% for the corresponding period in 2003. Non-interest expense consists primarily of compensation and employee benefits, net occupancy expense and other expenses. The increase in non-interest expense reflected increases in compensation and employee benefits, primarily due to an increase in our employee stock ownership plan expense, which is based on the current price of our stock. Income tax expense for the three months ended March 31, 2004 was $33.7 million compared with $30.1 million for the corresponding 2003 period. The effective rate for the first quarter of 2004 was 37.45% compared with 36.58% for the first quarter of 2003. The increase in income tax expense was primarily due to increases in income before income tax expense. 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 the largest savings bank based in New Jersey. Hudson City Savings currently operates 81 full-service branches in fourteen New Jersey counties and has 1,068 full-time equivalent employees. The Federal Deposit Insurance Corporation insures Hudson City Savings' deposits. 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 "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." 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 that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic and market conditions, legislative and regulatory conditions, changes in interest rates that adversely affect Hudson City Bancorp's interest rate spread, changes in deposit flows, loan demand or real estate values and other economic, governmental, competitive, regulatory and technological factors that may affect Hudson City Bancorp's operations. Hudson City Bancorp, Inc. and Subsidiary Consolidated Statements of Financial Condition March 31, December 31, 2004 2003 (Unaudited) (In thousands) Assets: Cash and due from banks $116,602 $190,984 Federal funds sold 113,900 63,600 Total cash and cash equivalents 230,502 254,584 Investment securities held to maturity 563,841 1,366 Investment securities available for sale 1,772,270 2,243,812 Federal Home Loan Bank of New York stock 160,000 164,850 Mortgage-backed securities held to maturity 4,005,352 4,292,444 Mortgage-backed securities available for sale 1,560,478 1,130,257 Loans 9,450,227 8,803,066 Less: Deferred loan fees 10,053 10,255 Allowance for loan losses 26,765 26,547 Net loans 9,413,409 8,766,264 Foreclosed real estate, net 1,103 1,002 Accrued interest receivable 79,093 80,220 Banking premises and equipment, net 32,564 31,354 Other assets 101,337 67,207 Total Assets $17,919,949 $17,033,360 Liabilities and Stockholders' Equity: Deposits: Interest-bearing $10,349,986 $10,057,285 Noninterest-bearing 410,029 396,495 Total deposits 10,760,015 10,453,780 Borrowed funds 5,650,000 5,150,000 Accrued expenses and other liabilities 121,014 100,214 Total liabilities 16,531,029 15,703,994 Common stock, $0.01 par value, 800,000,000 shares authorized; 231,276,600 shares issued, 189,602,811 shares outstanding at March 31, 2004 and 189,835,997 shares outstanding at December 31, 2003 2,313 2,313 Additional paid-in capital 558,160 543,589 Retained earnings 1,439,943 1,396,257 Treasury stock, at cost; 41,673,789 shares at March 31, 2004 and 41,440,603 shares at December 31, 2003 (569,034) (547,859) Unallocated common stock held by the employee stock ownership plan (49,023) (49,513) Unearned common stock held by the recognition and retention plan (11,080) (9,463) Accumulated other comprehensive income (loss), net of tax 17,641 (5,958) Total stockholders' equity 1,388,920 1,329,366 Total Liabilities and Stockholders' Equity $17,919,949 $17,033,360 Hudson City Bancorp, Inc. and Subsidiary Consolidated Statements of Income (Unaudited) For the Three Months Ended March 31, 2004 2003 (In thousands, except per share data) Interest and Dividend Income: Interest and fees on first mortgage loans $ 123,087 $ 106,709 Interest and fees on consumer and other loans 2,049 2,125 Interest on mortgage-backed securities held to maturity 45,851 61,075 Interest on mortgage-backed securities available for sale 15,796 14,399 Interest on investment securities held to maturity: Taxable 1,326 17 Exempt from federal taxes 5 5 Interest and dividends on investment securities available for sale - taxable 23,937 11,690 Dividends on Federal Home Loan Bank of New York stock 659 1,990 Interest on federal funds sold 317 526 Total interest and dividend income 213,027 198,536 Interest Expense: Interest on deposits 49,769 55,684 Interest on borrowed funds 47,719 40,270 Total interest expense 97,488 95,954 Net interest income 115,539 102,582 Provision for Loan Losses 225 225 Net interest income after provision for loan losses 115,314 102,357 Non-Interest Income: Service charges and other income 1,194 1,302 Gains on securities transactions, net 2,437 4,171 Total non-interest income 3,631 5,473 Non-Interest Expense: Compensation and employee benefits 19,684 16,916 Net occupancy expense 3,940 3,863 Federal deposit insurance assessment 417 378 Computer and related services 539 335 Other expense 4,473 4,030 Total non-interest expense 29,053 25,522 Income before income tax expense 89,892 82,308 Income Tax Expense 33,663 30,107 Net income $ 56,229 $ 52,201 Basic Earnings Per Share $ 0.31 $ 0.29 Diluted Earnings Per Share $ 0.30 $ 0.28 Weighted Average Number of Common Shares Outstanding: Basic 181,523,963 182,764,282 Diluted 187,040,989 187,557,530 Hudson City Bancorp, Inc. and Subsidiary Consolidated Average Balance Sheets (Unaudited) For the Three Months Ended March 31, 2004 Average Average Yield/ Balance Interest Cost (Dollars in thousands) Assets: Interest-earnings assets: First mortgage loans, net (1) $8,836,842 $123,087 5.57% Consumer and other loans 135,302 2,049 6.06 Federal funds sold 139,674 317 0.91 Mortgage-backed securities at amortized cost 5,540,780 61,647 4.45 Federal Home Loan Bank of New York stock 160,213 659 1.65 Investment securities at amortized cost 2,301,503 25,268 4.39 Total interest-earning assets 17,114,314 213,027 4.98 Noninterest-earnings assets 319,175 Total Assets $17,433,489 Liabilities and Stockholders' Equity: Interest-bearing liabilities: Savings accounts $943,526 2,331 0.99 Interest-bearing demand accounts 2,992,267 15,626 2.10 Money market accounts 618,330 1,472 0.96 Time deposits 5,642,579 30,340 2.16 Total interest-bearing deposits 10,196,702 49,769 1.96 Borrowed funds 5,376,374 47,719 3.57 Total interest-bearing liabilities 15,573,076 97,488 2.52 Noninterest-bearing liabilities: Noninterest-bearing deposits 394,167 Other noninterest-bearing liabilities 123,683 Total noninterest-bearing liabilities 517,850 Total liabilities 16,090,926 Stockholders' equity 1,342,563 Total Liabilities and Stockholders' Equity $17,433,489 Net interest income/net interest rate spread (2) $115,539 2.46% Net interest-earning assets/net interest margin (3) $1,541,238 2.69% Ratio of interest-earning assets to interest-bearing liabilities 1.10x For the Three Months Ended March 31, 2003 Average Average Yield/ Balance Interest Cost (Dollars in thousands) Assets: Interest-earnings assets: First mortgage loans, net (1) $6,729,310 $106,709 6.34% Consumer and other loans 126,172 2,125 6.74 Federal funds sold 185,053 526 1.15 Mortgage-backed securities at amortized cost 6,104,615 75,474 4.95 Federal Home Loan Bank of New York stock 141,639 1,990 5.62 Investment securities at amortized cost 880,963 11,712 5.32 Total interest-earning assets 14,167,752 198,536 5.61 Noninterest-earnings assets 318,520 Total Assets $14,486,272 Liabilities and Stockholders' Equity: Interest-bearing liabilities: Savings accounts $905,571 3,229 1.45 Interest-bearing demand accounts 1,301,176 8,182 2.55 Money market accounts 624,200 2,107 1.37 Time deposits 6,140,805 42,166 2.78 Total interest-bearing deposits 8,971,752 55,684 2.52 Borrowed funds 3,682,778 40,270 4.43 Total interest-bearing liabilities 12,654,530 95,954 3.08 Noninterest-bearing liabilities: Noninterest-bearing deposits 386,924 Other noninterest-bearing liabilities 111,640 Total noninterest-bearing liabilities 498,564 Total liabilities 13,153,094 Stockholders' equity 1,333,178 Total Liabilities and Stockholders' Equity $14,486,272 Net interest income/net interest rate spread (2) $102,582 2.53% Net interest-earning assets/net interest margin (3) $1,513,222 2.86% Ratio of interest-earning assets to interest-bearing liabilities 1.12x (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 Selected Performance Ratios (1) For the Three Months Ended March 31, 2004 2003 Return on average assets 1.29% 1.44% Return on average stockholders' equity 16.75 15.66 Net interest rate spread 2.46 2.53 Net interest margin 2.69 2.86 Non-interest expense to average assets 0.67 0.70 Efficiency ratio (2) 24.38 23.62 Dividend payout ratio 51.61 37.93 Cash dividends declared per common share $0.16 $0.11 (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 At or For the At or For the Three-Month Year Period Ended Ended March 31, December 31, 2004 2003 Asset Quality Ratios: Non-performing loans to total loans 0.24% 0.23% Non-performing assets to total assets 0.13 0.12 Allowance for loan losses to non-performing loans 119.32 131.09 Allowance for loan losses to total loans 0.28 0.30 Capital Ratios: Average stockholders' equity to average assets 7.70% 8.73% Stockholders' equity to assets 7.75 7.80 Book value per common share $7.66 $7.33 Regulatory Capital Ratios: Bank: Tangible capital 7.00% 7.24% Leverage (core) capital 7.00 7.24 Total risk-based capital 19.77 20.89 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.hudsoncitysavingsbank.com/

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