<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 2000
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number: 0-26001
HUDSON CITY BANCORP, INC.
-------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-3640393
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
West 80 Century Road
Paramus, New Jersey 07652
------------------- -----
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(201)967-1900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
As of November 7, 2000, the registrant had 113,459,300 shares of common
stock, $0.01 par value, outstanding. Of such shares outstanding, 61,288,300
shares were held by Hudson City, MHC, the registrant's mutual holding company
and 52,171,000 shares were held by the public and directors, officers and
employees of the registrant.
<PAGE> 2
Hudson City Bancorp, Inc.
Form 10-Q
Contents of Report
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Page
PART I - FINANCIAL INFORMATION Number
------
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Item 1. - Financial Statements
Consolidated Statements of Financial Condition -
September 30, 2000 (Unaudited) and December 31, 1999........... 3
Consolidated Statements of Income (Unaudited) - For the three
and nine months ended September 30, 2000 and 1999.............. 4
Consolidated Statements of Cash Flows (Unaudited) - For the
nine months ended September 30, 2000 and 1999.................. 5
Notes to Consolidated Financial Statements..................... 6
Item 2. - Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 11
Item 3. - Quantitative and Qualitative Disclosures About Market Risk.... 25
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings............................................. 27
Item 2. - Changes in Securities and Use of Proceeds..................... 27
Item 3. - Defaults Upon Senior Securities............................... 27
Item 4. - Submission of Matters to a Vote of Security Holders........... 27
Item 5. - Other Information............................................. 28
Item 6. - Exhibits and Reports on Form 8-K.............................. 28
SIGNATURES............................................................................ 29
</TABLE>
Explanatory Note: This Form 10-Q contains 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,
Inc. that are subject to various factors which could cause actual results to
differ materially from these estimates. These factors include: changes in
general, economic and market conditions, legislative and regulatory conditions,
or the development of an interest rate environment that adversely affects Hudson
City Bancorp's interest rate spread or other income anticipated from operations
and investments. As used in this Form 10-Q, "we" and "us" and "our" refer to
Hudson City Bancorp, Inc. and its consolidated subsidiary Hudson City Savings
Bank, depending on the context.
Page 2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
HUDSON CITY BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited)
(In thousands)
Assets
<S> <C> <C>
Cash and due from banks ................................................... $ 69,597 $ 84,239
Federal funds sold ........................................................ 42,100 116,600
----------- -----------
Total cash and cash equivalents ........................... 111,697 200,839
Investment securities held to maturity, market value of $1,473 at
September 30, 2000 and $1,348 at December 31, 1999 ................. 1,481 1,379
Investment securities available for sale, at market value ................. 853,910 812,058
Federal Home Loan Bank of New York stock .................................. 40,000 --
Mortgage-backed securities held to maturity, market value of $ 3,237,579
at September 30, 2000 and $3,085,596 at December 31, 1999 .......... 3,234,207 3,097,072
Loans ..................................................................... 4,813,123 4,305,875
Less:
Deferred loan fees ............................................. 10,018 10,631
Allowance for loan losses ...................................... 21,685 20,010
----------- -----------
Net loans ................................................. 4,781,420 4,275,234
Foreclosed real estate, net ............................................... 521 367
Accrued interest receivable ............................................... 57,348 51,970
Banking premises and equipment, net ....................................... 31,882 31,200
Other assets .............................................................. 49,601 48,746
----------- -----------
Total Assets .............................................. $ 9,162,067 $ 8,518,865
=========== ===========
Liabilities and Stockholders' Equity
Deposits:
Interest-bearing ................................................... $ 6,212,880 $ 6,379,929
Noninterest-bearing ................................................ 320,875 308,115
----------- -----------
Total deposits ............................................ 6,533,755 6,688,044
Borrowed funds ............................................................ 1,100,000 300,000
Accrued expenses and other liabilities .................................... 58,819 51,781
----------- -----------
Total liabilities ......................................... 7,692,574 7,039,825
----------- -----------
Common stock, $0.01 par value, 800,000,000 shares authorized, 115,638,300
shares issued, 114,089,300 shares outstanding at September 30, 2000,
115,638,300 shares outstanding at December 31, 1999 ................ 1,156 1,156
Additional paid-in capital ................................................ 526,688 526,619
Retained earnings ......................................................... 1,065,500 1,001,337
Treasury stock, at cost (1,549,000 shares at September 30, 2000) .......... (25,560) --
Unallocated common stock held by the employee stock
ownership plan ..................................................... (55,887) (22,109)
Unearned common stock held by the recognition and
retention plan ..................................................... (25,177) --
Accumulated other comprehensive loss, net of tax .......................... (17,227) (27,963)
----------- -----------
Total stockholders' equity ................................ 1,469,493 1,479,040
----------- -----------
Total Liabilities and Stockholders' Equity ................ $ 9,162,067 $ 8,518,865
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands, except share data)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on first mortgage loans ......... $ 84,175 $ 69,929 $ 240,938 $ 202,967
Interest and fees on consumer and other loans ..... 2,800 1,947 7,610 5,437
Interest on mortgage-backed securities ............ 54,349 47,679 157,361 143,555
Interest on investment securities held to maturity:
Taxable ....................................... 16 15 50 45
Exempt from federal taxes ..................... 7 7 20 21
Interest on investment securities available
for sale-taxable ............................. 13,697 15,111 41,051 42,267
Dividends on Federal Home Loan Bank
of New York stock ............................ 501 -- 595 --
Interest on federal funds sold .................... 981 773 3,340 2,036
--------- --------- --------- ---------
Total interest income ...................... 156,526 135,461 450,965 396,328
--------- --------- --------- ---------
Interest Expense:
Interest on deposits .............................. 78,654 72,874 229,679 222,575
Interest on borrowed funds ........................ 14,511 102 31,069 102
--------- --------- --------- ---------
Total interest expense ..................... 93,165 72,976 260,748 222,677
--------- --------- --------- ---------
Net interest income ..................... 63,361 62,485 190,217 173,651
Provision for loan losses ............................... 480 600 1,680 1,750
--------- --------- --------- ---------
Net interest income after provision
for loan losses ......................... 62,881 61,885 188,537 171,901
--------- --------- --------- ---------
Non-Interest Income:
Service charges and other income .................. 1,176 1,208 3,462 3,555
Gains on securities transactions, net ............. -- (8) -- (7)
--------- --------- --------- ---------
Total non-interest income .................. 1,176 1,200 3,462 3,548
--------- --------- --------- ---------
Non-Interest Expense:
Salaries and employee benefits .................... 12,502 10,659 36,559 32,381
Net occupancy expense ............................. 3,496 3,057 10,014 8,933
Federal deposit insurance assessment .............. 349 198 1,070 595
Amortization of goodwill .......................... -- 360 -- 1,080
Computer and related services ..................... 179 298 593 904
Other expense ..................................... 3,091 2,448 10,218 7,299
--------- --------- --------- ---------
Total non-interest expense ................. 19,617 17,020 58,454 51,192
--------- --------- --------- ---------
Income before income tax expense ........ 44,440 46,065 133,545 124,257
Income tax expense ...................................... 15,362 17,285 47,213 46,285
--------- --------- --------- ---------
Net income .............................. $ 29,078 $ 28,780 $ 86,332 $ 77,972
========= ========= ========= =========
Basic earnings per share (1) ............................ $ 0.27 $ 0.22 $ 0.78 $ 0.22
========= ========= ========= =========
Diluted earnings per share (1) .......................... $ 0.26 $ 0.22 $ 0.78 $ 0.22
========= ========= ========= =========
</TABLE>
(1) 1999 basic and diluted earnings per share data are from the date of
reorganization (July 13, 1999).
See accompanying notes to consolidated financial statements.
Page 4
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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
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<CAPTION>
For the nine months ended
September 30,
-------------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income ................................................................. $ 86,332 $ 77,972
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, accretion and amortization expense ..................... 5,121 5,160
Provision for loan losses ............................................ 1,680 1,750
Loss on net securities transactions .................................. -- 7
Deferred tax benefit ................................................. (3,301) (1,920)
Allocation of shares for employee benefit plans ...................... 4,996 940
Net proceeds from sale of foreclosed real estate ..................... 965 1,898
Increase in accrued interest receivable .............................. (5,378) (450)
(Increase) decrease in other assets .................................. (4,135) 491
Increase in accrued expenses and other liabilities ................... 7,038 4,069
----------- -----------
Net Cash Provided by Operating Activities ......................................... 93,318 89,917
----------- -----------
Cash Flows from Investing Activities:
Net increase in loans ...................................................... (423,159) (421,822)
Purchases of loans ......................................................... (84,195) (59,655)
Principal collection of mortgage-backed securities ......................... 496,173 873,561
Purchases of mortgage-backed securities .................................... (637,495) (1,001,299)
Proceeds from maturities and calls of investment securities held to
maturity .................................................................. 150 14
Purchases of investment securities held to maturity ........................ (252) --
Proceeds from maturities and calls of investment securities available for
sale ...................................................................... 505 723,647
Proceeds from sales of investment securities available for sale ............ -- 109,766
Purchases of investment securities available for sale ...................... (25,000) (913,976)
Purchases of Federal Home Loan Bank of New York stock ...................... (40,000) --
Purchases of premises and equipment, net ................................... (3,287) (1,769)
----------- -----------
Net Cash Used in Investment Activities ............................................ (716,560) (691,533)
----------- -----------
Cash Flows from Financing Activities:
Net decrease in deposits ................................................... (154,289) (64,829)
Proceeds from borrowed funds ............................................... 1,700,000 100,000
Principal payments on borrowed funds ....................................... (900,000) --
Proceeds from sale of stock ................................................ -- 527,335
Capitalization of Hudson City, MHC ......................................... -- (200)
Dividends paid ............................................................. (22,169) --
Purchases of stock by the employee stock ownership plan .................... (35,244) (11,492)
Purchases of stock by the recognition and retention plan ................... (28,638) --
Purchases of treasury stock ................................................ (25,560) --
----------- -----------
Net Cash Provided by Financing Activities ......................................... 534,100 550,814
----------- -----------
Net Decrease in Cash and Cash Equivalents ......................................... (89,142) (50,802)
Cash and Cash Equivalents at Beginning of Period .................................. 200,839 156,875
----------- -----------
Cash and Cash Equivalents at End of Period ........................................ $ 111,697 $ 106,073
=========== ===========
Supplemental Disclosures:
Interest paid .............................................................. $ 256,180 $ 223,144
=========== ===========
Income taxes paid .......................................................... $ 57,482 $ 46,994
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE> 6
Hudson City Bancorp, Inc.
Form 10-Q
1. - BASIS OF PRESENTATION
Hudson City Bancorp, Inc. is a Delaware corporation organized in March
1999 by Hudson City Savings Bank in connection with the conversion and
reorganization of Hudson City Savings from a New Jersey mutual savings bank into
a two-tiered mutual savings bank holding company structure, referred to as the
reorganization, as described more fully in Note 2. Prior to July 13, 1999,
Hudson City Bancorp had not issued any stock, had no assets and no liabilities
and had not conducted any business other than of an organizational nature.
Accordingly, the unaudited consolidated financial statements, notes to
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations presented for periods prior to
July 13, 1999 are solely for Hudson City Savings.
In management's opinion, all the adjustments (consisting of normal and
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations for the unaudited periods presented have
been included. The results of operations and other data presented for the three
and nine month periods ended September 30, 2000 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 2000. Certain information and note disclosures usually included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission for the preparation of the Form 10-Q. The
consolidated financial statements presented should be read in conjunction with
Hudson City Bancorp's audited consolidated financial statements and notes to
consolidated financial statements included in Hudson City Bancorp's December 31,
1999 Annual Report on Form 10-K.
Statements of Cash Flow. For the purposes of reporting cash flows, cash
and cash equivalents includes cash on hand, amounts due from banks and federal
funds sold. Transfers of loans to foreclosed real estate of $1,126,000 and
$1,299,000 for the nine month periods ended September 30, 2000 and 1999,
respectively, did not result in cash receipts or cash payments.
2. - REORGANIZATION
On July 13, 1999, Hudson City Savings converted and reorganized from a
New Jersey-chartered mutual savings bank into a two-tiered mutual savings bank
holding company structure pursuant to a Plan of Reorganization and Stock
Issuance. Under the terms of the Plan, Hudson City Savings became a wholly-owned
subsidiary of Hudson City Bancorp and received 50% of the net proceeds from the
initial public offering of Hudson City Bancorp's common stock. Hudson City
Bancorp became a majority-owned subsidiary of Hudson City, MHC, a New
Jersey-chartered mutual savings bank holding company, referred to as the MHC.
Hudson City Bancorp sold 54,350,000 shares of its common stock to the
public, representing 47% of the outstanding shares, at $10.00 per share. Hudson
City Bancorp received net proceeds of $527.6 million. An additional 61,288,300
shares, or 53% of the outstanding shares of Hudson City Bancorp, were issued to
Hudson City, MHC.
Page 6
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Hudson City Bancorp, Inc.
Form 10-Q
3. - COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and other comprehensive
income. Other comprehensive income includes unrealized gains and losses on
securities available for sale.
Total comprehensive income during the periods indicated is as follows.
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Net income ......................... $ 29,078 $ 28,780 $ 86,332 $ 77,972
Other comprehensive income:
Unrealized holding gain (loss)
on securities available for 8,700 (7,487) 10,736 (18,113)
sale ...................... -------- -------- -------- --------
Total comprehensive income ......... $ 37,778 $ 21,293 $ 97,068 $ 59,589
======== ======== ======== ========
</TABLE>
4. - EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock (such as stock
options) were exercised or resulted in the issuance of common stock. These
potentially dilutive shares would then be included in the weighted average
number of shares outstanding for the period using the treasury stock method.
Shares issued and shares reacquired during any period are weighted for the
portion of the period that they were outstanding. In computing both basic and
diluted earnings per share, the weighted average number of common shares
outstanding includes all 61,288,300 shares issued to Hudson City, MHC.
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations.
<TABLE>
<CAPTION>
For the three months ended September 30, 2000
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
(In thousands, except per share data)
<S> <C> <C> <C>
Net income ................................... $29,078
=======
Basic earnings per share:
Income available to common
stockholders ......................... $29,078 108,838 $ 0.27
=======
Effect of dilutive common stock equivalents .. -- 1,008
------- -------
Diluted earnings per share:
Income available to common
stockholders ......................... $29,078 109,846 $ 0.26
======= ======= =======
</TABLE>
Page 7
<PAGE> 8
Hudson City Bancorp, Inc.
Form 10-Q
<TABLE>
<CAPTION>
For the nine months ended September 30, 2000
--------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
(In thousands, except per share data)
<S> <C> <C> <C>
Net income ................................... $86,332
=======
Basic earnings per share:
Income available to common stockholders $86,332 110,167 $ 0.78
=======
Effect of dilutive common stock equivalents .. -- 443
------- -------
Diluted earnings per share:
Income available to common stockholders $86,332 110,610 $ 0.78
======= ======= =======
</TABLE>
For the three and nine month periods ended September 30, 1999, basic
and diluted earnings of $0.22 per common share were calculated from the date of
our reorganization (July 13, 1999), using net income of $25.0 million and
weighted average number of shares outstanding of 115,087,000.
5. - EMPLOYEE STOCK BENEFIT PLANS
The employee stock ownership plan ("ESOP") is authorized to purchase up
to 8%, or 4,348,000 shares, of Hudson City Bancorp common stock that was sold in
the reorganization. Through September 30, 2000, the ESOP had purchased the
entire amount of shares authorized at an average cost of $13.53 per share.
The stockholders of Hudson City Bancorp, at a Special Meeting of
Stockholders held on January 13, 2000, approved the adoption of the Hudson City
Bancorp, Inc. 2000 Stock Option Plan and the Hudson City Bancorp, Inc. 2000
Recognition and Retention Plan.
Under the Stock Option Plan, Hudson City Bancorp has reserved 5,435,000
shares of Hudson City Bancorp common stock for issuance upon the exercise of
options under the plan. As of September 30, 2000, total options of 4,497,000 had
been granted under the plan, of which 18,000 shares have been forfeited by
employees. Options granted may be incentive stock options that qualify for
special federal income tax treatment or non-qualified stock options that do not
qualify for special federal income tax treatment. Incentive stock options are
subject to additional restrictions under the Internal Revenue Code and the plan.
Each option granted entitles the holder to purchase one share of Hudson
City Bancorp's common stock at an exercise price of $13.875, equal to the fair
market value on January 13, 2000, the date of grant. We expect that there will
be no compensation cost attributable to these options as Hudson City uses the
intrinsic value based method of accounting. These options will vest primarily
over a five year period and will expire no later than ten years following the
grant date.
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Hudson City Bancorp, Inc.
Form 10-Q
Under the RRP, Hudson City Bancorp established a trust to which it
contributed certain amounts of money. The trustee invested the assets of the
trust primarily in shares of Hudson City Bancorp's common stock that were used
to make restricted stock awards. The stock purchases were made on the open
market. The trust is authorized to purchase not more than 2,174,000 shares of
Hudson City Bancorp common stock. As of September 30, 2000, the trust had
purchased and awarded 1,966,100 shares.
As a general rule, these restricted stock grants are held in trust for
the benefit of the award recipient until vested. Compensation cost attributable
to these restricted stock awards was determined on January 13, 2000, the grant
date of the awards. The compensation cost that was measured on the grant date is
being expensed ratably over the five year vesting period.
Any employee of Hudson City or any affiliate approved by the Board of
Directors may be selected to receive option grants and restricted stock awards.
Directors of Hudson City or any affiliate approved by the Board of Directors who
are not employees or officers may also be selected to receive option grants and
restricted stock awards. A committee of outside directors administers both the
stock option plan and the RRP.
6. - STOCKHOLDERS' EQUITY
Under our stock repurchase program, Hudson City Bancorp may purchase
shares of common stock in the open market and through other private transactions
from time-to-time, depending on market conditions. The repurchased shares are
held as treasury stock for general corporate use. As of September 30, 2000, we
had repurchased 1,549,000 shares under the program at an average cost of $16.50
per share.
7. - SUBSEQUENT EVENT
On October 12, 2000, the Board of Directors of Hudson City Bancorp
declared a quarterly cash dividend of nine cents ($0.09) per common share
outstanding. The dividend is payable on December 1, 2000 to stockholders of
record at the close of business on November 10, 2000.
8. - RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25." The interpretation
clarifies certain issues with respect to the application of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"). Among other issues, the interpretation clarifies the accounting
for modifications to stock awards, as well as the definition of employee for
purposes of applying APB No. 25. The provisions of the interpretation were
effective July 1, 2000 and apply prospectively, but certain conclusions in the
interpretation cover specific events that occur after December 15, 1998. The
initial adoption of the interpretation did not have a material impact on the
financial position or results of operations of Hudson City Bancorp.
Page 9
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Hudson City Bancorp, Inc.
Form 10-Q
In June 2000, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133." SFAS No.
138 amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. SFAS 138 and SFAS 133 are
effective for fiscal years beginning after June 15, 2000 and should not be
applied retroactively to prior period financial statements. The initial adoption
of SFAS 138 and SFAS 133 is not expected to have a material impact on the
financial position or results of operations of Hudson City Bancorp.
In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, a
replacement of FASB Statement No. 125." SFAS No. 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carries over most of SFAS
No. 125's provisions without reconsideration. While most of the provisions of
SFAS 140 are effective for transactions entered into after March 31, 2001,
certain of the provisions are effective for financial statements ending after
December 15, 2000. The initial adoption of SFAS No. 140 is not expected to have
a material impact on the financial position or results of operations of Hudson
City Bancorp.
Page 10
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Hudson City Bancorp, Inc.
Form 10-Q
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Hudson City Savings completed the reorganization, as described in Note
2 to the unaudited consolidated financial statements, on July 13, 1999. Prior to
July 13, 1999, Hudson City Bancorp had not yet issued any stock, had no assets
and no liabilities and had not conducted any business other than of an
organizational nature. Accordingly, comparative information prior to the
reorganization relates solely to the financial statements of Hudson City
Savings. Effective upon the closing of the reorganization, Hudson City Bancorp
acquired all of the issued and outstanding capital stock of Hudson City Savings.
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
Our total assets increased $643.2 million, or 7.5%, to $9.16 billion at
September 30, 2000 from $8.52 billion at December 31, 1999. This increase,
funded by borrowed funds, was generally reflected in increases in mortgage loans
and mortgage-backed securities.
Loans increased $507.2 million, or 11.8%, to $4.81 billion at September
30, 2000 from $4.31 billion at December 31, 1999. For the three and nine months
ended September 30, 2000, we originated and purchased first mortgage loans of
approximately $296.7 million and $834.9 million, respectively. These
originations and purchases were concentrated in one-to four-family residential
mortgage loans. We also originated for the three and nine months ended September
30, 2000, home equity loans of approximately $17.6 million and $54.2 million,
respectively. Mortgage-backed securities increased $137.1 million, or 4.4%, to
$3.23 billion at September 30, 2000 from $3.10 billion at December 31, 1999.
Investment securities available for sale increased $41.8 million, or 5.1%, to
$853.9 million at September 30, 2000 from $812.1 million at December 31, 1999.
These increases continue to reflect our emphasis on the origination and purchase
of one-to four-family mortgage loans supplemented by the purchase of
mortgage-backed securities. Due to our recent membership in the Federal Home
Loan Bank of New York ("FHLB"), we purchased FHLB stock of $40.0 million. We are
currently required to purchase approximately $34.0 million of additional FHLB
stock by April 30, 2001.
These increases in interest-earning assets were partially offset by an
$89.1 million, or 44.4%, decrease in total cash and cash equivalents to $111.7
million at September 30, 2000 from $200.8 million at December 31, 1999. The
decrease in total cash and cash equivalents reflects the reduction from the
higher level of planned liquidity that was maintained at December 31, 1999 due
to the general public's concern over the Year 2000 computer issue. Accrued
interest receivable increased $5.3 million, or 10.2%, to $57.3 million at
September 30, 2000 from $52.0 million at December 31, 1999 primarily due to the
growth in our mortgage loans and mortgage-backed securities.
At September 30, 2000, total liabilities were $7.69 billion, an
increase of 9.3%, or $652.7 million, compared with $7.04 billion at December 31,
1999. Borrowed funds, consisting entirely of securities sold under agreements to
repurchase, increased $800.0 million to $1.10 billion at September 30, 2000 from
$300.0 million at December 31, 1999. The use of borrowed funds has accelerated
over the past year to fund asset growth consistent with our capital management
strategy as well as to offset the decrease in total deposits. Funding asset
growth with borrowed funds generated additional earnings through a positive
interest rate spread on the borrowed funds that were invested.
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Hudson City Bancorp, Inc.
Form 10-Q
Total deposits decreased $154.3 million, or 2.3%, to $6.53 billion at
September 30, 2000 from $6.69 billion at December 31, 1999. Interest-bearing
deposits decreased $167.0 million, or 2.6%, to $6.21 billion at September 30,
2000 from $6.38 billion at December 31, 1999. The decrease in interest-bearing
deposits reflects a $91.9 million, or 1.8%, decrease in time deposits to $4.90
billion at September 30, 2000 from $4.99 billion at December 31, 1999, a $35.6
million, or 7.3%, decrease in money market accounts to $451.2 million at
September 30, 2000 from $486.8 million at December 31, 1999, and a $34.4
million, or 4.3%, decrease in regular savings deposits to $769.7 million at
September 30, 2000 from $804.1 million at December 31, 1999. We believe the
decrease in interest-bearing deposits is due in part to the intense competition
for deposits in the banking and financial services industry. The decrease in
interest-bearing deposits was partially offset by an increase in
noninterest-bearing deposits, particularly demand deposit accounts, of $12.8
million, or 4.2%, to $320.9 million at September 30, 2000 from $308.1 million at
December 31, 1999. This increase is partially attributable to the introduction
of a free checking account product during the second quarter of 2000.
Accrued expenses and other liabilities increased $7.0 million, or
13.5%, to $58.8 million at September 30, 2000 from $51.8 million at December 31,
1999. This increase is primarily due to an increase in accrued interest payable
on borrowed funds.
Total stockholders' equity decreased $9.5 million, or 0.6%, to $1.47
billion at September 30, 2000 from $1.48 billion at December 31, 1999. The
decrease was primarily due to purchases of common stock for employee stock
benefit plans, the implementation of our stock repurchase program, and dividends
declared on Bancorp common stock. Unallocated common stock held by the ESOP
decreased stockholders' equity $33.8 million primarily due to purchases of
Hudson City Bancorp common stock by the plan. The balance in unearned common
stock held by the RRP was $25.2 million at September 30, 2000, primarily due to
purchases of Hudson City Bancorp common stock by the plan. Treasury stock shares
totaling 1,549,000 purchased during 2000 decreased stockholders' equity by $25.6
million. Stockholders' equity also decreased $22.2 million due to the
declarations of cash dividends to common stockholders during the first nine
months of 2000. These decreases in stockholders' equity were partially offset by
net income of $86.3 million for the first nine months of 2000 and a year-to-date
unrealized gain of $10.8 million in accumulated other comprehensive loss due to
increases in the market values of our investment securities available for sale.
At September 30, 2000, the ratio of total stockholders' equity to total
assets was 16.04% compared with 17.36% at December 31, 1999. For the nine months
ended September 30, 2000, the ratio of average stockholders' equity to average
assets was 16.55% compared with 14.60% for the year ended December 31, 1999.
Stockholders' equity per common share was $13.58 at September 30, 2000 compared
with $12.99 at December 31, 1999.
Average Balance Sheets. The tables on the following pages present
certain information regarding Hudson City Bancorp's financial condition and net
interest income for the three and nine month periods ended September 30, 2000
and 1999. The tables present the annualized average yield on interest-earning
assets and the annualized average cost of interest-bearing liabilities. We
derived the yields and costs by dividing annualized income or expense by the
average balance of interest-earning assets and interest-bearing liabilities,
respectively, for the periods shown. We derived average balances from daily
balances over the periods indicated. Interest income includes fees which we
considered adjustments to yields. Yields on tax-exempt obligations were not
computed on a tax equivalent basis.
Page 12
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Hudson City Bancorp, Inc.
Form 10-Q
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
--------------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
First mortgage loans, net (1) ................ $4,553,767 $ 84,175 7.39% $3,857,853 $ 69,929 7.25%
Consumer and other loans ..................... 136,272 2,800 8.22 97,157 1,947 8.02
Federal funds sold ........................... 60,897 981 6.41 62,171 773 4.93
Mortgage-backed securities ................... 3,173,729 54,349 6.85 3,125,958 47,679 6.10
FHLB stock ................................... 28,261 501 7.09 -- -- --
Investment securities, at cost ............... 883,285 13,720 6.21 995,777 15,133 6.08
---------- ---------- ---------- ----------
Total interest-earning assets ............. 8,836,211 156,526 7.09 8,138,916 135,461 6.66
---------- ---------- ----------
Noninterest-earning assets ........................ 154,457 152,033
---------- ----------
Total assets .............................. $8,990,668 $8,290,949
========== ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings accounts ............................. $ 778,217 $ 4,682 2.39 $ 871,713 $ 5,637 2.57
Interest-bearing demand accounts ............. 95,005 415 1.74 96,410 519 2.14
Money market accounts ........................ 458,241 2,887 2.51 498,222 3,405 2.71
Time deposits ................................ 4,891,242 70,670 5.75 5,031,243 63,313 4.99
---------- ---------- ---------- ----------
Total deposits ............................ 6,222,705 78,654 5.03 6,497,588 72,874 4.45
Borrowed funds ............................... 910,857 14,511 6.34 7,065 102 5.73
---------- ---------- ---------- ----------
Total interest-bearing liabilities ........ 7,133,562 93,165 5.20 6,504,653 72,976 4.45
---------- ---------- ---------- ----------
Noninterest-bearing liabilities:
Noninterest-bearing deposits ................. 325,808 319,848
Other noninterest-bearing liabilities ........ 72,730 59,389
---------- ----------
Total noninterest-bearing liabilities ..... 398,538 379,237
---------- ----------
Total liabilities ............................ 7,532,100 6,883,890
Stockholders' equity ......................... 1,458,568 1,407,059
---------- ----------
Total liabilities and stockholders' equity $8,990,668 $8,290,949
========== ==========
Net interest income/net interest rate spread (2) .. $ 63,361 1.89% $ 62,485 2.21%
========== ==========
Net interest-earning assets/net interest margin (3) $1,702,649 2.89% $1,634,263 3.10%
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities ................. 1.24 X 1.25 X
</TABLE>
----------
(1) Amount is net of deferred loan fees and allowance for loan losses and
includes non-performing loans.
(2) We determined net interest spread by subtracting the annualized
weighted average cost of average interest-bearing liabilities from the
annualized weighted average yield on average interest-earning assets.
(3) We determined net interest margin by dividing annualized net interest
income by average interest-earning assets.
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Hudson City Bancorp, Inc.
Form 10-Q
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
--------------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets:
First mortgage loans, net (1) ................ $4,387,168 $ 240,938 7.32% $3,697,876 $ 202,967 7.32%
Consumer and other loans ..................... 125,678 7,610 8.07 90,508 5,437 8.01
Federal funds sold ........................... 74,151 3,340 6.02 58,634 2,036 4.64
Mortgage-backed securities ................... 3,179,256 157,361 6.60 3,095,786 143,555 6.18
FHLB stock ................................... 11,314 595 7.01 -- -- --
Investment securities, at cost ............... 881,837 41,121 6.22 909,851 42,333 6.20
---------- ---------- ---------- ----------
Total interest-earning assets ............. 8,659,404 450,965 6.94 7,852,655 396,328 6.73
---------- ----------
Noninterest-earning assets ........................ 148,365 160,037
---------- ----------
Total assets .............................. $8,807,769 $8,012,692
========== ==========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Savings accounts ............................. $ 789,619 $ 14,704 2.49 $ 862,494 $ 16,828 2.61
Interest-bearing demand accounts ............. 96,268 1,439 2.00 97,331 1,544 2.12
Money market accounts ........................ 468,933 9,197 2.62 501,515 10,332 2.75
Time deposits ................................ 4,931,347 204,339 5.53 5,095,581 193,871 5.09
---------- ---------- ---------- ----------
Total deposits ............................ 6,286,167 229,679 4.88 6,556,921 222,575 4.54
Borrowed funds ............................... 672,076 31,069 6.18 2,381 102 5.75
---------- ---------- ---------- ----------
Total interest-bearing liabilities ........ 6,958,243 260,748 5.01 6,559,302 222,677 4.54
---------- ---------- ---------- ----------
Noninterest-bearing liabilities:
Noninterest-bearing deposits ................. 319,769 309,125
Other noninterest-bearing liabilities ........ 72,336 57,378
---------- ----------
Total noninterest-bearing liabilities ..... 392,105 366,503
---------- ----------
Total liabilities ............................ 7,350,348 6,925,805
Stockholders' equity ......................... 1,457,421 1,086,887
---------- ----------
Total liabilities and stockholders' equity $8,807,769 $8,012,692
========== ==========
Net interest income/net interest rate spread (2) .. $ 190,217 1.93% $ 173,651 2.19%
========== ==========
Net interest-earning assets/net interest margin (3) $1,701,161 2.92% $1,293,353 2.94%
========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities ................. 1.24 X 1.20 X
</TABLE>
----------
(1) Amount is net of deferred loan fees and allowance for loan losses and
includes non-performing loans.
(2) We determined net interest spread by subtracting the annualized
weighted average cost of average interest-bearing liabilities from the
annualized weighted average yield on average interest-earning assets.
(3) We determined net interest margin by dividing annualized net interest
income by average interest-earning assets.
Page 14
<PAGE> 15
Hudson City Bancorp, Inc.
Form 10-Q
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
General. Net income was $29.1 million for the three months ended
September 30, 2000, an increase of $0.3 million, or 1.0%, from net income of
$28.8 million for the three months ended September 30, 1999. Basic and diluted
earnings per common share were $0.27 and $0.26, respectively, for the three
months ended September 30, 2000. Basic and diluted earnings per common share
were $0.22 for the period ended September 30, 1999. The increase in net income
was primarily attributable to an increase of $21.0 million in interest income, a
decrease of $1.9 million in income tax expense, offset by increases of $20.2
million in interest expense and $2.6 million in non-interest expense. Our
annualized return on average assets for the three month period ended September
30, 2000 was 1.29% compared with 1.39% for the three month period ended
September 30, 1999. Our annualized return on average equity for the third
quarter of 2000 was 7.97% compared with 8.18% for the third quarter of 1999.
Interest Income. Total interest income increased $21.0 million, or
15.5%, to $156.5 million for the three months ended September 30, 2000 compared
with $135.5 million for the three months ended September 30, 1999. Interest and
fees on first mortgage loans increased $14.3 million, or 20.5%, to $84.2 million
for the three months ended September 30, 2000 compared with $69.9 million for
the three months ended September 30, 1999. Interest and fees on consumer and
other loans increased $0.9 million or 47.4% to $2.8 million for the quarter
ended September 30, 2000 compared with $1.9 million for the corresponding 1999
quarter. Interest on mortgage-backed securities increased $6.6 million, or
13.8%, to $54.3 million for the three months ended September 30, 2000 compared
with $47.7 million for the three months ended September 30, 1999. Interest on
investment securities decreased $1.4 million, or 9.3%, to $13.7 million for the
third quarter of 2000 compared with $15.1 million for the third quarter of 1999.
The increase in total interest income was due in part to the average
balance of total interest-earning assets increasing $697.3 million, or 8.6%, to
$8.84 billion for the three month period ended September 30, 2000 compared with
$8.14 billion for the three month period ended September 30, 1999. This increase
was primarily attributable to a $695.9 million, or 18.0%, increase in the
average balance of first mortgage loans, net to $4.55 billion for the three
month period ended September 30, 2000 compared with $3.86 billion for the three
month period ended September 30, 1999. The average balance of consumer and other
loans increased $39.1 million, or 40.2%, to $136.3 million for the third quarter
of 2000 compared with $97.2 million for the third quarter of 1999. The average
balance of mortgage-backed securities increased $47.8 million, or 1.5%, to $3.17
billion for the three month period ended September 30, 2000 compared with $3.13
billion for the corresponding 1999 period. These increases were offset in part
by a decrease in the average balance of investment securities of $112.5 million,
or 11.3%, to $883.3 million for the three month period ended September 30, 2000
compared with $995.8 million for the corresponding 1999 period. The average
balance of FHLB stock for the third quarter of 2000 was $28.3 million. We did
not own FHLB stock in the third quarter of 1999.
The above increases in the average balances of interest-earning assets
reflect internal growth that was financed by borrowed funds and was consistent
with our capital management strategy to originate and purchase first mortgage
loans and consumer and other loans, while purchasing mortgage-backed securities
to manage interest rate risk. In addition, the growth also reflects a decline in
prepayment activity, year-to-year, primarily due to the increase in market
interest rates. The decline in
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Hudson City Bancorp, Inc.
Form 10-Q
the average balance of investment securities reflects the initial deployment of
funds received during our reorganization into short-term securities during the
third quarter of 1999. These short-term securities were eventually reinvested in
our loan and mortgage-backed security portfolios, which currently generate
higher yields.
The increase in interest income was also attributable to an increase in
the annualized average yield on interest-earning assets to 7.09% for the three
month period ended September 30, 2000 compared with 6.66% for the corresponding
1999 period. The annualized average yield on first mortgage loans, net increased
14 basis points to 7.39% for the third quarter of 2000 compared with 7.25% for
the third quarter of 1999. The annualized average yield on mortgage-backed
securities increased 75 basis points to 6.85% for the three month period ended
September 30, 2000 compared with 6.10% for the three month period ended
September 30, 1999. The annualized average yield on investment securities
increased to 6.21% for the three month period ended September 30, 2000 compared
with 6.08% for the corresponding 1999 period.
The increase in the annualized average yield on first mortgage loans,
net, is due to the overall increase in market interest rates. However, the
increase in the annualized average yield on first mortgage loans has not kept
pace with the increase in overall market interest rates, due to the slow-down in
prepayment activity which has slowed the overall repricing of our loan
portfolio. The increase in the annualized average yield on mortgage-backed
securities reflects the increases in market interest rates, as our portfolio
consists predominantly of adjustable-rate securities. The annualized average
yield on investment securities increased in 2000 due to the maturing of the
lower-yielding, short-term investments held in the third quarter of 1999.
Interest Expense. Total interest expense increased $20.2 million, or
27.7%, to $93.2 million for the three month period ended September 30, 2000
compared with $73.0 million for the three month period ended September 30, 1999.
Interest expense on borrowed funds increased $14.4 million to $14.5 million for
the quarter ended September 30, 2000 compared with $0.1 million for the quarter
ended September 30, 1999. Interest expense on deposits increased $5.8 million,
or 8.0%, to $78.7 million for the three months ended September 30, 2000 compared
with $72.9 million for the three months ended September 30, 1999.
The increase in interest expense was attributable in part to an
increase in the average balance of interest-bearing liabilities of $628.9
million, or 9.7%, to $7.13 billion for the three months ended September 30, 2000
compared with $6.50 billion for the corresponding 1999 period. The increase in
the average balance of total interest-bearing liabilities resulted from an
increase of $903.8 million in the average balance of borrowed funds to $910.9
million for the quarter ended September 30, 2000 compared with $7.1 million for
the quarter ended September 30, 1999. The use of borrowed funds has accelerated
over the past year to fund asset growth consistent with our capital management
strategy as well as to offset the decrease in the average balance of
interest-bearing deposits.
The average balance of interest-bearing deposits decreased $274.9
million, or 4.2%, to $6.22 billion for the three month period ended September
30, 2000 compared with $6.50 billion for the three month period ended September
30, 1999. Within the interest-bearing deposit mix, the average balance of time
deposits decreased $140.0 million, or 2.8%, to $4.89 billion for the third
quarter of 2000 compared with $5.03 billion for the third quarter of 1999. The
average balance of regular savings deposits decreased $93.5 million, or 10.7%,
to $778.2 million for the quarter ended September 30, 2000 compared with $871.7
million for the quarter ended September 30, 1999. The decrease in the
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Hudson City Bancorp, Inc.
Form 10-Q
average balance of interest-bearing deposits reflects the effect of the intense
competition for deposits in the banking and financial services industry, the use
by our depositors of approximately $110.0 million of funds on deposit with
Hudson City Savings Bank to fund their Hudson City Bancorp common stock
purchases during the reorganization, and the inclusion of the cash received from
the sale of our common stock in 1999 in the average balance of regular savings
deposits.
The increase in interest expense was also attributable to a 75 basis
point increase in the annualized average cost of interest-bearing liabilities to
5.20% for the quarter ended September 30, 2000 from 4.45% for the corresponding
1999 quarter. The annualized average cost of borrowed funds increased 61 basis
points to 6.34% for the quarter ended September 30, 2000 compared with 5.73% for
the corresponding 1999 quarter. The annualized average cost of interest-bearing
deposits increased 58 basis points to 5.03% for the three month period ended
September 30, 2000 compared with 4.45% for the three month period ended
September 30, 1999. Within the interest-bearing deposit mix, the annualized
average cost of time deposits increased 76 basis points to 5.75% for the third
quarter of 2000 compared with 4.99% for the corresponding 1999 quarter. The
increase in the annualized average cost of borrowed funds and the overall
average cost of interest-bearing deposits reflects the rising market interest
rate environment over the period, the fact that the majority of our time
deposits reprice within one year, and our current short-term borrowing strategy.
Net Interest Income. Net interest income increased $0.9 million, or
1.4%, to $63.4 million for the three month period ended September 30, 2000
compared with $62.5 million for the three month period ended September 30, 1999.
Our net interest rate spread, the difference between the annualized average
yield on average total interest-earning assets and the annualized average cost
of average total interest-bearing liabilities, decreased 32 basis points to
1.89% for the three month period ended September 30, 2000 compared with 2.21%
for the corresponding 1999 period. Our net interest margin, represented by net
interest income divided by average total interest-earning assets, decreased 21
basis points to 2.89% for the third quarter of 2000 compared with 3.10% for the
third quarter of 1999. The slight increase in net interest income, in
conjunction with the decreases in the net interest rate spread and net interest
margin, reflect the rising market interest rate environment over the period, the
fact that our interest-bearing liabilities reprice faster than our
interest-earning assets, and a shift within interest-bearing liabilities to
higher costing funds.
Provision for Loan Losses. Our provision for loan losses for the third
quarter of 2000 was $480,000 compared with $600,000 for the third quarter of
1999. The allowance for loan losses increased $1.7 million, or 8.5%, to $21.7
million at September 30, 2000 from $20.0 million at December 31, 1999.
Non-performing loans, defined as non-accruing loans and accruing loans
delinquent 90 days or more, decreased $1.3 million, or 9.3%, to $12.7 million at
September 30, 2000 from $14.0 million at December 31, 1999. Net loan charge-offs
during the third quarter of 2000 were $13,000. The increase in the allowance for
loan losses is primarily due to the growth of the loan portfolio. The decrease
in the provision, year-to-year, reflects the decrease in total non-performing
loans as a percent of total loans.
Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and the underlying collateral, trends
in non-performing loans, current economic conditions and other relevant factors
in order to maintain the allowance for loan losses at adequate levels to provide
for estimated losses.
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Hudson City Bancorp, Inc.
Form 10-Q
At September 30, 2000, the ratio of non-performing loans to total loans
was 0.26% compared with 0.33% at December 31, 1999. The ratio of the allowance
for loan losses to non-performing loans was 170.24% at September 30, 2000
compared with 142.65% at December 31, 1999. The ratio of non-performing assets
to total assets was 0.14% at September 30, 2000 compared with 0.17% at December
31, 1999. The ratio of the allowance for loan losses to total loans was 0.45% at
September 30, 2000 compared with 0.46% at December 31, 1999.
Non-Interest Income. Total non-interest income, consisting primarily of
service fees, remained stable at $1.2 million for both three month periods ended
September 30, 2000 and 1999.
Non-Interest Expense. Total non-interest expense increased $2.6
million, or 15.3%, to $19.6 million for the three months ended September 30,
2000 compared with $17.0 million for the three months ended September 30, 1999.
Salaries and employee benefits increased $1.8 million, or 16.8%, to $12.5
million for the quarter ended September 30, 2000 compared with $10.7 million for
the quarter ended September 30, 1999, primarily due to routine salary increases
and expense recognized in 2000 for the RRP. There was no comparable RRP expense
recognized in the third quarter of 1999.
Net occupancy expense increased $0.4 million, or 12.9%, to $3.5 million
for the quarter ended September 30, 2000 compared with $3.1 million for the
corresponding 1999 quarter. The increase is primarily due to increases in
maintenance and repairs of banking premises and equipment and increases in
rental expense. Federal deposit insurance expense increased primarily due to an
industry wide increase in the assessment charged by the FDIC. Goodwill was fully
amortized as of December 31, 1999, resulting in no amortization expense for the
quarter ended September 30, 2000.
Other expenses increased $0.7 million, or 29.2%, to $3.1 million for
the quarter ended September 30, 2000 compared with $2.4 million for the
corresponding 1999 quarter. The increase in other expenses was primarily due to
increases in operating expenses incurred in the third quarter of 2000 related to
our existence as a public company, such as increased fees for professional
services and expense related to the RRP allocation of common stock to
non-officer directors.
Our efficiency ratio, which we determined by dividing non-interest
expense by the sum of net interest income and non-interest income, excluding net
gains on securities transactions, was 30.4% for the third quarter of 2000
compared with 26.7% for the third quarter of 1999. Our ratio of non-interest
expense to average assets was 0.87% for the third quarter of 2000 compared with
0.82% for the third quarter of 1999. The increases in these ratios reflect the
increases, quarter-to-quarter, in non-interest expense discussed above.
Income Taxes. Income tax expense decreased $1.9 million, or 11.0%, to
$15.4 million for the three month period ended September 30, 2000 compared with
$17.3 million for the three month period ended September 30, 1999. The effective
tax rate for the third quarter of 2000 was 34.6% compared with an effective tax
rate of 37.5% for the third quarter of 1999. The decrease in income tax expense
and the effective tax rate was due to a realignment of corporate entities.
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Hudson City Bancorp, Inc.
Form 10-Q
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999
General. Net income was $86.3 million for the nine months ended
September 30, 2000, an increase of $8.3 million, or 10.6%, from net income of
$78.0 million for the nine months ended September 30, 1999. Basic and diluted
earnings per common share were $0.78 for the nine months ended September 30,
2000. From the date of our reorganization (July 13, 1999) to September 30, 1999,
basic and diluted earnings were $0.22 per common share. The increase in net
income was attributable to an increase of $54.7 million in interest income,
offset in part by increases of $38.0 million in interest expense and $7.3
million in non-interest expense. Our annualized return on average assets for the
nine month period ended September 30, 2000 was 1.31% compared with 1.30% for the
nine month period ended September 30, 1999. Our annualized return on average
equity for the first nine months of 2000 was 7.90% compared with 9.57% for the
first nine months of 1999. This decrease in the annualized return on average
equity was primarily due to the additional equity received in connection with
the reorganization.
Interest Income. Total interest income increased $54.7 million, or
13.8%, to $451.0 million for the nine months ended September 30, 2000 compared
with $396.3 million for the nine months ended September 30, 1999. Interest and
fees on first mortgage loans increased $37.9 million, or 18.7%, to $240.9
million for the nine months ended September 30, 2000 compared with $203.0
million for the nine months ended September 30, 1999. Interest and fees on
consumer and other loans increased $2.2 million, or 40.7%, to $7.6 million for
the nine months ended September 30, 2000 compared with $5.4 million for the
corresponding 1999 period. Interest on mortgage-backed securities increased
$13.8 million, or 9.6%, to $157.4 million for the nine months ended September
30, 2000 compared with $143.6 million for the nine months ended September 30,
1999.
The increase in total interest income was primarily due to the average
balance of total interest-earning assets increasing $806.7 million, or 10.3%, to
$8.66 billion for the nine month period ended September 30, 2000 compared with
$7.85 billion for the nine month period ended September 30, 1999. This increase
was primarily attributable to a $689.3 million, or 18.6%, increase in the
average balance of first mortgage loans, net to $4.39 billion for the nine month
period ended September 30, 2000 compared with $3.70 billion for the nine month
period ended September 30, 1999. The average balance of consumer and other loans
increased $35.2 million, or 38.9%, to $125.7 million for the nine month period
ended September 30, 2000 compared with $90.5 million for the nine month period
ended September 30, 1999. The average balance of mortgage-backed securities
increased $83.5 million, or 2.7%, to $3.18 billion for the nine month period
ended September 30, 2000 compared with $3.10 billion for the corresponding 1999
period. The average balance of investment securities for the nine month period
ended September 30, 2000 was $881.8 million, a decrease of $28.1 million, or
3.1%, from the average balance of $909.9 million for the corresponding nine
month period in 1999. The average balance of FHLB stock purchased was $11.3
million for the first nine months of 2000. We did not own FHLB stock in 1999.
The above increases in the average balances of interest-earning assets
reflect internal growth that was financed by borrowed funds and was consistent
with our capital management strategy to originate and purchase first mortgage
loans and consumer and other loans, while purchasing mortgage-backed securities
to manage interest rate risk. In addition, the growth also reflects a decline in
prepayment activity, year-to-year, primarily due to the increase in market
interest rates. The decline in the average balance of investment securities
reflects the initial deployment of funds received during
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Hudson City Bancorp, Inc.
Form 10-Q
our reorganization into short-term securities during the second and third
quarters of 1999. These short-term securities were eventually reinvested in our
loan and mortgage-backed security portfolios, which currently generate higher
yields.
The increase in interest income was also attributable to an increase in
the annualized average yield on interest-earning assets to 6.94% for the nine
month period ended September 30, 2000 compared with 6.73% for the corresponding
1999 period. The annualized average yield on first mortgage loans, net was 7.32%
for the first nine months of 2000 and 1999. The annualized average yield on
mortgage-backed securities increased 42 basis points to 6.60% for the nine month
period ended September 30, 2000 compared with 6.18% for the nine month period
ended September 30, 1999. The annualized average yield on investment securities
increased slightly to 6.22% for the nine month period ended September 30, 2000
compared with 6.20% for the corresponding 1999 period. The stability in the
annualized average yield on first mortgage loans, net, in the higher market
interest rate environment, reflects a slow-down in prepayment activity during
the period and the origination of primarily fixed rate mortgages in 1999 and
2000. The increase in the annualized average yield on mortgage-backed securities
reflects the increase in market interest rates, as our portfolio contains
predominantly adjustable-rate securities.
Interest Expense. Total interest expense increased $38.0 million, or
17.1%, to $260.7 million for the nine month period ended September 30, 2000
compared with $222.7 million for the nine month period ended September 30, 1999.
Interest expense on borrowed funds increased $31.0 million to $31.1 for the nine
month period September 30, 2000 compared with $0.1 million for the nine month
period ended September 30, 1999. Interest expense on deposits increased $7.1
million, or 3.2%, to $229.7 million for the nine months ended September 30, 2000
compared with $222.6 million for the nine months ended September 30, 1999.
The increase in interest expense was attributable in part to an
increase in the average balance of interest-bearing liabilities of $398.9
million, or 6.1%, to $6.96 billion for the nine months ended September 30, 2000
compared with $6.56 billion for the corresponding 1999 period. The increase in
the average balance of total interest-bearing liabilities resulted from an
increase in the average balance of borrowed funds of $669.7 million to $672.1
million for the nine months ended September 30, 2000 compared with $2.4 million
for the nine months ended September 30, 1999. The use of borrowed funds has
accelerated over the past year to offset the decrease in the average balance of
interest-bearing deposits and to fund asset growth consistent with our capital
management strategy.
The average balance of interest-bearing deposits decreased $270.8
million, or 4.1%, to $6.29 billion for the nine months ended September 30, 2000
compared with $6.56 billion for the nine months ended September 30, 1999. Within
the interest-bearing deposit mix, the average balance of time deposits decreased
$164.2 million, or 3.2%, to $4.93 billion for the first nine months of 2000
compared with $5.10 billion for the first nine months of 1999. The average
balance of regular savings deposits decreased $72.9 million, or 8.5%, to $789.6
million for the nine months ending September 30, 2000 compared with $862.5
million for the nine months ending September 30, 1999. The decrease in the
average balance of interest-bearing deposits primarily reflects the effect of
the intense competition for deposits in the banking and financial services
industry, the use by our depositors of approximately $110.0 million of funds on
deposit with Hudson City Savings Bank to fund their Hudson City Bancorp common
stock purchases during the reorganization, and the inclusion of the cash
received from the sale of our common stock in 1999 in the average balance of
regular savings deposits.
Page 20
<PAGE> 21
Hudson City Bancorp, Inc.
Form 10-Q
The increase in interest expense was also attributable to a 47 basis
point increase in the annualized average cost of interest-bearing liabilities to
5.01% for the nine months ended September 30, 2000 from 4.54% for the
corresponding 1999 period. The annualized average cost of borrowed funds
increased 43 basis points to 6.18% for the nine months ended September 30, 2000
compared with 5.75% for the nine months ended September 30, 1999. The annualized
average cost of interest-bearing deposits increased 34 basis points to 4.88% for
the nine month period ended September 30, 2000 compared with 4.54% for the nine
month period ended September 30, 1999. Within the interest-bearing deposit mix,
the annualized average cost of time deposits increased 44 basis points to 5.53%
for the first nine months of 2000 compared with 5.09% for the corresponding 1999
period. The increase in the annualized average cost of borrowed funds and
interest-bearing deposits reflects the rising market interest rate environment
over the period, the fact that the majority of our time deposits reprice within
one year, and our current short-term borrowing strategy.
Net Interest Income. Net interest income increased $16.5 million, or
9.5%, to $190.2 million for the nine month period ended September 30, 2000
compared with $173.7 million for the nine month period ended September 30, 1999.
This increase primarily reflects the increase in the average balance of first
mortgage loans, net and our other investments due to the use of the net proceeds
from the reorganization, and the additional earnings generated on the borrowed
funds that were invested. Our net interest rate spread, the difference between
the annualized average yield on average total interest-earning assets and the
annualized average cost of average total interest-bearing liabilities, decreased
26 basis points to 1.93% for the nine month period ended September 30, 2000
compared with 2.19% for the corresponding 1999 period. Our net interest margin,
represented by net interest income divided by average total interest-earning
assets, decreased 2 basis points to 2.92% for the first nine months of 2000
compared with 2.94% for the first nine months of 1999. The decreases in the net
interest rate spread and the net interest margin reflect the rising market
interest rate environment over the period, the fact that our interest-bearing
liabilities reprice faster than our interest-earning assets, and a shift within
interest-bearing liabilities to higher costing funds.
Provision for Loan Losses. Our provision for loan losses for the first
nine months of 2000 was $1.68 million, a decrease of $70,000, or 4.2%, compared
with $1.75 million for the corresponding 1999 period. There were net loan
charge-offs of $5,000 during the first nine months of 2000. The increase in the
allowance for loan losses is primarily due to the growth of the loan portfolio.
The decrease in the provision, year-to-year, reflects the lower non-performing
loans to total loans ratio.
Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and the underlying collateral, trends
in non-performing loans, current economic conditions and other relevant factors
in order to maintain the allowance for loan losses at adequate levels to provide
for estimated losses.
Non-Interest Income. Total non-interest income, consisting primarily of
service fees, was $3.5 million for both the nine month periods ended September
30, 2000 and 1999.
Non-Interest Expense. Total non-interest expense increased $7.3
million, or 14.3%, to $58.5 million for the nine months ended September 30, 2000
compared with $51.2 million for the nine months ended September 30, 1999.
Salaries and employee benefits increased $4.2 million, or 13.0%, to $36.6
million for the nine months ended September 30, 2000 compared with $32.4 million
for the nine months ended September 30, 1999, primarily due to expense
recognized in 2000 for the ESOP and RRP and routine salary increases.
Page 21
<PAGE> 22
Hudson City Bancorp, Inc.
Form 10-Q
Net occupancy expense increased $1.1 million, or 12.4%, to $10.0
million for the nine months ended September 30, 2000 compared with $8.9 million
for the corresponding 1999 period. The increase is primarily due to increases in
maintenance and repairs of banking premises and equipment and increases in
rental expense. Federal deposit insurance expense increased primarily due to an
industry wide increase in the assessment charged by the FDIC. Goodwill was fully
amortized as of December 31, 1999, resulting in no amortization expense for the
nine month period ended September 30, 2000.
Other expenses increased $2.9 million, or 39.7%, to $10.2 million for
the nine months ended September 30, 2000 compared with $7.3 million for the
corresponding 1999 period. The increase in other expenses was primarily due to
increases in operating expenses incurred in the first nine months of 2000
related to our existence as a public company, such as increased fees for
professional services and expense related to the RRP allocation of common stock
to non-officer directors.
Our efficiency ratio, which we determined by dividing non-interest
expense by the sum of net interest income and non-interest income, excluding net
gains on securities transactions, was 30.2% for the first nine months of 2000
compared with 28.9% for the first nine months of 1999. Our ratio of non-interest
expense to average assets was 0.88% for the first nine months of 2000 compared
with 0.85% for the corresponding period in 1999. The slight increase in these
ratios reflects the increases in non-interest expense discussed above.
Income Taxes. Income tax expense increased $0.9 million, or 1.9%, to
$47.2 million for the nine month period ended September 30, 2000 compared with
$46.3 million for the nine month period ended September 30, 1999. Our effective
tax rate for the nine month period ended September 30, 2000 was 35.4% compared
with 37.2% for the nine month period ended September 30, 1999. The modest
percentage increase in tax expense and the decrease in the effective tax rate
were due to a realignment of corporate entities.
LIQUIDITY AND CAPITAL RESOURCES
The term "liquidity" refers to our ability to generate adequate amounts
of cash to fund loan originations, loan purchases, deposit withdrawals and
operating expenses. Our primary sources of funds are scheduled amortization and
prepayments of loan principal and mortgage-backed securities, borrowed funds,
deposits, maturities and calls of investment securities and funds provided by
our operations. We also have a written agreement that allows us to borrow up to
$25.0 million in federal funds from a correspondent bank and our membership in
the FHLB provides us access to additional sources of borrowed funds. Scheduled
loan repayments and maturing investment securities are a relatively predictable
source of funds. However, deposit flows, calls of investment securities and
borrowed funds, and prepayments of loans and mortgage-backed securities are
strongly influenced by interest rates, general and local economic conditions and
competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds.
Our investing activities are generally funded by principal payments on
mortgage loans and mortgage-backed securities, calls and maturities on
investment securities, funds provided by our operating activities, borrowings
and deposits. Principal repayments on loans were $382.7 million during the first
nine months of 2000 compared with $635.5 million for the corresponding 1999
period.
Page 22
<PAGE> 23
Hudson City Bancorp, Inc.
Form 10-Q
Principal payments received on mortgage-backed securities totaled $496.2 million
during the first nine months of 2000 compared to $873.6 million during the first
nine months of 1999. The higher market interest rate environment during 2000
caused a decrease in prepayment activity for both our mortgage loans and
mortgage-backed securities. Maturities and calls of investment securities
totaled $0.7 million during the first nine months of 2000 compared with $723.7
million during the first nine months of 1999. The lower amount of maturities and
calls in 2000 is due to the higher interest rate environment during the last
three months of 1999 and in 2000.
During the first nine months of 2000 and 1999, we borrowed funds of
$1.70 billion and $100.0 million, respectively, through the use of securities
sold under agreements to repurchase. The net increase in borrowed funds during
2000 of $800.0 million was used to fund asset growth through our capital
management strategy and offset the $154.3 million decrease in deposits. Deposit
flows are affected by the level of interest rates, the interest rates and
products offered by competitors, including equity markets, and other factors. We
believe the decrease in deposits during 2000 reflects the intense competition
for deposits in the banking and financial services industry. Time deposit
accounts scheduled to mature within one year were $4.51 billion at September 30,
2000. Based on our deposit retention experience and current pricing strategy, we
anticipate that a significant portion of these time deposits will remain with
Hudson City Savings. We are committed to maintaining a strong liquidity
position; therefore, we monitor our liquidity position on a daily basis. We
anticipate that we will have sufficient funds to meet our current funding
commitments.
Our primary investing activities are the origination and purchase of
one-to four-family real estate loans, the purchase of mortgage-backed
securities, and to a lesser extent, the purchase of investment securities. We
originated and purchased loans of approximately $890.9 million during the first
nine months of 2000 compared with $1.12 billion during the first nine months of
1999. The decrease is primarily due to the higher market interest rate
environment during 2000 which caused a decrease in prepayments and refinancings.
Purchases of mortgage-backed securities during the first nine months of 2000
were $637.5 million compared with $1.00 billion for the first nine months of
1999. The decrease in purchases of mortgage-backed securities is also related to
the decrease in prepayment activity due to the higher market interest rate
environment in 2000. Purchases of investment securities were $25.3 million and
$914.0 million, respectively, for the first nine months of 2000 and 1999. During
the first nine months of 1999, the high volume of calls of investment
securities, due to the lower interest rate environment experienced at that time,
necessitated the reinvestment of the proceeds, which resulted in the high level
of purchases during the period. As part of the membership requirements of the
FHLB, we are required to purchase a certain dollar amount of FHLB common stock.
During the first nine months of 2000, we purchased $40.0 million of FHLB common
stock. We are currently required to purchase approximately $34.0 million of
additional FHLB stock by April 30, 2001.
During the first nine months of 2000 and 1999, purchases of common
stock by the ESOP were $35.2 million and $11.5 million, respectively. As of
September 30, 2000, the ESOP had purchased the entire amount of shares
authorized, or 4,348,000 shares. During the first nine months of 2000, the RRP
purchased $28.6 million of common stock. The RRP was not in existence in 1999.
The RRP is authorized to purchase not more than 2,174,000 shares of Hudson City
Bancorp common stock. As of September 30, 2000, the RRP had purchased and
awarded 1,966,100 shares. Additional awards may require the purchase of
additional shares of stock.
Page 23
<PAGE> 24
Hudson City Bancorp, Inc.
Form 10-Q
Under our stock repurchase program, shares of Hudson City Bancorp
common stock may be purchased in the open market and through other private
transactions from time-to-time, depending on market conditions. The repurchased
shares are held as treasury stock for general corporate use. During the first
nine months of 2000, we purchased 1,549,000 shares of common stock at a cost of
$25.6 million.
At September 30, 2000, Hudson City Savings had outstanding loan
commitments to borrowers of approximately $93.4 million, and available home
equity and overdraft lines of credit of approximately $63.5 million. There were
commitments to purchase mortgage-backed securities at September 30, 2000 of
$104.9 million. Expected maturities of borrowed funds over the next three months
total $500.0 million. In addition, $50.0 million of borrowed funds will be
called over the next three months.
On July 13, 2000, the Board of Directors declared a quarterly cash
dividend of eight cents ($0.08) per common share outstanding for a dividend
pay-out ratio for the third quarter of 2000 of 29.6%. The dividend was paid on
September 1, 2000 to stockholders of record at the close of business on August
11, 2000. On October 12, 2000, the Board of Directors declared a quarterly cash
dividend of nine cents ($0.09) per common share. The dividend is payable on
December 1, 2000 to stockholders of record at the close of business on November
10, 2000.
During the first nine months of 2000, we opened four new branch
locations, one in Atlantic County, one in Bergen County and two in Ocean County.
The expenditures related to their establishment are not expected to have a
material impact on our liquidity, financial position or results of operations.
We do not anticipate any material capital expenditures nor do we have any
balloon or other payments due on any long-term obligations or any off-balance
sheet items other than the commitments and unused lines of credit noted above.
At September 30, 2000, we exceeded each of the applicable regulatory
capital requirements of the FRB and the FDIC. The following table presents the
regulatory ratios of Hudson City Savings Bank and Hudson City Bancorp.
<TABLE>
<CAPTION>
Regulatory Requirements
-----------------------
Actual at Minimum Capital Classification as
September 30, 2000 Adequacy Well-Capitalized
------------------ ------------------------ ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Bank
Leverage (Tier 1)
capital .... $1,244,353 14.09% $ 353,380 4.00% $ 441,725 5.00%
Risk-based capital:
Tier 1 ..... 1,244,353 42.50 117,119 4.00 175,678 6.00
Total ...... 1,266,038 43.24 234,238 8.00 292,797 10.00
Bancorp
Leverage (Tier 1)
Capital .... $1,486,720 16.88% $ 352,311 4.00% $ 440,388 5.00%
Risk-based capital:
Tier 1 ..... 1,486,720 50.81 117,047 4.00 175,571 6.00
Total ...... 1,508,405 51.55 234,094 8.00 292,618 10.00
</TABLE>
Page 24
<PAGE> 25
Hudson City Bancorp, Inc.
Form 10-Q
Item 3. - Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosure about market risk is presented
as of December 31, 1999 in Hudson City Bancorp's Annual Report on Form 10-K. The
following is an update of the discussion provided therein.
General. As a financial institution, our primary component of market
risk is interest rate volatility. Due to the nature of our operations, we are
not subject to foreign currency exchange or commodity price risk. Our real
estate loan portfolio, concentrated in New Jersey, is subject to risks
associated with the local economy. We do not own any trading assets. We did not
engage in any hedging transactions that use derivative instruments (such as
interest rate swaps and caps) during the first nine months of 2000 and did not
have any such hedging transactions in place at September 30, 2000. In the
future, we may, with approval of our Board of Directors, engage in hedging
transactions utilizing derivative instruments.
Interest Rate Risk. Hudson City Bancorp continues to monitor the impact
of interest rate volatility upon the present value of equity in the same manner
as at December 31, 1999. The following table presents the estimated present
value of equity over a range of interest rate change scenarios at September 30,
2000. The present value ratio shown in the table is the present value of equity
as a percent of the present value of total assets in each of the different rate
environments.
<TABLE>
<CAPTION>
Present Value of Equity
As Percent of Present
Present Value of Equity Value of Assets
----------------------- ---------------
Change in Dollar Dollar Percent Present Percent
Interest Rates Amount Change Change Value Ratio Change
-------------- ------ ------ ------ ----------- ------
(Basis points) (Dollars in thousands)
<S> <C> <C> <C> <C> <C>
200 $1,148,464 $(408,072) (26.22)% 13.51% (21.64)%
150 1,260,508 (296,028) (19.02) 14.59 (15.37)
100 1,363,105 (193,431) (12.43) 15.54 (9.86)
50 1,456,514 (100,022) (6.43) 16.37 (5.05)
0 1,556,536 - - 17.24 -
(50) 1,646,993 90,457 5.81 18.00 4.41
(100) 1,712,580 156,044 10.03 18.50 7.31
(150) 1,724,913 168,377 10.82 18.51 7.37
(200) 1,716,501 159,965 10.28 18.33 6.32
</TABLE>
GAP Analysis. The table on the following page presents the amounts of
our interest-earning assets and interest-bearing liabilities outstanding at
September 30, 2000 which we anticipate to reprice or mature in each of the
future time periods shown. We have excluded non-accrual loans from the table.
This table is prepared in a similar manner as at December 31, 1999. The increase
in our negative one-year gap from December 31, 1999 reflects the increase in
short-term borrowings over the period to September 30, 2000 and the decrease in
estimated prepayments on our mortgage-related assets due to the rising market
interest rate environment.
Page 25
<PAGE> 26
Hudson City Bancorp, Inc.
Form 10-Q
<TABLE>
<CAPTION>
At September 30, 2000
--------------------------------------------------------------------------------------------
More than More than
More than More than two years three years
Six months six months one year to to three to five More than
or less to one year two years years years five years Total
------- ----------- --------- ----- ----- ---------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
First mortgage loans .......... $ 392,638 $ 432,970 $ 510,121 $ 462,512 $ 644,484 $2,219,535 $4,662,260
Consumer and other loans ...... 28,539 904 1,849 3,625 19,889 86,210 141,016
Federal funds sold ............ 42,100 -- -- -- -- -- 42,100
Mortgage-backed securities .... 1,059,977 1,290,366 290,407 95,422 83,641 414,394 3,234,207
FHLB stock .................... 40,000 -- -- -- -- -- 40,000
Investment securities ......... 25 300 715 10,050 474,307 369,994 855,391
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total interest-earning
assets .................... 1,563,279 1,724,540 803,092 571,609 1,222,321 3,090,133 8,974,974
----------- ----------- ----------- ----------- ---------- ---------- ----------
Interest-bearing liabilities:
Savings accounts .............. 25,131 19,505 190,807 228,969 152,646 152,645 769,703
Interest-bearing demand
accounts .................... 2,292 2,292 22,917 27,501 18,334 18,333 91,669
Money market accounts ......... 109,536 109,537 112,806 113,532 2,906 2,905 451,222
Time deposits ................. 3,055,806 1,452,860 353,508 21,801 16,311 -- 4,900,286
Borrowed funds ................ 550,000 150,000 -- -- -- 400,000 1,100,000
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total interest-bearing
liabilities ................. 3,742,765 1,734,194 680,038 391,803 190,197 573,883 7,312,880
----------- ----------- ----------- ----------- ---------- ---------- ----------
Interest rate sensitivity gap ... $(2,179,486) $ (9,654) $ 123,054 $ 179,806 $1,032,124 $2,516,250 $1,662,094
=========== =========== =========== =========== ========== ========== ==========
Cumulative interest rate
sensitivity gap ............... $(2,179,486) $(2,189,140) $(2,066,086) $(1,886,280) $ (854,156) $1,662,094
=========== =========== =========== ========== ========== ==========
Cumulative interest rate
sensitivity gap as a
percent of total assets ..... (23.79)% (23.89)% (22.55)% (20.59)% (9.32)% 18.14%
Cumulative interest-earning
assets as a percent of
interest-bearing
Liabilities ................. 41.77% 60.03% 66.44% 71.20% 87.33% 122.73%
</TABLE>
Page 26
<PAGE> 27
Hudson City Bancorp, Inc.
Form 10-Q
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
We are not involved in any pending legal proceedings other than routine
legal proceedings occurring in the ordinary course of business. We believe that
these routine legal proceedings, in the aggregate, are immaterial to our
financial condition and results of operations.
Item 2. - Changes in Securities and Use of Proceeds
Not applicable.
Item 3. - Defaults Upon Senior Securities
Not applicable.
Item 4. - Submission of Matters to a Vote of Security Holders
On July 13, 2000 the annual meeting of stockholders of Hudson City
Bancorp, Inc. was held to consider and vote on certain matters. The results are
indicated below.
Proposal 1 - Approval of four directors for terms of three years each.
Votes cast for John D. Birchby:
<TABLE>
<S> <C>
For: 105,983,505
Withheld: 264,578
</TABLE>
Votes cast for Victoria H. Bruni:
<TABLE>
<S> <C>
For: 105,997,579
Withheld: 250,504
</TABLE>
Votes cast for Andrew J. Egner:
<TABLE>
<S> <C>
For: 105,953,189
Withheld: 294,894
</TABLE>
Votes cast for Leonard S. Gudelski:
<TABLE>
<S> <C>
For: 106,001,514
Withheld: 246,569
</TABLE>
Page 27
<PAGE> 28
Hudson City Bancorp, Inc.
Form 10-Q
Proposal 2 - Approval of Article IX of the Hudson City Bancorp, Inc.
2000 Stock Option Plan.
<TABLE>
<S> <C>
For: 103,937,393
Against: 1,895,250
Abstained: 415,440
</TABLE>
Proposal 3 - Approval of Article X of the Hudson City Bancorp, Inc.
2000 Recognition and Retention Plan.
<TABLE>
<S> <C>
For: 103,781,473
Against: 2,027,983
Abstained: 438,627
</TABLE>
Proposal 4 - Ratification of the Appointment of KPMG LLP as Hudson City
Bancorp's independent auditors for the year ending December 31, 2000.
<TABLE>
<S> <C>
For: 105,909,556
Against: 173,988
Abstained: 164,539
</TABLE>
There were no broker held non-voted shares represented at the meeting with
respect to the above matters.
Item 5. - Other Information
Not applicable.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibit Number 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 2000.
Page 28
<PAGE> 29
Hudson City Bancorp, Inc.
Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hudson City Bancorp, Inc.
Date: November 10, 2000 By: /s/ Leonard S. Gudelski
---------------------------------------
Leonard S. Gudelski
Chairman and Chief Executive Officer
Date: November 10, 2000 By: /s/ Ronald E. Hermance, Jr.
---------------------------------------
Ronald E. Hermance, Jr.
President and Chief Operating Officer
Page 29
