Back to GetFilings.com



Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(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, 2004

o 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)
     
Delaware   22-3640393
  		 
 
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. Employer
Identification No.)
     
West 80 Century Road
Paramus, New Jersey 		   
07652
  		 
 
(Address of Principal Executive Offices)   (Zip Code)

(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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

As of November 2, 2004, the registrant had 186,022,481 shares of common stock, $0.01 par value, outstanding. Of such shares outstanding, 122,576,600 shares were held by Hudson City, MHC, the registrant’s mutual holding company, and 63,445,881 shares were held by the public and directors, officers and employees of the registrant.

 

Hudson City Bancorp, Inc.
Form 10-Q

Contents of Report

         
    Page Number
       
       
    3  
    4  
    5  
    6  
    13  
    31  
    35  
       
    35  
    35  
    36  
    36  
    36  
    36  
    37  
 CERTIFICATION
 CERTIFICATION
 CERTIFICATIONS

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

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. — Financial Statements

Hudson City Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition
                 
    September 30,   December 31,
    2004
   2003
    (Unaudited)        
    (In thousands)
Assets
                
Cash and due from banks
   $ 124,559     $ 190,984  
Federal funds sold
     23,900       63,600  
 
    
 		      
 		  
Total cash and cash equivalents
     148,459       254,584  
Investment securities held to maturity, market value of $1,173,915 at September 30, 2004 and $1,443 at December 31, 2003
     1,170,986       1,366  
Investment securities available for sale, at market value
     1,725,612       2,243,812  
Federal Home Loan Bank of New York stock
     140,000       164,850  
Mortgage-backed securities held to maturity, market value of $3,615,555 at September 30, 2004 and $4,250,688 at December 31, 2003
     3,646,758       4,292,444  
Mortgage-backed securities available for sale, at market value
     1,570,762       1,130,257  
Loans
     10,760,351       8,803,066  
Less:
                
Deferred loan fees
     7,405       10,255  
Allowance for loan losses
     27,210       26,547  
 
    
 		      
 		  
Net loans
     10,725,736       8,766,264  
Foreclosed real estate, net
     1,643       1,002  
Accrued interest receivable
     95,668       80,220  
Banking premises and equipment, net
     34,482       31,354  
Other assets
     61,168       67,207  
 
    
 		      
 		  
Total Assets
   $ 19,321,274     $ 17,033,360  
 
    
 		      
 		  
Liabilities and Stockholders’ Equity
                
Deposits:
                
Interest-bearing
   $ 10,779,505     $ 10,057,285  
Noninterest-bearing
     416,214       396,495  
 
    
 		      
 		  
Total deposits
     11,195,719       10,453,780  
Borrowed funds
     6,650,000       5,150,000  
Accrued expenses and other liabilities
     119,470       100,214  
 
    
 		      
 		  
Total liabilities
     17,965,189       15,703,994  
 
    
 		      
 		  
Common stock, $0.01 par value, 800,000,000 shares authorized; 231,276,600 shares issued, 186,012,681 shares outstanding at September 30, 2004, and 189,835,997 shares outstanding at December 31, 2003
     2,313       2,313  
Additional paid-in capital
     568,461       543,589  
Retained earnings
     1,538,221       1,396,257  
Treasury stock, at cost; 45,263,919 shares at September 30, 2004 and 41,440,603 shares at December 31, 2003
     (698,323 )     (547,859 )
Unallocated common stock held by the employee stock ownership plan
     (48,043 )     (49,513 )
Unearned common stock held by the recognition and retention plan
     (8,165 )     (9,463 )
Accumulated other comprehensive income (loss), net of tax
     1,621       (5,958 )
 
    
 		      
 		  
Total stockholders’ equity
     1,356,085       1,329,366  
 
    
 		      
 		  
Total Liabilities and Stockholders’ Equity
   $ 19,321,274     $ 17,033,360  
 
    
 		      
 		  

See accompanying notes to consolidated financial statements.

Page 3

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary

Consolidated Statements of Income
(Unaudited)
                                 
    For the Three Months   For the Nine Months
    Ended September 30,
   Ended September 30,
    2004
   2003
   2004
   2003
            (In thousands, except share data)        
Interest and Dividend Income:
                                
Interest and fees on first mortgage loans
   $ 138,421     $ 96,950     $ 389,400     $ 304,477  
Interest and fees on consumer and other loans
     2,213       2,084       6,345       6,296  
Interest on mortgage-backed securities held to maturity
     42,409       51,554       132,364       167,352  
Interest on mortgage-backed securities available for sale
     17,540       12,857       50,200       38,881  
Interest on investment securities held to maturity:
                                
Taxable
     14,193       14       25,884       48  
Exempt from federal taxes
     6       7       17       17  
Interest and dividend income on investment securities available for sale-taxable
     18,262       22,360       60,649       54,805  
Dividends on Federal Home Loan Bank of New York stock
     858       340       2,250       4,399  
Interest on federal funds sold
     359       519       970       1,602  
 
    
 		      
 		      
 		      
 		  
Total interest and dividend income
     234,261       186,685       668,079       577,877  
 
    
 		      
 		      
 		      
 		  
Interest Expense:
                                
Interest on deposits
     54,253       50,444       155,453       159,804  
Interest on borrowed funds
     56,040       41,552       154,159       122,738  
 
    
 		      
 		      
 		      
 		  
Total interest expense
     110,293       91,996       309,612       282,542  
 
    
 		      
 		      
 		      
 		  
Net interest income
     123,968       94,689       358,467       295,335  
Provision for Loan Losses
     225       225       675       675  
 
    
 		      
 		      
 		      
 		  
Net interest income after provision for loan losses
     123,743       94,464       357,792       294,660  
 
    
 		      
 		      
 		      
 		  
Non-Interest Income:
                                
Service charges and other income
     1,373       1,681       3,849       4,292  
Gains on securities transactions, net
     3,526       7,750       8,597       20,549  
 
    
 		      
 		      
 		      
 		  
Total non-interest income
     4,899       9,431       12,446       24,841  
 
    
 		      
 		      
 		      
 		  
Non-Interest Expense:
                                
Compensation and employee benefits
     19,878       17,598       59,349       50,795  
Net occupancy expense
     4,044       3,770       11,788       11,213  
Federal deposit insurance assessment
     405       402       1,228       1,165  
Computer and related services
     529       509       1,485       1,190  
Other expense
     4,032       3,332       13,275       11,682  
 
    
 		      
 		      
 		      
 		  
Total non-interest expense
     28,888       25,611       87,125       76,045  
 
    
 		      
 		      
 		      
 		  
Income before income tax expense
     99,754       78,284       283,113       243,456  
Income Tax Expense
     37,734       28,021       106,446       88,446  
 
    
 		      
 		      
 		      
 		  
Net income
   $ 62,020     $ 50,263     $ 176,667     $ 155,010  
 
    
 		      
 		      
 		      
 		  
Basic Earnings Per Share
   $ 0.35     $ 0.28     $ 0.98     $ 0.85  
 
    
 		      
 		      
 		      
 		  
Diluted Earnings Per Share
   $ 0.34     $ 0.27     $ 0.95     $ 0.83  
 
    
 		      
 		      
 		      
 		  
Weighted Average Number of Common Shares Outstanding:
                                
Basic
     178,964,733       182,576,472       180,273,112       182,666,536  
Diluted
     183,724,358       187,918,359       185,372,444       187,675,640  

See accompanying notes to consolidated financial statements.

Page 4

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows
(Unaudited)
                 
    For the Nine Months
    Ended September 30,
    2004
   2003
    (In thousands)
Cash Flows from Operating Activities:
                
Net income
   $ 176,667     $ 155,010  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation, accretion and amortization expense
     19,751       35,857  
Provision for loan losses
     675       675  
Gains on securities transactions, net
     (8,597 )     (20,549 )
Allocation of stock for employee benefit plans
     14,670       10,000  
Deferred tax benefit
     20       —  
Net proceeds from sale of foreclosed real estate
     1,651       2,089  
Increase in accrued interest receivable
     (15,448 )     (3,112 )
Decrease in other assets
     784       5,967  
Increase in accrued expenses and other liabilities
     19,256       7,230  
Tax benefit from stock plans
     20,269       —  
 
    
 		      
 		  
Net Cash Provided by Operating Activities
     229,698       193,167  
 
    
 		      
 		  
Cash Flows from Investing Activities:
                
Originations of loans
     (1,181,806 )     (1,855,221 )
Purchases of loans
     (2,361,841 )     (1,794,287 )
Payments on loans
     1,575,804       3,147,106  
Principal collection of mortgage-backed securities held to maturity
     1,208,846       2,958,240  
Proceeds from sales of mortgage-backed securities held to maturity
     —       54,549  
Purchases of mortgage-backed securities held to maturity
     (573,916 )     (3,014,172 )
Principal collection of mortgage-backed securities available for sale
     210,275       356,531  
Proceeds from sales of mortgage-backed securities available for sale
     380,863       943,614  
Purchases of mortgage-backed securities available for sale
     (1,016,973 )     (995,172 )
Proceeds from maturities and calls of investment securities held to maturity
     300,030       35  
Purchases of investment securities held to maturity
     (1,469,643 )     —  
Proceeds from maturities and calls of investment securities available for sale
     861,339       1,247,217  
Proceeds from sales of investment securities available for sale
     —       50,531  
Purchases of investment securities available for sale
     (337,306 )     (2,940,682 )
Purchases of Federal Home Loan Bank of New York stock
     —       (30,000 )
Redemption of Federal Home Loan Bank of New York stock
     24,850       —  
Purchases of premises and equipment, net
     (5,818 )     (870 )
 
    
 		      
 		  
Net Cash Used in Investment Activities
     (2,385,296 )     (1,872,581 )
 
    
 		      
 		  
Cash Flows from Financing Activities:
                
Net increase in deposits
     741,939       1,109,435  
Proceeds from borrowed funds
     3,050,000       850,000  
Principal payments on borrowed funds
     (1,550,000 )     (250,000 )
Dividends paid
     (29,761 )     (70,984 )
Purchases of stock by the RRP
     (7,299 )     —  
Purchases of treasury stock
     (160,729 )     (46,436 )
Exercise of stock options
     5,323       9,449  
 
    
 		      
 		  
Net Cash Provided by Financing Activities
     2,049,473       1,601,464  
 
    
 		      
 		  
Net Decrease in Cash and Cash Equivalents
     (106,125 )     (77,950 )
Cash and Cash Equivalents at Beginning of Period
     254,584       240,796  
 
    
 		      
 		  
Cash and Cash Equivalents at End of Period
   $ 148,459     $ 162,846  
 
    
 		      
 		  
Supplemental Disclosures:
                
Interest paid
   $ 304,413     $ 282,223  
 
    
 		      
 		  
Income taxes paid
   $ 78,299     $ 89,596  
 
    
 		      
 		  

See accompanying notes to consolidated financial statements.

Page 5

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

1. – Basis of Presentation

Hudson City Bancorp, Inc. is a Delaware corporation organized in 1999 by Hudson City Savings Bank in connection with the conversion and reorganization of Hudson City Savings from a mutual savings bank into a two-tiered mutual savings bank holding company structure.

In our opinion, all the adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated 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, 2004 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2004.

Certain information and note disclosures usually included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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, 2003 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 $2,255,000 and $2,994,000 for the nine month periods ended September 30, 2004 and 2003, respectively, did not result in cash receipts or cash payments.

Stock Option Plans’ Fair Value Disclosure. The Hudson City stock option plans and the recognition and retention plans (“RRP”) are accounted for in accordance with the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations. Accordingly, no compensation expense has been recognized for the stock option plans. Expense for the RRP in the amount of the fair value of the common stock at the date of grant is recognized ratably over the vesting period.

Page 6

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements

Had expense for Hudson City’s stock option plans been determined based on the fair value at the grant date for our stock options consistent with the method of SFAS No. 123, our net income and earnings per share would have been reduced to the pro forma amounts that follow.

                 
    For the Three Months
    Ended September 30,
    2004
   2003
    (In thousands, except per share data)
Net income, as reported
   $ 62,020     $ 50,263  
Add: expense recognized for the recognition and retention plans, net of related tax effect
     1,309       1,046  
Less: total stock option and recognition and retention plans expense, determined under the fair value method, net of related tax effect
     (2,133 )     (1,660 )
 
    
 		      
 		  
Pro forma net income
   $ 61,196     $ 49,649  
 
    
 		      
 		  
Basic earnings per share: As reported
   $ 0.35     $ 0.28  
Pro forma
     0.34       0.27  
Diluted earnings per share: As reported
   $ 0.34     $ 0.27  
Pro forma
     0.33       0.26  
                 
    For the Nine Months
    Ended September 30,
    2004
   2003
    (In thousands, except per share data)
Net income, as reported
   $ 176,667     $ 155,010  
Add: expense recognized for the recognition and retention plans, net of related tax effect
     4,294       3,085  
Less: total stock option and recognition and retention plans expense, determined under the fair value method, net of related tax effect
     (6,774 )     (4,912 )
 
    
 		      
 		  
Pro forma net income
   $ 174,187     $ 153,183  
 
    
 		      
 		  
Basic earnings per share: As reported
   $ 0.98     $ 0.85  
Pro forma
     0.97       0.84  
Diluted earnings per share: As reported
   $ 0.95     $ 0.83  
Pro forma
     0.94       0.82  

Page 7

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements

The fair value of the option grants, for those grants issued during the following periods, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

                 
    For the Three and Nine Months Ended
    September 30,
    2004
   2003
Expected dividend yield
     1.69 %     2.24 %
Expected volatility
     19.66       24.71  
Risk-free interest rate
     3.05       2.98  
Expected option life
   5 years   5 years

2. — Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes unrealized holding gains and losses on securities available for sale, net of tax. Total comprehensive income during the periods indicated is as follows.

                 
    For the Three Months
    Ended September 30,
    2004
   2003
    (In thousands)
Net income
   $ 62,020     $ 50,263  
Other comprehensive income:
                
Unrealized holding gain (loss) on securities available for sale, net of tax of $35,442 for 2004 and $(11,319) for 2003
     51,320       (16,389 )
Reclassification adjustment for gains in net income, net of tax of $(1,440) for 2004 and $(3,166) for 2003
     (2,086 )     (4,584 )
 
    
 		      
 		  
Total accumulated other comprehensive income
   $ 111,254     $ 29,290  
 
    
 		      
 		  
                 
    For the Nine Months
    Ended September 30,
    2004
   2003
    (In thousands)
Net income
   $ 176,667     $ 155,010  
Other comprehensive income:
                
Unrealized holding gain (loss) on securities available for sale, net of tax of $8,746 for 2004 and $(7,325) for 2003
     12,664       (10,606 )
Reclassification adjustment for gains in net income, net of tax of $(3,512) for 2004 and $(8,394) for 2003
     (5,085 )     (12,155 )
 
    
 		      
 		  
Total accumulated other comprehensive income
   $ 184,246     $ 132,249  
 
    
 		      
 		  

Page 8

Table of Contents

Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements

3. — Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.

                                                 
    For the Three Months Ended September 30,
    2004
   2003
                    Per                   Per
                    Share                   Share
    Income
   Shares
   Amount
   Income
   Shares
   Amount
    (In thousands, except per share data)
Net income
   $ 62,020                     $ 50,263                  
 
    
 		                      
 		                  
Basic earnings per share:
                                                
Income available to common stockholders
   $ 62,020       178,965     $ 0.35     $ 50,263       182,576     $ 0.28  
 
                    
 		                      
 		  
Effect of dilutive common stock equivalents
     —       4,759               —       5,342          
 
    
 		      
 		              
 		      
 		          
Diluted earnings per share:
                                                
Income available to common stockholders
   $ 62,020       183,724     $ 0.34     $ 50,263       187,918     $ 0.27  
 
    
 		      
 		      
 		      
 		      
 		      
 		  
                                                 
    For the Nine Months Ended September 30,
    2004
   2003
                    Per                   Per
                    Share                   Share
    Income
   Shares
   Amount
   Income
   Shares
   Amount
    (In thousands, except per share data)
Net income
   $ 176,667                       $155,010                  
 
    
 		                      
 		                  
Basic earnings per share:
                                                
Income available to common stockholders
   $ 176,667       180,273     $ 0.98     $ 155,010       182,667     $ 0.85