##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION  FORM 10-Q
   (Mark One) x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 June 30, 2004
 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  Commission File Number: 0-26001 Hudson City Bancorp, Inc. 
  Delaware
    
    22-3640393(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)West 80 Century RoadParamus, New Jersey
    
    07652(Address of Principal Executive Offices)
    
    (Zip Code)
 (201)967-1900 
  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 August 4, 2004, the registrant had 187,109,581 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
64,532,981 shares were held by the public and directors, officers and employees
of the registrant.




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Hudson City Bancorp, Inc.
Form 10-Q Contents of Report PageNumberPART I  FINANCIAL INFORMATIONItem 1.  Financial StatementsConsolidated Statements of Financial Condition  June 30, 2004 (Unaudited) and December 31, 2003
    
    
    3Consolidated Statements of Income (Unaudited)  For the three and six months ended June 30, 2004 and 2003
    
    
    4Consolidated Statements of Cash Flows (Unaudited)  For the six months ended June 30, 2004 and 2003
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.  Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4.  Controls and Procedures
    
    
    35PART II  OTHER INFORMATIONItem 1.  Legal Proceedings
    
    
    35Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    35Item 3.  Defaults Upon Senior Securities
    
    
    36Item 4.  Submission of Matters to a Vote of Security Holders
    
    
    36Item 5.  Other Information
    
    
    36Item 6.  Exhibits and Reports on Form 8-K
    
    
    37SIGNATURES
    
    
    38CERTIFICATIONCERTIFICATIONCERTIFICATION
  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




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##### Table of Contents



PART I  FINANCIAL INFORMATION 
 Item 1.  Financial Statements
 Hudson City Bancorp, Inc. and Subsidiary 
 Consolidated Statements of Financial Condition
 June 30,
    
    December 31,2004
    
    2003(Unaudited)(In thousands)AssetsCash and due from banks
    
    $
    149,034
    
    
    $
    190,984Federal funds sold
    
    
    13,700
    
    
    
    63,600Total cash and cash equivalents
    
    
    162,734
    
    
    
    254,584Investment securities held to maturity, market value of $1,081,974 at
June 30, 2004 and $1,443 at December 31, 2003
    
    
    1,100,424
    
    
    
    1,366Investment securities available for sale, at market value
    
    
    1,682,553
    
    
    
    2,243,812Federal Home Loan Bank of New York stock
    
    
    150,000
    
    
    
    164,850Mortgage-backed securities held to maturity, market value of $3,817,798
at June 30, 2004 and $4,250,688 at December 31, 2003
    
    
    3,967,628
    
    
    
    4,292,444Mortgage-backed securities available for sale, at market value
    
    
    1,369,389
    
    
    
    1,130,257Loans
    
    
    10,051,557
    
    
    
    8,803,066Less:Deferred loan fees
    
    
    11,669
    
    
    
    10,255Allowance for loan losses
    
    
    26,990
    
    
    
    26,547Net loans
    
    
    10,012,898
    
    
    
    8,766,264Foreclosed real estate, net
    
    
    1,278
    
    
    
    1,002Accrued interest receivable
    
    
    94,063
    
    
    
    80,220Banking premises and equipment, net
    
    
    33,918
    
    
    
    31,354Other assets
    
    
    96,450
    
    
    
    67,207Total Assets
    
    $
    18,671,335
    
    
    $
    17,033,360Liabilities and Stockholders EquityDeposits:Interest-bearing
    
    $
    10,610,849
    
    
    $
    10,057,285Noninterest-bearing
    
    
    465,612
    
    
    
    396,495Total deposits
    
    
    11,076,461
    
    
    
    10,453,780Borrowed funds
    
    
    6,200,000
    
    
    
    5,150,000Accrued expenses and other liabilities
    
    
    107,572
    
    
    
    100,214Total liabilities
    
    
    17,384,033
    
    
    
    15,703,994Common stock, $0.01 par value, 800,000,000 shares authorized; 231,276,600
shares issued, 187,156,831 shares outstanding at June 30, 2004,
189,835,997 shares outstanding at December 31, 2003
    
    
    2,313
    
    
    
    2,313Additional paid-in capital
    
    
    560,062
    
    
    
    543,589Retained earnings
    
    
    1,487,702
    
    
    
    1,396,257Treasury stock, at cost; 44,119,769 shares at June 30, 2004 and
41,440,603 shares at December 31, 2003
    
    
    (655,567
    )
    
    
    (547,859
    )Unallocated common stock held by the employee stock ownership plan
    
    
    (48,533
    )
    
    
    (49,513
    )Unearned common stock held by the recognition and retention plan
    
    
    (11,062
    )
    
    
    (9,463
    )Accumulated other comprehensive loss, net of tax
    
    
    (47,613
    )
    
    
    (5,958
    )Total stockholders equity
    
    
    1,287,302
    
    
    
    1,329,366Total Liabilities and Stockholders Equity
    
    $
    18,671,335
    
    
    $
    17,033,360
 See accompanying notes to consolidated financial statements. Page 3




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Hudson City Bancorp, Inc. and Subsidiary 
 Consolidated Statements of Income
 (Unaudited)
 For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,2004
    
    2003
    
    2004
    
    2003(In thousands, except share data)Interest and Dividend Income:Interest and fees on first mortgage loans
    
    $
    127,892
    
    
    $
    100,818
    
    
    $
    250,979
    
    
    $
    207,527Interest and fees on consumer and other loans
    
    
    2,083
    
    
    
    2,087

    
    
    
    4,132
    
    
    
    4,212Interest on mortgage-backed securities held to maturity
    
    
    44,104
    
    
    
    54,723
    
    
    
    89,955
    
    
    
    115,798Interest on mortgage-backed securities available for sale
    
    
    16,864
    
    
    
    11,625
    
    
    
    32,660
    
    
    
    26,024Interest on investment securities held to maturity:Taxable
    
    
    10,365
    
    
    
    17
    
    
    
    11,691
    
    
    
    34Exempt from federal taxes
    
    
    6
    
    
    
    5
    
    
    
    11
    
    
    
    10Interest and dividend income on investment securities
available for sale-taxable
    
    
    18,450
    
    
    
    20,755
    
    
    
    42,387
    
    
    
    32,445Dividends on Federal Home Loan Bank
of New York stock
    
    
    733
    
    
    
    2,069
    
    
    
    1,392
    
    
    
    4,059Interest on federal funds sold
    
    
    294
    
    
    
    557
    
    
    
    611
    
    
    
    1,083Total interest and dividend income
    
    
    220,791
    
    
    
    192,656
    
    
    
    433,818
    
    
    
    391,192Interest Expense:Interest on deposits
    
    
    51,431
    
    
    
    53,676
    
    
    
    101,200
    
    
    
    109,360Interest on borrowed funds
    
    
    50,400
    
    
    
    40,916
    
    
    
    98,119
    
    
    
    81,186Total interest expense
    
    
    101,831
    
    
    
    94,592
    
    
    
    199,319
    
    
    
    190,546Net interest income
    
    
    118,960
    
    
    
    98,064
    
    
    
    234,499
    
    
    
    200,646Provision for Loan Losses
    
    
    225
    

    
    
    225
    
    
    
    450
    
    
    
    450Net interest income after provision
for loan losses
    
    
    118,735
    
    
    
    97,839
    
    
    
    234,049
    
    
    
    200,196Non-Interest Income:Service charges and other income
    
    
    1,282
    
    
    
    1,309
    
    
    
    2,476
    
    
    
    2,611Gains on securities transactions, net
    
    
    2,634
    
    
    
    8,628
    
    
    
    5,071
    
    
    
    12,799Total non-interest income
    
    
    3,916
    
    
    
    9,937
    
    
    
    7,547
    
    
    
    15,410Non-Interest Expense:Compensation and employee benefits
    
    
    19,787
    
    
    
    16,281
    
    
    
    39,471
    
    
    
    33,197Net occupancy expense
    
    
    3,804
    
    
    
    3,580
    
    
    
    7,744
    
    
    
    7,443Federal deposit insurance assessment
    
    
    406
    
    
    
    385
    
    
    
    823
    
    
    
    763Computer and related services
    
    
    417
    
    
    
    346
    
    
    
    956
    
    
    
    681Other expense
    
    
    4,770
    
    
    
    4,320
    
    
    
    9,243
    
    
    
    8,350Total non-interest expense
    
    
    29,184
    
    
    
    24,912
    
    
    
    58,237
    
    
    
    50,434Income before income tax expense
    
    
    93,467
    
    
    
    82,864
    
    
    
    183,359
    
    
    
    165,172Income Tax Expense
    
    
    35,049
    
    
    
    30,318
    
    
    
    68,712
    
    
    
    60,425Net income
    
    $
    58,418
    
    
    $
    52,546
    
    
    $
    114,647
    
    
    $
    104,747Basic Earnings Per Share
    
    $
    0.32
    
    
    $
    0.29
    
    
    $
    0.63
    
    
    $
    0.57Diluted Earnings Per Share
    
    $
    0.32
    
    
    $
    0.28
    
    
    $
    0.62
    
    
    $
    0.56Weighted Average Number of Common Shares Outstanding:Basic
    
    
    180,345,017
    
    
    
    182,660,915
    
    
    
    180,934,489
    
    
    
    182,712,314Diluted
    
    
    185,410,221
    
    
    
    187,810,046
    
    
    
    186,204,987
    
    
    
    187,623,655
 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)
 For the Six MonthsEnded June 30,2004
    
    2003(In thousands)Cash Flows from Operating Activities:Net income
    
    $
    114,647
    
    
    $
    104,747Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation, accretion and amortization expense
    
    
    13,847
    
    
    
    23,720Provision for loan losses
    
    
    450
    
    
    
    450Gains on securities transactions, net
    
    
    (5,071
    )
    
    
    (12,799
    )Allocation of stock for employee benefit plans
    
    
    10,080
    
    
    
    6,335Deferred tax benefit
    
    
    415
    
    
    
    Net proceeds from sale of foreclosed real estate
    
    
    1,073
    
    
    
    954Increase in accrued interest receivable
    
    
    (13,843
    )
    
    
    (8,365
    )(Increase) decrease in other assets
    
    
    (891
    )
    
    
    8,662Increase (decrease) in accrued expenses and other liabilities
    
    
    7,358
    
    
    
    (4,244
    )Tax benefit from stock plans
    
    
    13,073
    
    
    
    Net Cash Provided by Operating Activities
    
    
    141,138
    
    
    
    119,460Cash Flows from Investing Activities:Originations of loans
    
    
    (812,005
    )
    
    
    (987,854
    )Purchases of loans
    
    
    (1,594,636
    )
    
    
    (851,388
    )Payments on loans
    
    
    1,154,542
    
    
    
    1,934,639Principal collection of mortgage-backed securities held to maturity
    
    
    881,578
    
    
    
    1,850,827Purchases of mortgage-backed securities held to maturity
    
    
    (564,710
    )
    
    
    (1,893,818
    )Principal collection of mortgage-backed securities available for sale
    
    
    142,997
    
    
    
    237,582Proceeds from sales of mortgage-backed securities available for sale
    
    
    226,593
    
    
    
    604,113Purchases of mortgage-backed securities available for sale
    
    
    (637,405
    )
    
    
    (857,878
    )Proceeds from maturities and calls of investment securities held to maturity
    
    
    30
    
    
    
    35Purchases of investment securities held to maturity
    
    
    (1,099,084
    )
    
    
    Proceeds from maturities and calls of investment securities available for sale
    
    
    861,335
    
    
    
    838,485Purchases of investment securities available for sale
    
    
    (337,306
    )
    
    
    (2,200,725
    )Purchases of Federal Home Loan Bank of New York stock
    
    
    
    
    
    
    (22,500
    )Redemption of Federal Home Loan Bank of New York stock
    
    
    14,850
    
    
    
    (Purchases) sales of premises and equipment, net
    
    
    (4,239
    )
    
    
    244Net Cash Used in Investment Activities
    
    
    (1,767,460
    )
    
    
    (1,348,238
    )Cash Flows from Financing Activities:Net increase in deposits
    
    
    622,681
    
    
    
    827,515Proceeds from borrowed funds
    
    
    1,850,000
    
    
    
    550,000Principal payments on borrowed funds
    
    
    (800,000
    )
    
    

    (100,000
    )Dividends paid
    
    
    (19,493
    )
    
    
    (44,199
    )Purchases of stock by the RRP
    
    
    (7,299
    )
    
    
    Purchases of treasury stock
    
    
    (115,538
    )
    
    
    (36,937
    )Exercise of stock options
    
    
    4,121
    
    
    
    8,518Net Cash Provided by Financing Activities
    
    
    1,534,472
    
    
    
    1,204,897Net Decrease in Cash and Cash Equivalents
    
    
    (91,850
    )
    
    
    (23,881
    )Cash and Cash Equivalents at Beginning of Period
    
    
    254,584
    
    
    
    240,796Cash and Cash Equivalents at End of Period
    
    $
    162,734
    
    
    $
    216,915Supplemental Disclosures:Interest paid
    
    $
    196,195
    
    
    $
    190,871Income taxes paid
    
    $
    53,699
    
    
    $
    66,721
 See accompanying notes to consolidated financial statements. Page 5




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Hudson City Bancorp, Inc. and Subsidiary 
  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 six-month periods ended June 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 $1,312,000 and
$2,596,000 for the six month periods ended June 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




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##### 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 MonthsEnded June 30,2004
    
    2003(In thousands, except per share data)Net income, as reported
    
    $
    58,418
    
    
    $
    52,546Add: expense recognized for the recognition and
retention plans, net of related tax effect
    
    
    1,827
    
    
    
    1,033Less: total stock option and recognition and
retention plans expense, determined under
the fair value method, net of
related tax effect
    
    
    (2,656
    )
    
    
    (1,640
    )Pro forma net income
    
    $
    57,589
    
    
    $
    51,939Basic earnings per share: As reported
    
    $
    0.32
    
    
    $
    0.29Pro forma
    
    
    0.32
    
    
    
    0.28Diluted earnings per share: As reported
    
    $
    0.32
    
    
    $
    0.28Pro forma
    
    
    0.31
    
    
    
    0.28
 For the Six MonthsEnded June 30,2004
    
    2003(In thousands, except per share data)Net income, as reported
    
    $
    114,647
    
    
    $
    104,747Add: expense recognized for the recognition and
retention plans, net of related tax effect
    
    
    2,987
    
    
    
    2,040Less: total stock option and recognition and
retention plans expense, determined under
the fair value method, net of
related tax effect
    
    
    (4,644
    )
    
    
    (3,253
    )Pro forma net income
    
    $
    112,990
    
    
    $
    103,534Basic earnings per share: As reported
    
    $
    0.63
    
    
    $
    0.57Pro forma
    
    
    0.62
    
    
    
    0.57Diluted earnings per share: As reported
    
    $
    0.62
    
    
    $
    0.56Pro forma
    
    
    0.61
    
    
    
    0.55
 Page 7




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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 SixMonths Ended June 30,2004
    
    2003Expected dividend yield
    
    
    1.69
    %
    
    
    2.24
    %Expected volatility
    
    
    19.66
    
    
    
    24.71Risk-free interest rate
    
    
    3.05
    
    
    
    2.98Expected 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 MonthsEnded June 30,2004
    
    2003(In thousands)Net income
    
    $
    58,418
    
    
    $
    52,546Other comprehensive income:Unrealized holding (loss) gain on securities
available for sale, net of tax of
($43,990)
for 2004 and $6,091 for 2003
    
    
    (63,696
    )
    
    
    8,820Reclassification adjustment for gains
in net income, net of tax of ($1,076)
for 2004 and $(3,525) for 2003
    
    
    (1,558
    )
    
    
    (5,103
    )Total accumulated other comprehensive (loss)
income
    
    $
    (6,836
    )
    
    $
    56,263
 For the Six MonthsEnded June 30,2004
    
    2003(In thousands)Net income
    
    $
    114,647
    
    
    $
    104,747Other comprehensive income:Unrealized holding (loss) gain on securities
available for sale, net of tax of
($26,696)
for 2004 and $3,994 for 2003
    
    
    (38,656
    )
    
    
    5,783Reclassification adjustment for gains
in net income, net of tax of ($2,072)
for 2004 and $(5,228) for 2003
    
    
    (2,999
    )
    
    
    (7,571
    )Total accumulated other comprehensive
income
    
    $
    72,992
    
    
    $
    102,959
 Page 8




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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 June 30,2004
    
    2003Per
    
    
    
    
    
    
    
    
    
    PerShare
    
    
    
    
    
    
    
    
    
    ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    Amount(In thousands, except per share data)Net income
    
    $
    58,418
    
    
    
    
    
    
    
    
    
    
    $
    52,546Basic earnings per share:Income available to
common
stockholders
    
    $
    58,418
    
    
    
    180,345
    
    
    $
    0.32
    
    
    $
    52,546
    
    
    
    182,661
    
    
    $
    0.29Effect of dilutive common
stock equivalents
    
    
    
    
    
    
    5,065
    
    
    
    
    
    
    
    
    
    
    
    5,149Diluted earnings per share:Income available to
common stockholders
    
    $
    58,418
    
    
    
    185,410
    
    
    $
    0.32
    
    
    $
    52,546
    
    
    
    187,810
    
    
    $
    0.28
 For the Six Months Ended June 30,2004
    
    2003Per
    
    
    
    
    
    
    
    
    
    PerShare
    
    
    
    
    
    
    
    
    
    ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    Amount(In thousands, except per share data)Net income
    
    $
    114,647
    
    
    
    
    
    
    
    
    
    
    $
    104,747Basic earnings per share:Income available to
common stockholders
    
    $
    114,647
    
    
    
    180,934
    
    
    $
    0.63
    
    
    $
    104,747
    
    
    
    182,712
    
    
    $
    0.57Effect of dilutive common
stock equivalents
    
    
    
    
    
    
    5,271
    
    
    
    
    
    
    
    
    
    
    
    4,912Diluted earnings per share:Income available to
common stockholders
    
    $
    114,647
    
    
    
    186,205
    
    
    $
    0.62
    
    
    $
    104,747
    
    
    
    187,624
    
    
    $
    0.56
 Page 9




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##### Table of Contents



Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements 4.  Fair Value and Unrealized Losses of Securities The following table summarizes the fair value and unrealized losses of those
investment and mortgage-backed securities which reported an unrealized loss at
June 30, 2004 and whether the unrealized loss position was continuous for the
twelve months prior to June 30, 2004. Less Than 12 Months
    
    12 Months or Longer
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    Losses(In thousands)United States government
agencies
    
    $
    2,436,154
    
    
    $
    69,326
    
    
    $
    
    
    
    $
    
    
    
    $
    2,436,154
    
    
    $
    69,326Corporate bonds
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    1
    
    
    
    69
    
    
    
    1Equity securities
    
    
    9,931
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    9,931
    
    
    
    237Total investment securities
    
    $
    2,446,085
    
    
    $
    69,563
    
    
    $
    69
    
    
    $
    1
    
    
    $
    2,446,154
    
    
    $
    69,564GNMA pass-through certificates
    
    $
    646,091
    
    
    $
    9,826
    
    
    $
    
    
    
    $
    
    
    
    $
    646,091
    
    
    $
    9,826FNMA pass-through certificates
    
    
    2,575,152
    
    
    
    67,913
    
    
    
    
    
    
    
    
    
    
    
    2,575,152
    
    
    
    67,913FHLMC pass-through certificates
    
    
    699,102
    
    
    
    21,389
    
    
    
    
    
    
    
    
    
    
    
    699,102
    
    
    
    21,389FHLMC, FNMA and GNMA -
REMICs
    
    
    806,702
    
    
    
    66,577
    
    
    
    132,671
    
    
    
    23,016
    
    
    
    939,373
    
    
    
    89,593Total mortgage-backed securities
    
    $
    4,727,047
    
    
    $
    165,705
    
    
    $
    132,671
    
    
    $
    23,016
    
    
    $
    4,859,718
    
    
    $
    188,721
 The unrealized losses are primarily due to the changes in interest rates during
the life of the security. We have not classified these items as impaired as the
coupon payments for the investment securities and the principal and interest
payments for the mortgage-backed securities have been made in accordance with
the terms of the agreement. We anticipate collecting the entire principal
balance on these securities as scheduled. 5.  Stockholders Equity Under our stock repurchase programs, shares of Hudson City Bancorp common stock
may be purchased in the open market and through other privately negotiated
transactions, from time-to-time, depending on market conditions. The
repurchased shares are held as treasury stock for general corporate use.
During the six-month period ended June 30, 2004, we purchased 3,259,000 shares
of our common stock at an aggregate cost of $115.5 million. At June 30, 2004,
there were 4,407,421 shares remaining to be repurchased under the existing
stock repurchase program. In the first quarter of 2004, Hudson City, MHC applied for and was granted
approval from the Office of Thrift Supervision (OTS) to waive receipt of
dividends declared by Hudson City Bancorp during 2004. This dividend waiver
will provide additional operating capital and liquidity at Hudson City Bancorp.
The $19.5 million cash dividend paid to common stockholders in the first six
months of 2004 decreased $24.7 million from the $44.2 million cash dividend
paid in the first six months of 2003 primarily due to this dividend waiver by
Hudson City, MHC. Page 10




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Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements 6.  Net Periodic Benefit Plans Expenses Non-contributory retirement and post-retirement plans are maintained to cover
all employees, including retired employees, who have met the eligibility
requirements of the plans. Benefits under the qualified and non-qualified
defined benefit retirement plans are based primarily on years of service and
compensation. Funding of the qualified retirement plan is actuarially
determined on an annual basis. It is our policy to fund the qualified
retirement plan sufficiently to meet the minimum requirements set forth in the
Employee Retirement Income Security Act of 1974. The non-qualified retirement
plan, which is maintained for certain executive officers, is unfunded. Net periodic benefit cost included the following components: For the Three Months Ended June 30,Retirement Plans
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(In thousands)Service cost
    
    $
    726
    
    
    $
    677
    
    
    $
    552
    
    
    $
    411Interest cost
    
    
    1,134
    
    
    
    1,068
    
    
    
    638
    
    
    
    490Expected return on assets
    
    
    (1,643
    )
    
    
    (1,322
    )
    
    
    
    
    
    
    Amortization of:Net loss (gain)
    
    
    12
    
    
    
    132
    
    
    
    1
    
    
    
    (92
    )Unrecognized prior service cost
    
    
    (4
    )
    
    
    (4
    )
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    225
    
    
    $
    551
    
    
    $
    1,191
    
    
    $
    809
 For the Six Months Ended June 30,Retirement Plans
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(In thousands)Service cost
    
    $
    1,453
    
    
    $
    1,355
    
    
    $
    1,105
    
    
    $
    822Interest cost
    
    
    2,268
    
    
    
    2,135
    
    
    
    1,276
    
    
    
    979Expected return on assets
    
    
    (3,286
    )
    
    
    (2,643
    )
    
    
    
    
    
    
    Amortization of:Net loss (gain)
    
    
    24
    
    
    
    264
    
    
    
    1
    
    
    
    (184
    )Unrecognized prior service cost
    
    
    (8
    )
    
    
    (8
    )
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    451
    
    
    $
    1,103
    
    
    $
    2,382
    
    
    $
    1,617
 In 2004, Hudson City expects to fund its qualified retirement plan with the
minimum contribution, which has not yet been determined. 7.  Subsequent Event On July 20, 2004, the Board of Directors of Hudson City Bancorp declared a
quarterly cash dividend of eighteen cents ($0.18) per common share outstanding.
The dividend is payable on September 1, 2004 to Page 11




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Hudson City Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements stockholders of record at the close of business on August 6, 2004. The Board of
Directors of Hudson City, MHC has waived receipt of this dividend consistent
with OTS approval. 8.  Recent Accounting Pronouncements On January 12, 2004, The FASB issued Staff Position No. 106-1 Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003, which allows companies to recognize or defer
recognizing the effects of the Medicare Prescription Drug Improvement and
Modernization Act of 2003, or Medicare Act, for financial statements of fiscal
years ending after December 7, 2003. The Medicare Act introduced both a
Medicare prescription-drug benefit and a federal subsidy to sponsors of retiree
health-care plans that provide a benefit at least actuarially equivalent to
the Medicare benefit. On May 19, 2004, the FASB issued Staff Position No. 106-2 which supersedes
Staff Position No. 106-1, and is effective for the first interim or annual
period beginning after June 15, 2004, or our interim period ending September
30, 2004. These provisions of the Medicare Act will affect accounting
measurements. We have elected to defer accounting for the effects of the
Medicare Act pending our determination of the impact of the Medicare Act on our
financial condition or results of operations. Page 12




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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 Executive Summary Our results of operations depend primarily on net interest income, which is a
direct result of the interest rate environment. Net interest income is the
difference between the interest income we earn on our interest-earning assets,
primarily mortgage loans, mortgage-backed securities and investment securities,
and the interest we pay on our interest-bearing liabilities, primarily time
deposits, interest-bearing demand deposits and borrowed funds. Net interest
income is directly impacted by the spread between long-term interest rates and
short-term interest rates, as our interest-earning assets, particularly those
with initial terms to maturity or repricing greater than one year, generally
price off long-term rates while our interest-bearing liabilities generally
price off short-term interest rates. Our net interest income is also impacted by the shape of the market yield
curve. A steep yield curve, where the difference in interest rates between time
periods is greater in the long-term time periods, could be beneficial to our
net interest income as the interest rate spread between our additional
interest-earning assets and interest-bearing liabilities would be larger.
Conversely, a flat or flattening yield curve, where the difference in rates is
lesser in the long-term periods or is shrinking over time, could have an
adverse impact on our net interest income as our interest rate spread would
decrease. The impact on our interest income due to changes in interest rates is generally
felt in later periods than the impact on our interest expense due to the timing
of the recording on the balance sheet of our interest-earning assets and
interest-bearing liabilities. The recording of interest-earning assets on the
balance sheet generally lags the current market rate due to commitment periods
of up to three months, while the recording of interest-bearing liabilities on
the balance sheet generally times the current market. This timing difference
could have an adverse impact on our net interest income in a rising interest
rate environment. Also impacting our net interest income and net interest rate spread is the
level of prepayment activity on our mortgage-related assets. The actual amount
of time before mortgage loans and mortgage-backed securities are repaid can be
significantly impacted by changes in market interest rates and mortgage
prepayment rates. Mortgage prepayment rates will vary due to a number of
factors, including the regional economy where the underlying mortgages were
originated, seasonal factors, demographic variables and the assumability of the
underlying mortgages. However, the major factors affecting prepayment rates are
prevailing interest rates, related mortgage refinancing opportunities and
competition. Generally, the level of prepayment activity directly affects the
yield earned on those assets, as the payments received on the interest-earning
assets will be reinvested at the prevailing market interest rate. Our results of operations may also be affected significantly by general and
local economic and competitive conditions, particularly those with respect to
changes in market interest rates, government policies and actions of regulatory
authorities. Our results are also affected by the price of our stock, as the
expense of certain of our employee stock compensation plans are related to the
current price of our common stock. Market interest rates generally increased during the second quarter of 2004
following a period of general stability in interest rates during the second
half of 2003 and the first quarter of 2004, notwithstanding the slight
long-term interest rate decrease in the first quarter of 2004. The market yield
curve has remained relatively steep during this period. The Federal Open Market
Committee increased the overnight lending Page 13




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Hudson City Bancorp, Inc.
Form 10-Q rate 25 basis points at the end of June 2004. It is anticipated that overall
market interest rates will continue to increase in future periods, and that the
short-term interest rates may increase faster than the long-term interest
rates, thus flattening the yield curve. If this occurs, the resulting interest
rate environment is likely to have a negative impact on our results of
operations as our interest-bearing liabilities generally price off short-term
interest rates, while our interest-earning assets generally price off long-term
interest rates and the spread between the rates we earn on our interest-earning
assets and the rates we pay on our interest-bearing liabilities will decrease.
If both long- and short-term interest rates increase by the same amount, and
the yield curve does not change, the resulting environment is also likely to
have a negative impact on our results of operations, as our interest-bearing
liabilities will reprice faster than our interest-earning assets. The stabilization of and overall increase in interest rates slowed the
prepayment activity on our mortgage-related assets during the first six months
of 2004 when compared to the activity experienced during the first six months
of 2003. The slowing of the prepayment activity in turn decreased the amount of
related premium amortized on these assets during the first six months of 2004.
The decrease in the prepayment activity and the slowing of the premium
amortization generally had a positive impact on our net interest income, net
interest rate spread and net interest margin for the periods reported in 2004
when compared to the periods reported in 2003. The low interest rate environment of 2003 afforded us the opportunity to
realize gains on certain of our mortgage-backed securities prior to interest
rate changes, such as the long-term interest rate increase seen in the second
quarter of 2004, which would have adversely affected their fair market value.
The low market interest rates caused increases in the fair market value of the
fixed-rate mortgage-backed securities sold. The increases in long-term market
interest rates in 2004 decreased the fair value of our primarily fixed-rate
available for sale portfolio resulting in less sale transactions during 2004
when compared to 2003. The decrease in the fair market value of our available
for sale portfolio also resulted in the reporting of an unrealized loss on
these assets on our statement of financial condition, as required by generally
accepted accounting principals. Although we have the flexibility to sell
available for sale securities, we do not anticipate the need to sell any of
these assets. During the first six months of 2004, we continued to grow our balance sheet
consistent with our traditional thrift business model and the growth
initiatives we have employed during recent periods. Our balance sheet growth,
primarily due to increases in residential first mortgage loans and callable
government-sponsored agency securities classified as held to maturity, was
funded principally by customer deposits and borrowed funds. The growth in our
core investment of residential first mortgage loans was due to our continued
strong levels of loan purchases. The growth in customer deposits was primarily
due to the continued success of our interest-bearing High Value Checking
account. Borrowed funds were increased to meet the goals of our growth
initiatives and to take advantage of the still historically low interest rate
environment, notwithstanding the recent increases in market interest rates. Our
ability to grow our business with low cost interest-bearing liabilities
resulted in the increase in our net interest income during the three- and
six-month periods ended June 30, 2004. We expect to continue to grow through internal expansion primarily through the
origination and purchase of mortgage loans, while purchasing investment and
mortgage-backed securities as a supplement to our mortgage loans. The primary
funding for our growth is expected to come from customer deposits, using
borrowed funds to supplement our deposit initiatives as a means to extend the
maturity of our liabilities. We intend to grow customer deposits by continuing
to offer desirable products at competitive rates and by opening new branch
offices. We have opened three branch offices during 2004, expect to open an Page 14




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Hudson City Bancorp, Inc.
Form 10-Q additional two during the remainder of 2004, and will continue to explore
branch expansion opportunities. Although new branching results in additional
expenses, we continue to maintain a low level of operating expenses. Comparison of Financial Condition at June 30, 2004 and December 31, 2003 During the first six months of 2004, our total assets increased $1.64 billion,
or 9.6%, to $18.67 billion at June 30, 2004 from $17.03 billion at December 31,
2003. Loans increased $1.25 billion, or 14.2%, to $10.05 billion at June 30,
2004 from $8.80 billion at December 31, 2003. The increase in loans reflected
an increase in our loan purchase activity as well as our continued focus on the
origination of one- to four-family first mortgage loans. For the first six
months of 2004, we purchased first mortgage loans of $1.59 billion and
originated first mortgage loans of $768.5 million, compared with purchases of
$851.4 million and originations of $940.9 million for the first six months of
2003. The larger volume of purchased mortgage loans in the first six months
2004, when compared to originated loans, allowed us to grow and diversify our
mortgage loan portfolio at a relatively low overhead cost while maintaining our
traditional thrift business model. We will continue to purchase mortgage loans
to grow and diversify our portfolio as opportunities and funding are available.
The lower volume of origination activity was due to a decline in refinancings. These first mortgage loan originations and purchases were exclusively in one-to
four-family mortgage loans and were primarily fixed-rate loans. At June 30,
2004, fixed-rate mortgage loans accounted for 92.8% of our first mortgage loan
portfolio compared with 90.9% at December 31, 2003. This percentage of
fixed-rate loans to total loans may have an adverse impact on our earnings in a
rising rate environment as the interest rate on these loans would not reprice,
while our interest-bearing deposits and callable borrowed funds would reprice
to the higher market interest rates. During the first six months of 2004, $87.8 million of our loan originations
were the result of refinancing of our existing mortgage loans compared with
$255.7 million during the first six months of 2003. The dollar amount of
refinancing of existing mortgage loans was included in total loan originations.
We allow certain customers to modify, for a fee, their existing mortgage loans
with the intent of maintaining customer relationships in periods of extensive
refinancing due to low long-term interest rates. In general, all terms and
conditions of the existing mortgage loan remain the same except the adjustment
of the interest rate to the currently offered fixed-rate product with a similar
term to maturity or to a reduced term at the request of the borrower.
Modifications of our existing mortgage loans during the first six months of
2004 were approximately $194.6 million compared with $878.8 million during the
first six months of 2003. These loan modifications were not reflected in loan
origination totals. We feel loan refinancing and modification activity are
inversely related to the level of interest rates. If long-term rates increase
or remain relatively stable, we expect the amount of loan refinancings and
modifications to remain at these levels or decrease during 2004. The loan purchases were made pursuant to our wholesale loan purchase program
established to supplement our retail loan originations. The purchasing
agreements, as established with each seller/servicer, contain parameters as to
the loans that can be included in each package. These parameters, such as
maximum loan size and maximum loan-to-value ratio, conform to parameters
generally utilized by us to originate mortgage loans. Purchased loan packages
are subject to internal due diligence procedures that may include review of
individual loan files. This review subjects the purchased loan file to
substantially the same underwriting standards used in our own loan origination
process. Loan packages Page 15




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##### Table of Contents



Hudson City Bancorp, Inc.
Form 10-Q purchased include mortgage loans secured by properties located primarily in the
east coast corridor states between Massachusetts and North Carolina, and in
Michigan and Illinois. Investment securities held to maturity increased to $1.10 billion at June 30,
2004 from $1.4 million at December 31, 2003. During 2004 we began to classify
certain of our government-sponsored agency security purchases as held to
maturity. This increase in investment securities held to maturity primarily
reflected the reinvestment of the cash flows from the $561.3 million decrease
in investment securities available for sale during the first six months of 2004
due to calls during this low interest rate environment. The increase also
represented a strategy to shorten the overall final maturity of our
interest-earning assets, while continuing to grow our balance sheet. Of the
agency securities purchased and classified as held to maturity, $496.6 million
have step-up features, where the interest rate is increased on scheduled future
dates. These securities have call options that are generally effective prior to
the initial rate increase but after an initial non-call period of three months
to one year. The initial rate for the securities purchased was higher than
interest rates on similar agency securities offered at the time of purchase
without the step-up feature. The rate increases are at least one percent per
adjustment and are fixed over the life of the security. Overall, the mortgage-backed securities portfolio remained relatively stable,
with an aggregate balance of $5.34 billion at June 30, 2004 compared with $5.42
billion at December 31, 2003. The $29.3 million increase in other assets
primarily reflected an increase in our deferred tax asset for our investment
and mortgage-backed securities available for sale, as required by generally
accepted accounting principles. Total liabilities increased $1.68 billion, or 10.7%, to $17.38 billion at June
30, 2004 compared with $15.70 billion at December 31, 2003. Total deposits
increased $622.7 million, or 6.0%, to $11.08 billion at June 30, 2004 from
$10.45 billion at December 31, 2003. The increase in total deposits was
primarily used to fund our growth initiatives. Interest-bearing deposits
increased $553.6 million primarily due to an increase of $771.1 million in our
interest-bearing High Value Checking account product, partially offset by a
$190.9 million decrease in time deposits. We believe the increase in
interest-bearing deposits was due primarily to our consistent offering of
competitive rates on our interest-bearing High Value Checking account product.
The balance in the High Value Checking account at June 30, 2004 was $3.48
billion compared with $2.71 billion at December 31, 2003. Borrowed funds increased $1.05 billion, or 20.4%, to $6.20 billion at June 30,
2004 from $5.15 billion at December 31, 2003. The additional borrowed funds
were primarily used to supplement our deposit growth. Borrowed funds were
comprised of $4.25 billion of securities sold under agreements to repurchase
and $1.95 billion of FHLB advances. The $1.85 billion in new borrowings, which
had initial call dates of one month to four years from the date of borrowing,
were partially offset by calls and maturities of borrowed funds in an aggregate
amount of $800.0 million. Total stockholders equity decreased $42.1 million, or 3.2%, to $1.29 billion
at June 30, 2004 from $1.33 billion at December 31, 2003. The decrease in
stockholders equity was primarily due to repurchases of 3,259,000 shares of
our common stock at an aggregate cost of $115.5 million, purchases of 200,000
shares of common stock for our recognition and retention plan at an aggregate
cost of $7.3 million and cash dividends declared and paid to common
stockholders of $19.5 million. As of June 30, 2004 there remained approximately
4,407,421 shares authorized to be purchased under our current stock repurchase
program. The amount of the cash dividend paid to common stockholders reflected
the waiver of receipt of the dividend by Hudson City, MHC, the majority
stockholder of Hudson City Bancorp. The decrease in stockholders equity also
reflected a $41.6 million decrease in accumulated other comprehensive income, Page 16




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Hudson City Bancorp, Inc.
Form 10-Q primarily due to a decrease in the fair value of our fixed-rate available for
sale investment portfolio, reflecting increases in longer term interest rates
during the second quarter of 2004. These decreases to stockholders equity were partially offset by net income of
$114.6 million for the first six months of 2004, a $4.1 million increase due to
the exercise of 579,834 stock options, a $13.1 million permanent tax benefit
due to the exercise of stock options and a $10.1 million increase due to the
commitment of shares for our employee stock benefit plans. At June 30, 2004, the ratio of total stockholders equity to total assets was
6.89% compared with 7.80% at December 31, 2003. For the six-month period ended
June 30, 2004, the ratio of average stockholders equity to average assets was
7.62% compared with 8.73% for the year ended December 31, 2003. Stockholders
equity per common share was $7.19 at June 30, 2004 compared with $7.33 at
December 31, 2003. The decrease in these ratios was primarily due to our
capital management strategy of planned asset growth, and a slower percentage
growth in stockholders equity as compared to the percentage growth in assets,
due to payment of cash dividends and stock repurchases. The decrease in these
ratios also reflected the decrease in accumulated other comprehensive income
due to the lower fair market value of our available for sale securities. Average Balance Sheets for the Three- and Six-Month Periods Ended June 30, 2004
and 2003 The tables on the following pages present certain information regarding Hudson
City Bancorps financial condition and net interest income for the three- and
six-month periods ended June 30, 2004 and 2003. 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 that we considered
adjustments to yields. Yields on tax-exempt obligations were not computed on a
tax equivalent basis. Page 17




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##### Table of Contents



Hudson City Bancorp, Inc 
Form 10-Q For the Three Months Ended June 30,2004
    
    2003Average
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    Yield/
    
    Average
    
    
    
    
    
    Yield/Balance
    
    Interest
    
    Cost
    
    Balance
    
    Interest
    
    Cost(Dollars in thousands)(Unaudited)Assets:Interest-earning assets:First mortgage loans, net (1)
    
    $
    9,368,244
    
    
    $
    127,892
    
    
    
    5.46
    %
    
    $
    6,655,193
    
    
    $
    100,818
    
    
    
    6.06
    %Consumer and other loans
    
    
    139,040
    
    
    
    2,083
    
    
    
    5.99
    
    
    
    125,952
    
    
    
    2,087
    
    
    
    6.63Federal funds sold
    
    
    125,231
    
    
    
    294
    
    
    
    0.94
    
    
    
    192,270
    
    
    
    557
    
    
    
    1.16Mortgage-backed securities at amortized cost
    
    
    5,504,413
    
    
    
    60,968
    
    
    
    4.43
    
    
    
    6,013,907
    
    
    
    66,348
    
    
    
    4.41Federal Home Loan Bank of New York stock
    
    
    155,973
    
    
    
    733
    
    
    
    1.88
    
    
    
    154,286
    
    
    
    2,069
    
    
    
    5.36Investment securities at amortized cost
    
    
    2,580,210
    
    
    
    28,821
    
    
    
    4.47
    
    
    
    1,729,827
    
    
    
    20,777
    
    
    
    4.80Total interest-earning assets
    
    
    17,873,111
    
    
    
    220,791
    
    
    
    4.94
    
    
    
    14,871,435
    
    
    
    192,656
    
    
    
    5.18Noninterest-earning assets
    
    
    379,875
    
    
    
    
    
    
    
    
    
    
    
    319,918Total Assets
    
    $
    18,252,986
    
    
    
    
    
    
    
    
    
    
    $
    15,191,353Liabilities and Stockholders Equity:Interest-bearing liabilities:Savings accounts
    
    $
    949,999
    
    
    
    2,345
    
    
    
    0.99
    
    
    $
    926,094
    
    
    
    2,749
    
    
    
    1.19Interest-bearing demand accounts
    
    
    3,389,216
    
    
    
    17,850
    
    
    
    2.12
    
    
    
    1,761,527
    
    
    
    10,027
    
    
    
    2.28Money market accounts
    
    
    600,796
    
    
    
    1,428
    
    
    
    0.96
    
    
    
    622,462
    
    
    
    1,755
    
    
    
    1.13Time deposits
    
    
    5,571,349
    
    
    
    29,808
    
    
    
    2.15
    
    
    
    6,081,111
    
    
    
    39,145
    
    
    
    2.58Total interest-bearing deposits
    
    
    10,511,360
    
    
    
    51,431
    
    
    
    1.97
    
    
    
    9,391,194
    
    
    
    53,676
    
    
    
    2.29Borrowed funds
    
    
    5,818,912
    
    
    
    50,400
    
    
    
    3.48
    
    
    
    3,928,846
    
    
    
    40,916
    
    
    
    4.18Total interest-bearing liabilities
    
    
    16,330,272
    
    
    
    101,831
    
    
    
    2.51
    
    
    
    13,320,040
    
    
    
    94,592
    
    
    
    2.85Noninterest-bearing liabilities:Noninterest-bearing deposits
    
    
    428,257
    
    
    
    
    
    
    
    
    
    
    
    408,359Other noninterest-bearing liabilities
    
    
    118,638
    
    
    
    
    
    
    
    
    
    
    
    117,187Total noninterest-bearing liabilities
    
    
    546,895
    
    
    
    
    
    
    
    
    
    
    
    525,546Total liabilities
    
    
    16,877,167
    
    
    
    
    
    
    
    
    
    
    
    13,845,586Stockholders equity
    
    
    1,375,819
    
    
    
    
    
    
    
    
    
    
    
    1,345,767Total Liabilities and Stockholders Equity
    
    $
    18,252,986
    
    
    
    
    
    
    
    
    
    
    $
    15,191,353Net interest income/net interest rate spread (2)
    
    
    
    
    
    $
    118,960
    
    
    
    2.43
    %
    
    
    
    
    
    $
    98,064
    
    
    
    2.33
    %Net interest-earning assets/net interest margin (3)
    
    $
    1,542,839
    
    
    
    
    
    
    
    2.65
    %
    
    $
    1,551,395
    
    
    
    
    
    
    
    2.63
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    1.09
    x
    
    
    
    
    
    
    
    
    
    
    1.12
    x
   (1)
    
    Amount is net of deferred loan fees and allowance for loan losses and includes non-performing loans(2)
    
    Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from
the annualized weighted average yield on total interest-earning assets(3)
    
    Determined by dividing annualized net interest income by total average interest-earning assets Page 18




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Hudson City Bancorp, Inc 
Form 10-Q For the Six Months Ended June 30,2004
    
    2003Average
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    Yield/
    
    Average
    
    
    
    
    
    Yield/Balance
    
    Interest
    
    Cost
    
    Balance
    
    Interest
    
    Cost(Dollars in thousands)(Unaudited)Assets:Interest-earning assets:First mortgage loans, net (1)
    
    $
    9,102,544
    
    
    $
    250,979
    
    
    
    5.51
    %
    
    $
    6,692,047
    
    
    $
    207,527
    
    
    
    6.20
    %Consumer and other loans
    
    
    137,170
    
    
    
    4,132
    
    
    
    6.02
    
    
    
    126,062
    
    
    
    4,212
    
    
    
    6.68Federal funds sold
    
    
    132,452
    
    
    
    611
    
    
    
    0.93
    
    
    
    188,682
    
    
    
    1,083
    
    
    
    1.16Mortgage-backed securities at amortized cost
    
    
    5,522,596
    
    
    
    122,615
    
    
    
    4.44
    
    
    
    6,059,010
    
    
    
    141,822
    
    
    
    4.68Federal Home Loan Bank of New York stock
    
    
    158,093
    
    
    
    1,392
    
    
    
    1.76
    
    
    
    147,997
    
    
    
    4,059
    
    
    
    5.49Investment securities at amortized cost
    
    
    2,440,856
    
    
    
    54,089
    
    
    
    4.43
    
    
    
    1,307,739
    
    
    
    32,489
    
    
    
    4.97Total interest-earning assets
    
    
    17,493,711
    
    
    
    433,818
    
    
    
    4.96
    
    
    
    14,521,537
    
    
    
    391,192
    
    
    
    5.39Noninterest-earning assets
    
    
    349,527
    
    
    
    
    
    
    
    
    
    
    
    319,223Total Assets
    
    $
    17,843,238
    
    
    
    
    
    
    
    
    
    
    $
    14,840,760Liabilities and Stockholders Equity:Interest-bearing liabilities:Savings accounts
    
    $
    946,762
    
    
    
    4,676
    
    
    
    0.99
    
    
    $
    915,890
    
    
    
    5,978
    
    
    
    1.32Interest-bearing demand accounts
    
    
    3,190,741
    
    
    
    33,476
    
    
    
    2.11
    
    
    
    1,532,623
    
    
    
    18,209
    
    
    
    2.40Money market accounts
    
    
    609,564
    
    
    
    2,900
    
    
    
    0.96
    
    
    
    623,325
    
    
    
    3,862
    
    
    
    1.25Time deposits
    
    
    5,606,964
    
    
    
    60,148
    
    
    
    2.16
    
    
    
    6,110,793
    
    
    
    81,311
    
    
    
    2.68Total interest-bearing deposits
    
    
    10,354,031
    
    
    
    101,200
    
    
    
    1.97
    
    
    
    9,182,631
    
    
    
    109,360
    
    
    
    2.40Borrowed funds
    
    
    5,597,642
    
    
    
    98,119
    
    
    
    3.52
    
    
    
    3,806,491
    
    
    
    81,186
    
    
    
    4.30Total interest-bearing liabilities
    
    
    15,951,673
    
    
    
    199,319
    
    
    
    2.51
    
    
    
    12,989,122
    
    
    
    190,546
    
    
    
    2.96Noninterest-bearing liabilities:Noninterest-bearing deposits
    
    
    411,212
    
    
    
    
    
    
    
    
    
    
    
    397,701Other noninterest-bearing liabilities
    
    
    121,163
    
    
    
    
    
    
    
    
    
    
    
    114,429Total noninterest-bearing liabilities
    
    
    532,375
    
    
    
    
    
    
    
    
    
    
    
    512,130Total liabilities
    
    
    16,484,048
    
    
    
    
    
    
    
    
    
    
    
    13,501,252Stockholders equity
    
    
    1,359,190
    
    
    
    
    
    
    
    
    
    
    
    1,339,508Total Liabilities and Stockholders Equity
    
    $
    17,843,238
    
    
    
    
    
    
    
    
    
    
    $
    14,840,760Net interest income/net interest rate spread (2)
    
    
    
    
    
    $
    234,499
    
    
    
    2.45
    %
    
    
    
    
    
    $
    200,646
    
    
    
    2.43
    %Net interest-earning assets/net interest margin (3)
    
    $
    1,542,038
    
    
    
    
    
    
    
    2.67
    %
    
    $
    1,532,415
    
    
    
    
    
    
    
    2.74
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    1.10
    x
    
    
    
    
    
    
    
    
    
    
    1.12
    x
   (1)
    
    Amount is net of deferred loan fees and allowance for loan losses and includes non-performing loans(2)
    
    Determined by subtracting the annualized weighted average cost of total interest-bearing liabilities from
the annualized weighted average yield on total interest-earning assets(3)
    
    Determined by dividing annualized net interest income by total average interest-earning assets Page 19




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Hudson City Bancorp, Inc.
Form 10-Q Comparison of Operating Results for the Three-Month Periods Ended June 30, 2004
and 2003 General.Net income was $58.4 million for the three months ended June 30,
2004, an increase of $5.9 million, or 11.2%, compared with net income of $52.5
million for the three months ended June 30, 2003. Basic and diluted earnings
per common share were both $0.32 for the second quarter of 2004 compared with
basic and diluted earnings per share of $0.29 and $0.28, respectively, for the
second quarter of 2003. For the second quarter of 2004 our return on average
stockholders equity was 16.98% compared with 15.62% for the second quarter of
2003. The increase in the return on average stockholders equity was primarily
due to the growth of our net income and a decline in stockholders equity due
to payment of cash dividends and stock repurchases. Our return on average
assets for the three-month period ended June 30, 2004 was 1.28% compared with
1.38% for the three-month period ended June 30, 2003. The decrease in the
return on average assets was primarily due to our overall balance sheet growth
in the low interest rate environment of 2003 and the first quarter of 2004. Interest and Dividend Income.Total interest and dividend income increased
$28.1 million, or 14.6%, to $220.8 million for the quarter ended June 30, 2004
compared with $192.7 million for the quarter ended June 30, 2003. The increase
in total interest and dividend income was primarily due to a $3.00 billion, or
20.2%, increase in the average balance of total interest-earning assets to
$17.87 billion for the second quarter of 2004 compared with $14.87 billion for
the second quarter of 2003. The growth in the average balance of total
interest-earning assets was consistent with the growth initiatives employed by
us during recent periods. The impact on interest and dividend income from the
increase in the average balance of our total interest-earning assets was
partially off-set by a 24 basis point decrease in the annualized average yield
on total interest-earning assets to 4.94% for the second quarter of 2004 from
5.18% for the second quarter of 2003, primarily reflecting yield declines in
mortgage loans and investment securities. The $27.1 million increase in interest and fee income on first mortgage loans
was primarily due to a $2.71 billion increase in the average balance of first
mortgage loans, which reflected our continued emphasis on our core investment
in first mortgage loans. The increase in mortgage loan income due to the
increase in the average balance was partially offset by a 60 basis point
decrease in the annualized average yield, which reflected the large volume of
loan origination and purchase activity during the low long-term interest rate
environment of 2003 and the first quarter of 2004. The $8.0 million increase in interest and dividends on total investment
securities was primarily due to an increase in the average balance of
investment securities of $850.4 million, which reflected the investment of
certain of the cash flows from the high level of prepayment activity on our
mortgage-related assets in 2003 into investment securities, and the decision to
shorten the overall weighted-average life of our assets by investing in
callable securities with initial call dates of three months to one year and
final maturity dates of five to seven years. The increase in income on total
investment securities due to the increase in the average balance was partially
offset by a 33 basis point decrease in the annualized average yield on our
investment securities, which reflected the large volume of purchases made
during the low interest rate environment of 2003 and the first quarter of 2004. The $5.3 million decrease in interest income on total mortgage-backed
securities was due to a $509.5 million decrease in the average balance of total
mortgage-backed securities, which reflected the high volume of prepayment
activity, the sales of mortgage-backed securities, and the subsequent
investment of certain of the cash flow into investment securities. The impact
on mortgage-backed securities income due to the decline of the average balance
was partially offset by the slowing of the premium amortization. Page 20




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Hudson City Bancorp, Inc.
Form 10-Q Interest Expense.Total interest expense, comprised of interest on deposits
and interest on borrowed funds, increased $7.2 million, or 7.6%, to $101.8
million for the quarter ended June 30, 2004 from $94.6 million for the quarter
ended June 30, 2003. This increase was primarily due to a $3.01 billion, or
22.6%, increase in the average balance of total interest-bearing liabilities to
$16.33 billion for the second quarter of 2004 compared with $13.32 billion for
the second quarter of 2003. The impact of the increase in the average balance
of total interest-bearing liabilities was offset, in part, by a 34 basis point
decrease in the annualized average cost of total interest-bearing liabilities
to 2.51% for the three-month period ended June 30, 2004 from 2.85% for the
corresponding period in 2003. Interest expense on borrowed funds increased $9.5 million primarily due to a
$1.89 billion increase in the average balance of borrowed funds, the impact of
which was partially offset by an 70 basis point decrease in the annualized
average cost of borrowed funds. The increase in the average balance of borrowed
funds was used to fund asset growth. The decrease in the average cost of
borrowed funds reflected the continued growth of our borrowed funds in the low
interest rate environment that existed during 2003 and the first quarter of
2004. The decrease in the annualized average cost of borrowed funds also
reflected the restructuring of certain of our borrowed funds during 2003, which
resulted in the extension of the weighted-average maturity and lowered the
contract rates. Interest expense on interest-bearing deposits decreased $2.3 million primarily
due to a 32 basis point decrease in the annualized average cost to 1.97%, the
impact of which was partially offset by an increase in the average balance of
interest-bearing deposits of $1.12 billion. The decrease in the annualized
average cost of interest-bearing deposits primarily reflected a 43 basis point
decrease in the annualized average cost of our time deposits and a 16 basis
point decrease in the annualized average cost of interest-bearing demand
deposits. These decreases in the annualized average cost of interest-bearing
deposits reflected the low interest rate environment experienced during 2003
and the first quarter of 2004. The increase in the average balance of interest-bearing deposits, primarily
used to fund asset growth, reflected a $1.63 billion increase in the average
balance of interest-bearing demand accounts due to the growth in our High Value
Checking account product. We believe the increase in the average balance of
interest-bearing deposits was primarily due to our consistent offering of
competitive rates on our High Value Checking account product. Although we
believe our time deposit rates are competitive, we believe the $509.8 million
decrease in the average balance of time deposits was due in part to transfers
to our High Value Checking account. We intend to continue to fund future asset
growth using customer deposits as our primary source of funds, by continuing to
pay attractive above market rates and by opening new branch offices, while
supplementing the deposit growth with borrowed funds. Net Interest Income.Net interest income increased $20.9 million, or 21.3%,
to $119.0 million for the quarter ended June 30, 2004 compared with $98.1
million for the quarter ended June 30, 2003. This increase primarily reflected
our growth initiatives, which resulted in increases in the average balance of
both interest-earning assets and interest-bearing liabilities, and the net
interest rate spread earned on this growth. Our net interest rate spread, the
difference between the annualized average yield on total interest-earning
assets and the annualized average cost of total interest-bearing liabilities,
increased 10 basis points to 2.43% for the second quarter of 2004 from 2.33%
for the corresponding period in 2003. Our net interest margin, represented by
annualized net interest income divided by average total interest-earning
assets, increased 2 basis points to 2.65% for the three-month period ended June
30, 2004 from 2.63% for the three-month period ended June 30, 2003. Page 21




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Hudson City Bancorp, Inc.
Form 10-Q The increases in these ratios reflected the larger decrease in the annualized
cost on total interest-bearing liabilities compared with the decrease in the
annualized yield of total interest-earning assets, primarily due to the
decreased prepayment activity on our mortgage-related assets, and the resulting
decrease in the amortization of the net premium on these assets. The lesser
increase in the net interest margin, when compared to the increase in the net
interest rate spread, was due to the use of funds to purchase treasury stock,
which otherwise could have been invested in interest-earning assets. It is anticipated that overall market interest rates will increase in future
periods, and that the short-term interest rates may increase faster than the
long-term interest rates, thus flattening the yield curve. If this occurs, the
resulting interest rate environment is likely to have a negative impact on our
net interest income, net interest spread and net interest margin, as our
interest-bearing liabilities generally price off short-term interest rates,
while our interest-earning assets generally price off long-term interest rates
and the spread between the rates we earn on our interest-earning assets and the
rates we pay on our interest-bearing liabilities will decrease. Provision for Loan Losses.Our provision for loan losses for the quarters
ended June 30, 2004 and 2003 was $225,000. Net charge-offs during the first six
months of 2004 were $7,000 compared with net charges-offs of $31,000 during the
first six months of 2003. The allowance for loan losses increased $443,000 to
$27.0 million at June 30, 2004 from $26.5 million at December 31, 2003. The
increase in the allowance for loan losses, through the provision for loan
losses, reflected the overall growth of the loan portfolio. Non-performing loans, defined as non-accruing loans and accruing loans
delinquent 90 days or more, increased $5.3 million to $25.6 million at June 30,
2004 from $20.3 million at December 31, 2003, reflecting increases in our
non-performing purchased loan portfolio. The ratio of non-performing loans to
total loans was 0.25% at June 30, 2004 compared with 0.23% at December 31,
2003. The ratio of the allowance for loan losses to non-performing loans was
105.48% at June 30, 2004 compared with 131.09% at December 31, 2003. The ratio
of the allowance for loan losses to total loans was 0.27% at June 30, 2004
compared with 0.30% at December 31, 2003. Although we believe that we have established and maintained the allowance for
loan losses at adequate levels, additions may be necessary if future economic
and other conditions differ substantially from the current operating
environment. Although we use the best information available, the level of the
allowance for loan losses remains an estimate that is subject to significant
judgment and short-term change. See Critical Accounting Policies. Non-Interest Income.Total non-interest income decreased $6.0 million to
$3.9 million for the quarter ended June 30, 2004 from $9.9 million for the
quarter ended June 30, 2003. The decrease in non-interest income reflected a
$6.0 million decrease in gains on securities transactions, net to $2.6 million
for the second quarter of 2004 from $8.6 million for the second quarter of 2003
primarily due to decreases in sales of mortgage-backed securities. The $2.6
million gain on securities transactions during the second quarter of 2004
resulted from an opportunity to realize gains from the sale of certain
available for sale mortgage-backed securities. The historically low interest
rate environment enabled us to realize these gains on the sales of securities,
as the lower rates increased the fair value of the fixed-rate securities sold.
The gains in 2003 resulted from the enhanced opportunities to realize gains due
to to a declining rate environment. The total cash flow from the sales of these
securities was $100.2 million. We may continue to realize gains on the sale of
securities during the remainder of 2004 if given the opportunity to sell these Page 22




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##### Table of Contents



Hudson City Bancorp, Inc.
Form 10-Q assets in a favorable interest rate environment. Non-Interest Expense.Total non-interest expense increased $4.3 million, or
17.3%, to $29.2 million for the quarter ended June 30, 2004 from $24.9 million
for the quarter ended June 30, 2003. The increase was primarily due to an
increase of $3.5 million in compensation and employee benefits reflecting
routine salary increases, staff increases, and increases in stock-related
compensation expense. Of the $3.5 million increase in compensation and employee
benefits, $1.6 million was due to increases in the expense of our employee
stock benefit plans, due to increases in the market price of our common stock. Our efficiency ratio, determined by dividing total non-interest expense by the
sum of net interest income and non-interest income was 23.75% for the second
quarter of 2004 compared with 23.07% for the second quarter of 2003. Our ratio
of annualized non-interest expense to average total assets for the second
quarter of 2004 was 0.64% compared with 0.66% for the second quarter of 2003.
The relative stability of these ratios reflected our efforts to control costs,
notwithstanding the actual increase in non-interest expense, as our average
assets grew in excess of 20.0% when comparing the second quarter of 2004 to the
same period in 2003. Income Taxes.Income tax expense increased $4.7 million, or 15.5%, to $35.0
million for the quarter ended June 30, 2004 from $30.3 million for the quarter
ended June 30, 2003, primarily due to the 12.8% increase in income before
income tax expense. Our effective tax rate increased for the second quarter of
2004 to 37.50% from 36.59% for the second quarter of 2003, primarily due to the
increase in expense of the employee stock ownership plan, which is not fully
deductible for income tax purposes. Comparison of Operating Results for the Six-Month Periods Ended June 30, 2004
and 2003 General.Net income was $114.6 million for the six months ended June 30,
2004, an increase of $9.9 million, or 9.5%, compared with net income of $104.7
million for the six months ended June 30, 2003. Basic and diluted earnings per
common share were $0.63 and $0.62, respectively, for the first six months of
2004 compared with basic and diluted earnings per share of $0.57 and $0.56,
respectively, for the first six months of 2003. For the six months ended June
30, 2004 our return on average stockholders equity was 16.87% compared with
15.64% for the corresponding period of 2003. The increase in the return on
average stockholders equity was primarily due to the growth of our net income
and a decline in stockholders equity due to payment of cash dividends and
stock repurchases. Our return on average assets for the six-month period ended
June 30, 2004 was 1.29% compared with 1.41% for the six-month period ended June
30, 2003. The decrease in the return on average assets was primarily due to our
overall balance sheet growth in the low interest rate environment of 2003 and
the first quarter of 2004. Interest and Dividend Income.Total interest and dividend income increased
$42.6 million, or 10.9%, to $433.8 million for the six-month period ended June
30, 2004 compared with $391.2 million for the six-month period ended June 30,
2003. The increase in total interest and dividend income was primarily due to a
$2.97 billion, or 20.5%, increase in the average balance of total
interest-earning assets to $17.49 billion for the first six months of 2004
compared with $14.52 billion for the first six months of 2003. The growth in
the average balance of total interest-earning assets was consistent with the
growth initiatives employed by us during recent periods. The impact on interest
and dividend income from the increase in the average balance of our total
interest-earning assets was partially off-set by a 43 basis point decrease in
the annualized average yield on total interest-earning assets to 4.96% for the
six-month period ended June Page 23




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##### Table of Contents



Hudson City Bancorp, Inc.
Form 10-Q 30, 2004 from 5.39% for the six-month period ended June 30, 2003, primarily
reflecting yield declines to varying degrees in all asset categories. The $43.5 million increase in interest and fee income on first mortgage loans
was primarily due to a $2.41 billion increase in the average balance of first
mortgage loans, which reflected our continued emphasis on our core investment
in first mortgage loans. The increase in mortgage loan income due to the
increase in the average balance was partially offset by a 69 basis point
decrease in the annualized average yield, which reflected the large volume of
loan origination and purchase activity during the low long-term interest rate
environment of 2003 and the first quarter of 2004. The $21.6 million increase in interest and dividends on total investment
securities was primarily due to an increase in the average balance of
investment securities of $1.13 billion, which reflected the investment of
certain of the cash flows from the high level of prepayment activity on our
mortgage-related assets in 2003 into investment securities, and the decision to
shorten the overall weighted-average life of our assets by investing in
callable securities with initial call dates of three months to one year and
final maturity dates of five to seven years. The increase in income on total
investment securities due to the increase in the average balance was partially
offset by a 54 basis point decrease in the annualized average yield on our
investment securities, which reflected the large volume of purchases made
during the low interest rate environment of 2003 and the first quarter of 2004. The $19.2 million decrease in interest income on total mortgage-backed
securities was primarily due to a $536.4 million decrease in the average
balance of total mortgage-backed securities, which reflected the high volume of
prepayment activity, the sales of mortgage-backed securities, and the
subsequent investment of certain of the cash flow into investment securities.
The decrease in interest income on total mortgage-backed securities also
reflected a 24 basis point decrease in the annualized average yield on
mortgage-backed securities, due to the reinvestment of certain of the proceeds
back into mortgage-backed securities in the low interest rate environment. The
impact on mortgage-backed securities income due to the decline in the average
balance and annualized weighted average yield was partially offset by the
slowing of the premium amortization. Interest Expense.Total interest expense, comprised of interest on deposits
and interest on borrowed funds, increased $8.8 million, or 4.6%, to $199.3
million for the six-month period ended June 30, 2004 from $190.5 million for
the six-month period ended June 30, 2003. This increase was primarily due to a
$2.96 billion, or 22.8%, increase in the average balance of total
interest-bearing liabilities to $15.95 billion for the first six months of 2004
compared with $12.99 billion for the first six months of 2003. The impact of
the increase in the average balance of total interest-bearing liabilities was
offset, in part, by a 45 basis point decrease in the annualized average cost of
total interest-bearing liabilities to 2.51% for the six-month period ended June
30, 2004 from 2.96% for the corresponding period in 2003. Interest expense on borrowed funds increased $16.9 million primarily due to a
$1.79 billion increase in the average balance of borrowed funds, the impact of
which was partially offset by an 78 basis point decrease in the annualized
average cost of borrowed funds. The increase in the average balance of borrowed
funds was used to fund asset growth. The decrease in the average cost of
borrowed funds reflected the continued growth of our borrowed funds in the low
interest rate environment that existed during 2003 and the first quarter of
2004. The decrease in the annualized average cost of borrowed funds also
reflected the restructuring of certain of our borrowed funds during 2003, which
resulted in the extension of the weighted-average maturity and lowered the
contract rates. Page 24




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##### Table of Contents



Hudson City Bancorp, Inc.
Form 10-Q Interest expense on interest-bearing deposits decreased $8.2 million primarily
due to a 43 basis point decrease in the annualized average cost to 1.97%, the
impact of which was partially offset by an increase in the average balance of
interest-bearing deposits of $1.17 billion. The decrease in the annualized
average cost of interest-bearing deposits primarily reflected a 52 basis point
decrease in the annualized average cost of our time deposits and a 29 basis
point decrease in the annualized average cost of interest-bearing demand
deposits. These decreases in the annualized average cost of interest-bearing
deposits reflected the low interest rate environment experienced during 2003
and the first quarter of 2004. The increase in the average balance of interest-bearing deposits, primarily
used to fund asset growth, reflected a $1.66 billion increase in the average
balance of interest-bearing demand accounts due to the growth in our High Value
Checking account product. We believe the increase in the average balance of
interest-bearing deposits was primarily due to our consistent offering of
competitive rates on our High Value Checking account product. Although we
believe our time deposit rates are competitive, we believe the $503.8 million
decrease in the average balance of time deposits was due in part to transfers
to our High Value Checking account. We intend to continue to fund future asset
growth using customer deposits as our primary source of funds, by continuing to
pay attractive above market rates and by opening new branch offices, while
supplementing the deposit growth with borrowed funds. Net Interest Income.Net interest income increased $33.9 million, or 16.9%,
to $234.5 million for the six-month period ended June 30, 2004 compared with
$200.6 million for the six-month period ended June 30, 2003. This increase
primarily reflected our growth initiatives, which resulted in increases in the
average balance of both interest-earning assets and interest-bearing
liabilities, and the net interest rate spread earned on this growth. Our net
interest rate spread increased 2 basis points to 2.45% for the first six months
of 2004 from 2.43% for the corresponding period in 2003. The slight increase in
this ratio reflected the larger decrease in the annualized cost on total
interest-bearing liabilities compared with the decrease in the annualized yield
of total interest-earning assets primarily due to the decreased prepayment
activity on our mortgage-related assets, and the resulting decrease in the
amortization of the net premium on these assets. Our net interest margin
decreased 7 basis points to 2.67% for the six-month period ended June 30, 2004
from 2.74% for the six-month period ended June 30, 2003. The decrease was
primarily due to the use of funds to purchase treasury stock, which otherwise
could have been invested in interest-earning assets. It is anticipated that overall market interest rates will increase in future
periods, and that the short-term interest rates may increase faster than the
long-term interest rates, thus flattening the yield curve. If this occurs, the
resulting interest rate environment is likely to have a negative impact on our
net interest income, net interest spread and net interest margin, as our
interest-bearing liabilities generally price off short-term interest rates,
while our interest-earning assets generally price off long-term interest rates
and the spread between the rates we earn on our interest-earning assets and the
rates we pay on our interest-bearing liabilities will decrease. Provision for Loan Losses.Our provision for loan losses for the six-months
periods ended June 30, 2004 and 2003 was $450,000. Non-Interest Income.Total non-interest income decreased $7.9 million to
$7.5 million for the six-month period ended June 30, 2004 from $15.4 million
for the six-month period ended June 30, 2003. The decrease in non-interest
income reflected a $7.7 million decrease in gains on securities transactions,
net to $5.1 million for the first six months of 2004 from $12.8 million for the
first six months of 2003 primarily due to decreases in sales of mortgage-backed
securities. The $5.1 million gain on securities transactions Page 25




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Hudson City Bancorp, Inc.
Form 10-Q during the first six months of 2004 resulted from an opportunity to realize
gains from the sale of certain available for sale mortgage-backed securities
prior to an interest rate change, such as seen in the second quarter of 2004,
which would have had an adverse impact on their fair market value. The
historically low interest rate environment enabled us to realize these gains on
the sales of securities, as the lower rates increased the fair value of the
fixed-rate securities sold. The gains in 2003 resulted from the enhanced
opportunities to realize gains due to the declining rate environment. The total
cash flow from the sales of these securities during the first six months of
2004 was $226.6 million. We may continue to realize gains on the sale of
securities during the remainder of 2004 if given the opportunity to sell these
assets in a favorable interest rate environment. Non-Interest Expense.Total non-interest expense increased $7.8 million, or
15.5%, to $58.2 million for the six-month period ended June 30, 2004 from $50.4
million for the six-month period ended June 30, 2003. The increase was
primarily due to an increase of $6.3 million in compensation and employee
benefits reflecting routine salary increases, staff increases, and increases in
stock-related compensation expense. Of the $6.3 million increase in
compensation and employee benefits, $3.86 million was due to increases in the
expense of our employee stock benefit plans, due to increases in the market
price of our common stock. Our efficiency ratio was 24.06% for the first six months of 2004 compared with
23.34% for the first six months of 2003. Our ratio of annualized non-interest
expense to average total assets for the first six months of 2004 was 0.65%
compared with 0.68% for the first six months of 2003. The relative stability
of these ratios reflected our efforts to control costs, notwithstanding the
actual increase in non-interest expense, as our average assets grew in excess
of 20.0% when comparing the first six months of 2004 to the same period in
2003. Income Taxes.Income tax expense increased $8.3 million, or 13.7%, to $68.7
million for the six-month period ended June 30, 2004 from $60.4 million for the
six-month period ended June 30, 2003, primarily due to the 11.0% increase in
income before income tax expense. Our effective tax rate increased for the
first six months of 2004 to 37.47% from 36.58% for the first six months of
2003, primarily due to the increase in expense of the employee stock ownership
plan, which is not fully deductible for income tax purposes. 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, deposits,
borrowed funds, maturities and calls of investment securities and funds
provided by our operations. Our membership in the FHLB provides us access to
additional sources of borrowed funds, which is generally limited to twenty
times the amount of FHLB stock owned. 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. As mortgage interest rates decline, customer-prepayment
activity tends to accelerate causing an increase in cash flow from both our
mortgage loan and mortgage-backed security Page 26




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Hudson City Bancorp, Inc.
Form 10-Q portfolios. If our pricing is competitive, the demand for mortgage originations
also accelerates. When mortgage rates increase, the opposite effect on
prepayment activity tends to occur and our loan origination and purchase
activity becomes increasingly dependent on the strength of our residential real
estate market, home purchases and new construction activity. Principal repayments on loans were $1.15 billion during the six-month period
ended June 30, 2004 compared with $1.93 billion for the six-month period ended
June 30, 2003. Principal payments received on mortgage-backed securities
totaled $1.02 billion during the first six months of 2004 compared with $2.09
billion during the first six months of 2003. The decrease in payments on loans
and mortgage-backed securities reflected the increasing interest rate
environment and the declining prepayment activity on these assets. Maturities
and calls of investment securities totaled $861.4 million during the six-month
period ended June 30, 2004 compared with maturities and calls of $838.5 million
during the corresponding period in 2003. Total deposits increased $622.7 million during the six-month period ended June
30, 2004 compared with an increase of $827.5 million during the six-month
period ended June 30, 2003. Deposit flows are affected by the level of market
interest rates, the interest rates and products offered by competitors, the
volatility of equity markets, and other factors. We believe the increase in
interest-bearing deposits was due primarily to our consistent offering of
competitive rates on our interest-bearing High Value Checking account. Time
deposit accounts scheduled to mature within one year were $4.15 billion at June
30, 2004. We anticipate that we will have sufficient resources to meet this
current funding commitment. Based on our deposit retention experience and
current pricing strategy, we anticipate that a significant portion of these
time deposits will remain with us. We are committed to maintaining a strong
liquidity position; therefore we monitor our liquidity position on a daily
basis. For the six-month period ended June 30, 2004 we borrowed $1.85 billion compared
with new borrowings of $550.0 million for the six-month period ended June 30,
2003. Principal payments on borrowed funds during the first six months of 2004
were $800.0 million compared with $100.0 million for the corresponding period
in 2003. The increase in principal payments reflected the increase in calls and
maturities on borrowed funds during this increasing interest rate environment.
The increase in new borrowings reflected the increase in call activity on
borrowed funds and our growth initiatives. The funds borrowed during 2004 had
initial call dates of one month to four years from the date of borrowing and
final maturities of one month to ten years. At June 30, 2004, there were $600.0
million of borrowed funds scheduled to mature within one year, and an
additional $1.30 billion of borrowed funds with the potential to be called
within one year. We anticipate we will have sufficient resources to meet
either funding commitment by borrowing new funds at the prevailing market
interest rate, or paying-off the borrowed funds, as they mature or are called,
from our usual cash flow sources. Our primary investing activities are the origination and purchase of one-to
four-family real estate loans and consumer and other loans, the purchase of
mortgage-backed securities, and the purchase of investment securities. We
originated total loans of $812.0 million during the six-month period ended June
30, 2004 compared with $987.9 million during the six-month period ended June
30, 2003. The decrease in originations reflected the decrease in refinancing
and prepayment activity in 2004 due to the increasing interest rate
environment. During the first six months of 2004 we purchased total loans of
$1.59 billion compared with $851.4 million during the first six months of 2003.
The larger volume of purchased mortgage loans in the first six months of 2004,
when compared to originated loans, allowed us to grow and geographically
diversify our mortgage loan portfolio at a relatively low overhead cost while
maintaining our traditional thrift business model. The increase in loan
purchases also reflected the growth Page 27




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Hudson City Bancorp, Inc.
Form 10-Q strategies we have employed during recent periods, using customer deposits and
borrowed funds as our funding sources. We will continue to purchase mortgage
loans to grow and diversify our portfolio as opportunities and funding are
available. Purchases of mortgage-backed securities during the six-month period ended June
30, 2004 were $1.20 billion compared with $2.75 billion during the six-month
period ended June 30, 2003. The decrease in purchases of mortgage-backed
securities reflected the decline in the prepayment activity, resulting in a
decrease in funds to reinvest, and the shift of security purchases to
government-sponsored agency investment securities. During the six-month period ended June 30, 2004, we purchased $1.44 billion of
investment securities compared with purchases of $2.20 billion during the
six-month period ended June 30, 2003. This decrease in purchases was primarily
due to lower prepayment activity on our mortgage-related assets. Of the
investment securities purchased during 2004, $1.10 billion were classified as
held to maturity. Of these securities, $496.6 million have step-up features,
where the interest rate is increased on scheduled future dates. These
securities have call options that are generally effective prior to the initial
rate increase but after an initial non-call period of three months to one year.
The initial rate for the securities purchased was higher than interest rates on
similar agency securities offered at the time of purchase without the step-up
feature. The rate increases are at least one percent per adjustment and are
fixed over the life of the security. As part of the membership requirements of the FHLB, we are required to hold a
certain dollar amount of FHLB common stock based on our asset size or our
borrowings from the FHLB. During the first six months of 2004, we redeemed
$14.9 million of FHLB common stock due to calls of funds borrowed from the
FHLB. During the first six months of 2003, we purchased $22.5 million of FHLB
stock. The redemptions made during 2004 brought our total investment in FHLB
stock to $150.0 million, the amount we are currently required to hold. Under our stock repurchase programs, shares of Hudson City Bancorp common stock
may be purchased in the open market and through other privately negotiated
transactions, from time-to-time, depending on market conditions. The
repurchased shares are held as treasury stock for general corporate use. During
the six-month period ended June 30, 2004, we purchased 3,259,000 shares of our
common stock at an aggregate cost of $115.5 million compared with purchases of
1,746,500 shares during the six-month period ended June 30, 2003 at an
aggregate cost of $36.9 million. At June 30, 2004, there were 4,407,421 shares
remaining to be repurchased under the existing stock repurchase program. During
the first six months of 2004, the trustee of our recognition and retention plan
purchased 200,000 shares of common stock for our recognition and retention plan
at an aggregate cost of $7.3 million due to awards to employees made during the
quarter. Cash dividends declared and paid during the first six months of 2004 were $19.5
million compared with $44.2 million during the first six months of 2003. In
the first quarter of 2004, Hudson City, MHC applied for and was granted
approval from the OTS to waive receipt of dividends declared by Hudson City
Bancorp during 2004. This dividend waiver will provide additional operating
capital and liquidity at Hudson City Bancorp. The decrease in the dividend
payment reflected the waiver by Hudson City, MHC. The dividend pay-out ratio,
not reflecting the dividend waiver by Hudson City, MHC, for the first six
months of 2004 was 52.38% compared with 40.35% for the first six months of
2003. On July 20, 2004, the Board of Directors declared a quarterly cash
dividend of eighteen cents ($0.18) per common share. Page 28




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Hudson City Bancorp, Inc.
Form 10-Q The dividend is payable on September 1, 2004 to stockholders of record at the
close of business on August 6, 2004. At June 30, 2004, Hudson City Savings exceeded all regulatory capital
requirements. Hudson City Savings tangible capital ratio, leverage (core)
capital ratio and total risk-based capital ratio were 6.72%, 6.72% and 18.89%,
respectively. The primary source of liquidity for Hudson City Bancorp, the holding company of
Hudson City Savings, is capital distributions from the banking subsidiary.
During the first six months of 2004, Hudson City Bancorp received $104.9
million in dividend payments from Hudson City Savings, which amounted to 92.4%
of Hudson City Savings net income for that period. The primary use of these
funds is the payment of dividends to our shareholders and the repurchase of our
common stock. Hudson City Bancorps ability to continue these activities is
solely dependent upon capital distributions from Hudson City Savings.
Applicable federal law may limit the amount of capital distributions Hudson
City Savings may make. Off-Balance Sheet Arrangements and Contractual Obligations Hudson City is a party to certain off-balance sheet arrangements, which occur
in the normal course of our business, to meet the credit needs of our customers
and the growth initiatives of the Bank. These arrangements are primarily
commitments to originate and purchase mortgage loans, and to purchase
securities. We did not engage in any hedging transactions that use derivative
instruments (such as interest rate swaps and caps) during the first six months
of 2004 and did not have any such hedging transactions in place at June 30,
2004, which would create other off-balance sheet arrangements. The following table reports the amounts of contractual obligations for Hudson
City as of June 30, 2004. Payments Due By PeriodLess Than
    
    1 Year to
    
    3 Years to
    
    More ThanContractual Obligation
    
    Total
    
    1 Year
    
    3 Years
    
    5 Years
    
    5 Years(In thousands)First mortgage loans
commitments
    
    $
    267,522
    
    
    $
    267,522
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage loan purchases
    
    
    501,256
    
    
    
    501,256
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed security
purchases
    
    
    286,329
    
    
    
    286,329
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    43,213
    
    
    
    2,838
    
    
    
    6,053
    
    
    
    5,694
    
    
    
    28,628Total
    
    $
    1,098,320
    
    
    $
    1,057,945
    
    
    $
    6,053
    
    
    $
    5,694
    
    
    $
    28,628
 Commitments to extend credit are agreements to lend money to a customer as long
as there is no violation of any condition established in the contract.
Commitments to fund first mortgage loans generally have fixed expiration dates
of approximately 90 days and other termination clauses. Since some commitments
are expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements. Hudson City Savings
evaluates each customers credit-worthiness on a case-by-case basis.
Additionally, we have available home equity and overdraft lines of credit,
which do not have fixed expiration dates, of approximately $82.0 million. We
are not obligated to advance further amounts on credit lines if the customer is
delinquent, or otherwise in violation of the agreement. The commitments to
purchase first mortgage loans and securities had a normal period from trade
date to settlement date of approximately 60 days. All commitments to purchase
loans and securities are expected to settle on a gross basis. Page 29




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Hudson City Bancorp, Inc.
Form 10-Q Critical Accounting Policies Note 1 to our Audited Consolidated Financial Statements of our Annual Report on
Form 10-K for the year ended December 31, 2003, contains a summary of our
significant accounting policies. We believe our policies with respect to the
methodology for our determination of the allowance for loan losses and asset
impairment judgments, including other than temporary declines in the value of
our securities, involve a higher degree of complexity and require management to
make difficult and subjective judgments which often require assumptions or
estimates about highly uncertain matters. Changes in these judgments,
assumptions or estimates could cause reported results to differ materially.
These critical policies and their application are periodically reviewed with
the Audit Committee and our Board of Directors. Allowance for Loan Losses.The allowance for loan losses has been
determined in accordance with accounting principles generally accepted in the
United States of America, under which we are required to maintain adequate
allowances for loan losses. We are responsible for the timely and periodic
determination of the amount of the allowance required. We believe that our
allowance for loan losses is adequate to cover specifically identifiable loan
losses, as well as estimated losses inherent in our portfolio for which certain
losses are probable but not specifically identifiable. As part of our evaluation of the adequacy of our allowance for loan losses,
each month we prepare a worksheet. This worksheet categorizes the entire loan
portfolio by certain risk characteristics such as loan type (one- to
four-family, multi-family, etc.) and payment status (i.e., current or number of
days delinquent). Loans with known potential losses are categorized separately.
We assign potential loss factors to the payment status categories on the basis
of our assessment of the potential risk inherent in each loan type. We use this
worksheet, together with loan portfolio balances and delinquency reports, to
evaluate the adequacy of the allowance for loan losses. Other key factors we
consider in this process are current real estate market conditions, changes in
the trend of non-performing loans, the current state of the local and national
economy and loan portfolio growth. We maintain the allowance for loan losses through provisions for loan losses
that we charge to income. We charge losses on loans against the allowance for
loan losses when we believe the collection of loan principal is unlikely. We
establish the provision for loan losses after considering the results of our
review of delinquency and charge-off trends, the allowance for loan loss
worksheet, the amount of the allowance for loan losses in relation to the total
loan balance, loan portfolio growth, accounting principles generally accepted
in the United States of America and regulatory guidance. We have applied this
process consistently and we have made minimal changes in the estimation methods
and assumptions that we have used. Our primary lending emphasis is the origination and purchase of one- to
four-family first mortgage loans on residential properties and, to a lesser
extent, second mortgage loans on one- to four-family residential properties. As
a result of our lending emphasis, we have a loan concentration in residential
first mortgage loans at June 30, 2004, the majority of which are secured by
real property located in New Jersey. Based on the composition of our loan portfolio and the growth in our loan
portfolio, we believe the primary risks inherent in our portfolio are possible
increases in interest rates, a decline in the economy, generally, and a decline
in real estate market values. Any one or a combination of these events may
adversely affect our loan portfolio resulting in increased delinquencies, loan
losses and future levels of provisions. Accordingly, we have maintained our
provision for loan losses at the current level to primarily Page 30




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Hudson City Bancorp, Inc.
Form 10-Q address the actual growth in our loan portfolio. We consider it important to
maintain the allowance for loan losses at an acceptable level given current
economic conditions, interest rates and the composition of our portfolio. The
increase in the allowance for loan losses reflected the continued growth in the
loan portfolio, the relatively low levels of loan charge-offs, the stability in
the real estate market and the resulting stability in our overall loan quality. Although we believe that we have established and maintained the allowance for
loan losses at adequate levels, additions may be necessary if future economic
and other conditions differ substantially from the current operating
environment. Although management uses the best information available, the level
of the allowance for loan losses remains an estimate that is subject to
significant judgment and short-term change. Asset Impairment Judgments.Certain of our assets are carried in our
consolidated statements of financial condition at fair value or at the lower of
cost or fair value. Valuation allowances are established when necessary to
recognize impairment of such assets. We periodically perform analyses to test
for impairment of various assets. In addition to our impairment analyses
related to loans discussed above, another significant impairment analysis
relates to other than temporary declines in the value of our securities. Our available for sale portfolio is carried at estimated fair value, with any
unrealized gains and losses, net of taxes, reported as accumulated other
comprehensive income in stockholders equity. The securities that we have the
positive intent and ability to hold to maturity are classified as held to
maturity and are carried at amortized cost. We conduct a periodic review and
evaluation of the securities portfolio to determine if the value of any
security has declined below its carrying value and whether such decline is
other than temporary. If such decline is deemed other than temporary, we would
adjust the carrying amount of the security by writing down the security to fair
market value through a charge to current period operations. The market values
of our securities are significantly affected by changes in interest rates. In
general, as interest rates rise, the market value of fixed-rate securities will
decrease, while, as interest rates fall, the market value of fixed-rate
securities will increase. With significant changes in interest rates, we
evaluate our intent and ability to hold the security to maturity or for a
sufficient time to recover the recorded principal balance to determine if the
security is impaired. Estimated fair values for securities are based on
published or securities dealers market values. 
 Item 3.  Quantitative and Qualitative Disclosures About Market Risk Quantitative and qualitative disclosure about market risk is presented as of
December 31, 2003 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. Net interest income is the primary component of
our net income, and fluctuations in interest rates will ultimately impact the
level of both income and expense recorded on a large portion of our assets and
liabilities. Fluctuations in interest rates will also affect the market value
of all interest-earning assets, other than those that possess a short term to
maturity. Due to the nature of our operations, we are not subject to foreign
currency exchange or commodity price risk. Our real estate loan portfolio, the
majority of which is located 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 Page 31




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Hudson City Bancorp, Inc.
Form 10-Q as interest rate swaps and caps) during the first six months of 2004 and did
not have any such hedging transactions in place at June 30, 2004. In the
future, we may, with approval of our Board of Directors, engage in hedging
transactions utilizing derivative instruments. Interest Rate Risk Analysis.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, 2003. The following table presents the estimated
present value of equity over a range of interest rate change scenarios at June
30, 2004. 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. We believe the 200 basis point decrease scenario
is not meaningful given the prevailing low market interest rate environment and
accordingly is not presented in the table. Present Value of EquityAs Percent of PresentPresent Value of Equity
    
    Value of AssetsChange in
    
    
    
    Dollar
    
    Dollar
    
    Percent
    
    Present
    
    PercentInterest Rates
    
    
    
    Amount
    
    Change
    
    Change
    
    Value Ratio
    
    Change(Basis points)
    
    
    
    (Dollars in thousands)200
    
    
    
    
    $
    1,225,413
    
    
    $
    (1,048,440
    )
    
    
    (46.11
    )%
    
    
    7.30
    %
    
    
    (40.26
    )%100
    
    
    
    
    
    1,704,171
    
    
    
    (569,682
    )
    
    
    (25.05
    )
    
    
    9.67
    
    
    
    (20.87
    )50
    
    
    
    
    
    1,953,291
    
    
    
    (320,562
    )
    
    
    (14.10
    )
    
    
    10.79
    
    
    
    (11.70
    )0
    
    
    
    
    
    2,273,853
    
    
    
    
    
    
    
    
    
    
    
    12.22
    
    
    
    (50
    )
    
    
    
    
    2,358,730
    
    
    
    84,877
    
    
    
    3.73
    
    
    
    12.45
    
    
    
    1.88(100
    )
    
    
    
    
    2,248,526
    
    
    
    (25,327
    )
    
    
    (1.11
    )
    
    
    11.77
    
    
    
    (3.68
    )
 The percent change in the present value of equity in the 200 basis point
increase scenario was negative 46.11% at June 30, 2004 compared with negative
34.95% at December 31, 2003. This increase in the negative percent change in
the present value of equity, and the overall decrease in the present value of
equity and the percent change in the present value of equity in the increasing
rate scenarios was primarily due to the growth of our fixed-rate
interest-earning assets, primarily our investment securities, mortgage-backed
securities and mortgage loans. The percent change in the present value of
equity in the 100 basis point decrease was negative 1.11% at June 30, 2004
compared with negative 8.26% at December 31, 2003. The overall decrease in the
present value of equity and the percent change in the present value of equity
in the decreasing rate scenarios was primarily due to the growth in our
borrowed funds with long terms to maturity and the growth in our
interest-bearing demand accounts. Our current policy sets a maximum percent
change in the present value of equity at 55% from the current, or zero basis
point scenario, present value of equity, given an instantaneous and parallel
increase or decrease of 200 basis points. Page 32




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Hudson City Bancorp, Inc.
Form 10-Q In addition to the impact on the present value of equity, we also monitor the
impact of interest rate changes on our net interest income over the next
twelve-month period. This model does not purport to provide estimates of net
interest income over the next twelve-month period, but attempts to assess the
impact of a simultaneous and parallel interest rate change on our net interest
income. Assumptions for this model are the same as those used for our present
value of equity analysis. Change in
    
    
    
    Percent Change inInterest Rates
    
    
    
    Net Interest Income(Basis points)200
    
    
    
    
    
    (9.05
    )%100
    
    
    
    
    
    (3.83
    )50
    
    
    
    
    
    (1.67
    )0
    
    
    
    
    
    (50
    )
    
    
    
    
    0.59(100
    )
    
    
    
    
    (1.15
    )
 GAP Analysis.The table on the following page presents the amounts of our
interest-earning assets and interest-bearing liabilities outstanding at June
30, 2004, which we anticipate to reprice or mature in each of the future time
periods shown. The decay rates applied to our non-maturity deposits are the
same as those reported in our Annual Report on Form 10-K for the year ended
December 31, 2003. The prepayment rate applied to our mortgage loans and
mortgage-backed securities for the June 30, 2004 analysis was 20% compared with
30% used for the December 31, 2003 analysis. The change in the prepayment rate
reflected the decrease in the prepayment activity on our mortgage-related
assets and the increase in long-term interest rates experienced during the
second quarter of 2004. At June 30, 2004, we have reported no callable bonds at
their call date, but have reported $450.0 million of callable borrowings at
their call date. The government-sponsored agency securities with step-up
features purchased during 2004 are reported at their next interest rate
adjustment. We have excluded non-accrual loans of $5,151,000 from the table. The cumulative one-year gap as a percent of total assets was negative 7.80% at
June 30, 2004 compared with positive 2.55% at December 31, 2003. This change in
the negative cumulative one-year gap primarily reflected the change in the
prepayment rate assumptions used for our mortgage-related assets and the
increase in borrowed funds under one year due to anticipated calls. Had the
prepayment and call assumptions used at December 31, 2003 been applied to our
June 30, 2004 gap analysis, the cumulative one-year gap as a percent of total
assets would have been a positive 2.27%. Page 33




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Hudson City Bancorp, Inc 
Form 10-Q At June 30, 2004More than
    
    More thanMore than
    
    More than
    
    two years
    
    three yearsSix months
    
    six months
    
    one year to
    
    to three
    
    to five
    
    More thanor less
    
    to one year
    
    two years
    
    years
    
    years
    
    five years
    
    Total(Dollars in thousands)Interest-earning assets:First mortgage loans
    
    $
    1,043,665
    
    
    $
    1,038,577
    
    
    $
    1,574,542
    
    
    $
    1,265,183
    
    
    $
    1,247,360
    
    
    $
    3,734,339
    
    
    $
    9,903,666Consumer and other loans
    
    
    28,878
    
    
    
    364
    
    
    
    1,248
    
    
    
    2,446
    
    
    
    16,272
    
    
    
    93,532
    
    
    
    142,740Federal funds sold
    
    
    13,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,700Mortgage-backed securities
    
    
    852,354
    
    
    
    863,765
    
    
    
    724,578
    
    
    
    579,636
    
    
    
    481,966
    
    
    
    1,834,718
    
    
    
    5,337,017FHLB stock
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000Investment securities
    
    
    10,031
    
    
    
    65
    
    
    
    
    
    
    
    12
    
    
    
    796,804
    
    
    
    1,976,065
    
    
    
    2,782,977Total interest-earning assets
    
    
    2,098,628
    
    
    
    1,902,771
    
    
    
    2,300,368
    
    
    
    1,847,277
    
    
    
    2,542,402
    
    
    
    7,638,654
    
    
    
    18,330,100Interest-bearing liabilities:Savings accounts
    
    
    27,904
    
    
    
    23,987
    
    
    
    47,447
    
    
    
    47,447
    
    
    
    94,894
    
    
    
    711,701
    
    
    
    953,380Interest-bearing demand accounts
    
    
    89,423
    
    
    
    89,423
    
    
    
    357,692
    
    
    
    357,692
    
    
    
    715,385
    
    
    
    1,967,308
    
    
    
    3,576,923Money market accounts
    
    
    14,813
    
    
    
    14,813
    
    
    
    59,250
    
    
    
    59,250
    
    
    
    118,502
    
    
    
    325,878
    
    
    
    592,506Time deposits
    
    
    2,904,483
    
    
    
    1,243,800
    
    
    
    891,098
    
    
    
    184,272
    
    
    
    264,387
    
    
    
    
    
    
    
    5,488,040Borrowed funds
    
    
    850,000
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,150,000
    
    
    
    6,200,000Total interest-bearing
liabilities
    
    
    3,886,623
    
    
    
    1,572,023
    
    
    
    1,355,487
    
    
    
    648,661
    
    
    
    1,193,168
    
    
    
    8,154,887
    
    
    
    16,810,849Interest rate sensitivity gap
    
    $
    (1,787,995
    )
    
    $
    330,748
    
    
    $
    944,881
    
    
    $
    1,198,616
    
    
    $
    1,349,234
    
    
    $
    (516,233
    )
    
    $
    1,519,251Cumulative interest rate sensitivity
Gap
    
    $
    (1,787,995
    )
    
    $
    (1,457,247
    )
    
    $
    (512,366
    )
    
    $
    686,250
    
    
    $
    2,035,484
    
    
    $
    1,519,251Cumulative interest rate sensitivity gap
as a percent of total assets
    
    
    (9.58
    )%
    
    
    (7.80
    )%
    
    
    (2.74
    )%
    
    
    3.68
    %
    
    
    10.90
    %
    
    
    8.14
    %Cumulative interest-earning assets
as a percent of interest-bearing
liabilities
    
    
    54.00
    %
    
    
    73.30
    %
    
    
    92.48
    %
    
    
    109.20
    %
    
    
    123.52
    %
    
    
    109.04
    %
 Page 34




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##### Table of Contents



Item 4.  Controls and Procedures Ronald E. Hermance, Jr., our President and Chief Executive Officer, and Denis
J. Salamone, our Senior Executive Vice President and Chief Operating Officer,
conducted an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of
1934, as amended) as of June 30, 2004. Based upon their evaluation, they each
found that our disclosure controls and procedures were adequate to ensure that
information required to be disclosed in the reports that we file and submit
under the Exchange Act was recorded, processed, summarized and reported as and
when required and that such information was accumulated and communicated to our
management as appropriate to allow timely decisions regarding required
disclosures. There were no changes in our internal control over financial reporting that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting and we identified no significant deficiencies or material
weaknesses requiring corrective action with respect to those controls. 
 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, Use of Proceeds and Issuer Purchases of Equity Securities The following table reports information regarding repurchases of our common
stock during the second quarter of 2004 and the stock repurchase plans approved
by our Board of Directors. MaximumTotal Number of
    
    Number of SharesTotal
    
    
    
    
    
    Shares Purchased
    
    that May Yet BeNumber of
    
    Average
    
    as Part of Publicly
    
    Purchased UnderShares
    
    Price Paid
    
    Announced Plans
    
    the Plans orPeriod
    
    Purchased(3)
    
    per Share
    
    or Programs
    
    Programs (1) (2)April 1-April 30, 2004
    
    
    283,000
    
    
    $
    34.53
    
    
    
    283,000
    
    
    
    6,683,421May 1-May 31, 2004
    
    
    1,760,000
    
    
    
    34.13
    
    
    
    1,760,000
    
    
    
    4,923,421June 1-June 30, 2004
    
    
    516,000
    
    
    
    35.46
    
    
    
    516,000
    
    
    
    4,407,421Total
    
    
    2,559,000
    
    
    
    34.44
    
    
    
    2,559,000
   (1)
    
    On March 20, 2003, Hudson City Bancorp announced the adoption of its fifth Stock Repurchase Program, which authorized the purchase of up to
9,525,000 shares of common stock. This program has no expiration date and has 4,407,421 shares yet to be purchased as of June 30, 2004.(2)
    
    No repurchase plan or program has expired or been terminated during the quarter.(3)
    
    Amounts do not reflect purchases of common stock by the trustee of the recognition and retention plan. Page 35




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##### Table of Contents



Item 3.  Defaults Upon Senior Securities Not applicable. 
 Item 4.  Submission of Matters to a Vote of Security Holders On May 21, 2004, 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  Election of four directors for terms of three years each. Votes cast for William J. Cosgrove: For:
    
    
    176,596,212Withheld:
    
    
    1,760,555
 Votes cast for Donald O. Quest: For:
    
    
    177,457,945Withheld:
    
    
    898,822
 Votes cast for Denis J. Salamone: For:
    
    
    177,434,028Withheld:
    
    
    922,739
 Votes cast for Joseph G. Sponholz: For:
    
    
    176,614,369Withheld:
    
    
    1,742,398
 Proposal 2  Ratification of the appointment of KPMG LLP as Hudson City
Bancorps independent auditors for the year ending December 31, 2004. For:
    
    
    176,346,147Against:
    
    
    1,283,136Abstain:
    
    
    727,484
 There were no broker held non-voted shares represented at the meeting with
respect to the above matters. 
 Item 5.  Other Information Not applicable. Page 36




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##### Table of Contents



Item 6.  Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number
    
    Exhibit31.1
    
    
    Certification of Chief Executive Officer31.2
    
    
    Certification of Chief Financial Officer32.1
    
    
    Written Statement of Chief Executive Officer and
Chief Financial Officer furnished pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350. *
   *
    
    Pursuant to SEC rules, this exhibit will not be deemed filed for purposes of Section 18
of the Exchange Act or otherwise subject to the liability of that section. (b) Hudson City Bancorp, Inc. filed five Current Reports on Form 8-K during the
quarter ended June 30, 2004 detailed as follows.  1.
    
    On April 16, 2004, a Form 8-K was filed following the issuance
of a press release announcing first quarter financial results for the
period ended March 31, 2004. A copy of the press release was filed
as an exhibit.2.
    
    On April 21, 2004, a Form 8-K was filed following the issuance
of a press release announcing the election of Ronald J. Butkovich and
J. Christopher Nettleton to the positions of Senior Vice President
and Vice President, respectively, and the grant to these individuals
of certain non-shareholder approved stock options and restricted
stock that were approved by Hudson Citys independent directors. A
copy of the press release was filed as an exhibit.3.
    
    On May 12, 2004, a Form 8-K was filed regarding a financial
presentation made at the Americas Community Bankers Community Bank
Investors Conference. The filing contained, as an exhibit, the text
of the slides used during this presentation.4.
    
    On May 21, 2004, a Form 8-K was filed regarding the State of
the Company presentation that was made during the Annual Meeting of
Shareholders of Hudson City Bancorp. The filing contained, as an
exhibit, the text of the slides used during this presentation.5.
    
    On June 30, 2004, a Form 8-K was filed following the issuance
of a press release announcing that on July 21, 2004, Hudson City
would report results of operations for the quarter and year to date
periods ending on June 30, 2004. A copy of the press release was
filed as an exhibit. Page 37




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##### Table of Contents



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: August 6, 2004
    
    By:
    
    /s/ Ronald E. Hermance, Jr.Ronald E. Hermance, Jr.President and Chief Executive Officer(principal executive officer)Date: August 6, 2004
    
    By:
    
    /s/ Denis J. SalamoneDenis J. SalamoneSenior Executive Vice President andChief Operating Officer(principal financial and accounting officer)
 Page 38