10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended: December 31, 2006

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number: 0-26001

Hudson City Bancorp, Inc.

(Exact name of registrant as specified in its charter)

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

(201) 967-1900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value
(Title of Class)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ      No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act.

Yes o      No þ

     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 þ      No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Act. (Check one):

Large accelerated filer þ      Accelerated filer o       Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o      No þ

     As of February 21, 2007, the registrant had 741,466,555 shares of common stock, $0.01 par value, issued and 556,082,729 shares outstanding. The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2006 was $6,912,953,000. This figure was based on the closing price by the NASDAQ National Market for a share of the registrant’s common stock, which was $13.33 as reported in the Wall Street Journal on July 1, 2006.

     Documents Incorporated by Reference: Portions of the definitive Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on April 24, 2007 and any adjournment thereof and which is expected to be filed with the Securities and Exchange Commission no later than March 21, 2007, are incorporated by reference into Part III.

Hudson City Bancorp, Inc.
2006 Annual Report on Form 10-K
Table of Contents

		Page
	Forward-Looking Statements and Associated Risk Factors		1
PART I
Item 1	Business		5
Item 1A	Risk Factors		46
Item 1B	Unresolved Staff Comments		50
Item 2	Properties		50
Item 3	Legal Proceedings		50
Item 4	Submission of Matters to a Vote of Security Holders		50
PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		51
Item 6	Selected Financial Data		54
Item 7	Management’s Discussion and Analysis of Financial Condition and Results Of Operations		55
Item 7A	Quantitative and Qualitative Disclosures About Market Risk		74
Item 8	Financial Statements and Supplementary Data		81
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		123
Item 9A	Controls and Procedures		123
Item 9B	Other Information		124
PART III
Item 10	Directors, Executive Officers and Corporate Governance		124
Item 11	Executive Compensation		125
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		125
Item 13	Certain Relationships and Related Transactions, and Director Independence		125
Item 14	Principal Accounting Fees and Services		125
PART IV
Item 15	Exhibits, Financial Statement Schedules		126
SIGNATURES			129
EX-10.28: FORM OF 2006 STOCK INCENTIVE PLAN PERFORMANCE STOCK OPTION AGREEMENT
EX-10.29: FORM OF 2006 STOCK INCENTIVE PLAN RETENTION STOCK OPTION AGREEMENT
EX-10.30: FORM OF 2006 STOCK INCENTIVE PLAN DIRECTOR STOCK OPTION AGREEMENT
EX-10.31: BENEFIT MAINTENANCE PLAN
EX-10.32: SUMMARY OF MATERIAL TERMS
EX-10.33: SUMMARY OF DIRECTOR COMPENSATION
EX-11.1: STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF KPMG LLP
EX-31.1: CERTIFICATIONS
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

This Annual Report on Form 10-K contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 which may be identified by the use of such words as “may,” “believe,” “expect,” “anticipate,” “should,” “plan,” “estimate,” “predict,” “continue,” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to estimates with respect to the financial condition, results of operations and business of Hudson City Bancorp, Inc. These factors include, but are not limited to:

• the timing and occurrence or non-occurrence of events may be subject to circumstances beyond our control;

• there may be increases in competitive pressure among the financial institutions or from non-financial institutions;

• changes in the interest rate environment may reduce interest margins or affect the value of our investments;

• changes in deposit flows, loan demand or real estate values may adversely affect our business;

• changes in accounting principles, policies or guidelines may cause our financial condition to be perceived differently;

• general economic conditions, either nationally or locally in some or all of the areas in which we do business, or conditions in the securities markets or the banking industry may be less favorable than we currently anticipate;

• legislative or regulatory changes may adversely affect our business;

• applicable technological changes may be more difficult or expensive than we anticipate;

• success or consummation of new business initiatives may be more difficult or expensive than we anticipate;

• litigation or matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than we anticipate;

• the risks associated with continued diversification of assets and adverse changes to credit quality;

• difficulties associated with achieving expected future financial results; and

• the risk of an economic slowdown that would adversely affect credit quality and loan originations.

Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. As such, forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this filing. We do not intend to update any of the forward-looking statements after the date of this Form 10-K or to conform these statements to actual events.

Page 3

As used in this Form 10-K, unless we specify otherwise, “Hudson City Bancorp,” “the Bank,” “our company, ” “we,” “us,” and “our” refer to Hudson City Bancorp, Inc., a Delaware corporation. “Hudson City Savings” refers to Hudson City Savings Bank, a federal stock savings bank and the wholly-owned subsidiary of Hudson City Bancorp. “Hudson City, MHC” refers to Hudson City, MHC, a New Jersey mutual holding company and former majority-owner of Hudson City Bancorp.

Page 4

PART I

Item 1. Business.

Hudson City Bancorp is a Delaware corporation organized in 1999 and serves as the holding company of its only subsidiary, Hudson City Savings Bank. Hudson City Bancorp’s executive offices are located at West 80 Century Road, Paramus, New Jersey 07652 and our telephone number is (201) 967-1900.

On June 7, 2005, Hudson City Bancorp reorganized from a two-tier mutual holding company structure to a stock holding company structure and completed a stock offering in accordance with a Plan of Conversion and Reorganization (the “Plan”). Under the terms of the Plan, Hudson City, MHC, which owned 65.77% of the outstanding common stock of Hudson City Bancorp immediately prior to the conversion, merged into Hudson City Bancorp and the shares of Hudson City Bancorp common stock owned by Hudson City, MHC were cancelled. Hudson City Bancorp sold 392,980,580 shares of common stock at a price of $10.00 per share raising approximately $3.93 billion. After incremental costs of $125.0 million directly attributable to the stock offering, net proceeds from the stock offering amounted to $3.80 billion. In accordance with the Plan, we also affected a stock split pursuant to which each share of common stock outstanding or held as treasury stock before completion of the offering was split into 3.206 shares. Hudson City Bancorp contributed $3.00 billion of the net proceeds from the offering to Hudson City Savings Bank. These transactions are referred to collectively as the second-step conversion.

Hudson City Savings is a federally chartered stock savings bank subject to supervision and examination by the Office of Thrift Supervision (“OTS”). Hudson City Bancorp, as a savings and loan holding company, is also subject to supervision and examination by the OTS. Our deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). Hudson City Savings Bank has served the customers of New Jersey since 1868. In July 2006, we completed the acquisition of Sound Federal Bancorp, Inc. (“Sound Federal”) for approximately $265 million in cash (the “Acquisition”). The Acquisition was accounted for as a purchase. Sound Federal operated 14 branches in the New York counties of Westchester, Putnam and Rockland and in Fairfield County, Connecticut.

We are a community- and consumer-oriented retail savings bank offering traditional deposit products, residential real estate mortgage loans and consumer loans. In addition, we purchase mortgages, mortgage-backed securities, securities issued by the U.S. government and government-sponsored agencies and other investments permitted by applicable laws and regulations. We retain in our portfolio substantially all of the loans we originate. Historically, we did not originate commercial mortgage loans or multi-family mortgage loans. However, these loan products were offered by Sound Federal and, as a result, we have continued to offer these products after the Acquisition.

Our business model and product offerings allow us to serve a broad range of customers with varying demographic characteristics. Our traditional thrift products such as conforming one- to four-family residential mortgages, certificates of deposit, and passbook savings accounts appeal to a broad customer base. Our jumbo mortgage lending proficiency and our deposit products allow us to target higher-income customers successfully.

Our revenues are derived principally from interest on our mortgage loans and mortgage-backed securities and interest and dividends on our investment securities. Our primary sources of funds are customer deposits, borrowings, scheduled amortization and prepayments of mortgage loans and mortgage-backed securities, maturities and calls of investment securities and funds provided by operations.

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Available Information

Our periodic and current reports, proxy and information statements, and other information that we file with the Securities and Exchange Commission (the “SEC”), are available free of charge through our website, www.hcbk.com, as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. Unless specifically incorporated by reference, the information on our website is not part of this annual report. Such reports are also available on the SEC’s website at www.sec.gov, or at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC, 20549. Information may be obtained on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Market Area

We conduct our operations out of our corporate offices in Paramus in Bergen County, New Jersey and through 111 branches in the New York metropolitan area. We operate 88 branches located in 16 counties throughout the State of New Jersey. In New York State, we operate eight branch offices in Westchester County, five branch offices in Suffolk County, one branch office each in Putnam and Rockland Counties and four branch offices in Richmond County (Staten Island). We also operate four branch offices in Fairfield County, Connecticut. Branch offices in these areas give us operations in nine of the top 50 counties in the United States ranked by median household income. Operating in high median household income counties fits well with our jumbo mortgage loan and consumer deposit business model. We plan to open approximately ten branch locations in 2007 in these market areas, while continually evaluating new locations in areas that present the greatest opportunity to promote our deposit and mortgage products.

Our current market areas provide distinct differences in demographics and economic characteristics. The northern New Jersey market represents the greatest concentration of population, deposits and income in New Jersey. The combination of these counties represents more than half of the entire New Jersey population and more than half of New Jersey households. The northern New Jersey market also represents the greatest concentration of Hudson City Savings retail operations – both lending and deposit gathering – and based on its high level of economic activity, we believe that the northern New Jersey market provides significant opportunities for future growth.

The New Jersey shore market represents a strong concentration of population and income, and is an increasingly popular resort and retirement market area, which provides healthy opportunities for deposit growth and residential lending. The southwestern New Jersey market consists of communities adjacent to the Philadelphia metropolitan area. The Suffolk County market area has similar demographic and economic characteristics to the northern New Jersey market area. As a result of the Acquisition, we entered the New York counties of Westchester, Rockland, and Putnam and Fairfield County, Connecticut, which have similar demographic and economic characteristics as the Northern New Jersey market. Entry into these counties allows us to continue to expand our retail operations and geographic footprint.

Our future growth opportunities will be influenced by the growth and stability of the regional economy, other demographic population trends and the competitive environment within and around the State of New Jersey and the New York metropolitan area. We expect to continue to grow primarily through the origination and purchase of mortgage loans, while purchasing mortgage-backed securities and investment securities as a supplement to our mortgage loans. We believe that we have developed lending products and marketing strategies to address the diverse credit-related needs of the residents in our market areas. We intend to fund our growth with customer deposits and borrowed funds. We intend to grow customer deposits by continuing to offer desirable products at competitive rates and by opening new branch offices.

Page 6

Competition

We face intense competition both in making loans and attracting deposits in the market areas we serve. New Jersey and the New York metropolitan area have a high concentration of financial institutions, many of which are branches of large money center and regional banks. Some of these competitors have greater resources than we do and may offer services that we do not provide such as trust services or investment services. Customers who seek “one stop shopping” may be drawn to these institutions.

Our competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, insurance companies and brokerage and investment banking firms. Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. We face additional competition for deposits from short-term money market funds and other corporate and government securities funds and from brokerage firms and insurance companies.

Lending Activities

Loan Portfolio Composition. Our loan portfolio primarily consists of one- to four-family residential first mortgage loans. To a lesser degree, the loan portfolio includes multi-family and commercial mortgage loans, construction loans and consumer loans, which primarily consist of fixed-rate second mortgage loans and home equity credit lines.

At December 31, 2006, we had total loans of $19.08 billion, of which $18.70 billion, or 98.0%, were first mortgage loans. Of the first mortgage loans outstanding at that date, 81.0% were fixed-rate mortgage loans and 19.0% were adjustable-rate mortgage (ARM) loans. At December 31, 2006, multi-family and commercial mortgage loans totaled $69.3 million, or 0.4% of the loan portfolio, construction loans totaled $41.2 million, or 0.2% of total loans and consumer and other loans, primarily fixed-rate second mortgage loans and home equity credit lines, amounted to $382.1 million, or 2.0%, of total loans. We also offer guaranteed student loans through the Student Loan Marketing Association Loan Referral Program. As part of the Acquisition we transferred $774.9 million of loans to our portfolio. Approximately 84% of these loans were secured by one- to four- family properties. Sound Federal’s underwriting standards were similar to those used by us.

Our loans are subject to federal and state laws and regulations. The interest rates we charge on loans are affected principally by the demand for loans, the supply of money available for lending purposes and the interest rates offered by our competitors. These factors are, in turn, affected by general and local economic conditions, monetary policies of the federal government, including the Federal Reserve Board (“FRB”), legislative tax policies and governmental budgetary matters.

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The following table presents the composition of our loan portfolio in dollar amounts and in percentages of the total portfolio at the dates indicated.

	At December 31,
	2006						2005						2004						2003						2002
				Percent						Percent						Percent						Percent						Percent
	Amount			of Total			Amount			of Total			Amount			of Total			Amount			of Total			Amount			of Total
	(Dollars in thousands)
First mortgage loans:
One- to four-family	$	18,561,467			97.27	%	$	14,780,819			98.13	%	$	11,120,874			97.87	%	$	8,567,442			97.32	%	$	6,708,806			96.25	%
FHA/VA		29,573			0.15			43,672			0.29			81,915			0.72			98,502			1.12			131,209			1.88
Multi-family and commercial		69,322			0.36			2,320			0.02			3,000			0.03			2,843			0.03			2,668			0.04
Construction		41,150			0.22			—			—			—			—			—			—			—			—
Total first mortgage loans		18,701,512			98.00			14,826,811			98.44			11,205,789			98.62			8,668,787			98.47			6,842,683			98.17
Consumer and other loans:
Fixed-rate second mortgages		274,028			1.44			205,826			1.37			127,737			1.12			105,361			1.20			93,691			1.34
Home equity credit lines		97,644			0.51			29,150			0.19			28,929			0.25			28,217			0.32			33,543			0.48
Other		10,433			0.05			662			—			584			0.01			701			0.01			983			0.01
Total consumer and other loans		382,105			2.00			235,638			1.56			157,250			1.38			134,279			1.53			128,217			1.83
Total loans		19,083,617			100.00	%		15,062,449			100.00	%		11,363,039			100.00	%		8,803,066			100.00	%		6,970,900			100.00	%
Deferred loan costs (fees)		16,159						1,653						(8,073	)					(10,255	)					(13,508	)
Allowance for loan losses		(30,625	)					(27,393	)					(27,319	)					(26,547	)					(25,501	)
Net Loans	$	19,069,151					$	15,036,709					$	11,327,647					$	8,766,264					$	6,931,891

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Loan Maturity. The following table presents the contractual maturity of our loans at December 31, 2006. The table does not include the effect of prepayments or scheduled principal amortization. Prepayments and scheduled principal amortization on first mortgage loans totaled $1.68 billion for 2006, $2.10 billion for 2005 and $1.96 billion for 2004.

	At December 31, 2006
			Multi-family
	First Mortgage		and Commercial				Consumer and
	Loans		Mortgages		Construction		Other Loans		Total
	(In thousands)
Amounts Due:
One year or less	$	1,822	$	1,300	$	41,150	$	1,422	$	45,694
After one year:
One to three years		184,147		311		—		12,486		196,944
Three to five years		612,278		1,232		—		18,205		631,715
Five to ten years		282,461		2,984		—		63,381		348,826
Ten to twenty years		2,333,385		30,619		—		283,567		2,647,571
Over twenty years		15,176,947		32,876		—		3,044		15,212,867
Total due after one year		18,589,218		68,022		—		380,683		19,037,923
Total loans	$	18,591,040	$	69,322	$	41,150	$	382,105		19,083,617
Deferred loan costs										16,159
Allowance for loan losses										(30,625	)
Net loans									$	19,069,151

The following table presents, as of December 31, 2006, the dollar amount of all fixed rate and adjustable rate loans that are contractually due after December 31, 2007.

	Due After December 31, 2007
	Fixed		Adjustable		Total
	(In thousands)
First mortgage loans	$	15,039,351	$	3,549,867	$	18,589,218
Multi-family and commercial mortgages		65,882		2,140		68,022
Consumer and other loans		276,700		103,983		380,683
Total loans due after one year	$	15,381,933	$	3,655,990	$	19,037,923

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The following table presents our loan originations, purchases, sales and principal payments for the years indicated.

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands)
Total loans:
Balance outstanding at beginning of year	$	15,062,449		$	11,363,039		$	8,803,066
Loans transferred in Acquisition		774,908			—			—
Originations:
First mortgage loans		2,155,997			2,068,183			1,378,709
Consumer and other loans		151,490			126,591			85,932
Total originations		2,307,487			2,194,774			1,464,641
Purchases:
One- to four-family first mortgage loans		2,685,186			3,676,260			3,099,759
FHA/VA first mortgage loans		26,418			—			22,334
Other first mortgage loans		544			—			316
Total purchases		2,712,148			3,676,260			3,122,409
Less:
Principal payments:
First mortgage loans		(1,678,882	)		(2,103,100	)		(1,956,395	)
Consumer and other loans		(73,997	)		(48,203	)		(62,960	)
Total principal payments		(1,752,879	)		(2,151,303	)		(2,019,355	)
Premium amortization and discount accretion, net		(1,440	)		(8,247	)		(5,374	)
Transfers to foreclosed real estate		(3,642	)		(1,750	)		(2,348	)
Loan sales		(15,414	)		(10,324	)		—
Balance outstanding at end of year	$	19,083,617		$	15,062,449		$	11,363,039

Residential Mortgage Lending. Our primary lending emphasis is the origination and purchase of first mortgage loans secured by one- to four-family properties that serve as the primary or secondary residence of the owner. We do not offer loans secured by cooperative apartment units or interests therein. Since the early 1980’s, we have originated and purchased substantially all of our one- to four-family first mortgage loans for retention in our portfolio. We have developed a core competency in residential mortgage loans with principal balances in excess of the Federal National Mortgage Association (“FannieMae”), single-family limit of $417,000 (“non-conforming” or “jumbo” loans). We are one of the largest jumbo residential mortgage lenders in New Jersey and one of the largest buyers of jumbo mortgages nationally. We believe that our retention and servicing of the residential mortgage loans that we originate allows us to maintain higher levels of customer service and satisfaction than originators who sell loans to third parties.

Our wholesale loan purchase program is an important component of our strategy to grow our residential loan portfolio, and complements our retail loan origination production by enabling us to diversify assets outside our local market area, thus providing a safeguard against economic trends that might affect one particular area of the nation. Through this program, we have obtained assets at a relatively low overhead cost and have minimized related servicing costs. At December 31, 2006, $9.91 billion, or 53.0%, of our first mortgage loans were purchased loans. At December 31, 2006, approximately 65.5% of the mortgage loan portfolio was secured by real estate located in the states of New Jersey, New York and Connecticut. Additionally, the states of Virginia, Illinois, and Maryland

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each accounted for 6.2%, 5.0%, and 4.3%, respectively, of our total mortgage loan portfolio. The remainder of the loan portfolio is secured by real estate in 34 other states.

We have developed written standard operating guidelines relating to the purchase of these assets. These guidelines include an evaluation and approval process for the various sellers from whom we choose to buy whole loans, the types of whole loans, acceptable property locations and maximum interest rate variances. The purchase agreements, as established with each seller/servicer, contain parameters of the loan characteristics that can be included in each package. These parameters, such as maximum loan size and maximum loan-to-value ratio, generally conform to parameters utilized by us to originate mortgage loans. All loans are reviewed for compliance with the agreed upon parameters. All purchased loan packages are subject to internal due diligence procedures including review of a sampling of individual loan files. It is our policy to perform full credit reviews of between 10% to 50% of all loans purchased. Our due diligence procedures include a review of the legal documents, including the note, the mortgage and the title policy, review of the credit file, evaluating debt service ratios, review of the appraisal and verifying loan-to-value ratios and evaluating the completeness of the loan package. This review subjects the loan file to substantially the same underwriting standards used in our own loan origination process.

The loan purchase agreements recognize that the time frame to complete our due diligence reviews may not be sufficient prior to the completion of the purchase and afford us a limited period of time after closing to complete our review and return, or request substitution of, any loan for any legitimate underwriting concern. After the review period, we are still provided recourse against the seller for any breach of a representation or warranty with respect to the loans purchased. Among these representations and warranties are attestations of the legality and enforceability of the legal documentation, adequacy of insurance on the collateral real estate, compliance with regulations and certifications that all loans are current as to principal and interest at the time of purchase.

In general, the seller of a purchased loan continues to service the loan after we purchase it. The servicing of purchased loans is governed by the servicing agreement entered into with each servicer. Oversight of the servicer is maintained by us through review of all reports, remittances and non-performing loan ratios with appropriate further action, such as contacting the servicers by phone or in writing to clarify or correct our concerns, taken as required. We also require that all servicers provide end-of-year financial statements to confirm the financial soundness of the servicer. These servicers must also deliver industry certifications substantiating that they have in place all appropriate controls to ensure their mode of administration is in accordance with standards set by the Mortgage Bankers Association of America. These operating guidelines provide a means of evaluating and monitoring the quality of mortgage loan purchases and the servicing abilities of the loan servicers. We typically purchase loans from eight to ten of the largest nationwide mortgage producers. We purchased first mortgage loans of $2.71 billion in 2006, $3.68 billion in 2005 and $3.12 billion in 2004. The average size of our one-to-four family mortgage loans purchased during 2006 was approximately $444,000.

Most of our retail loan originations are from existing or past customers, members of our local communities or referrals from local real estate agents, licensed mortgage bankers and brokers, attorneys and builders. Our extensive branch network is a source of new loan generation. We also employ a staff of representatives who call on real estate professionals to disseminate information regarding our loan programs and take applications directly from their clients. These representatives are paid for each origination.

We currently offer loans that generally conform to underwriting standards specified by FannieMae (“conforming loans”), non-conforming loans, loans processed as limited documentation loans and, to a

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limited extent, no income or asset verification loans, as described below. These loans may be fixed-rate one- to four-family mortgage loans or adjustable-rate one- to four-family mortgage loans with maturities of up to 40 years. The non-conforming loans generally follow FannieMae guidelines, except for the loan amount. FannieMae guidelines limit the principal amount of single-family loans to $417,000; our non-conforming loans generally exceed such limits. The average size of our one- to four-family mortgage loans originated in 2006 was approximately $384,000. The overall average size of our one- to four-family first mortgage loans was approximately $339,000 at December 31, 2006. We are an approved seller/servicer for FannieMae and an approved servicer for Federal Home Loan Mortgage Corporation (“FreddieMac”). We generally hold loans for our portfolio but have, from time to time, sold loans in the secondary market. During 2006, we sold approximately $15.4 million of first mortgage loans to other financial institutions.

Our originations of first mortgage loans amounted to $2.12 billion in 2006, $2.07 billion in 2005 and $1.38 billion in 2004. Total refinancing of our existing first mortgage loans were as follows:

			Percent of
			First Mortgage
	Amount		Loan Originations
	(In thousands)
2006	$	83,693		4.0	%
2005		156,492		7.6
2004		143,959		10.4

We allow existing customers to modify their mortgage loans with the intent of maintaining customer relationships in periods of extensive refinancing due to a low interest rate environment. The modification changes the existing interest rate to the currently offered fixed interest rate product with a similar or reduced term, for a fee, after past payment performance is reviewed. In general, all other terms and conditions of the existing mortgage remain the same. Modifications of existing mortgage loans were as follows:

	Mortgage Loans
	Modified
	(In thousands)
2006	$	11,656
2005		39,254
2004		220,059

We offer a variety of adjustable-rate and fixed-rate one- to four-family mortgage loans with maximum loan-to-value ratios that depend on the type of property and the size of loan involved. The loan-to-value ratio is the loan amount divided by the appraised value of the property. The loan-to-value ratio is a measure commonly used by financial institutions to determine exposure to risk. Except for loans to low- and moderate-income home mortgage applicants, as described below, loans on owner-occupied one- to four-family homes of up to $1,000,000 are generally subject to a maximum loan-to-value ratio of 80%. However, we make loans in amounts up to $500,000 with a 95% loan-to-value ratio and loans in excess of $500,000 and less than $600,000 with a 90% loan-to-value ratio if the borrower obtains private mortgage insurance. Under certain circumstances we will originate a first and second mortgage, up to a combined loan amount of $600,000, where the combined loan-to-value ratio is 90%. Under these circumstances, we will waive the private mortgage insurance requirements and receive a higher interest rate on the second mortgage loan than we would receive on a regular second mortgage loan. Loan-to-value ratios of 75% or less are generally required for one- to four-family loans in excess

Page 12

of $1.0 million and less than $1.5 million. Loans in excess of $1.5 million and less than $2.0 million are generally subject to a maximum loan-to-value ratio of 70%. Loans in excess of $2.0 million and up to $2.5 million are generally subject to a maximum loan-to-value ratio of 65%. Loans in excess of $2.5 million and up to $3.0 million are generally subject to a maximum loan-to-value ratio of 60%. We typically do not originate mortgage loans in excess of $3.0 million. At December 31, 2006, we had outstanding 730 originated mortgage loans with principal balances in excess of $750,000 with an aggregate balance of $710.0 million.

We also offer a variety of ARM loans secured by one- to four-family residential properties with a fixed rate for initial terms of three years, five years or ten years. After the initial adjustment period, ARM loans adjust on an annual basis. These loans are originated in amounts generally up to $3.0 million. The ARM loans that we currently originate have a maximum 40-year amortization period and are generally subject to the loan-to-value ratios described above. The interest rates on ARM loans fluctuate based upon a fixed spread above the monthly average yield on United States treasury securities, adjusted to a constant maturity of one year and generally are subject to a maximum increase of 2% per adjustment period and a limitation on the aggregate adjustment of 5% over the life of the loan. In the current rate environment, where the yield curve is relatively flat, the ARM loans we offer have initial interest rates below the fully indexed rate. As of December 31, 2006, the initial offered rate on these loans was 162.5 to 212.5 basis points below the current fully indexed rate. We originated $972.4 million of one- to four-family ARM loans in 2006. At December 31, 2006, 19.1% of our one- to four-family mortgage loans consisted of ARM loans.

The origination and retention of ARM loans helps reduce exposure to increases in interest rates. However, ARM loans can pose credit risks different from the risks inherent in fixed-rate loans, primarily because as interest rates rise, the underlying payments of the borrower may rise, which increases the potential for default. The marketability of the underlying property also may be adversely affected by higher interest rates. In order to minimize risks, we evaluate borrowers of ARM loans based on their ability to repay the loans at the higher of the initial interest rate or the fully indexed rate. In an effort to further reduce risk, we have not in the past, nor do we currently, originate ARM loans that provide for negative amortization of principal.

In 2005, we began to offer interest-only mortgage loans. These loans are designed for mortgage clients who desire flexible amortization schedules. These loans are originated as 5/1, 7/1, or 10/1 ARM loans, with the interest only portion of the payment based upon the initial loan term, or offered on a 30-year fixed-rate loan, with interest-only payments for the first 10 years of the obligation. At the end of the initial 5-, 7- or 10-year interest-only period of these loans, the payment will adjust to include both principal and interest and will amortize over the remaining term so the loan will be repaid at the end of its original life. These loans are underwritten using fully amortizing payment amounts, more restrictive standards and generally are made with lower loan to value limitations imposed to help minimize any potential credit risk. These loans may involve higher risks compared to standard loan products since there is the potential for higher payments once the interest rate resets and the principal begins to amortize and they rely on a stable or rising housing market to maintain an acceptable loan-to-value ratio. However, we do not believe these programs will have a material adverse impact on our asset quality. As of December 31, 2006, we had originated $722.2 million of interest-only loans outstanding. We have not in the past, nor do we currently, originate option ARM loans, where the borrower is given various payment options that could change payment flows to the Bank. For a description of recent guidance on high risk loans, See – “Regulation of Hudson City Savings Bank and Hudson City Bancorp.”

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In addition to our full documentation loan program, we process some loans as limited documentation loans. We have originated these types of loans for over 15 years. Loans eligible for limited documentation processing are ARM loans and 10-, 15-, 20-, 30- and 40-year fixed-rate loans to owner-occupied primary and second home applicants. These loans are available in amounts up to 75% of the lower of the appraised value or purchase price of the property. Generally the maximum loan amount for limited documentation loans is $600,000. We do not charge borrowers additional fees for limited documentation loans. We require applicants for limited documentation loans to complete a FreddieMac/FannieMae loan application and request income, assets and credit history information from the borrower. Additionally, we obtain credit reports from outside vendors on all borrowers. We also review other information to ascertain the credit history of the borrower. Applicants with delinquent credit histories usually do not qualify for the limited documentation processing, although relatively minor delinquencies that are adequately explained will not prohibit processing as a limited documentation loan. We reserve the right to verify income, asset information and other information where we believe circumstances warrant. We also allow certain borrowers to obtain mortgage loans without verification of income or assets. These loans are subject to somewhat higher interest rates than our regular products, and are limited to a maximum loan-to-value ratio of 65% on purchases and 60% on refinancing transactions.

Limited documentation and no verification loans may involve higher risks compared to loans with full documentation, as there is a greater opportunity for borrowers to falsify their income and ability to service their debt. We believe these programs have not had a material adverse effect on our asset quality. Unseasoned limited documentation and no verification loans are not as readily salable in the secondary market as are conforming loans. We do not believe that an inability to sell such loans will have a material adverse impact on our liquidity needs, because internally generated sources of liquidity are expected to be sufficient to meet our liquidity needs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

We offer mortgage programs designed to address the credit needs of low- and moderate-income home mortgage applicants, first-time home buyers and low- and moderate-income home improvement loan applicants. We define low- and moderate-income applicants as borrowers residing in low- and moderate-income census tracts or households with income not greater than 80% of the median income of the Metropolitan Statistical Area in the county where the subject property is located. Our low- and moderate-income home improvement loans are discussed under “Consumer Loans.” Among the features of the low- and moderate-income home mortgage and first-time home buyer’s programs are reduced rates, lower down payments, reduced fees and closing costs, and generally less restrictive requirements for qualification compared with our traditional one- to four-family mortgage loans. For example, these programs currently provide for loans with up to 95% loan-to-value ratios and rates which are 25 to 50 basis points lower than our traditional mortgage loans. In 2006, we originated $20.6 million in mortgage loans to home buyers under these programs.

Multi-family and Commercial Mortgage Loans. At December 31, 2006, $69.3 million, or 0.4%, of the total loan portfolio consisted of multi-family and commercial mortgage loans, substantially all of which were transferred in the Acquisition. Commercial mortgage loans are secured by office buildings, religious facilities and other commercial properties. The Bank generally originates fixed-rate commercial mortgage loans with maximum terms of up to 25 years with balloon payment features. At December 31, 2006, the largest commercial mortgage loan had a principal balance of $5.5 million and was secured by a storage unit facility.

Multi-family mortgage loans generally are secured by multi-family rental properties (including mixed-use buildings and walk-up apartments). Multi-family mortgage loans generally are offered with both fixed and adjustable interest rates, although in the current interest rate environment the Bank has not

Page 14

recently originated adjustable rate multi-family loans. Multi-family loans are originated for terms of up to 30 years.

In underwriting multi-family and commercial mortgage loans, the Bank reviews a number of factors, such as the expected net operating income generated by the real estate to ensure that it is at least 125% of the amount of the monthly debt service; the age and condition of the collateral; the financial resources and income level of the borrower; and the borrower’s business experience. Personal guarantees are obtained in most cases from borrowers. The maximum loan to value ratio of multi-family and commercial mortgage loans is generally 75%.

Loans secured by multi-family and commercial real estate generally are larger than one-to-four family residential loans and involve a greater degree of risk. Commercial mortgage loans can involve large loan balances to single borrowers or groups of related borrowers. Payments on these loans depend to a large degree on the results of operations and management of the properties or underlying businesses, and may be affected to a greater extent by adverse conditions in the real estate market or in the economy in general. Accordingly, the nature of commercial real estate loans makes them more difficult for Bank management to monitor and evaluate.

Construction Lending. The Bank originates construction loans to local builders, generally with whom it has an established relationship, and to individuals who have a contract with a builder for the construction of their residence. Construction loans are disbursed as certain portions of the project are completed. The Bank’s construction loans are secured by residential and commercial properties located in the Bank’s market area. At December 31, 2006, the Bank had construction loans totaling $41.2 million, or 0.2% of total loans, substantially all of which were transferred in the Acquisition.

The Bank’s construction loans to home builders generally have fixed interest rates, are typically for a term of up to 18 months and have a maximum loan to value ratio of 80%. Loans to builders are made on either a pre-sold or speculative (unsold) basis. Construction loans to individuals are generally originated pursuant to the same policy guidelines regarding loan to value ratios and interest rates that are used in connection with loans secured by one-to-four family residential real estate. Construction loans to individuals who intend to occupy the completed dwelling may be converted to permanent financing after the construction phase is completed.

Construction loans are generally considered to involve a higher degree of risk than permanent mortgage loans because of the inherent difficulty in estimating both a property’s value at completion of the project and the estimated cost of the project. If the estimate of construction costs is inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value upon completion is inaccurate, the value of the property may be insufficient to assure full repayment. Projects may also be jeopardized by disagreements between borrowers and builders and by the failure of builders to pay subcontractors. Loans to builders to construct residential properties for which no purchaser has been identified carry more risk because the repayment of the loan depends on the builder’s ability to sell the property prior to the time that the construction loan is due. The Bank has attempted to minimize the foregoing risks by, among other things, generally requiring personal guarantees from the principals of its corporate borrowers.

Consumer Loans. At December 31, 2006, $382.1 million, or 2.0%, of our total loans consisted of consumer and other loans, primarily fixed-rate second mortgage loans and home equity credit lines. Consumer loans generally have shorter terms to maturity, relative to our mortgage portfolio, which reduces our exposure to changes in interest rates. Consumer loans generally carry higher rates of interest than do one- to four-family residential mortgage loans. In addition, we believe that offering

Page 15

consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

We offer fixed-rate second mortgage loans in amounts up to $200,000 secured by owner-occupied one- to four-family residences located in the State of New Jersey, and the portions of New York and Connecticut served by our first mortgage loan products, for terms of up to 20 years. At December 31, 2006 these loans totaled $274.0 million, or 1.4% of total loans. The underwriting standards applicable to these loans generally are the same as one- to four-family first mortgage loans, except that the combined loan-to-value ratio, including the balance of the first mortgage, generally cannot exceed 80% of the appraised value of the property.

Our home equity credit line loans, which totaled $97.6 million, or 0.5% of total loans at December 31, 2006, are adjustable-rate loans secured by a second mortgage on owner-occupied one- to four-family residences located in our market area. Current interest rates on home equity credit lines are based on the “prime rate” as published in the “Money Rates” section of The Wall Street Journal (the “Index”) subject to certain interest rate limitations. Interest rates on home equity credit lines are adjusted monthly based upon changes in the Index. Minimum monthly principal payments on currently offered home equity lines of credit are based on 1/240th of the outstanding principal balance or $100 whichever is greater. The maximum credit line available is $200,000. The underwriting terms and procedures applicable to these loans are substantially the same as for our fixed-rate second mortgage loans.

Other loans totaled $10.4 million at December 31, 2006 and consisted of collateralized passbook loans, overdraft protection loans, automobile loans, unsecured personal loans, and secured and unsecured commercial lines of credit. We no longer originate unsecured personal loans and automobile loans.

Loan Approval Procedures and Authority. All first mortgage loans up to $600,000 must be approved by two officers in the Mortgage Origination Department. Loans in excess of $600,000 require one of the two officers approving the loan bear the title of either First Vice President-Mortgage Officer, Senior Vice President-Lending, Chief Executive Officer or Chief Operating Officer prior to the issuance of a commitment letter. The aggregate of all loans existing and/or committed by any one borrower in excess of $3,000,000 requires the review of the Board of Directors. Home equity credit lines and fixed-rate second mortgage loans in principal amounts of $25,000 or less are approved by one of our designated loan underwriters. Home equity loans in excess of $25,000, up to the $200,000 maximum, are approved by an underwriter and either our Consumer Loan Officer, Senior Vice President-Lending, Chief Executive Officer or Chief Operating Officer.

Upon receipt of a completed loan application from a prospective borrower, we order a credit report and, except for loans originated as limited documentation, stated income, or no income/no asset verification loans, we verify certain other information. If necessary, we obtain additional financial or credit-related information. We require an appraisal for all mortgage loans, except for some loans made to refinance existing mortgage loans. Appraisals may be performed by our in-house Appraisal Department or by licensed or certified third-party appraisal firms. Currently most appraisals are performed by third-party appraisers and are reviewed by our in-house Appraisal Department.

We require title insurance on all mortgage loans, except for home equity credit lines and fixed-rate second mortgage loans. For these loans, we require a property search detailing the current chain of title. We require borrowers to obtain hazard insurance and we may require borrowers to obtain flood insurance prior to closing. We require most borrowers to advance funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from which we make

Page 16

disbursements for items such as real estate taxes, flood insurance and private mortgage insurance premiums, if required. In a limited number of instances, at our discretion, we will waive the real estate tax escrow for the borrower on New Jersey properties, subject to an interest rate somewhat higher than our regular offered rate. Presently, we do not escrow for real estate taxes on properties located in the States of New York and Connecticut.

Asset Quality

One of our key operating objectives has been, and continues to be, to maintain a high level of asset quality. Through a variety of strategies, including, but not limited to, borrower workout arrangements and aggressive marketing of owned properties, we have been proactive in addressing problem and non-performing assets. These strategies, as well as our concentration on one- to four-family mortgage lending, our maintenance of sound credit standards for new loan originations and favorable real estate market conditions have resulted in relatively low delinquency ratios. This, in turn, has helped strengthen our financial condition.

Delinquent Loans and Foreclosed Assets. When a borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to a current status. In the case of originated mortgage loans, our mortgage servicing department is responsible for collection procedures from the 15th day up to the 90th day of delinquency. Specific procedures include a late charge notice being sent at the time a payment is over 15 days past due. Telephone contact is attempted on approximately the 20th day of the month to avoid a 30-day delinquency. A second written notice is sent at the time the payment becomes 30 days past due.

We send additional letters if no contact is established by approximately the 45th day of delinquency. On the 60th day of delinquency, we send another letter followed by continued telephone contact. Between the 30th and the 60th day of delinquency, if telephone contact has not been established, an independent contractor makes a physical inspection of the property. When contact is made with the borrower at any time prior to foreclosure, we attempt to obtain full payment or work out a repayment schedule with the borrower in order to avoid foreclosure. It has been our experience that most loan delinquencies are cured within 90 days and no legal action is taken.

We send foreclosure notices when a loan is 90 days delinquent and refer the loan to legal counsel. The accrual of income on loans that do not carry private mortgage insurance or are not guaranteed by a federal agency is generally discontinued when interest or principal payments are 90 days in arrears. We commence foreclosure proceedings if the loan is not brought current between the 90th and 120th day of delinquency unless specific limited circumstances warrant an exception. The collection procedures for mortgage loans guaranteed by government agencies follow the collection guidelines outlined by those agencies.

We monitor delinquencies on our serviced loan portfolio, in aggregate, from reports sent to us by the servicers. Once all past due reports are received, we examine the delinquencies and contact appropriate servicer personnel to determine the collectability of the loans. We also use these reports to prepare our own monthly reports for management review. These summaries break down, by servicer, total principal and interest due, length of delinquency, as well as accounts in foreclosure and bankruptcy. We control, on a case-by-case basis, all accounts in foreclosure to confirm that the servicer has taken all proper steps to foreclose promptly if there is no other recourse. We also monitor whether mortgagors who filed bankruptcy are meeting their obligation to pay the mortgage debt in accordance with the terms of the bankruptcy petition.

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The collection procedures for other loans include sending periodic late notices to a borrower once a loan is past due. We attempt to make direct contact with a borrower once a loan becomes 30 days past due. Supervisory personnel in our Consumer Loan department review the delinquent loans and collection efforts on a regular basis. If collection activity is unsuccessful after 90 days, we may refer the matter to our legal counsel for further collection effort or charge-off the loan. Loans we deem to be uncollectible are proposed for charge-off. Charge-offs of consumer loans require the approval of our Consumer Loan Officer and either the Senior Vice President-Lending, our Chief Executive Officer or Chief Operating Officer.

We carry foreclosed real estate at the lower of fair market value less estimated selling costs, or at cost. If a foreclosure action is commenced and the loan is not brought current, paid in full or refinanced before the foreclosure sale, the real property securing the loan is either sold at the foreclosure sale, or we sell the property as soon thereafter as practicable.

Our policies require that management continuously monitor the status of the loan portfolio and report to the Board of Directors on a monthly basis. These reports include information on delinquent loans and foreclosed real estate.

Loans delinquent 60 days to 89 days and 90 days or more were as follows as of the dates indicated:

	At December 31,
	2006										2005										2004
	60-89 Days					90 Days or More					60-89 Days					90 Days or More					60-89 Days					90 Days or More
			Principal					Principal					Principal					Principal					Principal					Principal
	No. of		Balance			No. of		Balance			No. of		Balance			No. of		Balance			No. of		Balance			No. of		Balance
	Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		of Loans
	(Dollars in thousands)
One- to four-family first mortgages		60	$	16,910			82	$	22,026			44	$	10,113			67	$	15,273			43	$	9,819			64	$	15,232
FHA/VA first mortgages		8		1,236			23		3,657			10		1,755			24		4,037			8		773			53		6,375
Multi-family and commercial mortgages		1		566			—		—			—		—			—		—			1		76			—		—
Construction loans		4		2,769			2		3,098			—		—			—		—			—		—			—		—
Consumer and other loans		20		1,125			11		1,217			2		2			2		2			—		—			—		—
Total delinquent loans (60 days and over)		93	$	22,606			118	$	29,998			56	$	11,870			93	$	19,312			52	$	10,668			117	$	21,607
Delinquent loans (60 days and over) to total loans				0.12	%				0.16	%				0.08	%				0.13	%				0.09	%				0.19	%

Non-performing assets, which include foreclosed real estate, net, non-accrual loans and accruing loans delinquent 90 days or more, were $33.2 million at December 31, 2006 compared with $20.4 million at December 31, 2005. Our $30.0 million in loans delinquent 90 days or more at December 31, 2006 consisted primarily of 105 one- to four-family first mortgage loans (including VA first mortgage loans). At December 31, 2006, our largest loan delinquent 90 days or more was a construction loan with a balance of $3.0 million that has become current subsequent to December 31, 2006.

With the exception of first mortgage loans guaranteed by a federal agency or for which the borrower has obtained private mortgage insurance, we stop accruing income on loans when interest or principal payments are 90 days in arrears or earlier when the timely collectibility of such interest or principal is doubtful. We reverse outstanding interest on non-accrual loans that we previously credited to income. We recognize income in the period that we collect it or when the ultimate collectibility of principal is no longer in doubt. We return a non-accrual loan to accrual status when factors indicating doubtful collection no longer exist. The accrual of income on VA loans is generally not discontinued as they are guaranteed by a federal agency.

Page 18

Foreclosed real estate consists of property we acquired through foreclosure or deed in lieu of foreclosure. After foreclosure, foreclosed properties held for sale are carried at the lower of fair value minus estimated cost to sell, or at cost. A valuation allowance account is established through provisions charged to income, which results from the ongoing periodic valuations of foreclosed real estate properties. Fair market value is generally based on recent appraisals.

The following table presents information regarding non-performing assets as of the dates indicated.

	At December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Non-accrual first mortgage loans	$	23,151		$	9,649		$	6,057		$	4,401		$	6,053
Non-accrual consumer and other loans		1,217			2			—			102			19
Accruing loans delinquent 90 days or more		5,630			9,661			15,550			15,748			14,123
Total non-performing loans		29,998			19,312			21,607			20,251			20,195
Foreclosed real estate, net		3,161			1,040			878			1,002			1,276
Total non-performing assets	$	33,159		$	20,352		$	22,485		$	21,253		$	21,471
Non-performing loans to total loans		0.16	%		0.13	%		0.19	%		0.23	%		0.29	%
Non-performing assets to total assets		0.09			0.07			0.11			0.12			0.15

The total amount of interest income received during the year on non-accrual loans outstanding and additional interest income on non-accrual loans that would have been recognized if interest on all such loans had been recorded based upon original contract terms is immaterial. We are not committed to lend additional funds to borrowers whose loans are in non-accrual status.

We had no loans classified as impaired at December 31, 2006 and 2005 within the scope of SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”. In addition, at December 31, 2006 and 2005, we had no loans classified as troubled debt restructurings, as defined in SFAS No. 15.

Allowance for Loan Losses. The following table presents the activity in our allowance for loan losses at or for the periods indicated.

	At or for the Year December 31,
	2006			2005			2004			2003			2002
	(Dollars in thousands)
Balance at beginning of year	$	27,393		$	27,319		$	26,547		$	25,501		$	24,010
Provision for loan losses		—			65			790			900			1,500
Allowance transferred in Acquisition		3,308			—			—			—			—
Charge-offs:
First mortgage loans		(72	)		(2	)		(11	)		(92	)		(3	)
Consumer and other loans		(7	)		(8	)		(9	)		(4	)		(10	)
Total charge-offs		(79	)		(10	)		(20	)		(96	)		(13	)
Recoveries		3			19			2			242			4
Net (charge-offs) recoveries		(76	)		9			(18	)		146			(9	)
Balance at end of year	$	30,625		$	27,393		$	27,319		$	26,547		$	25,501
Allowance for loan losses to total loans		0.16	%		0.18	%		0.24	%		0.30	%		0.37	%
Allowance for loan losses to non-performing loans		102.09			141.84			126.44			131.09			126.27

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The allowance for loan losses has been determined in accordance with U.S. generally accepted accounting principles, which requires us 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.

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 resulting in a loan concentration in residential first mortgage loans at December 31, 2006. As a result of our lending practices, we also have a concentration of loans secured by real property located in New Jersey, New York, and Connecticut. 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 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.

We did not record a provision for loan losses during 2006 reflecting recent low levels of charge-offs. At December 31, 2006, the allowance for loan losses as a percentage of total loans was 0.16%, which, given the primary emphasis of our lending practices and the current market conditions, we consider to be at an acceptable level. The increase in the allowance for loan losses during 2006 was due to the carryover of the allowance in the Acquisition, none of which related to loans that were impaired at that time.

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. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Comparison of Operating Results for the Years Ended December 31, 2006 and 2005—Critical Accounting Policies and Provision for Loan Losses.”

The following table presents our allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans at the dates indicated.

	At December 31,
	2006					2005					2004					2003					2002
			Percentage					Percentage					Percentage					Percentage					Percentage
			of Loans in					of Loans in					of Loans in					of Loans in					of Loans in
			Category					Category					Category					Category					Category
			to Total					to Total					to Total					to Total					to Total
	Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans			Amount		Loans
	(Dollars in thousands)
First mortgage loans:
One- to four-family	$	24,578		80.26	%	$	25,474		98.13	%	$	25,524		97.87	%	$	24,690		97.32	%	$	23,040		96.25	%
Other first mortgages		999		3.26			23		0.31			35		0.75			28		1.15			26		1.92
Total first mortgage loans		25,577		83.52			25,497		98.44			25,559		98.62			24,718		98.47			23,066		98.17
Consumer and other loans		3,618		11.81			1,774		1.56			1,305		1.38			1,152		1.53			1,097		1.83
Unallocated		1,430		4.67			122		—			455		—			677		—			1,338		—
Total allowance for loans losses	$	30,625		100.00	%	$	27,393		100.00	%	$	27,319		100.00	%	$	26,547		100.00	%	$	25,501		100.00	%

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Investment Activities

The Board of Directors reviews and approves our investment policy on an annual basis. The Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, as authorized by the Board of Directors, implement this policy. The Board of Directors reviews our investment activity on a monthly basis.

Our investment policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our lending activities and to provide and maintain liquidity within established guidelines. In establishing our investment strategies, we consider our interest rate sensitivity position, the types of securities to be held, liquidity and other factors. We have authority to invest in various types of assets, including U.S. Treasury obligations, federal agency securities, mortgage-backed securities, certain time deposits of insured banks and savings institutions, certain bankers’ acceptances, repurchase agreements, federal funds sold, and, subject to certain limits, corporate debt and equity securities, commercial paper and mutual funds.

Our investment policy currently does not authorize participation in hedging programs, options or futures transactions or interest rate swaps, and also prohibits the purchase of non-investment grade bonds. In the future we may amend our policy to allow us to engage in these types of transactions. Our investment policy also provides that we will not engage in any practice that the Federal Financial Institutions Examination Council considers being an unsuitable investment practice. In addition, the policy provides that we shall maintain a primary liquidity ratio, which consists of investments in cash, cash in banks, Federal funds sold, securities with remaining maturities of less than five years and adjustable-rate mortgage-backed securities repricing within one year, in an amount equal to at least 4% of total deposits and short-term borrowings. At December 31, 2006, our primary liquidity ratio was 39.2%.

We classify investments as held to maturity or available for sale at the date of purchase. Held to maturity securities are reported at cost, adjusted for amortization of premium and accretion of discount. We have both the ability and positive intent to hold these securities to maturity. Available for sale securities are reported at fair market value. We currently have no securities classified as trading.

Investment Securities. During 2006, we purchased $1.25 billion of investment securities compared with $4.31 billion during 2005. These securities were primarily U.S Government agency securities. Of the agency securities held as of December 31, 2006, $1.37 billion 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. Approximately $750.0 million of these step-up notes will reset or mature within two years. Also included in investment securities as of December 31, 2006 were $2.18 billion of agency securities with initial periods to maturity of less than two years. The aggregate $2.93 billion of step-up notes and short-term securities maturing within two years assists in our management of interest rate risk. Also, at December 31, 2006, we had $445.0 million in FHLB-NY stock. See “- Regulation of Hudson City Savings Bank and Hudson City Bancorp.”

Mortgage-backed Securities. All of our mortgage-backed securities are issued by GNMA, FannieMae or FreddieMac. We classify mortgage-backed securities as held to maturity or available for sale at the date of purchase based on our assessment of our internal liquidity requirements. Held to maturity mortgage-backed securities are reported at cost, net of unamortized premiums and discounts. We have both the ability and positive intent to hold these investments to maturity. Available for sale

Page 21

mortgage-backed securities are reported at fair market value. We currently have no mortgage-backed securities classified as trading.

At December 31, 2006, mortgage-backed securities classified as held to maturity totaled $6.92 billion, or 19.5% of total assets, while $2.40 billion, or 6.8% of total assets, were classified as available for sale. At December 31, 2006, the mortgage-backed securities portfolio had a weighted-average rate of 5.11% and a market value of approximately $9.21 billion. Of the mortgage-backed securities we held at December 31, 2006, $6.50 billion, or 69.6% of total mortgage-backed securities, had adjustable rates and $2.83 billion, or 30.4% of total mortgage-backed securities, had fixed rates. Our mortgage-backed securities portfolio includes real estate mortgage investment conduits (“REMICs”), which are securities derived by reallocating cash flows from mortgage pass-through securities or from pools of mortgage loans held by a trust. REMICs are a form of, and are often referred to as, collateralized mortgage obligations (“CMOs”). At December 31, 2006, we held $406.3 million of fixed-rate REMICs, which constituted 4.3% of our mortgage-backed securities portfolio. Mortgage-backed security purchases totaled $3.93 billion during 2006 compared with $3.28 billion during 2005. 98.7% of the mortgage-backed securities purchased during 2006 were variable-rate or hybrid instruments in order to manage our interest rate risk.

Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees or credit enhancements that reduce credit risk. However, mortgage-backed securities are more liquid than individual mortgage loans and may be used to collateralize certain borrowings. In general, mortgage-backed securities issued or guaranteed by GNMA, FannieMae and FreddieMac are weighted at no more than 20% for risk-based capital purposes, compared to the 50% risk-weighting assigned to most non-securitized residential mortgage loans.

While mortgage-backed securities carry a reduced credit risk as compared to whole loans, they remain subject to the risk of a fluctuating interest rate environment. Along with other factors, such as the geographic distribution of the underlying mortgage loans, changes in interest rates may alter the prepayment rate of those mortgage loans and affect both the prepayment rates and value of mortgage-backed securities. At December 31, 2006, we did not own any principal-only, REMIC residuals or other higher risk securities.

Page 22

The following table presents our investment securities activity for the years indicated.

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands)
Investment securities:
Carrying value at beginning of year	$	5,496,727		$	2,928,888		$	2,245,178
Transferred in Acquisition		120,087			—			—
Purchases:
Held to maturity		—			300,000			1,769,643
Available for sale		1,250,010			4,008,680			337,306
Calls:
Held to maturity		(256	)		(99,978	)		(436,670	)
Available for sale		(350,004	)		(100,007	)		(986,343	)
Maturities:
Held to maturity		—			(65	)		(100	)
Available for sale		(500,005	)		(1,500,000	)		—
Sales:
Available for sale		(97,549	)		—			—
Mutual fund shares		(15,530	)		(10,000	)		—
Premium amortization and discount accretion, net		(17	)		16,295			32
Change in unrealized gain or loss		10,121			(47,086	)		(158	)
Net increase in investment securities		416,857			2,567,839			683,710
Carrying value at end of year	$	5,913,584		$	5,496,727		$	2,928,888

The following table presents our mortgage-backed securities activity for the years indicated.

	For the Year Ended December 31,
	2006			2005			2004
	(In thousands)
Mortgage-backed securities:
Carrying value at beginning of year	$	6,910,497		$	5,376,629		$	5,422,701
Transferred in Acquisition		186,169			—			—
Purchases:
Held to maturity		3,313,669			1,604,473			921,765
Available for sale		617,171			1,675,428			1,278,921
Principal payments:
Held to maturity		(773,343	)		(960,630	)		(1,445,507	)
Available for sale		(741,200	)		(499,387	)		(282,901	)
Sales:
Held to maturity		—			—			—
Available for sale		(186,169	)		(227,894	)		(499,067	)
Premium amortization and discount accretion, net		(10,709	)		(14,627	)		(14,138	)
Change in unrealized gain or loss		13,546			(43,495	)		(5,145	)
Net increase (decrease) in mortgage-backed securities		2,419,134			1,533,868			(46,072	)
Carrying value at end of year	$	9,329,631		$	6,910,497		$	5,376,629

Page 23

The following table presents the composition of our money market investments, investment securities and mortgage-backed securities portfolios in dollar amount and in percentage of each investment type at the dates indicated. It also presents the coupon type for the mortgage-backed securities portfolio.

	At December 31,
	2006							2005							2004
			Percent							Percent							Percent
	Carrying		of			Fair		Carrying		of			Fair		Carrying		of			Fair
	Value		Total (1)			Value		Value		Total (1)			Value		Value		Total (1)			Value
	(Dollars in thousands)
Money market investments:
Federal funds sold	$	56,616		100.00	%	$	56,616	$	4,587		100.00	%	$	4,587	$	45,700		100.00	%	$	45,700
Investment securities:
Held to maturity:
United States government-sponsored agencies	$	1,533,059		25.92	%	$	1,502,014	$	$1,533,050		27.89	%	$	1,506,865	$	1,333,018		45.51	%	$	1,325,054
Municipal bonds		910		0.02			920		1,166		0.02			1,190		1,231		0.04			1,282
Total held to maturity		1,533,969		25.94			1,502,934		1,534,216		27.91			1,508,055		1,334,249		45.55			1,326,336
Available for sale:
United States government-sponsored agencies		4,372,295		73.94			4,372,295		3,962,178		72.09			3,962,178		1,584,384		54.10			1,584,384
Corporate bonds		57		—			57		67		—			67		74		—			74
Equity securities		7,263		0.12			7,263		266		—			266		10,181		0.35			10,181
Total available for sale		4,379,615		74.06			4,379,615		3,962,511		72.09			3,962,511		1,594,639		54.45			1,594,639
Total investment securities	$	5,913,584		100.00	%	$	5,882,549	$	$5,496,727		100.00	%	$	5,470,566		2,928,888		100.00	%	$	2,920,975
Mortgage-backed securities:
By issuer:
Held to maturity:
GNMA pass-through certificates	$	215,161		2.31	%	$	216,504	$	$293,680		4.25	%	$	294,332	$	416,665		7.75	%	$	422,032
FNMA pass-through certificates		3,233,852		34.66			3,191,324		2,535,361		36.69			2,489,102		2,017,165		37.51			2,017,791
FHLMC pass-through certificates		3,069,884		32.90			3,019,995		1,108,195		16.04			1,082,564		561,095		10.44			554,341
FHLMC and FNMA REMICs		406,313		4.36			376,775		452,628		6.55			422,774		760,996		14.15			726,865
Total held to maturity		6,925,210		74.23			6,804,598		4,389,864		63.53			4,288,772		3,755,921		69.85			3,721,029
Available for sale:
GNMA pass-through certificates		1,696,715		18.18			1,696,715		1,700,132		24.60			1,700,132		503,839		9.37			503,839
FNMA pass-through certificates		575,293		6.17			575,293		666,485		9.64			666,485		743,380		13.83			743,380
FHLMC pass-through certificates		132,413		1.42			132,413		154,016		2.23			154,016		373,489		6.95			373,489
Total available for sale		2,404,421		25.77			2,404,421		2,520,633		36.47			2,520,633		1,620,708		30.15			1,620,708
Total mortgage-backed securities	$	9,329,631		100.00	%	$	9,209,019	$	$6,910,497		100.00	%	$	6,809,405	$	5,376,629		100.00	%	$	5,341,737
By coupon type:
Adjustable-rate	$	6,495,769		69.63	%	$	6,457,465	$	$3,704,146		53.60	%	$	3,683,965	$	1,258,859		23.41	%	$	1,262,923
Fixed-rate		2,833,862		30.37			2,751,554		3,206,351		46.40			3,125,440		4,117,770		76.59			4,078,814
Total mortgage-backed securities	$	9,329,631		100.00	%	$	9,209,019	$	$6,910,497		100.00	%	$	6,809,405	$	5,376,629		100.00	%	$	5,341,737
Total investment portfolio	$	15,299,831				$	15,148,184	$	$12,411,811				$	12,284,558	$	8,351,217				$	8,308,412

(1) Based on carrying value for each investment type.

Page 24

Carrying Values, Rates and Maturities. The table below presents information regarding the carrying values, weighted average rates and contractual maturities of our money market investments, investment securities and mortgage-backed securities at December 31, 2006. Mortgage-backed securities are presented by issuer and by coupon type. Equity securities have been excluded from this table.

	At December 31, 2006
						More Than One Year					More Than Five Years
	One Year or Less					to Five Years					to Ten Years					More Than Ten Years					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
	Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average			Carrying		Average
	Value		Rate			Value		Rate			Value		Rate			Value		Rate			Value		Rate
	(Dollars in thousands)
Money market investments:
Federal funds sold	$	56,616		5.25	%	$	—		—	%	$	—		—	%	$	—		—	%	$	56,616		5.25	%
Investment securities:
Held to maturity:
United States government-sponsored agencies	$	—		—		$	845,561		4.72		$	65,968		5.00		$	621,530		5.02		$	1,533,059		4.85
Municipal bonds		5		5.25			600		6.50			305		6.30			—		—			910		6.43
Total held to maturity		5		5.25			846,161		4.73			66,273		5.01			621,530		5.02			1,533,969		4.86
Available for sale:
United States government-sponsored agencies		1,320,665		4.31			2,792,529		4.60			259,101		4.57			—		—			4,372,295		4.51
Corporate bonds		50		6.02			7		3.79			—		—			—		—			57		5.75
Total available for sale		1,320,715		4.31			2,792,536		4.60			259,101		4.57			—		—			4,372,352		4.51
Total investment securities	$	1,320,720		4.31		$	3,638,697		4.63		$	325,374		4.66		$	621,530		5.02		$	5,906,321		4.60
Mortgage-backed securities:
By issuer:
Held to maturity:
GNMA pass-through certificates	$	121		7.27		$	756		8.98		$	89		11.53		$	214,195		5.41		$	215,161		5.43
FNMA pass-through certificates		139		6.58			4,283		6.28			5,322		7.08			3,224,108		5.17			3,233,852		5.17
FHLMC pass-through certificates		2		7.58			2,128		7.26			2,045		6.74			3,065,709		5.24			3,069,884		5.24
FHLMC and FNMA REMICs		—		—			—		—			—		—			406,313		4.56			406,313		4.56
Total held to maturity		262		6.91			7,167		6.86			7,456		7.04			6,910,325		5.17			6,925,210		5.18
Available for sale:
GNMA pass-through certificates		—		—			—		—			—		—			1,696,715		4.86			1,696,715		4.86
FNMA pass-through certificates		—		—			—		—			—		—			575,293		5.00			575,293		5.00
FHLMC pass-through certificates		—		—			—		—			—		—			132,413		5.10			132,413		5.10
Total available for sale		—		—			—		—			—		—			2,404,421		4.91			2,404,421		4.91
Total mortgage-backed securities	$	262		6.91		$	7,167		6.86		$	7,456		7.04		$	9,314,746		5.10		$	9,329,631		5.11
By coupon type:
Adjustable-rate	$	—		—		$	—		—		$	884		5.85		$	6,494,885		5.18		$	6,495,769		5.18
Fixed-rate		262		6.91			7,167		6.86			6,572		7.20			2,819,861		4.93			2,833,862		4.94
Total mortgage-backed securities	$	262		6.91		$	7,167		6.86		$	7,456		7.04		$	9,314,746		5.10		$	9,329,631		5.11
Total investment portfolio	$	1,377,598		4.35		$	3,645,864		4.64		$	332,830		4.71		$	9,936,276		5.09		$	15,292,568		4.91

Page 25

Sources of Funds

General. Customer deposits, borrowed funds, scheduled amortization and prepayments of mortgage loans and mortgage-backed securities, maturities and calls of investment securities and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes. Retail deposits generated through our branch network and longer-term wholesale borrowings are our primary means of funding our growth initiatives. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Deposits. We offer a variety of deposit accounts having a range of interest rates and terms. We currently offer passbook and statement savings accounts, interest-bearing transaction accounts including our High Value Checking product and traditional NOW accounts, checking accounts, money market accounts and time deposits. We also offer IRA accounts and qualified retirement plans.

Deposit flows are influenced significantly by general and local economic conditions, changes in prevailing market interest rates, pricing of deposits and competition. In determining our deposit rates, we consider local competition, U.S. Treasury securities offerings and the rates charged on other sources of funds. Our deposits are primarily obtained from market areas surrounding our offices. We rely primarily on paying competitive rates, providing strong customer service and maintaining long-standing relationships with customers to attract and retain these deposits. We do not use brokers to obtain deposits and currently do not accept new deposits via the internet. During 2006, we experienced significant competitive pressure and extreme pricing of short-term deposits in the New York metropolitan area. We believed the price of incremental borrowed funds was more economical and reflective of current rates than the price of incremental deposits and, therefore, priced our deposits at a competitive, but prudent rate.

Total deposits increased $2.03 billion during 2006 as a result of marketing efforts to grow deposits in existing branches and approximately $1.1 billion of deposits assumed in the Acquisition. The increase in deposits was also due to the addition of seven new branch offices during 2006, which in total had approximately $145 million of deposits at December 31, 2006. The increase in deposits included a $2.92 billion increase in total time deposits and a $576.5 million increase in our money market accounts partially offset by a $1.47 billion decrease in savings and transaction accounts (other than money-market accounts). Total core deposits (defined as non-time deposit accounts) represented approximately 32.2% of total deposits as of December 31, 2006 compared with 45.8% as of December 31, 2005. This decrease is due to customers shifting deposits to short-term time deposits earning a higher interest rate. The aggregate balance in our time deposit accounts was $9.10 billion as of December 31, 2006 compared with $6.17 billion as of December 31, 2005. Time deposits with remaining maturities of less than one year amounted to $8.33 billion at December 31, 2006 compared with $4.98 billion at December 31, 2005, reflecting the shift of customer deposits to short-term time deposits.

The balance in our High Value Checking account product was $1.93 billion, representing 44.8% of core deposits at December 31, 2006. We view our interest-bearing High Value Checking account as an attractive alternative to cash management accounts offered by brokerage firms. This account offers unlimited check writing, no charge on-line banking, no-charge bill payment and debit card availability as part of the product, and pays an interest rate generally above competitive market rates. We also offer a Business Money Market Account that has similar features and benefits to our High Value Checking account. This product, in conjunction with our regular business checking account, provides small business customers in our market area competitive returns and operating flexibility. Early in 2006 we introduced a high yielding money market checking account product, which is a complementary alternative investment to our High Value Checking account and pays a slightly higher rate than our High Value Checking account.

Page 26

The following table presents our deposit activity for the years indicated:

	For the Year Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
Total deposits at beginning of year	$	11,383,300		$	11,477,300		$	10,453,780
Deposits assumed in Acquisition		1,062,121			—			—
Net increase (decrease) in deposits		534,070			(387,736	)		808,707
Interest credited		436,096			293,736			214,813
Total deposits at end of year	$	13,415,587		$	11,383,300		$	11,477,300
Net increase (decrease)	$	2,032,287		$	(94,000	)	$	1,023,520
Percent increase (decrease)		17.85	%		(0.82	)%		9.79	%

At December 31, 2006, we had $2.57 billion in time deposits with balances of $100,000 and over maturing as follows:

Maturity Period	Amount
	(In thousands)
3 months or less	$	707,440
Over 3 months through 6 months		1,458,217
Over 6 months through 12 months		228,919
Over 12 months		170,444
Total	$	2,565,020

Page 27

The following table presents the distribution of our deposit accounts at the dates indicated by dollar amount and percent of portfolio, and the weighted average nominal interest rate on each category of deposits.

	At December 31,
	2006								2005								2004
						Weighted								Weighted								Weighted
			Percent			average					Percent			average					Percent			average
			of total			nominal					of total			nominal					of total			nominal
	Amount		deposits			rate			Amount		deposits			rate			Amount		deposits			rate
	(Dollars in thousands)
Savings	$	805,278		6.00	%		0.92	%	$	808,325		7.10	%		0.98	%	$	931,783		8.12	%		0.98	%
Interest-bearing transaction		2,095,811		15.62			3.29			3,616,644		31.77			3.19			4,290,099		37.38			2.46
Money market		918,549		6.85			3.59			342,021		3.00			1.14			564,700		4.92			0.96
Noninterest-bearing demand		498,301		3.71			—			442,042		3.88			—			417,502		3.64			—
Total		4,317,939		32.18			2.53			5,209,032		45.75			2.44			6,204,084		54.06			1.94
Time deposits:
Time deposits $100,000 and over		2,565,020		19.12			5.03			1,378,340		12.11			3.61			886,079		7.72			2.45
Time deposits less than $100,000 with original maturities of:
Three months or less		146,921		1.10			4.37			199,280		1.75			3.17			339,354		2.96			1.37
Over three months to twelve months		4,302,331		32.06			5.23			1,338,588		11.76			3.72			864,250		7.53			1.64
Over twelve months to twenty-four months		557,510		4.16			3.82			1,541,166		13.54			3.36			1,368,900		11.93			2.07
Over twenty-four months to thirty-six months		202,276		1.51			3.67			495,670		4.35			3.17			650,289		5.67			2.81
Over thirty-six months to forty-eight months		264,204		1.97			3.66			294,538		2.59			3.47			283,747		2.47			3.40
Over forty-eight months to sixty months		43,243		0.32			3.72			50,680		0.45			3.72			48,692		0.42			3.76
Over sixty months		164,502		1.23			3.99			149,724		1.32			3.93			135,160		1.18			3.87
Qualified retirement plans		851,641		6.35			4.47			726,282		6.38			3.49			696,745		6.06			2.65
Total time deposits		9,097,648		67.82			4.89			6,174,268		54.25			3.51			5,273,216		45.94			2.32
Total deposits	$	13,415,587		100.00	%		4.13		$	11,383,300		100.00	%		3.02		$	11,477,300		100.00	%		2.11

Page 28

The following table presents, by rate category, the amount of our time deposit accounts outstanding at the dates indicated.

	At December 31,
	2006		2005		2004
	(In thousands)
Time deposit accounts:
3.00% or less	$	38,158	$	816,838	$	4,174,601
3.01% to 3.50%		457,995		2,246,361		557,706
3.51% to 4.00%		979,918		2,154,784		370,029
4.01% to 4.50%		1,283,911		952,228		157,142
4.51% to 5.00%		482,847		3,341		11,460
5.01% and over		5,854,819		716		2,278
Total	$	9,097,648	$	6,174,268	$	5,273,216

The following table presents, by rate category, the remaining period to maturity of time deposit accounts outstanding as of December 31, 2006.

	Period to Maturity from December 31, 2006
	Within		Over three		Over six		Over one		Over two		Over
	three		to six		months to		to two		to three		three
	months		months		one year		years		years		years		Total
	(In thousands)
Time deposit accounts:
3.00% or less	$	19,433	$	16,559	$	1,344	$	395	$	427	$	—	$	38,158
3.01% to 3.50%		203,960		120,082		85,645		48,295		4		9		457,995
3.51% to 4.00%		146,070		149,459		390,431		214,281		79,614		63		979,918
4.01% to 4.50%		658,476		301,199		68,843		62,243		100,204		92,946		1,283,911
4.51% to 5.00%		66,659		244,413		6,616		160,674		3,061		1,424		482,847
5.01% and over		1,490,862		3,929,037		433,772		7		41		1,100		5,854,819
Total	$	2,585,460	$	4,760,749	$	986,651	$	485,895	$	183,351	$	95,542	$	9,097,648

Borrowings. We have entered into sales of securities under agreements to repurchase with selected brokers and the Federal Home Loan Bank of New York (“FHLB”). These agreements are recorded as financing transactions as we have maintained effective control over the transferred securities. The dollar amount of the securities underlying the agreements continues to be carried in our securities portfolio. The obligations to repurchase the securities are reported as a liability in the consolidated statements of financial condition. The securities underlying the agreements are delivered to the party with whom each transaction is executed. They agree to resell to us the same securities at the maturity or call of the agreement. We retain the right of substitution of the underlying securities throughout the terms of the agreements.

We have also obtained advances from the FHLB, which are generally secured by a blanket lien against our mortgage portfolio. Borrowings with the FHLB are generally limited to approximately twenty times the amount of FHLB stock owned.

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Borrowed funds at December 31 are summarized as follows:

	2006					2005
			Weighted					Weighted
			Average					Average
	Principal		Rate			Principal		Rate
	(Dollars in thousands)
Securities sold under agreements to repurchase:
FHLB	$	823,000		4.96	%	$	850,000		4.96	%
Other brokers		8,100,000		3.86			7,050,000		3.45
Total securities sold under agreements to repurchase		8,923,000		3.96			7,900,000		3.61
Advances from the FHLB		8,050,000		4.21			3,450,000		3.95
Total borrowed funds	$	16,973,000		4.08		$	11,350,000		3.72

The average balances of borrowings and the maximum amount outstanding at any month-end are as follows:

	At or for the Year Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
Repurchase Agrements:
Average balance outstanding during the year	$	8,313,321		$	6,447,560		$	4,182,197
Maximum balance outstanding at any month-end during the year	$	8,923,000		$	7,900,000		$	5,300,000
Weighted average rate during the period		3.81	%		3.52	%		3.41	%
FHLB Advances:
Average balance outstanding during the year	$	5,977,115		$	2,469,529		$	1,916,085
Maximum balance outstanding at any month-end during the year	$	8,050,000		$	3,450,000		$	1,950,000
Weighted average rate during the period		4.17	%		3.89	%		3.79	%

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At December 31, 2006, borrowed funds had scheduled maturities and potential call dates as indicated below. Substantially all of our borrowed funds are callable at the discretion of the issuer. These call features are generally quarterly, after an initial non-call period of three months to five years from the date of borrowing.

	Borrowings by Scheduled					Borrowings by Earlier of Maturity Date or Next
	Maturity Date					Potential Call Date
			Weighted					Weighted
			Average					Average
Year	Principal		Rate			Principal		Rate
	(Dollars in thousands)
2007	$	7,000		2.65	%	$	7,667,000		4.04	%
2008		16,000		4.94			6,156,000		4.10
2009		—		—			2,550,000		4.09
2010		300,000		5.68			350,000		4.01
2011		250,000		4.90			250,000		4.90
2012		900,000		4.16			—		—
2013		350,000		5.09			—		—
2014		1,850,000		2.94			—		—
2015		4,175,000		3.84			—		—
2016		9,125,000		4.30			—		—
Total	$	16,973,000		4.08		$	16,973,000		4.08

The amortized cost and fair value of the underlying securities used as collateral for securities sold under agreements to repurchase are as follows:

	At or for the Year Ended December 31,
	2006		2005		2004
	(Dollars in thousands)
Amortized cost of collateral:
United States government-sponsored agency securities	$	3,329,639	$	2,849,947	$	2,030,978
Mortgage-backed securities		5,937,758		5,224,648		3,198,768
REMICs		319,920		356,579		455,598
Total amortized cost of collateral	$	9,587,317	$	8,431,174	$	5,685,344
Fair value of collateral:
United States government-sponsored agency securities	$	3,195,765	$	2,778,462	$	2,008,710
Mortgage-backed securities		5,846,562		5,119,225		3,188,386
REMICs		296,661		332,532		434,249
Total fair value of collateral	$	9,338,988	$	8,230,219	$	5,631,345

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Subsidiaries

Hudson City Savings has two wholly owned and consolidated subsidiaries: HudCiti Service Corporation and HC Value Broker Services, Inc. HudCiti Service Corporation, which qualifies as a New Jersey investment company, has two wholly owned and consolidated subsidiaries: Hudson City Preferred Funding Corporation and Sound REIT, Inc. Hudson City Preferred Funding and Sound REIT qualify as real estate investment trusts, pursuant to the Internal Revenue Code of 1986, as amended, and had $6.12 billion and $50.5 million, respectively, of residential mortgage loans outstanding at December 31, 2006.

HC Value Broker Services, Inc., whose primary operating activity is the referral of insurance applications, formed a strategic alliance that jointly markets insurance products with Savings Bank Life Insurance of Massachusetts. HC Value Broker Services offers customers access to a variety of life insurance products.

Personnel

As of December 31, 2006, we had 1,168 full-time employees and 151 part-time employees. Employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

REGULATION OF HUDSON CITY SAVINGS BANK AND HUDSON CITY BANCORP

General

Hudson City Savings has been a federally chartered savings bank since January 1, 2004 when it converted from a New Jersey chartered savings bank. Its deposit accounts are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”) under the Bank Insurance Fund (“BIF”). Under its charter, Hudson City Savings is subject to extensive regulation, examination and supervision by the Office of Thrift Supervision as its chartering agency, and by the FDIC as the deposit insurer. Hudson City Bancorp is a unitary savings and loan holding company regulated, examined and supervised by the Office of Thrift Supervision. Each of Hudson City Bancorp and Hudson City Savings must file reports with the Office of Thrift Supervision concerning its activities and financial condition, and must obtain regulatory approval from the Office of Thrift Supervision prior to entering into certain transactions, such as mergers with, or Acquisitions of, other depository institutions. The Office of Thrift Supervision will conduct periodic examinations to assess Hudson City Bancorp’s and Hudson City Savings Bank’s compliance with various regulatory requirements. The Office of Thrift Supervision has primary enforcement responsibility over federally chartered savings banks and has substantial discretion to impose enforcement action on an institution that fails to comply with applicable regulatory requirements, particularly with respect to its capital requirements. In addition, the FDIC has the authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular federally chartered savings bank and, if action is not taken by the Director, the FDIC has authority to take such action under certain circumstances.

This regulation and supervision establishes a comprehensive framework of activities in which a federal savings bank can engage and is intended primarily for the protection of the deposit insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such laws and regulations, whether by the Office of Thrift Supervision, the FDIC or through legislation, could have a material adverse impact on Hudson City Bancorp and Hudson City Savings and their operations and stockholders.

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Federally Chartered Savings Bank Regulation

Activity Powers. Hudson City Savings derives its lending, investment and other activity powers primarily from the Home Owners’ Loan Act, as amended, commonly referred to as HOLA, and the regulations of the Office of Thrift Supervision thereunder. Under these laws and regulations, federal savings banks, including Hudson City Savings, generally may invest in:

• real estate mortgages;

• consumer and commercial loans;

• certain types of debt securities; and

• certain other assets.

Hudson City Savings may also establish service corporations that may engage in activities not otherwise permissible for Hudson City Savings, including certain real estate equity investments and securities and insurance brokerage activities. These investment powers are subject to various limitations, including (1) a prohibition against the acquisition of any corporate debt security that is not rated in one of the four highest rating categories, (2) a limit of 400% of an association’s capital on the aggregate amount of loans secured by non-residential real estate property, (3) a limit of 20% of an association’s assets on commercial loans, with the amount of commercial loans in excess of 10% of assets being limited to small business loans, (4) a limit of 35% of an association’s assets on the aggregate amount of consumer loans and acquisitions of certain debt securities, (5) a limit of 5% of assets on non-conforming loans (loans in excess of the specific limitations of HOLA), and (6) a limit of the greater of 5% of assets or an association’s capital on certain construction loans made for the purpose of financing what is or is expected to become residential property.

Capital Requirements. The Office of Thrift Supervision capital regulations require federally chartered savings banks to meet three minimum capital ratios: a 1.5% tangible capital ratio, a 4% (3% if the savings bank received the highest rating on its most recent examination) leverage (core capital) ratio and an 8% total risk-based capital ratio. In assessing an institution’s capital adequacy, the Office of Thrift Supervision takes into consideration not only these numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where necessary. Hudson City Savings, as a matter of prudent management, targets as its goal the maintenance of capital ratios which exceed these minimum requirements and that are consistent with Hudson City Savings’ risk profile. At December 31, 2006, Hudson City Savings exceeded each of its capital requirements as shown in the following table:

						OTS Requirements
						Minimum Capital					For Classification as
	Bank Actual					Adequacy					Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
December 31, 2006
Tangible capital	$	4,000,577		11.30	%	$	530,878		1.50	%		n/a		n/a
Leverage (core) capital		4,000,577		11.30			1,415,674		4.00		$	1,769,592		5.00	%
Total-risk-based capital		4,031,202		30.99			1,040,513		8.00			1,300,642		10.00
December 31, 2005
Tangible capital	$	4,129,937		14.68	%	$	422,069		1.50	%		n/a		n/a
Leverage (core) capital		4,129,937		14.68			1,125,518		4.00		$	1,406,897		5.00	%
Total-risk-based capital		4,157,330		41.31			805,040		8.00			1,006,300		10.00

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The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, requires that the Office of Thrift Supervision and other federal banking agencies revise their risk-based capital standards, with appropriate transition rules, to ensure that they take into account interest rate risk, or IRR, concentration of risk and the risks of non-traditional activities. The Office of Thrift Supervision adopted regulations, effective January 1, 1994, that set forth the methodology for calculating an IRR component to be incorporated into the Office of Thrift Supervision risk-based capital regulations. On May 10, 2002, the Office of Thrift Supervision adopted an amendment to its capital regulations which eliminated the IRR component of the risk-based capital requirement.

Pursuant to the amendment, the Office of Thrift Supervision will continue to monitor the IRR of individual institutions through the Office of Thrift Supervision requirements for IRR management, the ability of the Office of Thrift Supervision to impose individual minimum capital requirements on institutions that exhibit a high degree of IRR, and the requirements of Thrift Bulletin 13a, which provides guidance on the management of IRR and the responsibility of boards of directors in that area.

The Office of Thrift Supervision continues to monitor the IRR of individual institutions through analysis of the change in net portfolio value, or NPV. NPV is defined as the net present value of the expected future cash flows of an entity’s assets and liabilities and, therefore, hypothetically represents the value of an institution’s net worth. The Office of Thrift Supervision has also used this NPV analysis as part of its evaluation of certain applications or notices submitted by thrift institutions. The Office of Thrift Supervision, through its general oversight of the safety and soundness of savings associations, retains the right to impose minimum capital requirements on individual institutions to the extent the institution is not in compliance with certain written guidelines established by the Office of Thrift Supervision regarding NPV analysis. The Office of Thrift Supervision has not imposed any such requirements on Hudson City Savings.

Safety and Soundness Standards. Pursuant to the requirements of FDICIA, as amended by the Riegle Community Development and Regulatory Improvement Act of 1994, each federal banking agency, including the Office of Thrift Supervision, has adopted guidelines establishing general standards relating to internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal stockholder.

In addition, the Office of Thrift Supervision adopted regulations to require a savings bank that is given notice by the Office of Thrift Supervision that it is not satisfying any of such safety and soundness standards to submit a compliance plan to the Office of Thrift Supervision. If, after being so notified, a savings bank fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the Office of Thrift Supervision may issue an order directing corrective and other actions of the types to which a significantly undercapitalized institution is subject under the “prompt corrective action” provisions of FDICIA. If a savings bank fails to comply with such an order, the Office of Thrift Supervision may seek to enforce such an order in judicial proceedings and to impose civil monetary penalties.

Prompt Corrective Action. FDICIA also established a system of prompt corrective action to resolve the problems of undercapitalized institutions. Under this system, the bank regulators are required to take certain, and authorized to take other, supervisory actions against undercapitalized institutions, based upon

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five categories of capitalization which FDICIA created: “well-capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically capitalized.” The severity of the action authorized or required to be taken under the prompt corrective action regulations increases as a bank’s capital decreases within the three undercapitalized categories. All banks are prohibited from paying dividends or other capital distributions or paying management fees to any controlling person if, following such distribution, the bank would be undercapitalized. The Office of Thrift Supervision is required to monitor closely the condition of an undercapitalized bank and to restrict the growth of its assets.

An undercapitalized bank is required to file a capital restoration plan within 45 days of the date the bank receives notices that it is within any of the three undercapitalized categories, and the plan must be guaranteed by every parent holding company. The aggregate liability of a parent holding company is limited to the lesser of:

(1)	an amount equal to five percent of the bank’s total assets at the time it became “undercapitalized; and
(2)	the amount that is necessary (or would have been necessary) to bring the bank into compliance with all capital standards applicable with respect to such bank as of the time it fails to comply with the plan.

If a bank fails to submit an acceptable plan, it is treated as if it were “significantly undercapitalized.” Banks that are significantly or critically undercapitalized are subject to a wider range of regulatory requirements and restrictions. Under the Office of Thrift Supervision regulations, generally, a federally chartered savings bank is treated as well capitalized if its total risk-based capital ratio is 10% or greater, its Tier 1 risk-based capital ratio is 6% or greater, and its leverage ratio is 5% or greater, and it is not subject to any order or directive by the Office of Thrift Supervision to meet a specific capital level. As of December 31, 2006, Hudson City Savings was considered “well capitalized” by the Office of Thrift Supervision.

Insurance Activities. Hudson City Savings is generally permitted to engage in certain activities through its subsidiaries. However, the federal banking agencies have adopted regulations prohibiting depository institutions from conditioning the extension of credit to individuals upon either the purchase of an insurance product or annuity or an agreement by the consumer not to purchase an insurance product or annuity from an entity that is not affiliated with the depository institution. The regulations also require prior disclosure of this prohibition to potential insurance product or annuity customers.

Deposit Insurance. Pursuant to FDICIA, the FDIC established a system for setting deposit insurance premiums based upon the risks a particular bank or savings association posed to its deposit insurance funds. Under the risk-based deposit insurance assessment system, the FDIC assigns an institution to one of three capital categories based on the institution’s financial information as of its most recent quarterly financial report filed with the applicable bank regulatory agency prior to the commencement of the assessment period. The three capital categories are (1) well-capitalized, (2) adequately capitalized and (3) undercapitalized. The FDIC also assigns an institution to one of three supervisory subcategories within each capital group. The FDIC also assigns an institution to a supervisory subgroup based on a supervisory evaluation provided to the FDIC by the institution’s primary federal regulator and information that the FDIC determines to be relevant to the institution’s financial condition and the risk posed to the deposit insurance funds.

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Prior to January 1, 2007, an institution’s assessment rate depended on the capital category and supervisory category to which it was assigned. Under the final risk-based assessment system, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Assessment rates for deposit insurance currently range from 0 basis points to 27 basis points. The capital and supervisory subgroup to which an institution is assigned by the FDIC is confidential and may not be disclosed. The assessment rates for our BIF assessable deposits are zero basis points. If the FDIC determines that assessment rates should be increased, institutions in all risk categories could be affected. The FDIC has exercised this authority several times in the past and could raise insurance assessment rates in the future.

Under the Deposit Insurance Funds Act of 1996 (“Funds Act”), the assessment base for the payments on the bonds (“FICO bonds”) issued in the late 1980’s by the Financing Corporation to recapitalize the now defunct Federal Savings and Loan Insurance Corporation was expanded to include, beginning January 1, 1997, the deposits of BIF-insured institutions, such as Hudson City Savings. Our total expense in 2006 for the assessment for deposit insurance and the FICO payments was $1.7 million.

Under the FDIA, the FDIC may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The management of Hudson City Savings does not know of any practice, condition or violation that might lead to termination of deposit insurance.

On February 8, 2006, President Bush signed the “Federal Deposit Insurance Reform Act of 2005,” or the 2005 Deposit Act, into law. The 2005 Deposit Act contains provisions designed to reform and modernize the Federal deposit insurance system. Effective in 2006, the 2005 Deposit Act merged the BIF and SAIF into the new DIF; indexed the current $100,000 deposit insurance limit to inflation beginning in 2011 and every succeeding five years; and increased the deposit insurance limit for certain retirement accounts to $250,000 and indexed that limit to inflation as well. Effective January 1, 2007, the FDIC established a new risk-based assessment system for determining the deposit insurance assessments to be paid by insured depository institutions. The FDIC consolidated the previous nine assessment rate categories into four new categories. Base assessment rates will range from two to four basis points for Risk Category I institutions and will be seven basis points for Risk Category II institutions, twenty-five basis points for Risk Category III institutions and forty basis points for Risk Category IV institutions. For institutions within Risk Category I, assessment rates will depend upon a combination of CAMELS component ratings and financial ratios, or for large institutions with long-term debt issuer ratings, assessment rates will depend on a combination of long-term debt issuer ratings and CAMELS component ratings. The FDIC has the flexibility to adjust rates, without further notice-and-comment rulemaking, provided that no such adjustment can be greater than three basis points from one quarter to the next, that adjustments cannot result in rates more than three basis points above or below the base rates and that rates cannot be negative. Effective January 1, 2007, the FDIC has set the assessment rates at three basis points above the base rates. Assessment rates will, therefore, range from five to forty-three basis points of deposits. The deposit insurance assessment rates are in addition to the FICO payments. The FDIC also established 1.25% of estimated insured deposits as the designated reserve ratio of the DIF. The FDIC is authorized to change the assessment rates as necessary, subject to the previously discussed limitations, to maintain the required reserve ratio of 1.25%.

The FDIC also approved a One-Time Assessment Credit to institutions that were in existence on December 31, 1996 and paid deposit insurance assessments prior to that date, or are a successor to such an institution. Hudson City Savings is entitled to a One-Time Assessment Credit which may be used to offset 100% of the 2007 deposit insurance assessment, excluding the FICO payments. Any remaining credit can

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be used to offset up to 90% of the 2008 deposit insurance assessment. We estimate that our credit will fully offset our 2007 deposit insurance assessment as well as a portion of our 2008 deposit insurance assessment.

Transactions with Affiliates of Hudson City Savings. Hudson City Savings is subject to the affiliate and insider transaction rules set forth in Sections 23A, 23B, 22(g) and 22(h) of the Federal Reserve Act (“FRA”), Regulation W issued by the Federal Reserve Board (“FRB”), as well as additional limitations as adopted by the Director of the Office of Thrift Supervision. Office of Thrift Supervision regulations regarding transactions with affiliates conform to Regulation W. These provisions, among other things, prohibit or limit a savings bank from extending credit to, or entering into certain transactions with, its affiliates (which for Hudson City Savings would include Hudson City Bancorp) and principal stockholders, directors and executive officers.

In addition, the Office of Thrift Supervision regulations include additional restrictions on savings banks under Section 11 of HOLA, including provisions prohibiting a savings bank from making a loan to an affiliate that is engaged in non-bank holding company activities and provisions prohibiting a savings association from purchasing or investing in securities issued by an affiliate that is not a subsidiary. Office of Thrift Supervision regulations also include certain specific exemptions from these prohibitions. The FRB and the Office of Thrift Supervision require each depository institution that is subject to Sections 23A and 23B to implement policies and procedures to ensure compliance with Regulation W and the Office of Thrift Supervision regulations regarding transactions with affiliates.

Section 402 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) prohibits the extension of personal loans to directors and executive officers of issuers (as defined in Sarbanes-Oxley). The prohibition, however, does not apply to mortgages advanced by an insured depository institution, such as Hudson City Savings, that are subject to the insider lending restrictions of Section 22(h) of the FRA.

Privacy Standards. Hudson City Savings is subject to Office of Thrift Supervision regulations implementing the privacy protection provisions of the Gramm-Leach-Bliley Act (“Gramm-Leach”). These regulations require Hudson City Savings to disclose its privacy policy, including identifying with whom it shares “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter.

The regulations also require Hudson City Savings to provide its customers with initial and annual notices that accurately reflect its privacy policies and practices. In addition, Hudson City Savings is required to provide its customers with the ability to “opt-out” of having Hudson City Savings share their non-public personal information with unaffiliated third parties before they can disclose such information, subject to certain exceptions. The implementation of these regulations did not have a material adverse effect on Hudson City Savings.

Hudson City Savings is subject to regulatory guidelines establishing standards for safeguarding customer information. These regulations implement certain provisions of Gramm-Leach. The guidelines describe the agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

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Community Reinvestment Act. Under the Community Reinvestment Act (“CRA”), as implemented by the Office of Thrift Supervision regulations, any federally chartered savings bank, including Hudson City Savings, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the Office of Thrift Supervision, in connection with its examination of a federally chartered savings bank, to assess the depository institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution.

Current CRA regulations rate an institution based on its actual performance in meeting community needs. In particular, the evaluation system focuses on three tests:

• a lending test, to evaluate the institution’s record of making loans in its service areas;

• an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and

• a service test, to evaluate the institution’s delivery of services through its branches, ATMs and other offices.

The CRA also requires all institutions to make public disclosure of their CRA ratings. Hudson City Savings has received a “satisfactory” rating in its most recent CRA examination. The federal banking agencies adopted regulations implementing the requirements under Gramm-Leach that insured depository institutions publicly disclose certain agreements that are in fulfillment of the CRA. Hudson City Savings has no such agreements in place at this time.

Loans to One Borrower. Under the HOLA, savings banks are generally subject to the national bank limits on loans to one borrower. Generally, savings banks may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of the institution’s unimpaired capital and unimpaired surplus. Additional amounts may be loaned, not in excess of 10% of unimpaired capital and unimpaired surplus, if such loans or extensions of credit are secured by readily-marketable collateral. Hudson City Savings is in compliance with applicable loans to one borrower limitations. At December 31, 2006, Hudson City Savings’ largest aggregate amount of loans to one borrower totaled $5.5 million. All of the loans for the largest borrower were performing in accordance with their terms and the borrower had no affiliation with Hudson City Savings.

Interagency Guidance on Nontraditional Mortgage Product Risks. On October 4, 2006, the OTS and other federal bank regulatory authorities published the Interagency Guidance on Nontraditional Mortgage Product Risks, or the Guidance. The Guidance describes sound practices for managing risk, as well as marketing, originating and servicing nontraditional mortgage products, which include, among other things, interest only loans. The Guidance sets forth supervisory expectations with respect to loan terms and underwriting standards, portfolio and risk management practices and consumer protection. For example, the Guidance indicates that originating interest only loans with reduced documentation is considered a layering of risk and that institutions are expected to demonstrate mitigating factors to support their underwriting decision and the borrower’s repayment capacity. Specifically, the Guidance indicates that a lender may accept a borrower’s statement as to the borrower’s income without obtaining verification only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity and that, for many borrowers, institutions should be able to readily document income.

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Currently, we originate both interest only and interest only limited documentation loans. We do not originate negative amortization or payment option ARM loans. During 2006, originations of interest only loans totaled $403.8 million, of which all were one-to-four family loans. At December 31, 2006, our mortgage loan portfolio included $722.2 million of interest only loans, all of which were one- to four-family loans.

We have evaluated the Guidance to determine our compliance and, as necessary, modified our risk management practices and underwriting guidelines. The guidance does not apply to all mortgage lenders with whom we compete for loans. Therefore, we cannot predict the impact the Guidance may have, if any, on our loan origination volumes in future periods.

OTS Guidance on Commercial Real Estate Lending. In late 2006, the OTS adopted guidance entitled “Concentrations in Commercial Real Estate (CRE) Lending, Sound Risk Management Practices,” or the CRE Guidance, to address concentrations of commercial real estate loans in savings associations. The CRE Guidance reinforces and enhances the OTS’s existing regulations and guidelines for real estate lending and loan portfolio management, but does not establish specific commercial real estate lending limits. Rather, the CRE Guidance seeks to promote sound risk management practices that will enable savings associations to continue to pursue commercial real estate lending in a safe and sound manner. The CRE Guidance applies to savings associations with an accumulation of credit concentration exposures and asks that the associations quantify the additional risk such exposures may pose. We do not have a concentration in commercial real estate and, although we added a commercial real estate lending platform as a result of the Acquisition, we do not expect that commercial real estate loans will become a material component of our loan portfolio or result in a concentration. Accordingly, we believe that the CRE Guidance will not have a material impact on the conduct of our business and we will be able to effectively implement requirements and suggestions set forth in the CRE Guidance during 2007.

Qualified Thrift Lender (“QTL”) Test. The HOLA requires federal savings banks to meet a QTL test. Under the QTL test, a savings bank is required to maintain at least 65% of its “portfolio assets” (total assets less (1) specified liquid assets up to 20% of total assets, (2) intangibles, including goodwill, and (3) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities, credit card loans, student loans, and small business loans) on a monthly basis during at least 9 out of every 12 months. As of December 31, 2006, Hudson City Savings held 82.1% of its portfolio assets in qualified thrift investments and had more than 75% of its portfolio assets in qualified thrift investments for each of the 12 months ending December 31, 2006. Therefore, Hudson City Savings qualified under the QTL test.

A savings bank that fails the QTL test and does not convert to a bank charter generally will be prohibited from: (1) engaging in any new activity not permissible for a national bank, (2) paying dividends not permissible under national bank regulations, and (3) establishing any new branch office in a location not permissible for a national bank in the institution’s home state. In addition, if the institution does not requalify under the QTL test within three years after failing the test, the institution would be prohibited from engaging in any activity not permissible for a national bank.

Limitation on Capital Distributions. The Office of Thrift Supervision regulations impose limitations upon certain capital distributions by federal savings banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash out merger and other distributions charged against capital.

The Office of Thrift Supervision regulates all capital distributions by Hudson City Savings directly or indirectly to Hudson City Bancorp, including dividend payments. As the subsidiary of a savings and loan

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holding company, Hudson City Savings currently must file a notice with the Office of Thrift Supervision at least 30 days prior to each capital distribution. However, if the total amount of all capital distributions (including each proposed capital distribution) for the applicable calendar year exceeds net income for that year to date plus the retained net income for the preceding two years, then Hudson City Savings must file an application to receive the approval of the Office of Thrift Supervision for a proposed capital distribution.

Hudson City Savings may not pay dividends to Hudson City Bancorp if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements, or the Office of Thrift Supervision notified Hudson City Savings Bank that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, or FDIA, an insured depository institution such as Hudson City Savings is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is used in the FDIA). Payment of dividends by Hudson City Savings also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.

In addition, Hudson City Savings may not declare or pay cash dividends on or repurchase any of its shares of common stock if the effect thereof would cause stockholders’ equity to be reduced below the amounts required for the liquidation account which was established as a result of Hudson City Savings’ conversion to a stock holding company structure.

Liquidity. Hudson City Savings maintains sufficient liquidity to ensure its safe and sound operation, in accordance with Office of Thrift Supervision regulations.

Assessments. The Office of Thrift Supervision charges assessments to recover the cost of examining federal savings banks and their affiliates. These assessments are based on three components: the size of the institution on which the basic assessment is based; the institution’s supervisory condition, which results in an additional assessment based on a percentage of the basic assessment for any savings institution with a composite rating of 3, 4 or 5 in its most recent safety and soundness examination; and the complexity of the institution’s operations, which results in an additional assessment based on a percentage of the basic assessment for any savings institution that managed over $1.00 billion in trust assets, serviced for others loans aggregating more than $1.00 billion, or had certain off-balance sheet assets aggregating more than $1.00 billion. Hudson City Savings paid an assessment of $3.5 million in 2006.

Branching. The Office of Thrift Supervision regulations authorize federally chartered savings banks to branch nationwide to the extent allowed by federal statute. This permits federal savings and loan associations with interstate networks to more easily diversify their loan portfolios and lines of business geographically. Office of Thrift Supervision authority preempts any state law purporting to regulate branching by federal savings associations.

Anti-Money Laundering and Customer Identification

Hudson City Savings is subject to Office of Thrift Supervision regulations implementing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act. The USA PATRIOT Act gives the federal government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT takes measures intended to

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encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.

Title III of the USA PATRIOT Act and the related Office of Thrift Supervision regulations impose the following requirements with respect to financial institutions:

• Establishment of anti-money laundering programs.

• Establishment of a program specifying procedures for obtaining identifying information from customers seeking to open new accounts, including verifying the identity of customers within a reasonable period of time.

• Establishment of enhanced due diligence policies, procedures and controls designed to detect and report money-laundering.

• Prohibitions on correspondent accounts for foreign shell banks and compliance with record keeping obligations with respect to correspondent accounts of foreign banks.

• Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications.

Federal Home Loan Bank System

Hudson City Savings is a member of the FHLB system, which consists of twelve regional FHLBs, each subject to supervision and regulation by the Federal Housing Finance Board, or FHFB. The FHLB provides a central credit facility primarily for member thrift institutions as well as other entities involved in home mortgage lending. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLBs. It makes loans to members (i.e., advances) in accordance with policies and procedures, including collateral requirements, established by the respective boards of directors of the FHLBs. These policies and procedures are subject to the regulation and oversight of the FHFB. All long-term advances are required to provide funds for residential home financing. The FHFB has also established standards of community or investment service that members must meet to maintain access to such long-term advances.

Hudson City Savings, as a member of FHLB-NY, is currently required to acquire and hold shares of FHLB-NY Class B stock. The Class B stock has a par value of $100 per share and is redeemable upon five years notice, subject to certain conditions. The Class B stock has two subclasses, one for membership stock purchase requirements and the other for activity-based stock purchase requirements. The minimum stock investment requirement in the FHLB-NY Class B stock is the sum of the membership stock purchase requirement, determined on an annual basis at the end of each calendar year, and the activity-based stock purchase requirement, determined on a daily basis. For Hudson City Savings, the membership stock purchase requirement is 0.2% of the Mortgage-Related Assets, as defined by the FHLB-NY, which consists principally of residential mortgage loans and mortgage-backed securities, including CMOs and REMICs, held by Hudson City Savings. The activity-based stock purchase requirement for Hudson City Savings is equal to the sum of: (1) 4.5% of outstanding borrowing from the FHLB-NY; (2) 4.5% of the outstanding principal balance of Acquired Member Assets, as defined by the FHLB-NY, and delivery commitments for Acquired Member Assets; (3) a specified dollar amount related to certain off-balance sheet items, which for Hudson City Savings is zero; and (4) a specified percentage ranging from 0 to 5% of the carrying value on the FHLB-NY’s balance sheet of

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derivative contracts between the FHLB-NY and its members, which for Hudson City Savings is also zero. The FHLB-NY can adjust the specified percentages and dollar amount from time to time within the ranges established by the FHLB-NY capital plan. At December 31, 2006, the amount of FHLB stock held by us satisfies the requirements of the FHLB-NY capital plan.

Federal Reserve System

FRB regulations require federally chartered savings banks to maintain non-interest-earning cash reserves against their transaction accounts (primarily NOW and demand deposit accounts). A reserve of 3% is to be maintained against aggregate transaction accounts between $8.5 million and $45.8 million (subject to adjustment by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $45.8 million. The first $8.5 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt from the reserve requirements. Hudson City Savings is in compliance with the foregoing requirements. Because required reserves must be maintained in the form of either vault cash, a non-interest-bearing account at a Federal Reserve Bank or a pass-through account as defined by the FRB, the effect of this reserve requirement is to reduce Hudson City Savings’ interest-earning assets. FHLB system members are also authorized to borrow from the Federal Reserve “discount window,” but FRB regulations require institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

Federal Holding Company Regulation

Hudson City Bancorp is a unitary savings and loan holding company within the meaning of the HOLA. As such, Hudson City Bancorp is registered with the Office of Thrift Supervision and is subject to the Office of Thrift Supervision regulation, examination, supervision and reporting requirements. In addition, the Office of Thrift Supervision has enforcement authority over Hudson City Bancorp and its savings bank subsidiary. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings bank.

Restrictions Applicable to New Savings and Loan Holding Companies. Gramm-Leach also restricts the powers of new unitary savings and loan holding companies. Under Gramm-Leach, all unitary savings and loan holding companies formed after May 4, 1999, such as Hudson City Bancorp, are limited to financially related activities permissible for bank holding companies, as defined under Gramm-Leach. Accordingly, Hudson City Bancorp’s activities are restricted to:

• furnishing or performing management services for a savings institution subsidiary of such holding company;

• conducting an insurance agency or escrow business;

• holding, managing, or liquidating assets owned or acquired from a savings institution subsidiary of such company;

• holding or managing properties used or occupied by a savings institution subsidiary of such company;

• acting as trustee under a deed of trust;

• any other activity (i) that the FRB, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956 (the “BHC

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	Act”), unless the Director of the Office of Thrift Supervision, by regulation, prohibits or limits any such activity for savings and loan holding companies, or (ii) which multiple savings and loan holding companies were authorized by regulation to directly engage in on December 5, 1987;
•	purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such holding company is approved by the Director of the Office of Thrift Supervision; and
•	any activity permissible for financial holding companies under section 4(k) of the BHC Act.

Permissible activities which are deemed to be financial in nature or incidental thereto under section 4(k) of the BHC Act include:

• lending, exchanging, transferring, investing for others, or safeguarding money or securities;

• insurance activities or providing and issuing annuities, and acting as principal, agent, or broker;

• financial, investment, or economic advisory services;

• issuing or selling instruments representing interests in pools of assets that a bank is permitted to hold directly;

• underwriting, dealing in, or making a market in securities;

• activities previously determined by the FRB to be closely related to banking;

• activities that bank holding companies are permitted to engage in outside of the U.S.; and

• portfolio investments made by an insurance company.

In addition, Hudson City Bancorp cannot be acquired or acquire a company unless the acquirer or target, as applicable, is engaged solely in financial activities.

Restrictions Applicable to All Savings and Loan Holding Companies. Federal law prohibits a savings and loan holding company, including Hudson City Bancorp, directly or indirectly, from acquiring:

• control (as defined under HOLA) of another savings institution (or a holding company parent) without prior Office of Thrift Supervision approval;

• through merger, consolidation, or purchase of assets, another savings institution or a holding company thereof, or acquiring all or substantially all of the assets of such institution (or a holding company) without prior Office of Thrift Supervision approval; or

• control of any depository institution not insured by the FDIC (except through a merger with and into the holding company’s savings institution subsidiary that is approved by the Office of Thrift Supervision).

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A savings and loan holding company may not acquire as a separate subsidiary an insured institution that has a principal office outside of the state where the principal office of its subsidiary institution is located, except:

• in the case of certain emergency acquisitions approved by the FDIC;

• if such holding company controls a savings institution subsidiary that operated a home or branch office in such additional state as of December 5, 1987; or

• if the laws of the state in which the savings institution to be acquired is located specifically authorize a savings institution chartered by that state to be acquired by a savings institution chartered by the state where the acquiring savings institution or savings and loan holding company is located or by a holding company that controls such a state chartered association.

If the savings institution subsidiary of a federal mutual holding company fails to meet the QTL test set forth in Section 10(m) of the HOLA and regulations of the Office of Thrift Supervision, the holding company must register with the FRB as a bank holding company under the BHC Act within one year of the savings institution’s failure to so qualify.

The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or more subsidiaries) from acquiring another savings association or holding company thereof without prior written approval of the Office of Thrift Supervision; acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or acquiring or retaining control of a depository institution that is not federally insured. In evaluating applications by holding companies to acquire savings associations, the Office of Thrift Supervision must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the Acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

Federal Securities Law

Hudson City Bancorp’s securities are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. As such, Hudson City Bancorp is subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Securities Exchange Act of 1934.

Delaware Corporation Law

Hudson City Bancorp is incorporated under the laws of the State of Delaware, and is therefore subject to regulation by the State of Delaware. In addition, the rights of Hudson City Bancorp’s shareholders are governed by the Delaware General Corporation Law.

TAXATION

Federal

General. The following discussion is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to Hudson City Savings or Hudson City Bancorp. For federal income tax purposes, Hudson City Bancorp reports its income on the basis of a taxable year

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ending December 31, using the accrual method of accounting, and is generally subject to federal income taxation in the same manner as other corporations. Hudson City Savings and Hudson City Bancorp constitute an affiliated group of corporations and are therefore eligible to report their income on a consolidated basis. Hudson City Savings is not currently under audit by the Internal Revenue Service and has not been audited by the IRS during the past five years.

Bad Debt Reserves. Pursuant to the Small Business Job Protection Act of 1996, Hudson City Savings is no longer permitted to use the reserve method of accounting for bad debts, and has recaptured (taken into income) over a multi-year period a portion of the balance of its tax bad debt reserve as of December 31, 1995. Since Hudson City Savings had already provided a deferred tax liability equal to the amount of such recapture, the recapture did not adversely impact Hudson City Savings’ financial condition or results of operations.

Distributions. To the extent that Hudson City Savings makes “non-dividend distributions” to stockholders, such distributions will be considered to result in distributions from Hudson City Savings’ unrecaptured tax bad debt reserve “base year reserve,” i.e., its reserve as of December 31, 1987, to the extent thereof and then from its supplemental reserve for losses on loans, and an amount based on the amount distributed will be included in Hudson City Savings’ taxable income. Non-dividend distributions include distributions in excess of Hudson City Savings’ current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation. However, dividends paid out of Hudson City Savings’ current or accumulated earnings and profits, as calculated for federal income tax purposes, will not constitute non-dividend distributions and, therefore, will not be included in Hudson City Savings’ income.

The amount of additional taxable income created from a non-dividend distribution is equal to the lesser of Hudson City Savings’ base year reserve and supplemental reserve for losses on loans or an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, in certain situations, approximately one and one-half times the non-dividend distribution would be included in gross income for federal income tax purposes, assuming a 35% federal corporate income tax rate. Hudson City Savings does not intend to pay dividends that would result in the recapture of any portion of its bad debt reserve.

Corporate Alternative Minimum Tax. In addition to the regular corporate income tax, corporations generally are subject to an alternative minimum tax, or AMT, in an amount equal to 20% of alternative minimum taxable income, to the extent the AMT exceeds the corporation’s regular income tax. The AMT is available as a credit against future regular income tax. We do not expect to be subject to the AMT.

Elimination of Dividends; Dividends Received Deduction. Hudson City Bancorp may exclude from its income 100% of dividends received from Hudson City Savings because Hudson City Savings is a member of the affiliated group of corporations of which Hudson City Bancorp is the parent.

State

New Jersey State Taxation. Hudson City Savings files New Jersey Corporate Business income tax returns. Generally, the income of savings institutions in New Jersey, which is calculated based on federal taxable income, subject to certain adjustments, is subject to New Jersey tax at a rate of 9.00%. Savings institutions must also calculate, as part of their corporate tax return, an Alternative Minimum Assessment (“AMA”), which for Hudson City Savings is based on New Jersey gross receipts. Hudson City Savings must calculate its corporate business tax and the AMA, then pay the higher amount. In future years, if the corporate business tax is greater than the AMA paid in prior years, Hudson City Savings may apply the

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prepaid AMA against its corporate business taxes (up to 50% of the corporate business tax, subject to certain limitations). Hudson City Savings is not currently under audit with respect to its New Jersey income tax returns and Hudson City Savings’ state tax returns have not been audited for the past five years.

Hudson City Bancorp is required to file a New Jersey income tax return and will generally be subject to a state income tax at a 9% rate. However, if Hudson City Bancorp meets certain requirements, it may be eligible to elect to be taxed as a New Jersey Investment Company, which would allow it to be taxed at a rate of 3.60%. Further, investment companies are not subject to the AMA. If Hudson City Bancorp does not qualify as an investment company, it would be subject to taxation at the higher of the 9% corporate business rate on taxable income or the AMA.

Delaware State Taxation. As a Delaware holding company not earning income in Delaware, Hudson City Bancorp is exempt from Delaware corporate income tax but is required to file annual returns and pay annual fees and a franchise tax to the State of Delaware.

New York State Taxation. New York State imposes an annual franchise tax on banking corporations, based on net income allocable to New York State, at a rate of 7.5%. If, however, the application of an alternative minimum tax (based on taxable assets allocated to New York, “alternative” net income, or a flat minimum fee) results in a greater tax, an alternative minimum tax will be imposed. In addition, New York State imposes a tax surcharge of 17.0% of the New York State Franchise Tax, calculated using an annual franchise tax rate of 9.0% (which represents the 2000 annual franchise tax rate), allocable to business activities carried on in the Metropolitan Commuter Transportation District. These taxes apply to Hudson City Savings.

Connecticut State Taxation. Connecticut imposes an income tax based on net income allocable to the State of Connecticut, at a rate of 7.5%.

New York City Taxation. Hudson City Savings is also subject to the New York City Financial Corporation Tax calculated, subject to a New York City income and expense allocation, on a similar basis as the New York State Franchise Tax. A significant portion of Hudson City Savings’ entire net income for New York City purposes is allocated outside the jurisdiction which has the effect of significantly reducing the New York City taxable income of Hudson City Savings.

Item 1A. Risk Factors.

Changes In Interest Rates Could Adversely Affect Our Results of Operations And Financial Condition. Our earnings may be adversely impacted by an increase in interest rates because the majority of our interest-earning assets are long-term, fixed-rate mortgage-related assets that will not reprice as long-term interest rates increase while a majority of our interest-bearing liabilities are expected to reprice as interest rates increase. At December 31, 2006, 80.8% of our loans with contractual maturities of greater than one year had fixed rates of interest, and 95.4% of our total loans had contractual maturities of five or more years. Overall, at December 31, 2006, 82.8% of our total interest-earning assets had contractual maturities of more than five years. Conversely, our interest-bearing liabilities generally have much shorter contractual maturities. A significant portion of our deposits, including the $2.10 billion in our interest-bearing transaction accounts as of December 31, 2006, have no contractual maturities and are likely to reprice quickly as short-term interest rates increase. In addition, 91.6% of our certificates of deposit will mature within one year and 45.2% of our borrowed funds may be called by the lenders within one year. Therefore, in an increasing rate environment, our cost of funds is expected to increase more rapidly than the yields earned on our loan portfolio and securities portfolio. An increasing rate

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environment is expected to cause a narrowing of our net interest rate spread and a decrease in our earnings.

The Federal Open Market Committee of the Federal Reserve Bank’s (“FOMC”) policy of monetary tightening through seventeen consecutive Federal Funds rate increases from June 2004 through June 2006, resulted in a significant flattening of the U.S. Treasury yield curve in 2005 and a flat-to-inverted yield curve during 2006. The pause in Federal Funds rate hikes since June 2006 has reversed the trend of rising U.S. Treasury yields and resulted in a further inversion of the market yield curve as of December 31, 2006. The market interest rate scenario has had a negative impact on our results of operations and our net interest margin as the yields on our interest-earning assets have remained substantially unchanged while the costs of our interest-bearing liabilities have increased. In addition, our interest-bearing liabilities will reset to the current market interest rates faster than our interest-earning assets as our interest-bearing liabilities generally have shorter periods to reset than our interest-earning assets and our originated and purchased interest-earning assets generally have commitment periods of up to 90 days.

We expect the operating environment to remain very challenging as a result of the prolonged inverted market yield curve that continues to negatively impact our net interest margin and earnings and limits opportunities for profitable growth. Interest rates do and will continue to fluctuate, and we cannot predict future Federal Reserve Board actions or other factors that will cause rates to change. Accordingly, no assurance can be given that the yield curve will not remain inverted and that our net interest margin and net interest income will not feel greater pressure in 2007.

Also impacting our net interest income and net interest rate spread is the level of prepayment activity on our mortgage-related assets. Mortgage prepayment rates will vary due to a number of factors, including the regional economy where the mortgage loan or the underlying mortgages of the mortgage-backed security were originated, seasonal factors and demographic variables. However, the major factors affecting prepayment rates are the prevailing market 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. In a rising interest rate environment, prepayment rates tend to decrease and, therefore, the yield earned on our existing mortgage-related assets will remain constant instead of increasing. This would adversely affect our net interest margin and, therefore, our net interest income.

We monitor interest rate risk sensitivity through analysis of the change in net interest income and net portfolio value, or NPV. NPV is defined as the net present value of the expected future cash flows of an entity’s assets and liabilities. The model estimates changes in NPV and net interest income in response to a range of assumed changes in market interest rates. The OTS uses a similar model to monitor interest rate risk of all OTS-regulated institutions. The Board of Directors of Hudson City Savings has adopted an interest rate risk policy that defines the permissible range for the change in NPV under certain interest rate shock scenarios. We expect the OTS will continue to closely monitor the interest rate risk of Hudson City Savings.

Our Plans To Increase The Level Of Our Adjustable-Rate Assets May Be Difficult To Implement And May Decrease Our Profitability. One component of our plans for reducing our interest rate risk is to grow our variable-rate and short-term investments at an equivalent rate as our fixed-rate investments. While we believe that in the anticipated interest rate environment there will be demand for variable-rate assets, there is no assurance that this will be the case. If we are unable to originate or purchase variable-rate assets at favorable rates, we will either not be able to execute successfully this component of our interest rate risk reduction strategy or our profitability may decrease, or both.

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Because We Compete Primarily On The Basis Of The Interest Rates We Offer Depositors And The Terms Of Loans We Offer Borrowers, Our Margins Could Decrease If We Were Required To Increase Deposit Rates Or Lower Interest Rates On Loans In Response To Competitive Pressures. We face intense competition both in making loans and attracting deposits. The New Jersey and metropolitan New York market areas have a high concentration of financial institutions, many of which are branches of large money center and regional banks. National competitors have significantly greater resources than we do and may offer services that we do not provide such as trust and investment services. Customers who seek “one stop shopping” may be drawn to these institutions.

We compete primarily on the basis of the rates we pay on deposits and the rates and other terms we charge on the mortgage loans we originate or purchase, as well as the quality of our customer service. Our competition for loans comes principally from mortgage banking firms, commercial banks, savings institutions, credit unions, finance companies, insurance companies and brokerage and investment banking firms operating locally and elsewhere. Some of the largest mortgage originators in the country have significant operations in New Jersey. In addition, we purchase a significant volume of mortgage loans in the wholesale markets, and our competition in these markets also includes many other types of institutional investors located throughout the country. Price competition for loans might result in us originating fewer loans or earning less on our loans.

Our most direct competition for deposits comes from commercial banks, savings banks, savings and loan associations and credit unions. There are large money-center and regional financial institutions operating throughout our market area, and we also face strong competition from other community-based financial institutions. As interest rates continue to rise, we would expect to face additional significant competition for deposits from short-term money market funds and other corporate and government securities funds and from brokerage firms and insurance companies, in addition to the money center and regional financial institutions. To the extent the equity markets continue to improve, we would also expect significant competition from brokerage firms and mutual funds. Price competition for deposits might result in us attracting or retaining fewer deposits or paying more on our deposits.

We May Not Be Able To Successfully Implement Our Plans For Growth. Since our conversion to the mutual holding company form of organization in 1999, we have experienced rapid and significant growth. Our assets have grown from $8.52 billion at December 31, 1999 to $35.5 billion at December 31, 2006. We acquired a significant amount of capital from the second-step conversion, which we plan to use to continue implementing our growth strategy, primarily by building our core banking business through internal growth and increased de novo branching. In addition, we will consider expansion opportunities through the acquisition of branches and other financial institutions, such as the acquisition of Sound Federal in 2006. There can be no assurance, however, that we will continue to experience such rapid growth, or any growth, in the future. Significant changes in interest rates or the competition we face may make it difficult to attract the level of customer deposits needed to fund our internal growth at projected levels. In addition, we may have difficulty finding suitable sites for de novo branches. Our expansion plans may result in us opening branches in geographic markets in which we have no previous experience, and, therefore, our ability to grow effectively in those markets will be dependent on our ability to identify and retain management personnel familiar with the new markets. Furthermore, any future acquisitions of branches or of other financial institutions would present many challenges associated with integrating merged institutions and expanding operations. There can be no assurance that we will be able to adequately and profitably implement our possible future growth or that we will not have to incur additional expenditures beyond current projections to support such growth.

The Geographic Concentration Of Our Loan Portfolio And Lending Activities Makes Us Vulnerable To A Downturn In The Local Economy. Originating loans secured by residential real estate is our

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primary business. Our financial results may be adversely affected by changes in prevailing economic conditions, either nationally or in our local New Jersey and metropolitan New York market areas, including decreases in real estate values, adverse employment conditions, the monetary and fiscal policies of the federal and state government and other significant external events. As of December 31, 2006, approximately 65.5% of our loan portfolio was secured by properties located in New Jersey, New York and Connecticut. Decreases in real estate values could adversely affect the value of property used as collateral for our loans. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings. In addition, if poor economic conditions result in decreased demand for real estate loans, our profits may decrease because our alternative investments may earn less income for us than real estate loans.

During the first half of 2006, the national and local real estate markets, although somewhat weaker than a year ago, continued to support new and existing home sales at reduced levels. There has been a slowdown in the housing market, particularly during the third and fourth quarters of 2006, both nationally and locally, as evidenced by reports of reduced levels of new and existing home sales, increasing inventories of houses on the market, stagnant to declining property values and an increase in the length of time houses remain on the market. No assurance can be given that these conditions will improve or will not worsen or that such conditions will not result in a decrease in our interest income or an adverse impact on our loan losses.

We operate in a highly regulated industry, which limits the manner and scope of our business activities. We are subject to extensive supervision, regulation and examination by the OTS and by the FDIC. As a result, we are limited in the manner in which we conduct our business, undertake new investments and activities and obtain financing. This regulatory structure is designed primarily for the protection of the deposit insurance funds and our depositors, and not to benefit our stockholders. This regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to capital levels, the timing and amount of dividend payments, the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. In addition, we must comply with significant anti-money laundering and anti-terrorism laws. Government agencies have substantial discretion to impose significant monetary penalties on institutions which fail to comply with these laws.

On October 4, 2006, the OTS and other federal bank regulatory authorities published the Interagency Guidance on Nontraditional Mortgage Product Risks, or the Guidance. The Guidance describes sound practices for managing risk, as well as marketing, originating and servicing nontraditional mortgage products, which include, among other things, interest only loans. The Guidance sets forth supervisory expectations with respect to loan terms and underwriting standards, portfolio and risk management practices and consumer protection. For example, the Guidance indicates that originating interest only loans with reduced documentation is considered a layering of risk and that institutions are expected to demonstrate mitigating factors to support their underwriting decision and the borrower’s repayment capacity. Specifically, the Guidance indicates that a lender may accept a borrower’s statement as to the borrower’s income without obtaining verification only if there are mitigating factors that clearly minimize the need for direct verification of repayment capacity and that, for many borrowers, institutions should be able to readily document income.

Currently, we originate both interest only and limited documentation loans. We do not originate negative amortization or payment option ARM loans. Limited documentation loans include stated income, full asset loans; stated income, stated asset loans; and streamline loans. We have evaluated the Guidance and we

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modified, as necessary, our risk management practices, underwriting guidelines or practices relating to communications with consumers.

Our Stock Benefit Plans Will Increase Our Costs, Which Will Reduce Our Profitability And Stockholders’ Equity. During 2005, our employee stock ownership plan purchased approximately 15.7 million shares of common stock at an aggregate cost of $189.3 million, adding to the previous 22.3 million shares purchased following our initial conversion in 1999. Under current accounting standards, we will record annual employee stock ownership plan expenses in an amount equal to the fair market value of shares committed to be released to employees for that year. These shares are released to participants over a forty-year period. If our common stock appreciates in value over time, compensation expense relating to the employee stock ownership plan will increase.

During 2006, we adopted a stock incentive plan pursuant to which our officers and directors were granted stock options. Under the terms of the stock incentive plan, up to 8% of the common shares outstanding could be awarded as either stock options or shares of common stock or a combination of both. For awards of common stock, as the shares are awarded and vest, we will recognize compensation cost equal to the fair market value of such shares at grant. In the event that a portion of the shares used to fund the plan are newly issued shares purchased from us, the issuance of additional shares will decrease our net income per share and stockholders’ equity per share and will dilute existing stockholders’ ownership and voting interests. For awards of stock options, as these options vest, we recognize compensation expense equal to the fair value of the options. Under the stock incentive plan, no stock awards were made in 2006. Awards of 7,960,000 options were granted. Compensation expense related to the vesting of these options amounted to $5.5 million in 2006. At December 31, 2006, unearned compensation costs related to all non-vested awards of options and restricted stock not yet recognized totaled $26.3 million.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

During 2006, we conducted our business through our two owned executive office buildings located in Paramus, NJ, our leased operations center located in Glen Rock, NJ, and 111 branch offices. At December 31, 2006, we owned 35 of our locations and leased the remaining 76. Our lease arrangements are typically long-term arrangements with third parties that generally contain several options to renew at the expiration date of the lease.

For additional information regarding our lease obligations, see Note 7 of Notes to Consolidated Financial Statements in Item 8 “Financial Statements and Supplementary Data.”

Item 3. 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 operation.

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the quarter ended December 31, 2006 to a vote of security holders of Hudson City Bancorp through the solicitation of proxies or otherwise.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

On July 13, 1999, Hudson City Bancorp, Inc. common stock commenced trading on the Nasdaq National Market under the symbol “HCBK.” The table below shows the reported high and low sales prices of the common stock during the periods indicated. Certain share, per share and dividend information reflects the 3.206 to 1 stock split effected as part of our second-step conversion and stock offering completed in June 2005.

	Sales Price				Dividend Information
	High		Low		Amount Per Share		Date of Payment
2005
First quarter	$	11.82	$	10.75	$	0.062	March 1, 2005
Second quarter		11.69		10.09		0.066	June 1, 2005
Third quarter		12.61		11.36		0.070	September 1, 2005
Fourth quarter		12.25		11.15		0.070	December 1, 2005
2006
First quarter		13.50		11.90		0.075	March 1, 2006
Second quarter		14.07		12.93		0.075	June 1, 2006
Third quarter		13.53		12.64		0.075	September 1, 2006
Fourth quarter		14.09		12.99		0.075	December 1, 2006

On January 24, 2007, the Board of Directors of Hudson City Bancorp declared a quarterly cash dividend of $0.08 per common share outstanding that is payable on March 1, 2007 to stockholders of record as of the close of business on February 2, 2007. The Board of Directors intends to review the payment of dividends quarterly and plans to continue to maintain a regular quarterly dividend in the future, dependent upon our earnings, financial condition and other relevant factors.

As the principal asset of Hudson City Bancorp, Hudson City Savings provides the principal source of funds for the payment of dividends by Hudson City Bancorp. Hudson City Savings is subject to certain restrictions that may limit its ability to pay dividends. See “Item 1 – Business - Regulation of Hudson City Savings Bank and Hudson City Bancorp – Federally Chartered Savings Bank Regulation – Limitation on Capital Distributions.”

As of February 2, 2007, there were approximately 33,000 holders of record of Hudson City Bancorp common stock.

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The following table reports information regarding repurchases of our common stock during the fourth quarter of 2006 and the stock repurchase plans approved by our Board of Directors.

							Maximum
					Total Number of		Number of Shares
	Total				Shares Purchased		that May Yet Be
	Number of		Average		as Part of Publicly		Purchased Under
	Shares		Price Paid		Announced Plans		the Plans or
Period	Purchased(2)		per Share		or Programs		Programs (1)
October 1-October 31, 2006		1,200,000	$	13.62		1,200,000		51,429,000
November 1-November 30, 2006		4,015,000		13.57		4,015,000		47,414,000
December 1-December 31, 2006		3,100,000		13.62		3,100,000		44,314,000
Total		8,315,000		13.60		8,315,000

(1)	On June 20, 2006, Hudson City Bancorp announced the adoption of its seventh Stock Repurchase Program, which authorized the repurchase of up to 56,975,000 shares of common stock. This program has no expiration date and has 44,314,000 shares yet to be purchased as of December 31, 2006.
(2)	Amounts do not reflect purchases of common stock by the trustee of the recognition and retention plan.

Performance Graph

Pursuant to the regulations of the SEC, the graph below compares the perfomance of Hudson City Bancorp with that of the Standard and Poor’s 500 Stock Index, and for all thrift stocks as reported by SNL Securities L.C. from December 31, 2001 through December 31, 2006. The graph assumes the reinvestment of dividends in all additional shares of the same class of equity securities as those listed below. The index level for all series was set to 100.00 on December 31, 2001.

Hudson City Bancorp, Inc.
Total Return Performance

* Source: SNL Financial LC and Bloomberg Financial Database

There can be no assurance that stock performance will continue in the future with the same or similar trends as those depicted in the graph above.

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Item 6. Selected Financial Data

The summary information presented below under “Selected Financial Condition Data,” “Selected Operating Data” and “Selected Financial Ratios and Other Data” at or for each of the years presented is derived in part from the audited consolidated financial statements of Hudson City Bancorp. The following information is only a summary and you should read it in conjunction with our audited consolidated financial statements in Item 8 of this document. Certain share, per share and dividend information reflects the 3.206 to 1 stock split effected in conjunction with our second-step conversion and stock offering completed June 7, 2005.

	At December 31,
	2006		2005		2004		2003		2002
	(In thousands)
Selected Financial Condition Data:
Total assets	$	35,506,581	$	28,075,353	$	20,145,981	$	17,033,360	$	14,144,604
Total loans		19,083,617		15,062,449		11,363,039		8,803,066		6,970,900
Federal Home Loan Bank of New York stock		445,006		226,962		140,000		164,850		137,500
Investment securities held to maturity		1,533,969		1,534,216		1,334,249		1,366		1,406
Investment securities available for sale		4,379,615		3,962,511		1,594,639		2,243,812		560,932
Mortgage-backed securities held to maturity		6,925,210		4,389,864		3,755,921		4,292,444		4,734,266
Mortgage-backed securities available for sale		2,404,421		2,520,633		1,620,708		1,130,257		1,391,895
Total cash and cash equivalents		182,246		102,259		168,183		254,584		240,796
Foreclosed real estate, net		3,161		1,040		878		1,002		1,276
Total deposits		13,415,587		11,383,300		11,477,300		10,453,780		9,138,629
Total borrowed funds		16,973,000		11,350,000		7,150,000		5,150,000		3,600,000
Total stockholders’ equity		4,930,256		5,201,476		1,402,884		1,329,366		1,316,083

	For the Year Ended December 31,
	2006		2005		2004		2003		2002
	(In thousands)
Selected Operating Data:
Total interest and dividend income	$	1,614,843	$	1,178,908	$	915,058	$	777,328	$	784,217
Total interest expense		1,001,610		616,774		430,066		376,354		395,774
Net interest income		613,233		562,134		484,992		400,974		388,443
Provision for loan losses		—		65		790		900		1,500
Net interest income after provision for loan losses		613,233		562,069		484,202		400,074		386,943
Non-interest income:
Service charges and other income		6,287		5,267		5,128		5,338		5,947
Gains on securities transactions, net		4		2,740		11,429		24,326		2,066
Total non-interest income		6,291		8,007		16,557		29,664		8,013
Total non-interest expense		158,955		127,703		118,348		102,527		93,541
Income before income tax expense		460,569		442,373		382,411		327,211		301,415
Income tax expense		171,990		166,318		143,145		119,801		109,382
Net income	$	288,579	$	276,055	$	239,266	$	207,410	$	192,033

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	At or for the Year Ended December 31,
	2006			2005			2004			2003			2002
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets		0.91	%		1.14	%		1.29	%		1.34	%		1.50	%
Return on average stockholders’ equity		5.70			7.52			17.66			15.38			14.84
Net interest rate spread (1)		1.31			1.84			2.43			2.37			2.66
Net interest margin (2)		1.96			2.35			2.66			2.65			3.10
Non-interest expense to average assets		0.50			0.53			0.64			0.66			0.73
Efficiency ratio (3)		25.66			22.40			23.60			23.81			23.59
Average interest-earning assets to average interest-bearing liabilities		1.20	x		1.20	x		1.09	x		1.11	x		1.14	x
Share and Per Share Data:
Basic earnings per share	$	0.54		$	0.49		$	0.41		$	0.35		$	0.32
Diluted earnings per share		0.53			0.48			0.40			0.34			0.32
Cash dividends paid per common share		0.30			0.27			0.22			0.16			0.11
Dividend pay-out ratio (4)		55.56	%		54.69	%		53.17	%		46.29	%		33.75	%
Book value per share (5)	$	9.47		$	9.44		$	7.85		$	7.33		$	7.22
Tangible book value per share (5)		9.15			9.44			7.85			7.33			7.22
Weighted average number of common shares outstanding:
Basic		536,214,778			567,789,397			576,621,209			585,316,009			592,880,271
Diluted		546,790,604			581,063,426			593,000,573			601,681,732			609,157,242
Capital Ratios:
Average stockholders’ equity to average assets		16.00	%		15.10	%		7.29	%		8.73	%		10.12	%
Stockholders’ equity to assets		13.89			18.53			6.96			7.80			9.30
Regulatory Capital Ratios of Bank:
Leverage capital (6)		11.30	%		14.68	%		6.36	%		7.52	%		8.85	%
Total risk-based capital (7)		30.99			41.31			17.49			20.89			26.81
Asset Quality Ratios:
Non-performing loans to total loans		0.16	%		0.13	%		0.19	%		0.23	%		0.29	%
Non-performing assets to total assets		0.09			0.07			0.11			0.12			0.15
Allowance for loan losses to non-performing loans		102.09			141.84			126.44			131.09			126.27
Allowance for loan losses to total loans		0.16			0.18			0.24			0.30			0.37
Branch and Deposit Data:
Number of deposit accounts		580,987			484,956			476,627			491,293			503,998
Branches		111			90			85			81			81
Average deposits per branch (thousands)	$	120,861		$	126,481		$	135,027		$	129,059		$	112,823

(1)	Determined by subtracting the weighted average cost of average total interest-bearing liabilities from the weighted average yield on average total interest-earning assets.
(2)	Determined by dividing net interest income by average total interest-earning assets.
(3)	Determined by dividing total non-interest expense by the sum of net interest income and total non-interest income.
(4)	The dividend pay-out ratio for 2004 and 2005 uses amount per share information that does not reflect the dividend waiver by Hudson City, MHC.
(5)	Computed based on total common shares issued, less treasury shares, unallocated ESOP shares and unvested stock award shares. Tangible book value excludes goodwill and other intangible assets.
(6)	Ratios determined pursuant to FDIC regulations for 2003 and prior years. Beginning January 1, 2004, Hudson City Savings became subject to the capital requirements under OTS regulations.
(7)	The calculation is the same under both OTS and FDIC regulations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with Hudson City Bancorp’s Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements in Item 8, and the other statistical data provided elsewhere in this document.

Executive Summary

Our results of operations depend primarily on net interest income, which, in part, is a direct result of the market 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 transaction deposits and borrowed funds. Net interest income is affected by the shape of the market yield curve, the timing of the placement and repricing of interest-earning assets and interest-bearing liabilities on our balance sheet, and the prepayment rate on our mortgage-related assets. 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 market price of our stock, as the expense of certain of our employee stock compensation plans is related to the current price of our common stock.

The Federal Open Market Committee of the Federal Reserve Bank (“FOMC”) increased the overnight lending rate 17 times from June 2004 through June 2006 to 5.25%, but did not change the rate during the second-half of 2006. Short-term interest rates increased due to these changes in the overnight lending rate, but did decrease slightly during the second-half of 2006 in anticipation of a decrease in the overnight rate. Intermediate-term market interest rates, those with maturities of two to five years, and long-term market interest rates, in particular the 10-year bond, also increased during 2006, but at a slower pace than the short-term interest rates. The result of these market interest rate changes was the inversion of the market yield curve during the second half of 2006. This market rate environment has caused net interest margin to decrease, but we have been able to maintain a slight positive spread on our incremental growth as our primary investment has been in mortgage-related products. We have also experienced higher deposit costs due to increases in short-term market interest rates during 2006 and the intense competitive pressure for deposits in the New York metropolitan area.

During 2006, we grew total assets by $7.43 billion, primarily reflecting balance sheet growth funded primarily by borrowed funds and deposits, and a $1.21 billion increase due to the Acquisition. This growth reflects a $4.03 billion increase in loans and a $2.42 billion increase in total mortgage-backed securities. The growth in our loan portfolio was due primarily to residential mortgage loan purchases and originations of $2.71 billion and $2.12 billion, respectively, during 2006. The growth in total mortgage-backed securities reflected purchases of variable-rate or hybrid instruments. The $5.62 billion growth in total borrowed funds was the result of securing $9.14 billion of new borrowings at a weighted-average rate of 4.30%. These new borrowings have final maturities of ten years and initial non-call periods of one to three years. In addition, deposits increased $2.03 billion, reflecting in part the $1.06 billion transferred as a result of the Acquisition.

Our net income increased 4.5% for 2006 to $288.6 million primarily due to the growth of our interest-earning assets due to our second-step conversion and stock offering as well as growth funded by deposits and borrowed funds. Basic and diluted earnings per share for 2006 were $0.54 and $0.53, respectively, compared with $0.49 and $0.48, respectively, for 2005. Our return on average stockholders’ equity was 5.70% for 2006, as compared to 7.52% in 2005. The decrease reflects an increase in stockholders’ equity

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due to the capital received from our second-step conversion and stock offering completed in June 2005. Our return on average assets decreased to 0.91% for 2006, when compared to 1.14 % for 2005, reflecting our internally generated balance sheet growth in this flat to inverted yield curve environment.

Net interest income increased 9.1% to $613.2 million due primarily to the overall growth in our balance sheet. Our total average interest-earning assets increased 30.3% for the year ended December 31, 2006, while the yields over those same periods increased 25 basis points. Our total average interest-bearing liabilities increased 29.4%, for the year ended December 31, 2006 and the average cost increased 78 basis points.

Our net interest margin decreased 39 basis points to 1.96% and our net interest rate spread decreased 53 basis points to 1.31% when comparing 2006 with 2005. Our interest income, in general, reflects movements in long-term rates while our interest expense, in general, reflects movements in short-term rates, which have increased over the past two years at a faster pace than long-term rates. These decreases in the net interest margin and net interest rate spread were also due, in part, to a shift in our interest-earning asset mix to shorter-term investment securities and variable-rate mortgage loans and mortgage-backed securities to help manage our interest rate risk. In addition, our interest-bearing liabilities reset to the current market interest rates faster than our interest-earning assets as changes to interest rates on our interest-bearing liabilities generally time movements in market interest rates while changes to interest rates on our interest-earning assets generally lag market interest rates due to normal commitment periods of up to 90 days.

Comparison of Financial Condition at December 31, 2006 and December 31, 2005

During 2006, our total assets increased $7.43 billion, or 26.5%, to $35.51 billion at December 31, 2006 from $28.08 billion at December 31, 2005. Loans increased $4.03 billion, or 26.8%, to $19.07 billion at December 31, 2006 from $15.04 billion at December 31, 2005, reflecting internal growth initiatives funded primarily by borrowed funds and the addition of $786.1 million of loans from the Acquisition. The increase in loans reflected our continued purchases of loans as well as our focus on the origination of one- to four-family first mortgage loans in New Jersey, New York and Connecticut. During 2006, we purchased first mortgage loans of $2.71 billion and originated first mortgage loans of $2.12 billion as compared to purchases of $3.68 billion and originations of $2.07 billion for 2005. The larger volume of purchased mortgage loans in 2006, when compared to the volume of loan originations, allowed us to continue to grow and geographically 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.

Our first mortgage loan originations and purchases were substantially in one-to four-family mortgage loans. Approximately 1.0% of the mortgage loan purchases and 45.0% of the mortgage loan originations were variable-rate loans. We purchased a lower percentage of variable-rate mortgage loans, when compared to originated mortgage loans, as a large percentage of variable-rate loans available for purchase are outside our defined geographic parameters and contain types of variable-rate instruments, such as option ARM’s, that do not meet our underwriting standards. At December 31, 2006, fixed-rate mortgage loans accounted for 81.0% of our first mortgage loan portfolio compared with 82.7% at December 31, 2005. At December 31, 2006, we were committed to purchase and originate $951.0 million and $176.7 million, respectively, of first mortgage loans, which are expected to settle during the first quarter of 2007.

Total mortgage-backed securities increased $2.42 billion to $9.33 billion at December 31, 2006 from $6.91 billion at December 31, 2005 reflecting internal growth initiatives funded primarily by borrowed funds. This increase in total mortgage-backed securities resulted from $3.93 billion in purchases of securities, all of which are issued by a U.S. government agency or U.S. government-sponsored enterprise. Of

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these purchases, approximately 98.7% were variable-rate (adjustable annually) or hybrid (adjustable annually after fixed periods of three to seven years) instruments. At December 31, 2006, variable-rate mortgage-backed securities accounted for 69.6% of our portfolio compared with 53.6% at December 31, 2005. At December 31, 2006, we were committed to purchase $846.9 million of U.S. government agency or U.S. government-sponsored enterprise variable-rate mortgage-backed securities, which are expected to settle during the first quarter of 2007. We intend to continue to purchase variable-rate securities, such as those mortgage-backed securities described above or U.S. government-sponsored enterprise step-up notes, as well as originate and purchase variable-rate mortgage loans in order to grow our fixed-rate and variable-rate portfolios by equal amounts, as part of our strategy to assist in the management of our interest rate risk.

Accrued interest receivable increased $53.5 million, primarily due to increased balances in loans and investments. The $20.1 million increase in other assets included an increase of $11.0 million of bank-owned life insurance transferred in connection with the Acquisition. The Acquisition also resulted in the addition of $150.8 million of goodwill and other intangible assets of $13.4 million.

Total liabilities increased $7.71 billion, or 33.7%, to $30.58 billion at December 31, 2006 compared with $22.87 billion at December 31, 2005. Borrowed funds increased $5.62 billion, or 49.5%, to $16.97 billion at December 31, 2006 from $11.35 billion at December 31, 2005. The additional borrowed funds were primarily used to fund our asset growth. We believed the cost of the incremental borrowed funds was lower than the cost of new deposits and therefore used borrowings to fund a substantial portion of our asset growth. Borrowed funds were comprised of $8.92 billion of securities repurchase agreements and $8.05 billion of FHLB advances. New borrowings amounted to $9.14 billion and have initial non-call periods ranging from one to three years, final maturities of ten years, and a weighted-average rate of 4.30%.

Total deposits increased $2.03 billion during 2006, due primarily to a $2.92 billion increase in total time deposits, $1.06 billion of deposits from the Acquisition, and a $576.5 million increase in our money market accounts. These increases were partially offset by a $1.52 billion decrease in our interest-bearing transaction accounts, due to customers shifting deposits to short-term time deposits. We experienced increased competitive pressure and pricing of short-term deposits during 2006 in the New York metropolitan area. The increase in time deposits reflected our competitive pricing of these deposits and a shift of our customer preference to short-term time deposits.

Other liabilities increased to $187.7 million at December 31, 2006 compared with $140.6 million at December 31, 2005. The increase is primarily the result of a $34.5 million increase in the accrued interest payable on borrowed funds and deposits.

Total stockholders’ equity decreased $271.2 million to $4.93 billion at December 31, 2006 from $5.20 billion at December 31, 2005. The decrease was primarily due to repurchases of 33,747,243 shares of outstanding common stock at an aggregate cost of $448.2 million and cash dividends declared and paid to common stockholders of $161.4 million. These decreases to stockholders’ equity were partially offset by net income of $288.6 million for 2006.

As of December 31, 2006, 44,314,000 shares were authorized and yet to be repurchased under our existing stock repurchase programs. At December 31, 2006, our stockholders’ equity to asset ratio was 13.89% compared with 18.53% at December 31, 2005. The decrease reflected our strategy to grow assets, purchase outstanding common stock and pay dividends. For 2006, the ratio of average stockholders’ equity to average assets was 16.00% compared with 15.10% for the year 2005. The increase reflected the receipt of the net offering proceeds from our second-step conversion and stock offering during 2005. At

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December 31, 2006, our book value per share, using the period-end share count of outstanding shares, less purchased but unallocated employee stock ownership plan shares and less purchased but unvested management plan shares, was $9.47 compared with $9.44 at December 31, 2005. Our tangible book value per share, calculated by eliminating goodwill and the core deposit intangible from stockholders’ equity, was $9.15 at December 31, 2006.

Analysis of Net Interest Income

Net interest income represents the difference between the interest income we earn on our interest-earning assets, such as mortgage loans, mortgage-backed securities and investment securities, and the expense we pay on interest-bearing liabilities, such as time deposits and borrowed funds. Net interest income depends on our volume of interest-earning assets and interest-bearing liabilities and the interest rates we earned or paid on them.

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Average Balance Sheet. The following table presents certain information regarding our financial condition and net interest income for 2006, 2005, and 2004. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities for the periods indicated. We derived the yields and costs by dividing income or expense by the average balance of interest-earning assets or 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. Non-accrual loans were included in the computation of average balances and therefore have a zero yield. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase premiums and discounts that are amortized or accreted to interest income. Interest income on loans for 2006, 2005, and 2004 has been reduced by the amortization of net deferred loan origination costs of $(374,000), $(2.2) million and $707,000, respectively. Interest income on loans for 2006, 2005, and 2004 has been reduced by amortization of purchase premiums (net of discounts) of $525,000, $8.2 million, and $5.4 million for those same respective years. Interest income on mortgage-backed securities has been reduced by amortization of purchase premiums (net of discounts) of $10.7 million, $14.6 million, and $14.1 million for those same respective years.

	For the Year Ended December 31,
	2006							2005							2004
					Average							Average							Average
	Average				Yield/			Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost			Balance		Interest		Cost
	(Dollars in thousands)
Assets:
Interest-earnings assets:
First mortgage loans, net (1)	$	16,685,920	$	932,550		5.59	%	$	12,656,118	$	689,435		5.45	%	$	9,783,953	$	539,966		5.52	%
Consumer and other loans		316,844		19,698		6.22			185,320		10,786		5.82			144,621		8,650		5.98
Federal funds sold		165,380		8,242		4.98			236,288		5,013		2.12			124,755		1,580		1.27
Mortgage-backed securities, at amortized cost		8,022,309		381,995		4.76			6,218,312		273,063		4.39			5,379,439		242,335		4.50
Federal Home Loan Bank stock		345,870		16,507		4.77			169,781		9,394		5.53			150,104		3,213		2.14
Investment securities, at amortized cost		5,697,565		255,851		4.49			4,503,416		191,217		4.25			2,671,263		119,314		4.47
Total interest-earning assets		31,233,888		1,614,843		5.17			23,969,235		1,178,908		4.92			18,254,135		915,058		5.01
Noninterest-earning assets		414,084							324,004							334,712
Total assets	$	31,647,972						$	24,293,239						$	18,588,847
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Savings accounts	$	796,410		7,851		0.99		$	980,707		9,709		0.99		$	942,486		9,359		0.99
Interest-bearing transaction accounts		2,734,787		90,936		3.33			4,124,359		118,530		2.87			3,575,468		79,750		2.23
Money market accounts		688,311		20,670		3.00			469,254		5,172		1.10			593,426		5,681		0.96
Time deposits		7,417,812		316,639		4.27			5,546,364		160,325		2.89			5,482,554		120,023		2.19
Total interest-bearing deposits		11,637,320		436,096		3.75			11,120,684		293,736		2.64			10,593,934		214,813		2.03
Repurchase agreements		8,313,321		316,444		3.81			6,447,560		226,909		3.52			4,182,197		142,648		3.41
Federal Home Loan Bank of New York		5,977,115		249,070		4.17			2,469,529		96,129		3.89			1,916,085		72,605		3.79
Total borrowed funds		14,290,436		565,514		3.96			8,917,089		323,038		3.62			6,098,282		215,253		3.53
Total interest-bearing liabilities		25,927,756		1,001,610		3.86			20,037,773		616,774		3.08			16,692,216		430,066		2.58
Noninterest-bearing liabilities:
Noninterest-bearing deposits		462,022							437,790							415,905
Other noninterest-bearing liabilities		195,845							148,523							125,929
Total noninterest-bearing liabilities		657,867							586,313							541,834
Total liabilities		26,585,623							20,624,086							17,234,050
Stockholders’ equity		5,062,349							3,669,153							1,354,797
Total liabilities and stockholders’ equity	$	31,647,972						$	24,293,239						$	18,588,847
Net interest income			$	613,233						$	562,134						$	484,992
Net interest rate spread (2)						1.31	%						1.84	%						2.43	%
Net interest-earning assets	$	5,306,132						$	3,931,462						$	1,561,919
Net interest margin (3)						1.96	%						2.35	%						2.66	%
Ratio of interest-earning assets to interest-bearing liabilities						1.20	x						1.20	x						1.09	x

(1)	Amount is net of deferred loan costs and allowance for loan losses and includes non-performing loans.
(2)	Determined by subtracting the weighted average cost of average total interest-bearing liabilities from the weighted average yield on average total interest-earning assets.
(3)	Determined by dividing net interest income by average total interest-earning assets.
(4)	At December 31, 2006, the weighted-average rate on our outstanding interest-earning assets, other than our FHLB stock, was as follows: first mortgage loans, 5.78%, consumer and other loans, 6.55%, federal funds sold, 5.25%, mortgage-backed securities, 5.21%, investment securities, 4.72%. At December 31, 2006, the weighted-average rate on our outstanding interest-bearing liabilities was as follows: savings accounts, 0.94%, interest-bearing transaction accounts, 3.29%, money market accounts, 3.59%, time deposits, 4.89%, borrowed funds, 4.08%.

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Rate/Volume Analysis. The following table presents the extent to which the changes in interest rates and the changes in volume of our interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to:

• changes attributable to changes in volume (changes in volume multiplied by prior rate);

• changes attributable to changes in rate (changes in rate multiplied by prior volume); and

• the net change.

The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	For the Year Ended December 31,
	2006 vs. 2005									2005 vs. 2004
	Increase (Decrease) Due To									Increase (Decrease) Due To
	Volume			Rate			Net			Volume			Rate			Net
	(In thousands)
Interest-earning assets:
First mortgage loans, net	$	224,965		$	18,150		$	243,115		$	156,410		$	(6,941	)	$	149,469
Consumer and other loans		8,125			787			8,912			2,373			(237	)		2,136
Federal funds sold		(1,872	)		5,101			3,229			1,963			1,470			3,433
Mortgage-backed securities		84,409			24,523			108,932			36,795			(6,067	)		30,728
Federal Home Loan Bank stock		8,559			(1,446	)		7,113			472			5,709			6,181
Investment securities		53,286			11,348			64,634			78,056			(6,153	)		71,903
Total		377,472			58,463			435,935			276,069			(12,219	)		263,850
Interest-bearing liabilities:
Savings accounts		(1,858	)		—			(1,858	)		350			—			350
Interest-bearing transaction accounts		(44,411	)		16,817			(27,594	)		13,514			25,266			38,780
Money market accounts		3,298			12,200			15,498			(1,279	)		770			(509	)
Time deposits		64,721			91,593			156,314			1,416			38,886			40,302
Repurchase agreements		69,693			19,842			89,535			79,525			4,736			84,261
FHLB Advances		145,564			7,377			152,941			21,555			1,969			23,524
Total		237,007			147,829			384,836			115,081			71,627			186,708
Net change in net interest income	$	140,465		$	(89,366	)	$	51,099		$	160,988		$	(83,846	)	$	77,142

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Comparison of Operating Results for the Years Ended December 31, 2006 and 2005

General. Net income was $288.6 million for 2006, reflecting an increase of $12.5 million, or 4.5%, compared with net income of $276.1 million for 2005. Basic and diluted earnings per common share were $0.54 and $0.53, respectively, for 2006 compared with basic and diluted earnings per share of $0.49 and $0.48, respectively, for 2005. Our return on average stockholders’ equity was 5.70% in 2006, compared with 7.52% for 2005. Our return on average assets for 2006 was 0.91% compared with 1.14% for 2005. The decreases in these ratios were primarily due to the receipt of the net proceeds from our second-step conversion and stock offering completed in June 2005, which significantly increased average stockholders’ equity and average assets. The decrease in the return on average assets also reflected our balance sheet growth during a period of narrowing net interest rate spreads and a flat to inverted market yield curve.

Interest and Dividend Income. Total interest and dividend income increased $435.9 million, or 36.9%, to $1.61 billion for 2006 compared with $1.18 billion for 2005. The increase in total interest and dividend income was primarily due to a $7.26 billion, or 30.3%, increase in the average balance of total interest-earning assets to $31.23 billion for 2006 compared with $23.97 billion for 2005. The growth in the average balance of total interest-earning assets was consistent with the growth initiatives employed by us during recent periods and also reflected the receipt of the net offering proceeds from our second-step conversion. The increase in interest and dividend income was also partially due to a 25 basis point increase in the weighted-average yield on total interest-earning assets to 5.17% for the year 2006 from 4.92% for the year 2005. This increase in the weighted-average yield reflected a modest increase in intermediate and long-term interest rates experienced during 2006.

Interest and fees on mortgage loans increased $243.1 million primarily due to a $4.03 billion increase in the average balance, reflecting increases in our core investment of first mortgage loans. The increase in mortgage loan income was also due to a 14 basis point increase in the weighted-average yield, which reflected the large volume of originations and purchases of mortgage loans during this period of rising intermediate and long-term interest rates.

The $108.9 million increase in interest income on total mortgage-backed securities was due to an $1.80 billion increase in the average balance of total mortgage-backed securities, due primarily to the purchase of variable-rate securities during 2006 to complement our purchases of fixed-rate mortgage loans. The increase in was also due to a 37 basis point increase in the weighted-average yield to 4.76%, reflecting these purchases during this period of rising interest rates.

The $64.6 million increase in interest and dividends on total investment securities was primarily due to an increase in the average balance of total investment securities of $1.19 billion, which reflected the investment into short-term securities of part of the net proceeds from the second-step conversion and stock offering. The increase in interest and dividends on total investment securities was also due to a 24 basis point increase in the weighted-average yield reflecting purchases of securities during this period of rising short-term interest rates.

Interest Expense. Total interest expense increased $384.8 million, or 62.4%, to $1.00 billion for the year ended December 31, 2006 from $616.8 million for 2005. This increase was primarily due to a $5.89 billion, or 29.4%, increase in the average balance of total interest-bearing liabilities to $25.93 billion for 2006 compared with $20.04 billion for 2005. The increase in interest-bearing liabilities was used to fund our asset growth. The increase in total interest expense was also due to a 78 basis point increase in the weighted-average cost of total interest-bearing liabilities to 3.86% for the year 2006 compared with 3.08%

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for the year 2005. The increase in the average cost reflected the growth and re-pricing of our interest-bearing liabilities during the rising short-term interest rate environment experienced 2006.

Interest expense on borrowed funds increased $242.5 million primarily due to a $5.37 billion increase in the average balance of borrowed funds and a 34 basis point increase in the weighted-average cost of borrowed funds. The increase in the average balance of borrowed funds was used to fund asset growth. The increase in the average cost of borrowed funds reflected the new borrowings with a higher rate than the existing borrowings.

The $142.4 million increase in interest expense on interest-bearing deposits for the year 2006 was primarily due to an 111 basis point increase in the weighted-average cost of interest-bearing deposits, reflecting the rising short-term interest rate environment, the competitive pricing of our deposit products and a shift by our customers, during 2006 to higher costing short-term time deposits from our High Value Checking product.

The $156.3 million increase in interest expense on our time deposit accounts reflected a 138 basis point increase in the weighted-average cost, due to the rising short-term market interest rate environment, and a $1.87 billion increase in the average balance of time deposit accounts. The $15.5 million increase in interest expense on our money market accounts primarily reflected an increase in the weighted-average cost of 190 basis points, reflecting increases in short-term interest rates and the competitive pricing of this product. The $27.6 million decrease in interest expense on our interest-bearing transaction accounts was primarily due to a $1.39 billion decrease in the average balance, reflecting shifts to time deposit products. Time deposits accounted for 63.7% of the average balance of interest-bearing deposits compared to 49.9% during 2005. We intend to continue to fund future asset growth using borrowed funds and customer deposits as our primary sources of funds. We intend to grow customer deposits by continuing to pay competitive, but prudent rates and by opening new branch offices.

Net Interest Income. Net interest income increased $51.1 million, or 9.1%, to $613.2 million for the year 2006 compared with $562.1 million for the year 2005. This increase primarily reflected the investment of the net offering proceeds from our second-step conversion over the course of a full year and our balance sheet growth initiatives. The increase due to our growth was partially offset by an increase in the costs of our interest-bearing deposits and borrowed funds. Our net interest rate spread decreased 53 basis points to 1.31% for 2006 from 1.84% for 2005 and our net interest margin decreased 39 basis points to 1.96% for 2006 from 2.35% for 2005.

Market interest rates resulted in an inverted U.S. Treasury yield curve during 2006. This market interest rate scenario has had a negative impact on our results of operations and our net interest margin as the yields on our interest-earning assets have increased far less than the costs of our interest-bearing liabilities. In addition, our interest-bearing liabilities will reprice to current market interest rates faster than the yields earned on our interest-earning assets. The increase in the cost of our interest-bearing liabilities reflected the rising short-term interest rate environment, affecting both our deposits and borrowed funds, and the shift within our deposits to higher costing short-term time deposits. Our net interest margin is likely to decrease further if the yield curve remains inverted in 2007.

Provision for Loan Losses. The allowance for loan losses amounted to $30.6 million and $27.4 million at December 31, 2006 and 2005, respectively. The increase in the allowance for loan losses was due to the inclusion of Sound Federal’s allowance for loan losses as a result of the Acquisition. The allowance for loan losses as a percent of total loans was 0.16% at December 31, 2006 compared with 0.18% at December 31, 2005. We did not record a provision for loan losses during 2006. We did record a provision of $65,000 during 2005. Net charge-offs for the year 2006 were

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$76,000 compared with net recoveries of $9,000 for 2005. Non-performing loans, defined as non-accruing and accruing loans delinquent 90 days or more increased to $30.0 million at December 31, 2006 from $19.3 million at December 31, 2005. The increase reflected an increase in the number of non-performing loans to 118 loans at December 31, 2006 from 93 loans at December 31, 2005. At December 31, 2006, our largest loan delinquent 90 days or more was a construction loan with a balance of $3.0 million that has become current subsequent to December 31, 2006. The ratio of non-performing loans to total loans was 0.16% at December 31, 2006 compared with 0.13% at December 31, 2005. The ratio of allowance for loan losses to total non-performing loans was 102.09% at December 31, 2006 compared with 141.84% at December 31, 2005.

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 $1.7 million to $6.3 million for 2006 from $8.0 million for 2005. The decrease in non-interest income primarily reflected the $2.7 million decrease in gains on securities transactions as there were minimal realized gains/losses from sales of securities that occurred during 2006.

Non-Interest Expense. Total non-interest expense increased $31.3 million, or 24.5%, to $159.0 million for 2006 from $127.7 million for 2005. This increase is primarily due to increases of $20.2 million in compensation and employee benefits expense, $4.8 million in net occupancy expense, and $5.9 million in other non-interest expense. The increase in compensation and employee benefits expense primarily reflected a $12.7 million increase in the expense related to our employee stock ownership plan, as a result of increases in our stock price. The increase also reflected the expense related to stock options that amounted to $5.5 million during 2006. The increase in net occupancy expense is the result of our branch expansion and the addition of 14 branches from Sound Federal in July 2006. The increases in the other categories of non-interest expense are due to an increase in professional services of $2.3 million, operating expenses for new branches and increased costs related to our growth. Our efficiency ratio was 25.66% for 2006 compared with 22.40% for 2005. Our ratio of non-interest expense to average total assets for 2006 was 0.50% compared with 0.53% for 2005.

Income Taxes. Income tax expense for the year ended December 31, 2006 was $172.0 million compared with $166.3 million for 2005. Our effective tax rate for the year ended December 31, 2006 was 37.34% compared with 37.60% for the year 2005. The 3.4% increase in income tax expense reflected the 4.1% increase in income before income tax expense.

Comparison of Operating Results for the Years Ended December 31, 2005 and 2004

General. Net income was $276.1 million for the year 2005, reflecting an increase of $36.8 million, or 15.4%, compared with net income of $239.3 million for the year 2004. Basic and diluted earnings per common share were $0.49 and $0.48, respectively, for 2005 compared with basic and diluted earnings per share of $0.41 and $0.40, respectively, for 2004. For the year 2005 our return on average stockholders’ equity was 7.52% compared with 17.66% for the year 2004. Our return on average assets for 2005 was 1.14% compared with 1.29% for 2004. The decreases in these ratios were primarily due to the receipt of the net proceeds from our second-step conversion and stock offering completed in June 2005, which significantly increased average stockholders’ equity and average assets. The decrease in the return on

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average assets also reflected our balance sheet growth during a period of narrowing net interest rate spreads and a flattening market yield curve.

Interest and Dividend Income. Total interest and dividend income increased $263.9 million, or 28.8%, to $1.18 billion for 2005 compared with $915.1 million for 2004. The increase in total interest and dividend income was primarily due to a $5.72 billion, or 31.3%, increase in the average balance of total interest-earning assets to $23.97 billion for 2005 compared with $18.25 billion for 2004. The growth in the average balance of total interest-earning assets was consistent with the growth initiatives employed by us during recent periods and also reflected the receipt of the net offering proceeds from our second-step conversion. The increase in interest and dividend income due to the increase in the average balance was partially offset by a decrease of nine basis points in the weighted-average yield on total interest-earning assets to 4.92% for the year 2005 from 5.01% for the year 2004. This decrease in the weighted-average yield reflected a shift in our interest-earning asset mix to shorter-term investment securities to help manage our interest rate risk. Investments of this type included the purchase of agency discount notes from the second-step conversion net offering proceeds, and the origination and purchase of a larger percentage of variable-rate mortgage loans and mortgage-backed securities.

The $149.4 million increase in interest and fee income on first mortgage loans was primarily due to a $2.88 billion increase in the average balance of first mortgage loans, which reflected our continued emphasis on balance sheet growth in 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 seven basis point decrease in the weighted-average yield, which reflected the larger volume of originations and purchases of variable-rate loans during 2005, which generally have initial yields that are less than fixed-rate loans.

The $71.9 million increase in interest and dividends on total investment securities was primarily due to an increase in the average balance of total investment securities of $1.83 billion, which reflected the investment of part of the net proceeds from the second-step conversion and stock offering, and the investment of certain of the cash flows from the prepayment activity on our mortgage-related assets in 2004 into investment securities. The increase in interest and dividends on total investment securities due to the increase in the average balance was partially offset by a 22 basis point decrease in the weighted-average yield reflecting purchases of securities with maturity or initial rate reset dates of less than two years, in order to assist in our management of interest rate risk.

The $30.8 million increase in interest income on total mortgage-backed securities was due to an $838.9 million increase in the average balance of total mortgage-backed securities, which primarily reflected the purchase of variable-rate securities during 2005 from the investment of part of the net proceeds from the second-step offering to assist in our management of interest rate risk. The increase in income due to the increase in the average balance was partially offset by a 11 basis point decrease in the weighted-average yield, reflecting the larger volume of purchases of variable-rate and hybrid instruments, which generally have initial yields that are less than fixed-rate securities.

Interest Expense. Total interest expense, comprised of interest on deposits and interest on borrowed funds, increased $186.7 million, or 43.4%, to $616.8 million for the year 2005 from $430.1 million for the year 2004. This increase was primarily due to a $3.35 billion, or 20.1%, increase in the average balance of total interest-bearing liabilities to $20.04 billion for 2005 compared with $16.69 billion for 2004. This increase in interest-bearing liabilities was primarily used to fund asset growth. The increase in total interest expense was also due to a 50 basis point increase in the weighted-average cost of total interest-bearing liabilities to 3.08% for the year 2005 compared with 2.58% for the year 2004, which reflected the

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growth of our interest-bearing liabilities during the rising short-term interest rate environment experienced during 2004 and 2005.

Interest expense on borrowed funds increased $107.7 million primarily due to a $2.82 billion increase in the average balance of borrowed funds and, to a lesser extent, a nine basis point increase in the weighted-average cost of borrowed funds. The increase in the average balance of borrowed funds was used to fund asset growth. The $5.13 billion of new borrowings incurred during 2005 all had maturity periods of ten years and initial non-call periods of one to five years, extending the overall maturity of our liabilities in order to assist in the management of interest rate risk. The new borrowings had a weighted-average rate of 3.82%. The increase in the average cost of borrowed funds reflected the continued growth of our borrowed funds in the increasing intermediate- and long-term interest rate environment that existed during 2004 and 2005.

The $78.9 million increase in interest expense on interest-bearing deposits for the year 2005 was due to a $526.8 million increase in the average balance of interest-bearing deposits and a 61 basis point increase in the weighted-average cost of interest-bearing deposits. The growth in the average balance of interest-bearing deposits was primarily used to fund our growth initiatives and was primarily due to increases in our interest-bearing transaction account. The increase in the weighted-average cost of interest-bearing deposits, experienced principally in interest-bearing transaction accounts and time deposits, reflected the rising short-term market interest rate environment experienced during 2004 and 2005 and the need to increase rates on these deposit products in the highly competitive deposit market of the New York metropolitan area.

The $38.7 million increase in interest expense on our interest-bearing transaction accounts reflected an increase in the average balance of interest-bearing transaction accounts of $548.9 million, primarily due to the growth of our High Value Checking account product, and a 64 basis point increase in the weighted-average cost due to the rising short-term market interest rate environment. The $40.3 million increase in interest expense on our time deposit accounts reflected a 70 basis point increase in the weighted-average cost, due to the rising short-term market interest rate environment, and a $63.8 million increase in the average balance of time deposit accounts. We intend to continue to fund future asset growth using customer deposits as our primary source of funds, by continuing to pay competitive, but prudent rates and by opening new branch offices. We will continue to supplement deposit growth using borrowed funds.

Net Interest Income. Net interest income increased $77.1 million, or 15.9%, to $562.1 million for the year 2005 compared with $485.0 million for the year 2004. This increase primarily reflected the investment of the net offering proceeds from our second-step conversion and our internally generated growth initiatives, the combination of which resulted in a larger increase in the average balance of total interest-earning assets when compared to the increase in the average balance of total interest-bearing liabilities. The increase due to our growth was partially offset by an increase in the costs of our interest-bearing deposits and borrowed funds. Our net interest rate spread decreased 59 basis points to 1.84% for 2005 from 2.43% for 2004 and our net interest margin decreased 31 basis points to 2.35% for 2005 from 2.66% for 2004.

The decrease in these ratios was primarily due to an increase in the weighted-average cost of interest-bearing liabilities and a decrease in the weighted-average yield on interest-earning assets. The increase in the cost of our interest-bearing liabilities reflected the rising short-term interest rate environment and the borrowing of funds with longer terms to initial reprice or maturity than in previous periods. The decrease in the yield on our interest-earning assets reflected the shift in our investment portfolio to shorter-term interest-earning assets, accomplished by purchasing and originating a larger percentage of variable-rate instruments and purchasing agency discount notes with part of the proceeds from our second-step

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conversion and stock offering. The smaller decrease in our net interest margin, when compared to the decrease in our net interest rate spread, reflected the infusion of capital due to the completion of our second-step conversion.

Provision for Loan Losses. Our provision for loan losses during 2005 was $65,000 compared with $790,000 during 2004. The decrease in the provision reflected recent favorable charge-off trends and strong payment performance by our borrowers during 2005 resulting in a positive delinquency experience. Net recoveries for the year 2005 were $9,000 compared with net charge-offs of $18,000 for the year 2004. The allowance for loan losses increased $74,000 to $27.4 million at December 31, 2005 from $27.3 million at December 31, 2004. The ratio of the allowance for loan losses to total loans was 0.18% at December 31, 2005 compared with 0.24% at December 31, 2004.

Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, decreased $2.3 million to $19.3 million at December 31, 2005 from $21.6 million at December 31, 2004, reflecting decreases in delinquencies primarily in our serviced loan portfolio. The ratio of non-performing loans to total loans was 0.13% at December 31, 2005 compared with 0.19% at December 31, 2004. The ratio of the allowance for loan losses to non-performing loans was 141.84% at December 31, 2005 compared with 126.44% at December 31, 2004.

During 2005, we lowered the loss factors used in our analysis of the loan loss allowance for our first mortgage loans to reflect the seasoning of the purchased loan portfolio and the recent favorable charge-off experience and delinquency trends. As a result of these trends, we recorded no provision during the second, third and fourth quarters of 2005 and a minimal provision for loan losses in the year 2005 to reflect probable losses resulting from the actual growth in our loan portfolio. We consider the ratio of allowance for loan losses to total loans at December 31, 2005, given our primary lending emphasis and current market conditions, to be adequate.

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 $8.6 million to $8.0 million for 2005 from $16.6 million for 2004. The decrease in non-interest income primarily reflected the decrease in gains on securities transactions, net, as no sales of securities occurred during the second, third or fourth quarters of 2005, and minimal sales occurred in the first quarter of 2005.

Non-Interest Expense. Total non-interest expense increased $9.4 million, or 7.9%, to $127.7 million for 2005 from $118.3 million for 2004. The increase primarily reflected normal salary adjustments, and increases in net occupancy expense, employee compensation and advertising expense due to our branch expansion program. Our efficiency ratio was 22.40% for the year 2005 compared with 23.60% for the year 2004. Our ratio of non-interest expense to average total assets for 2005 was 0.53% compared with 0.64% for 2004. The decrease in these ratios reflected our ability to leverage our existing infrastructure to support continuing asset growth while controlling operating expenses, as our average assets grew in excess of 30.0% during 2005.

Income Taxes. Income tax expense increased $23.2 million, or 16.2%, to $166.3 million for 2005 from $143.1 million for 2004, reflecting the 15.7% increase in income before income tax expense. Our effective tax rate for the year 2005 was 37.60% compared with 37.43% for 2004.

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Liquidity and Capital Resources

The term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loan and security purchases, deposit withdrawals, repayment of borrowings 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 approximately twenty times the amount of FHLB stock owned. We also have the ability to access the capital markets from time to time, depending on market conditions.

Our investment policy provides that we shall maintain a primary liquidity ratio, which consists of cash, Federal funds sold, securities with remaining maturities of less than five years and adjustable-rate mortgage-backed securities repricing within one year, in an amount equal to at least 4% of total deposits and short-term borrowings. At December 31, 2006, our primary liquidity ratio was 39.0%.

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 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 and the volume of home purchases and new construction activity in the markets we serve.

Principal repayments on loans were $1.75 billion during the year 2006 compared with $2.15 billion for the year 2005. The decrease in payments on loans reflected the slowing prepayment rate on mortgage loans due to the rising interest rate environment during 2006. Principal payments received on mortgage-backed securities totaled $1.51 billion during 2006 compared with $1.46 billion during 2005. The increase in payments on mortgage-backed securities reflected the growth of our primarily variable-rate portfolio and the fact that the prepayment rates on variable-rate instruments remained high as customers refinanced to fixed-rate instruments. Maturities and calls of investment securities during 2006 were $850.3 million compared with maturities and calls totaling $1.70 billion for 2005. The decrease in maturities and calls reflected the rising interest rate environment resulting in a decrease in call activity.

Total deposits increased $2.03 billion during the year 2006 compared with a decrease of $94.0 million during the year 2005. Deposit flows, in general, 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. The increase in deposits during 2006 was primarily due to the Acquisition and increases in short-term time deposits and money market accounts, reflecting the competitive pricing of these deposit types. The decrease in deposits during 2005 reflected the use of deposit balances by customers to purchase common stock during our second-step conversion and stock offering. Time deposit accounts scheduled to mature within one year were $8.33 billion at December 31, 2006. 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 as renewed time deposits or transfers to other deposit products at the prevailing interest rate. We are

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committed to maintaining a strong liquidity position; therefore we monitor our liquidity position on a daily basis.

For the year 2006, we borrowed an additional $9.14 billion compared with new borrowings of $5.13 billion for the year 2005. We made $3.53 billion in principal payments on borrowed funds during 2006 compared with $925.0 million for 2005. The funds borrowed during 2006 all have initial non-call periods ranging from one to three years and final maturities of ten years, and were primarily used to fund our asset growth. At December 31, 2006 we had $16.97 billion in borrowed funds, with a weighted-average rate of 4.08%, which have the potential to be called within one year. We anticipate we will have sufficient resources to meet this funding commitment by borrowing new funds at the prevailing market interest rate, or by paying-off the borrowed funds as they are called with internally generated cash.

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 $2.31 billion during the year 2006 compared with $2.19 billion during the year 2005. Of the first mortgage loan originations during 2006, 45.0% were variable-rate loans. During the year 2006 we purchased total loans of $2.71 billion compared with $3.68 billion during the year 2005. These continued strong levels of mortgage loan originations and purchases, which were funded primarily by borrowed funds, reflected the internal growth initiatives we have employed during recent periods. The slight decrease in combined originations and purchases reflected the decrease in loan prepayments due to the rising interest rate environment. The continued larger volume of purchased mortgage loans during 2006, 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. 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 year 2006 were $3.93 billion compared with $3.28 billion during the year 2005. Of the mortgage-backed securities purchased during 2006, 98.7% were variable-rate securities. During 2006, we purchased $1.25 billion of investment securities compared with $4.31 billion during 2005. The decrease in purchases of investment securities reflected the lower amount of cash flows available for investment during 2006 due to the rising interest environment and the reinvestment of cash flows into loan originations and purchases.

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 year 2006, we purchased an additional $236.0 million in FHLB common stock compared with purchases of $104.2 million during 2005. The purchases of additional FHLB common stock were necessitated by increases in the amount of our outstanding borrowings with the FHLB. The additional purchases made during 2006 brought our total investment in FHLB stock to $445.0 million, the amount we are currently required to hold.

Cash dividends declared and paid during 2006 were $161.4 million compared with $102.1 million during 2005. In 2005, Hudson City, MHC applied for and was granted approval from the OTS to waive receipt of dividends declared by Hudson City Bancorp. These waivers of dividend payments were effective for the first six months of 2005. Beginning in the third quarter of 2005, due to the consolidation of Hudson City, MHC into Hudson City Bancorp as part of the second-step conversion, dividends were paid on all outstanding shares of Hudson City Bancorp common stock. The dividend pay-out ratio using amount per share information, which does not reflect the dividend waiver by Hudson City, MHC in periods prior to the third quarter of 2005, was 55.56% for the year 2006 compared with 54.69% for the year 2005. On January 23, 2007, the Board of Directors declared a quarterly cash dividend of $0.08 per common share.

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The dividend is payable on March 1, 2007 to stockholders of record at the close of business on February 2, 2007. We anticipate we will have sufficient resources to meet this obligation.

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 year 2006, we purchased 33,747,243 shares of our common stock at an aggregate cost of $448.2 million. During most of the year 2005, our stock repurchase program was suspended pending the completion of our second-step conversion and stock offering. We did, however, purchase 256,768 shares, at an aggregate cost of $2.7 million, which were vesting in our recognition and retention plan and were surrendered by plan participants for the payment of income taxes. In June 2006, the Board of Directors approved our seventh stock repurchase program to repurchase up to 56,975,000 shares of common stock. At December 31, 2006, there were 44,314,000 shares authorized and yet to be purchased under our stock repurchase programs.

At December 31, 2006, 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 11.30%, 11.30% and 30.99%, respectively. These ratios reflect the $3.00 billion contribution of net offering proceeds from Hudson City Bancorp.

The primary source of liquidity for Hudson City Bancorp, the holding company of Hudson City Savings, is capital distributions from the banking subsidiary. During 2006, Hudson City Bancorp received $282.9 million in dividend payments from Hudson City Savings, which amounted to approximately 101.9% 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. (See “Item 1 — Business — Regulation of Hudson City Savings Bank and Hudson City Bancorp – Federally Chartered Savings Bank Regulations – Limitation on Capital Distributions”)

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 mortgage-backed securities. We are also obligated under a number of non-cancelable operating leases.

The following table summarizes contractual obligations of Hudson City by contractual payment period, as of December 31, 2006.

	Payments Due By Period
			Less Than		One Year to		Three Years to		More Than
Contractual Obligation	Total		One Year		Three Years		Five Years		Five Years
					(In thousands)
Mortgage loan originations	$	176,655	$	176,655	$	—	$	—	$	—
Mortgage loan purchases		951,000		951,000		—		—		—
Mortgage-backed security purchases		846,900		846,900		—		—		—
Operating leases		122,243		7,317		15,111		13,825		85,990
Total	$	2,096,798	$	1,981,872	$	15,111	$	13,825	$	85,990

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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, overdraft and commercial/construction lines of credit, which do not have fixed expiration dates, of approximately $140.5 million, $3.3 million, and $57.6 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 mortgage-backed securities had a normal period from trade date to settlement date of approximately 60 days.

Recent Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FASB Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The application of FASB Interpretation No. 48 is not expected to have an impact on our financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement provides guidance for using fair value to measure assets and liabilities. The FASB believes the standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The application of SFAS No. 157 is not expected to have a material impact on our financial condition or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, which expresses the SEC staff’s views regarding the process of quantifying financial statement misstatements. The approaches used in practice to accumulate and quantify misstatements are referred to as the “rollover” and “iron curtain” approaches. The rollover approach quantifies a misstatement based on the amount of the error originating in the current year income statement. The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year of origination. The staff believes registrants must quantify the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. This can be accomplished by quantifying an error under both the rollover and iron curtain approaches and by evaluating the error measured under each approach. SAB No. 108 became effective for the Company as of December 31, 2006. The application of SAB No. 108 did not have a material impact on our financial condition or results of operations.

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Impact of Inflation and Changing Prices

The Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements of Hudson City Bancorp have been prepared in accordance with U.S. generally accepted accounting principles, commonly referred as GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation.

Critical Accounting Policies

We have identified the accounting policies below as critical to understanding our financial results. In addition, Note 1 to the Audited Consolidated Financial Statements in Item 8 of this report 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 continually reviewed by management, and 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 U.S. generally accepted accounting principles, 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.

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 resulting in a loan concentration in residential first mortgage loans at December 31, 2006. As a result of our lending practices, we also have a concentration of loans secured by real property located in New Jersey, New York and Connecticut. 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 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. We consider it important to maintain the ratio of our allowance for loan losses to total loans at an acceptable level given current economic conditions, interest rates and the composition of our portfolio.

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Due to the nature of our loan portfolio, our evaluation of the adequacy of our allowance for loan losses is performed on a pool basis. We evaluated the multi-family and commercial mortgage, construction and unsecured commercial loans transferred in the Acquisition in a similar manner as our previously existing portfolio. Each month we categorize the loan portfolio by certain risk characteristics such as loan type (one- to four-family, multi-family, etc.), loan source (originated or purchased) 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. These factors are periodically reviewed for appropriateness giving consideration to charge-off history and delinquency trends. We use this analysis, as a tool, together with principal balances and delinquency reports, to determine the adequacy of the allowance for loan losses. Other key factors we consider in this process are current real estate market conditions in geographic areas where our loans are located, 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 analysis, the amount of the allowance for loan losses in relation to the total loan balance, loan portfolio growth, U.S. generally accepted accounting principles 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.

Hudson City defines the population of potential impaired loans to be all non-accrual commercial real estate and multi-family loans. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral or the present value of the loan’s expected future cash flows. Smaller balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and consumer loans, are specifically excluded from the impaired loan portfolio.

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. For additional information, see “Item 1 – Business – Allowance for Loan Losses” for a detailed description of how we determine the allowance for loan losses.

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 the value of 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 or loss in stockholders’ equity. The securities which 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.

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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; 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. Estimated fair values for securities are based on published or securities dealers’ market values.

Stock-Based Compensation

We recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards for all awards granted, modified, repurchased or cancelled after January 1, 2006 in accordance with SFAS No. 123(R). For the portion of outstanding awards for which the requisite service was not rendered as of January 1, 2006, the recognition of the cost of employee services is based on the grant-date fair value of those awards calculated under SFAS No. 123 for pro forma disclosures.

We estimate the per share fair value of option grants on the date of grant using the Black-Scholes option pricing model using assumptions for the expected dividend yield, expected stock price volatility, risk-free interest rate and expected option term. These assumptions are based on our analysis of our historical option exercise experience and our judgments regarding future option exercise experience and market conditions. These assumptions are subjective in nature, involve uncertainties and, therefore, cannot be determined with precision. The Black-Scholes option pricing model also contains certain inherent limitations when applied to options that are not traded on public markets.

The per share fair value of options is highly sensitive to changes in assumptions. In general, the per share fair value of options will move in the same direction as changes in the expected stock price volatility, risk-free interest rate and expected option term, and in the opposite direction as changes in the expected dividend yield. For example, the per share fair value of options will generally increase as expected stock price volatility increases, risk-free interest rate increases, expected option term increases and expected dividend yield decreases. The use of different assumptions or different option pricing models could result in materially different per share fair values of options.

Goodwill

Goodwill is presumed to have an indefinite useful life and is tested, at least annually, for impairment at the reporting unit level. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. At December 31, 2006, the carrying amount of our goodwill totaled $150.8 million. When performing the impairment test, if the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired.

We will test our goodwill for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount. The identification of additional reporting units or the use of other valuation techniques could result in materially different evaluations of impairment.

Pension and Other Postretirement Benefit Assumptions. Non-contributory retirement and post-retirement defined benefit plans are maintained for certain employees, including certain retired employees. We adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R” as of December

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31, 2006. This statement requires an employer to: (a) recognize in its statement of financial condition an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; and (c) recognize, in comprehensive income, changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for the Company as of December 31, 2008.

We provide our actuary with certain rate assumptions used in measuring our benefit obligation. The most significant of these is the discount rate used to calculate the period-end present value of the benefit obligations, and the expense to be included in the following year’s financial statements. A lower discount rate will result in a higher benefit obligation and expense, while a higher discount rate will result in a lower benefit obligation and expense. The discount rate assumption was determined based on a cash flow-yield curve model specific to our pension and post-retirement plans. We compare this rate to certain market indices, such as long-term treasury bonds, or the Moody’s or Merrill Lynch bond indices, for reasonableness. A discount rate of 6.0% was selected for the December 31, 2006 measurement date and the 2006 expense calculation.

For our pension plan, we also assumed a rate of salary increase of 4.25% for future periods. This rate is comparable to actual salary increases experienced over prior years. We assumed a return on plan assets of 8.75% for future periods. We actuarially determine the return on plan assets based on actual plan experience over the previous ten years. The actual return on plan assets was 11.47% for 2006.

For our post-retirement benefit plan, the assumed health care cost trend rate used to measure the expected cost of other benefits for 2006 was 9.25%. The rate was assumed to decrease gradually to 4.75% for 2013 and remain at that level thereafter. Changes to the assumed health care cost trend rate are expected to have an immaterial impact as we capped our obligations to contribute to the premium cost of coverage to the post-retirement health benefit plan at the 2007 premium level.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Management of Interest Rate Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our net income is primarily based on net interest 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. During 2006, the market yield curve inverted, primarily due to increases in short-term market interest rates. This interest rate environment had an adverse impact on our net interest income as our interest-bearing liabilities generally reflect movements in short-term rates, while our interest-earning assets, a majority of which have initial terms to maturity or repricing greater than one year, generally reflect movements in long-term interest rates.

The impact of interest rate changes on our interest income is generally felt in later periods than the impact on our interest expense due to differences in the timing of the maturities, repayments and repricing of our interest-earning assets and interest-bearing liabilities. The timing of the placement of interest-earning assets and interest-bearing liabilities on our balance sheet, also had an adverse impact on our net interest income as our interest-bearing liabilities generally time market rate movements while our interest-earning assets lag market rates due to commitment periods.

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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 in the area 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. Prepayment rates are generally inversely related to the prevailing market interest rate, thus, as market interest rates increase, prepayment rates tend to decrease.

The primary objectives of our interest rate risk management strategy are to:

• evaluate the interest rate risk inherent in our balance sheet accounts;

• determine the appropriate level of interest rate risk given our business plan, the current business environment and our capital and liquidity requirements; and

• manage interest rate risk in a manner consistent with the approved guidelines and policies set by our Board of Directors.

We seek to manage our asset/liability mix to help minimize the impact that interest rate fluctuations may have on our earnings. To achieve the objectives of managing interest rate risk, our Asset/Liability Committee meets weekly to discuss and monitor the market interest rate environment compared to interest rates that are offered on our products. This committee consists of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and other senior officers of the institution as required. The Asset/Liability Committee presents periodic reports to the Board of Directors at its regular meetings and, on a quarterly basis, presents a comprehensive report addressing the results of activities and strategies and the effect that changes in interest rates will have on our results of operations and the present value of our equity.

Historically, our lending activities have emphasized one- to four-family fixed-rate first and second mortgage loans. Our growth in variable-rate mortgage related assets has helped reduce our exposure to interest rate fluctuations and is expected to benefit our long-term profitability, as the rate earned on the mortgage loan will increase as prevailing market rates increase. However, the prevailing interest rate environment, and the desires of our customers, has resulted in a demand for long-term hybrid and fixed-rate first mortgage loans. This may have an adverse impact on our net interest income, particularly in a rising interest rate environment.

In the past several years, we have been originating a larger percentage of variable-rate assets in order to better manage our interest rate risk. Included in variable-rate loans and securities are loans or securities with a contractual annual rate adjustment after an initial fixed-rate period of one to ten years. These variable-rate instruments are more rate sensitive, given the potential interest rate adjustment, than the long-term fixed-rate investments we currently hold in our portfolio. Variable-rate products constituted 45.0% of loan originations, 1.0% of loan purchases and 98.7% of mortgage-backed security purchases made during the year 2006. In aggregate, 55.4% of our mortgage-related asset originations and purchases had variable rates. Of the growth in our total mortgage-related assets, 59.6% was due to growth in our variable-rate products.

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The strategy to originate and purchase a larger percentage of variable-rate assets, has lowered our percentage of fixed-rate interest-earning assets to total interest-earning assets to 60.8% at December 31, 2006 from 70.2% at December 31, 2005. Notwithstanding the decrease in the percentage of fixed-rate interest-earning assets to total interest-earning assets, our fixed-rate interest earning assets may have an adverse impact on our earnings in a rising rate environment as the interest rate on these interest-earning assets would not reprice to current market interest rates as fast as the interest rates on our interest-bearing deposits and callable borrowed funds. The strategy to originate a higher percentage of variable-rate instruments may also have an adverse impact on our net interest income and net interest margin as variable-rate interest-earning assets generally have initial interest rates lower than alternative fixed-rate investments. In 2007, we intend to originate and purchase similar percentages to 2006 of variable-rate mortgage-related assets.

Our primary source of funds has been deposits, consisting primarily of time deposits and interest-bearing demand accounts and borrowings. Our deposits have substantially shorter terms to maturity than our mortgage loan portfolio and borrowed funds. The borrowings are generally long-term to maturity, in an effort to offset our short-term deposit liabilities and assist in managing our interest rate risk. These long-term borrowings have call options that could shorten their maturities in a changing interest rate environment. We intend to continue to grow our borrowed funds, as part of our interest rate risk management strategy with new borrowings having maturities of ten years and initial non-call periods of one to five years.

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, New York and Connecticut, is subject to risks associated with the local economy. We do not own any trading assets. We did not engage in any hedging transactions that use derivative instruments (such as interest rate swaps and caps) during the year 2006 and did not have any such hedging transactions in place at December 31, 2006.

Simulation Model. We use a simulation model as our primary means to calculate and monitor the interest rate risk inherent in our portfolio. This model reports net interest income and the present value of equity in different interest rate environments, assuming an instantaneous and permanent interest rate shock to all interest rate-sensitive assets and liabilities. We assume maturing or called instruments are reinvested into the same type of product, with the rate earned or paid reset to our currently offered rate for loans and deposits, or the current market rate for securities and borrowed funds.

Our interest-earning assets and interest-bearing liabilities are generally reported at the earlier of their maturity date or next rate reset date, subject to assumptions regarding prepayment rates, non-maturity deposit decay rates, and the call of certain of our investment securities and borrowed funds. Assumptions regarding prepayment and deposit decay rates can have a significant impact on the simulation model. While we believe our assumptions are reasonable, there can be no assurance that assumed prepayment and decay rates will approximate actual future prepayment and withdrawal activity. Significant increases in market interest rates may tend to reduce prepayment speeds on our mortgage-related assets, as fewer borrowers refinance their loans. At the same time, deposit decay rates may tend to increase in the shorter-term periods, as depositors seek higher yielding investments elsewhere. If these trends occur, we could experience larger negative percent changes in our model results in the varying rate shock scenarios.

The information presented in the table below is based on the following assumptions:

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• we assumed an annual prepayment rate for fixed-rate first mortgage loans of 125% of the FHLMC fixed-rate index of moderately seasoned loans and an annual prepayment rate for variable-rate first mortgage loans of 125% of the FHLMC 5 year balloon index of new loans;

• we assumed an annual prepayment rate for our mortgage-backed securities using the prepayment rate associated with the security type;

• for savings accounts that had no stated maturity, we used decay rates (the assumed rate at which the balance of existing accounts would decline) of: 5.0% in less than six months, 5.0% in six months to one year, 5.0% in one year to two years, 5.0% in two years to three years, 10.0% in three years to five years, and 70.0% in more than five years;

• for our High Value Checking product, which is included in interest-bearing transaction accounts, we used decay rates of : 10.0% in less than six months, 10.0% in six months to one year, 15% in one to two years, 15% in two to three years, 25% in three to five years, and 25% in more than five years;

• for other interest-bearing transaction accounts that had no stated maturity, we used decay rates of : 2.5% in less than six months, 2.5% in six months to one year, 10.0% in one to two years, 10.0% in two to three years, 20.0% in three years to five years, and 55.0% in more than five years;

• for money market accounts that had no stated maturity, we used decay rates of: 2.5% in less than six months, 2.5% in six months to one year, 10.0% in one to two years, 10.0% in two to three years, 20.0% in three years to five years, and 55.0% in more than five years; and

• callable investment securities and borrowed funds are shown at the earlier of their probable call date or maturity date given the rate of the instrument in relation to the current market rate environment and the call option frequency, the model assumed no calls of investment securities and $3.56 billion of calls of borrowed funds over the next year in the current (zero basis point) change scenario.

As a primary means of managing interest rate risk, we 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. The following table reports the changes to our net interest income over various interest rate change scenarios. Our internal policy sets a maximum change of 40.0% given a positive or negative 200 basis point interest rate shock.

Change in			Percent Change in
Interest Rates			Net Interest Income
(Basis points)
	200			(11.76	)%
	100			(5.12	)
	50			(1.91	)
	—			—
	(50	)		1.19
	(100	)		(1.45	)
	(200	)		(10.09	)

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The negative change to net interest income in the positive change scenarios was primarily due to the expected calls, and subsequent reset to higher market interest rates, of our borrowed funds. The negative change to net interest income in the negative change scenarios was primarily due to the expected calls of our government-sponsored agency securities and the acceleration of the prepayment speeds on our mortgage-related assets, and the subsequent reset to lower market interest rates of the reinvested assets.

We also monitor our interest rate risk by monitoring changes in the present value of equity in the different rate environments. The present value of equity is the difference between the estimated fair value of interest rate-sensitive assets and liabilities. The changes in market value of assets and liabilities due to changes in interest rates reflect the interest sensitivity of those assets and liabilities as their values are derived from the characteristics of the asset or liability (i.e., fixed-rate, adjustable-rate, caps, floors) relative to the current interest rate environment. For example, in a rising interest rate environment the fair market value of a fixed-rate asset will decline, whereas the fair market value of an adjustable-rate asset, depending on its repricing characteristics, may not decline. Increases in the market value of assets will increase the present value of equity whereas decreases in the market value of assets will decrease the present value of equity. Conversely, increases in the market value of liabilities will decrease the present value of equity whereas decreases in the market value of liabilities will increase the present value of equity.

The following table presents the estimated present value of equity over a range of interest rate change scenarios at December 31, 2006. 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. Our current policy sets a minimum ratio of the present value of equity to the fair value of assets in the current interest rate environment (no rate shock) of 8.00%, a minimum present value ratio of 6.50% in the plus 200 basis point interest rate shock scenario and a minimum present value ratio of 6.00% in the minus 200 basis point scenario.

											Present Value of Equity
											As Percent of Present
					Present Value of Equity						Value of Assets
Change in			Dollar		Dollar			Percent			Present			Basis Point
Interest Rates			Amount		Change			Change			Value Ratio			Change
(Basis points)					(Dollars in thousands)
	200		$	3,893,098	$	(1,588,208	)		(28.97	)%		11.79	%		(364	)
	100			4,776,023		(705,283	)		(12.87	)		13.92			(151	)
	50			5,204,666		(276,640	)		(5.05	)		14.89			(54	)
	—			5,481,306		—			—			15.43			—
	(50	)		5,366,967		(114,339	)		(2.09	)		14.92			(51	)
	(100	)		4,795,263		(686,043	)		(12.52	)		13.29			(214	)
	(200	)		3,217,799		(2,263,507	)		(41.30	)		8.93			(650	)

The decreases in the present value of equity and the present value ratio in the increasing rate scenarios analysis were primarily due to the high percentage of fixed-rate mortgage loans, mortgage-backed securities and investment securities in our portfolio. At December 31, 2006, fixed-rate interest earning-assets were 60.8% of total interest-earning assets. This percentage of fixed-rate interest-earning assets to total interest-earning assets may have an adverse impact on our earnings in a rising rate environment, as these assets will not reprice in a rising rate environment.

Page 78

The decreases in the present value of equity and the present value ratio in the decreasing rate scenarios in the December 31, 2006 analysis were primarily due to the growth of our fixed-rate borrowed funds with long terms to maturity, which generally do not reprice in a decreasing rate environment.

The methods we used in simulation modeling are inherently imprecise. This type of modeling requires that we make assumptions that may not reflect the manner in which actual yields and costs respond to changes in market interest rates. For example, we assume the composition of the interest rate-sensitive assets and liabilities will remain constant over the period being measured and that all interest rate shocks will be uniformly reflected across the yield curve, regardless of the duration to maturity or repricing. The table assumes that we will take no action in response to the changes in interest rates. In addition, prepayment estimates and other assumptions within the model are subjective in nature, involve uncertainties, and, therefore, cannot be determined with precision. Accordingly, although the previous two tables may provide an estimate of our interest rate risk at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in interest rates on our net interest income or present value of equity.

Gap Analysis. The matching of the repricing characteristics of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate-sensitive” and by monitoring a financial institution’s interest rate sensitivity “gap.” An asset or liability is said to be “interest rate-sensitive” within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period.

A gap is considered negative when the amount of interest-bearing liabilities maturing or repricing within a specific time period exceeds the amount of interest-earning assets maturing or repricing within that same period. A gap is considered positive when the amount of interest-earning assets maturing or repricing within a specific time period exceeds the amount of interest-bearing liabilities maturing or repricing within that same time period. During a period of rising interest rates, a financial institution with a negative gap position would be expected, absent the effects of other factors, to experience a greater increase in the costs of its interest-bearing liabilities relative to the yields of its interest-earning assets and thus a decrease in the institution’s net interest income. An institution with a positive gap position would be expected, absent the effect of other factors, to experience the opposite result. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to reduce net interest income.

Page 79

The following table, presents the amounts of our interest-earning assets and interest-bearing liabilities outstanding at December 31, 2006, which we anticipate to reprice or mature in each of the future time periods shown. Except for prepayment activity and non-maturity deposit decay rates, we determined the amounts of assets and liabilities that reprice or mature during a particular period in accordance with the earlier of the term to rate reset or the contractual maturity of the asset or liability. For purposes of this table, assumptions used in decay rates and prepayment activity are similar to those used in the preparation of our simulation model. Borrowed funds are reported at the anticipated call date, for those that are callable within one year, or at their contractual maturity date. We have excluded originated non-accrual mortgage loans of $23.2 million and non-accrual other loans of $1.2 million from the table.

	At December 31, 2006
										More Than			More Than
				More than			More Than			Two Years			Three Years
	Six Months			Six Months			One Year to			to Three			To Five			More Than
	or Less			to One Year			Two Years			Years			Years			Five Years			Total
										(Dollars in thousands)
Interest-earning assets:
First mortgage loans	$	1,157,047		$	1,208,446		$	2,152,534		$	1,933,000		$	2,957,674		$	9,269,660		$	18,678,361
Consumer and other loans		96,586			1,366			8,615			3,867			18,205			252,249			380,888
Federal funds sold		56,616			—			—			—			—			—			56,616
Mortgage-backed securities		1,200,768			1,442,823			1,387,777			1,036,044			4,126,849			135,370			9,329,631
FHLB stock		445,006			—			—			—			—			—			445,006
Investment securities		1,055,018			722,965			1,219,635			1,001,511			1,589,176			325,279			5,913,584
Total interest-earning assets		4,011,041			3,375,600			4,768,561			3,974,422			8,691,904			9,982,558			34,804,086
Interest-bearing liabilities:
Savings accounts		40,998			41,719			40,142			40,142			80,285			561,992			805,278
Interest-bearing transaction accounts		197,565			197,565			306,361			306,361			515,942			572,017			2,095,811
Money market accounts		22,964			22,964			91,855			91,855			183,710			505,201			918,549
Time deposits		7,346,209			986,651			485,895			183,351			95,542			—			9,097,648
Borrowed funds		1,757,000			1,800,000			16,000			—			550,000			12,850,000			16,973,000
Total interest-bearing liabilities		9,364,736			3,048,899			940,253			621,709			1,425,479			14,489,210			29,890,286
Interest rate sensitivity gap	$	(5,353,695	)	$	326,701		$	3,828,308		$	3,352,713		$	7,266,425		$	(4,506,652	)	$	4,913,800
Cumulative interest rate sensitivity gap	$	(5,353,695	)	$	(5,026,994	)	$	(1,198,686	)	$	2,154,027		$	9,420,452		$	4,913,800
Cumulative interest rate sensitivity gap as a percent of total assets		(15.08)	%		(14.16)	%		(3.38)	%		6.07	%		26.53	%		13.84	%
Cumulative interest-earning assets as a percent of interest-bearing liabilities		42.83	%		59.50	%		91.02	%		115.41	%		161.17	%		116.44	%

As indicated in the gap table our interest-bearing liabilities maturing or repricing within one year exceeded our interest-earning assets maturing or repricing within the same period by $5.03 billion compared with $1.90 billion at December 31, 2005. This represented a cumulative one-year interest rate sensitivity gap as a percent of total assets of negative 14.2% at December 31, 2006, compared with negative 6.8% at December 31, 2005. The change in these ratios, year-to-year, was partially due to the larger amount of anticipated calls of borrowed funds in the current year and a shift of our customer deposits to time deposit maturities of less than one year, due to internal pricing strategies.

The methods used in the gap table are inherently imprecise. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets, such as adjustable-rate loans and mortgage-backed securities, have features that limit changes in interest rates on a short-term basis and over the life of the loan. If interest rates change, prepayment and early withdrawal levels would likely deviate from those assumed in calculating the table. Finally, the ability of borrowers to make payments on their adjustable-rate loans may decrease if interest rates increase.

Page 80

Item 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Hudson City Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition of Hudson City Bancorp, Inc. and subsidiary (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hudson City Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hudson City Bancorp, Inc. and subsidiary’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2007 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

New York, New York

February 28, 2007

Page 81

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Hudson City Bancorp, Inc.:

We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that Hudson City Bancorp, Inc. and subsidiary (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Hudson City Bancorp, Inc. and subsidiary maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Hudson City Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated February 28, 2007 expressed an unqualified opinion on those consolidated financial statements.

New York, New York

February 28, 2007

Page 82

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition

	December 31,			December 31,
	2006			2005
	(In thousands, except share and per share amounts)
Assets:
Cash and due from banks	$	125,630		$	97,672
Federal funds sold		56,616			4,587
Total cash and cash equivalents		182,246			102,259
Securities available for sale:
Mortgage-backed securities		2,404,421			2,520,633
Investment securities		4,379,615			3,962,511
Securities held to maturity:
Mortgage-backed securities (fair value of $6,804,598 and $4,288,772 at December 31, 2006 and 2005, respectively)		6,925,210			4,389,864
Investment securities (fair value of $1,502,934 and $1,508,055 at December 31, 2006 and 2005, respectively)		1,533,969			1,534,216
Total securities		15,243,215			12,407,224
Loans		19,083,617			15,062,449
Deferred loan costs		16,159			1,653
Allowance for loan losses		(30,625	)		(27,393	)
Net loans		19,069,151			15,036,709
Federal Home Loan Bank of New York stock		445,006			226,962
Foreclosed real estate, net		3,161			1,040
Accrued interest receivable		194,229			140,723
Banking premises and equipment, net		73,929			49,132
Goodwill		150,831			—
Other intangible assets, net		13,407			—
Other assets		131,406			111,304
Total Assets	$	35,506,581		$	28,075,353
Liabilities and Stockholders’ Equity:
Deposits:
Interest-bearing	$	12,917,286		$	10,941,258
Noninterest-bearing		498,301			442,042
Total deposits		13,415,587			11,383,300
Repurchase agreements		8,923,000			7,900,000
Federal Home Loan Bank of New York advances		8,050,000			3,450,000
Total borrowed funds		16,973,000			11,350,000
Accrued expenses and other liabilities		187,738			140,577
Total liabilities		30,576,325			22,873,877
Commitments and Contingencies (Note 14)
Common stock, $0.01 par value, 3,200,000,000 shares authorized; 741,466,555 shares issued; 557,787,921 and 588,905,543 shares outstanding at December 31, 2006 and 2005, respectively		7,415			7,415
Additional paid-in capital		4,553,614			4,533,329
Retained earnings		1,877,840			1,759,492
Treasury stock, at cost; 183,678,634 and 152,561,012 shares at December 31, 2006 and 2005, respectively		(1,230,793	)		(798,232	)
Unallocated common stock held by the employee stock ownership plan		(228,257	)		(234,264	)
Unearned common stock held by the recognition and retention plan		—			(2,815	)
Accumulated other comprehensive loss, net of tax		(49,563	)		(63,449	)
Total stockholders’ equity		4,930,256			5,201,476
Total Liabilities and Stockholders’ Equity	$	35,506,581		$	28,075,353

See accompanying notes to consolidated financial statements.

Page 83

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income

	Year Ended December 31,
	2006		2005		2004
	(In thousands, except per share data)
Interest and Dividend Income:
Interest and fees on first mortgage loans	$	932,550	$	689,435	$	539,966
Interest and fees on consumer and other loans		19,698		10,786		8,650
Interest on mortgage-backed securities held to maturity		262,417		182,309		174,596
Interest on mortgage-backed securities available for sale		119,578		90,754		67,739
Interest on investment securities held to maturity		74,592		72,582		41,435
Interest and dividends on investment securities available for sale		181,259		118,635		77,879
Dividends on Federal Home Loan Bank of New York stock		16,507		9,394		3,213
Interest on federal funds sold		8,242		5,013		1,580
Total interest and dividend income		1,614,843		1,178,908		915,058
Interest Expense:
Interest on deposits		436,096		293,736		214,813
Interest on borrowed funds		565,514		323,038		215,253
Total interest expense		1,001,610		616,774		430,066
Net interest income		613,233		562,134		484,992
Provision for Loan Losses		—		65		790
Net interest income after provision for loan losses		613,233		562,069		484,202
Non-Interest Income:
Service charges and other income		6,287		5,267		5,128
Gains on securities transactions, net		4		2,740		11,429
Total non-interest income		6,291		8,007		16,557
Non-Interest Expense:
Compensation and employee benefits		103,443		83,211		79,195
Net occupancy expense		25,015		20,211		16,035
Federal deposit insurance assessment		1,695		1,656		1,644
Computer and related services		2,812		2,498		2,041
Other expense		25,990		20,127		19,433
Total non-interest expense		158,955		127,703		118,348
Income before income tax expense		460,569		442,373		382,411
Income Tax Expense		171,990		166,318		143,145
Net income	$	288,579	$	276,055	$	239,266
Basic Earnings Per Share	$	0.54	$	0.49	$	0.41
Diluted Earnings Per Share	$	0.53	$	0.48	$	0.40

See accompanying notes to consolidated financial statements.

Page 84

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity

	Year Ended December 31,
	2006			2005			2004
	(In thousands , except share amounts)
Common Stock	$	7,415		$	7,415		$	7,415
Additional paid-in capital:
Balance at beginning of year		4,533,329			565,403			538,487
Common stock offering		—			3,953,001			—
Unvested RRP awards reclassified as additonal paid-in-capital		(2,815	)		—			—
Stock option plan expense		5,526			—			—
Tax benefit from stock plans		8,633			9,431			20,880
Allocation of ESOP stock		6,700			5,632			8,544
Vesting of RRP stock		2,241			(138	)		(2,508	)
Balance at end of year		4,553,614			4,533,329			565,403
Retained Earnings:
Balance at beginning of year		1,759,492			1,588,792			1,396,257
Net Income		288,579			276,055			239,266
Dividends paid on common stock ($0.30, $0.268, and $0.218 per share, respectively)		(161,374	)		(102,103	)		(40,482	)
Exercise of stock options		(8,857	)		(3,252	)		(6,249	)
Balance at end of year		1,877,840			1,759,492			1,588,792
Treasury Stock:
Balance at beginning of year		(798,232	)		(696,812	)		(547,859	)
Purchase of common stock		(448,237	)		(107,499	)		(161,662	)
Exercise of stock options		15,676			6,079			12,709
Balance at end of year		(1,230,793	)		(798,232	)		(696,812	)
Unallocated common stock held by the ESOP:
Balance at beginning of year		(234,264	)		(47,552	)		(49,513	)
Purchase of ESOP stock		—			(189,348	)		—
Allocation of ESOP stock		6,007			2,636			1,961
Balance at end of year		(228,257	)		(234,264	)		(47,552	)
Unallocated common stock held by the RRP:
Balance at beginning of year		(2,815	)		(5,267	)		(9,463	)
Unvested RRP awards reclassified as additonal paid-in-capital		2,815			—			—
Purchase of RRP stock		—			(1,290	)		(7,299	)
Vesting of RRP stock		—			3,742			11,495
Balance at end of year		—			(2,815	)		(5,267	)
Accumulated other comprehensive loss:
Balance at beginning of year		(63,449	)		(9,095	)		(5,958	)
Unrealized holding gains(losses) arising during period, net of tax(benefit) of $9,765 for 2006, ($35,884) for 2005 and $2,503 for 2004		14,143			(51,958	)		3,623
Reclassification adjustment for gains in net income, net of tax of ($2) for 2006, ($1,119) for 2005 and ($4,669) for 2004		(2	)		(1,621	)		(6,760	)
Funded status of defined benefit postretirement plans upon adoption of SFAS		(1,030	)		—			—
No. 158, net of tax
Minimum pension liability adjustment		775			(775	)		—
Balance at end of year		(49,563	)		(63,449	)		(9,095	)
Total Stockholders’ Equity	$	4,930,256		$	5,201,476		$	1,402,884
Summary of comprehensive income
Net income	$	288,579		$	276,055		$	239,266
Other comprehensive income(loss), net of tax		13,886			(54,354	)		(3,137	)
Total comprehensive income	$	302,465		$	221,701		$	236,129

See accompanying notes to consolidated financial statements.

Page 85

Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows

	Year Ended December 31,
	2006			2005			2004
				(In thousands)
Cash Flows from Operating Activities:
Net income	$	288,579		$	276,055		$	239,266
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization expense		21,952			10,197			24,129
Provision for loan losses		—			65			790
Gains on securities transactions, net		(4	)		(2,740	)		(11,429	)
Share-based compensation, including committed ESOP shares		20,474			11,872			19,492
Deferred tax benefit		(3,659	)		(6,505	)		(6,912	)
Increase in accrued interest receivable		(48,580	)		(43,233	)		(17,270	)
(Increase) decrease in other assets		(4,166	)		2,070			6,418
Increase in accrued expenses and other liabilities		46,571			24,005			15,583
Tax benefit from stock plans		—			9,431			20,880
Net Cash Provided by Operating Activities		321,167			281,217			290,947
Cash Flows from Investing Activities:
Originations of loans		(2,307,487	)		(2,194,774	)		(1,464,641	)
Purchases of loans		(2,712,148	)		(3,676,260	)		(3,122,409	)
Payments on loans		1,754,157			2,154,125			2,016,447
Principal collection of mortgage-backed securities held to maturity		773,343			960,630			1,445,507
Purchases of mortgage-backed securities held to maturity		(3,313,668	)		(1,604,473	)		(921,765	)
Principal collection of mortgage-backed securities available for sale		741,200			499,387			282,901
Proceeds from sales of mortgage-backed securities available for sale		186,169			230,632			510,496
Purchases of mortgage-backed securities available for sale		(617,172	)		(1,675,428	)		(1,278,921	)
Proceeds from maturities and calls of investment securities held to maturity		256			100,043			436,770
Purchases of investment securities held to maturity		—			(300,000	)		(1,769,643	)
Proceeds from maturities and calls of investment securities available for sale		850,013			1,600,029			986,343
Proceeds from sales of investment securities available for sale		112,157			9,980			—
Purchases of investment securities available for sale		(1,250,010	)		(4,008,680	)		(337,306	)
Purchases of Federal Home Loan Bank of New York stock		(233,236	)		(104,162	)		—
Redemption of Federal Home Loan Bank of New York stock		18,000			17,200			24,850
Cash paid in purchase acquistion, net of cash acquired		(197,653	)		—			—
Purchases of premises and equipment, net		(22,557	)		(18,566	)		(9,023	)
Net proceeds from sale of foreclosed real estate		1,449			1,588			2,509
Net Cash Used in Investment Activities		(6,217,187	)		(8,008,729	)		(3,197,885	)
Cash Flows from Financing Activities:
Net increase (decrease) in deposits		970,166			(94,000	)		1,023,520
Proceeds from borrowed funds		9,125,000			5,125,000			3,750,000
Principal payments on borrowed funds		(3,525,000	)		(925,000	)		(1,750,000	)
Cash proceeds from the common stock offering — net		—			3,806,627			—
Consolidation of Hudson City, MHC		—			146,374			—
Dividends paid		(161,374	)		(102,103	)		(40,482	)
Purchases of stock by the employee stock ownership plan		—			(189,348	)		—
Purchases of stock by the recognition and retention plan		—			(1,290	)		(7,299	)
Purchases of treasury stock		(448,237	)		(107,499	)		(161,662	)
Exercise of stock options		6,819			2,827			6,460
Tax benefit from stock plans		8,633			—			—
Net Cash Provided by Financing Activities		5,976,007			7,661,588			2,820,537
Net Increase (Decrease) in Cash and Cash Equivalents		79,987			(65,924	)		(86,401	)
Cash and Cash Equivalents at Beginning of Year		102,259			168,183			254,584
Cash and Cash Equivalents at End of Year	$	182,246		$	102,259		$	168,183
Supplemental Disclosures:
Interest paid	$	969,606		$	599,037		$	422,862
Loans transferred to foreclosed real estate	$	3,642		$	1,750		$	2,348
Income taxes paid	$	172,382		$	167,200		$	133,800

     See accompanying notes to consolidated financial statements.

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1.	Organization
	Hudson City Bancorp, Inc. (“Hudson City Bancorp”) is a Delaware corporation organized in March 1999 by Hudson City Savings Bank (“Hudson City Savings”) in connection with the conversion and reorganization of Hudson City Savings from a New Jersey mutual savings bank into a two-tiered mutual savings bank holding company structure. Prior to June 7, 2005, a majority of Hudson City Bancorp’s common stock was owned by Hudson City, MHC, a mutual holding company
	Plan of Conversion and Reorganization
	On June 7, 2005, Hudson City Bancorp, Hudson City Savings and Hudson City, MHC reorganized from a two-tier mutual holding company structure to a stock holding company structure, and Hudson City Bancorp completed a stock offering, all in accordance with a Plan of Conversion and Reorganization (the “Plan”). Under the terms of the Plan, Hudson City, MHC, which owned 65.77% of the outstanding common stock of Hudson City Bancorp immediately prior to the conversion, merged into Hudson City Bancorp and the shares of Hudson City Bancorp common stock owned by Hudson City, MHC were cancelled. Hudson City Bancorp sold 392,980,580 shares of common stock at a price of $10.00 per share raising approximately $3.93 billion. After incremental costs of $125.0 million directly attributable to the stock offering, net proceeds from the stock offering amounted to $3.80 billion. The amount reported in the Statements of Changes in Stockholders’ Equity reflects the $145.8 million consolidation of the deposit of Hudson City, MHC. In accordance with the Plan, we also effected a stock split pursuant to which each share of common stock outstanding or held as treasury stock before completion of the offering was split into 3.206 shares. Hudson City Bancorp contributed $3.00 billion of the net proceeds from the offering to Hudson City Savings Bank.
	Acquisition of Sound Federal
	On July 14, 2006, we completed the acquisition of Sound Federal Bancorp (the “Acquisition”), for $20.75 per share in cash, representing an aggregate transaction value of approximately $265 million. As a result of the Acquisition, we added $1.21 billion in assets, fair value of approximately $1.18 billion, and $1.06 billion in deposits, fair value of approximately $1.05 billion. The Acquisition was accounted for using the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed were recorded at their fair values at the consummation date. Related operating results are included in our consolidated financial statements for periods after the consummation date. The excess of the total acquisition cost over the fair value of the net assets acquired, or “goodwill”, totaled $150.8 million and was recognized as an intangible asset at the consummation date. Also as a result of the Acquisition we recorded a core deposit intangible of $13.7 million.
2.	Summary of Significant Accounting Policies
	Basis of Presentation
	The following are the significant accounting and reporting policies applied by Hudson City Bancorp and its wholly-owned subsidiary, Hudson City Savings, in the preparation of the accompanying consolidated financial statements. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles. All significant intercompany transactions and balances have been eliminated in consolidation. As used in these consolidated financial statements, “Hudson City” refers to Hudson City Bancorp, Inc. and its consolidated subsidiary, depending on the context. In preparing the consolidated financial statements, management

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is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and income for the period. Actual results could differ from these estimates.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are sold for one-day periods. Cash reserves are required to be maintained on deposit with the Federal Reserve Bank based on deposits. The average amount of the reserves on deposit for the years ended December 31, 2006 and 2005 was approximately $7,211,000 and $9,540,000, respectively.

Mortgage-Backed Securities

Mortgage-backed securities include pass-through certificates, which represent participating interests in pools of long-term first mortgage loans originated and serviced by third-party issuers of the securities, and real estate mortgage investment conduits (“REMICs”), which are debt securities that are secured by mortgage loans or other mortgage-backed securities.

Mortgage-backed securities are classified as either held to maturity or available for sale. Mortgage-backed securities classified as held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Amortization and accretion is reflected as an adjustment to interest income over the life of the security using the effective interest method. Hudson City has both the ability and the positive intent to hold these investment securities to maturity. Mortgage-backed securities available for sale are carried at fair value, with unrealized gains and losses, net of tax, reported as a component of other comprehensive income or loss, which is included in stockholders’ equity. Realized gains and losses are recognized when securities are sold using the specific identification method. The estimated fair market value of these securities is determined by use of quoted market prices.

Investment Securities

Investment securities are classified as either held to maturity or available for sale. Investment securities classified as held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Amortization and accretion is reflected as an adjustment to interest income over the life of the security using the effective interest method. Hudson City has both the ability and the positive intent to hold these investment securities to maturity. Securities available for sale are carried at fair value, with unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive income or loss, which is included in stockholders’ equity. Realized gains and losses are recognized when securities are sold or called using the specific identification method. The estimated fair market value of all investment securities is determined by use of quoted market prices.

Security Impairment

We periodically perform analyses to test for impairment of various assets. We conduct periodic reviews and evaluations of our 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 adjust the carrying amount of the security by writing it down to fair market value through a charge to current period operations.

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Loans

Loans are stated at their principal amounts outstanding. Interest income on loans is accrued and credited to income as earned. Net loan origination fees and broker costs are deferred and amortized to interest income over the life of the loan using the effective interest method. Purchased loans are stated at their principal amounts outstanding, adjusted for amortization of premiums and accretion of discounts. Such amortization and accretion is reflected as an adjustment to interest income over the life of the purchased loan using the effective interest method.

Existing customers are permitted to modify the terms of their mortgage loan, for a fee, to the terms of the currently offered fixed-rate product with a similar or reduced period to maturity than the current remaining period of their existing loan. The modified terms of these loans are at least as favorable to us as the terms of mortgage loans we offer to new customers. The fee assessed for modifying the mortgage loan is deferred and accreted over the life of the modified loan using the effective interest method. Such accretion is reflected as an adjustment to interest income. We deem the specific facts and circumstances surrounding the modification of the terms of the loan (i.e. the change in rate and period to maturity), to be more than a minor change to the loan. Accordingly, pre-modification deferred fees or costs associated with the mortgage loan are recognized in interest income at the time of the modification.

A loan is considered delinquent when we have not received a payment within 30 days of its contractual due date. The accrual of income on loans that do not carry private mortgage insurance or are not guaranteed by a federal agency is generally discontinued when interest or principal payments are 90 days in arrears or when the timely collection of such income is doubtful. Loans on which the accrual of income has been discontinued are designated as non-accrual loans and outstanding interest previously credited is reversed. It is recognized subsequently in the period collected or when the ultimate collection of principal is no longer in doubt. A non-accrual loan is returned to accrual status when factors indicating doubtful collection no longer exist.

Hudson City defines the population of potential impaired loans to be all non-accrual commercial real estate and multi-family loans. Impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral or the present value of the loan’s expected future cash flows. Smaller balance homogeneous loans that are collectively evaluated for impairment, such as residential mortgage loans and consumer loans, are specifically excluded from the impaired loan portfolio.

Allowance for Loan Losses

The allowance for loan losses has been determined in accordance with U.S. generally accepted accounting principles, 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.

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 resulting in a loan concentration in residential first mortgage loans at December

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31, 2006. As a result of our lending practices, we also have a concentration of loans secured by real property located in New Jersey, New York and Connecticut. 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 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, charge-offs and future levels of loan loss provisions. We consider it important to maintain the ratio of our allowance for loan losses to total loans at an acceptable level given current economic conditions, interest rates and the composition of our portfolio.

Due to the nature of our loan portfolio, our evaluation of the adequacy of our allowance for loan losses is performed on a “pooled” basis. We evaluated the multi-family and commercial mortgage, construction and unsecured commercial loans transferred in the Acquisition in a similar manner as our previously existing portfolio. Each month we prepare an analysis which categorizes the entire loan portfolio by certain risk characteristics such as loan type (one- to four-family, multi-family, etc.), loan source (originated or purchased) 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. These factors are periodically reviewed for appropriateness giving consideration to charge-off history and delinquency trends. We use this analysis, as a tool, together with principal 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 in geographic areas where our loans are located, 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 analysis, the amount of the allowance for loan losses in relation to the total loan balance, loan portfolio growth, U.S. generally accepted accounting principles and regulatory guidance. We have applied this process consistently and have not made significant changes in the estimation methods and assumptions that we have used.

Foreclosed Real Estate

Foreclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure. After foreclosure, foreclosed properties held for sale are carried at the lower of fair value minus estimated cost to sell, or at cost. Fair market value is generally based on recent appraisals. Subsequent provisions, which may result from the ongoing periodic valuations of these properties, are charged to income in the period in which they are identified and credited to a valuation allowance account. Foreclosed real estate is reported net of the valuation allowance. Carrying costs, such as maintenance and taxes, are charged to operating expenses as incurred.

Banking Premises and Equipment

Land is carried at cost. Buildings, leasehold improvements and furniture, fixtures and equipment are carried at cost, less accumulated depreciation and leasehold amortization. Buildings are depreciated over their estimated useful lives using the straight-line method. Furniture, fixtures and equipment are depreciated over their estimated useful lives using the double-declining balance method. Leasehold

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improvements are amortized over the shorter of their estimated useful lives or the term of the respective leases. The costs for major improvements and renovations are capitalized, while maintenance, repairs and minor improvements are charged to operating expenses as incurred. Gains and losses on dispositions are reflected currently as other non-interest income or expense.

Goodwill and Other Intangible Assets

Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually using a fair-value based approach. We did not recognize any impairment of goodwill for the year ended December 31, 2006. Other intangible assets include the core deposit intangible recorded as a result of the Acquisition. These intangible assets are amortizing intangible assets and as such are accounted evaluated for impairment in accordance with SFAS No. 144, “Accounting for the Impairment of Disposal or Long-Lived Assets.”

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Employee Benefit Plans

Hudson City maintains certain noncontributory retirement and postretirement benefit plans, which cover employees hired prior to August 1, 2005 who have met the eligibility requirements of the plans. Certain health care and life insurance benefits are provided for retired employees. The expected cost of benefits provided for retired employees is actuarially determined and accrued ratably from the date of hire to the date the employee is fully eligible to receive the benefits.

We adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R” as of December 31, 2006. This statement requires an employer to: (a) recognize in its statement of financial position an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; and (c) recognize, in comprehensive income, changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial condition is effective for the Company as of December 31, 2008.

The employee stock ownership plan (“ESOP”) is accounted for in accordance with the provisions of Statement of Position 93-6, “Employer’s Accounting for Employee Stock Ownership Plans.” The funds borrowed by the ESOP from Hudson City Bancorp to purchase Hudson City Bancorp common stock are being repaid from Hudson City Savings’ contributions and dividends paid on unallocated

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ESOP shares over a period of up to 40 years. Hudson City common stock not allocated to participants is recorded as a reduction of stockholders’ equity at cost. Compensation expense for the ESOP is based on the average price of our stock during each quarter.

Stock Based Compensation

Effective January 1, 2006, Hudson City Bancorp adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” using the modified prospective method. Stock-based compensation expense is recognized for new stock-based awards granted, modified, repurchased or cancelled after January 1, 2006, and the remaining portion of the requisite service under previously granted unvested awards outstanding as of January 1, 2006 based upon the grant-date fair value of those awards. There was no impact of the adoption on previously reported periods, in accordance with the transition guidance in SFAS No. 123(R). Prior to January 1, 2006, Hudson City accounted for employee stock options and restricted stock grants using the intrinsic value method of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under this method, Hudson City did not recognize any stock-based compensation expense for employee stock options, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

Bank-Owned Life Insurance

Bank-owned life insurance (“BOLI”) is accounted for in accordance with FASB Technical Bulletin No. 85-4, “Accounting for Purchases of Life Insurance” and EITF No. 06-04, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Agreements.” The cash surrender value of BOLI is recorded on our consolidated statements of financial condition as an asset and the change in the cash surrender value is recorded as non-interest income. The amount by which any death benefits received exceeds a policy’s cash surrender value is recorded in non-interest income at the time of receipt. A liability is also recorded on our consolidated balance sheet for post-retirement death benefits provided by the split-dollar endorsement policy. A corresponding expense is recorded in non-interest expense.

Borrowed Funds

Hudson City enters into sales of securities under agreements to repurchase with selected brokers and the Federal Home Loan Bank (“FHLB”). These agreements are recorded as financing transactions as Hudson City maintains effective control over the transferred securities. The dollar amount of the securities underlying the agreements continues to be carried in Hudson City’s securities portfolio. The obligations to repurchase the securities are reported as a liability in the consolidated statements of financial condition. The securities underlying the agreements are delivered to the party with whom each transaction is executed. They agree to resell to Hudson City the same securities at the maturity or call of the agreement. Hudson City retains the right of substitution of the underlying securities throughout the terms of the agreements.

Hudson City has also obtained advances from the FHLB, which are generally secured by a blanket lien against our mortgage portfolio. Total borrowings with the FHLB are generally limited to approximately twenty times the amount of FHLB stock owned or the fair value of our mortgage portfolio, whichever is greater.

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	Comprehensive Income
	Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes items such as unrealized gains and losses on securities available for sale, net of tax and the changes in the unrealized gains or losses and prior service costs or credits of defined benefit pension and other postretirement plans, net of tax. Comprehensive income is presented in the consolidated statements of changes in stockholders’ equity.
	Segment Information
	SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires public companies to report certain financial information about significant revenue-producing segments of the business for which such information is available and utilized by the chief operating decision maker. As a community-oriented financial institution, substantially all of our operations involve the delivery of loan and deposit products to customers. Management makes operating decision and assesses performance based on an ongoing review of these community banking operations, which constitute our only operating segment for financial reporting purposes.
	Earnings Per Share
	Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or resulted in the issuance of common stock. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. Shares issued and shares reacquired during any period are weighted for the portion of the period that they were outstanding.
	In computing both basic and diluted earnings per share, the weighted average number of common shares outstanding includes the ESOP shares previously allocated to participants and shares committed to be released for allocation to participants and the RRP shares which have vested or have been allocated to participants. ESOP and RRP shares that have been purchased but have not been committed to be released have not been considered in computing basic and diluted earnings per share.
3.	Stock Repurchase Programs
	We have previously announced several stock repurchase programs. Under our stock repurchase programs, shares of Hudson City Bancorp common stock may be purchased in the open market or through other privately negotiated transactions, depending on market conditions. The repurchased shares are held as treasury stock for general corporate use. During the years ended December 31, 2006 and 2005, we purchased 33,747,243 and 9,119,768 shares of our common stock at an aggregate cost of $448.2 million and $107.5 million, respectively. At December 31, 2006, there were 44,314,000 shares remaining to be repurchased under our existing stock repurchase program.

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4.	Mortgage-Backed Securities
The amortized cost and estimated fair market value of mortgage-backed securities at December 31 are as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair Market
	Cost		Gains		Losses			Value
			(In thousands)
2006
Held to Maturity:
GNMA pass-through certificates	$	215,161	$	1,491	$	(148	)	$	216,504
FNMA pass-through certificates		3,233,852		6,796		(49,324	)		3,191,324
FHLMC pass-through certificates		3,069,884		9,197		(59,086	)		3,019,995
FHLMC and FNMA — REMICs		406,313		4		(29,542	)		376,775
Total held to maturity	$	6,925,210	$	17,488	$	(138,100	)	$	6,804,598
Available for Sale:
GNMA pass-through certificates	$	1,708,855	$	638	$	(12,778	)	$	1,696,715
FNMA pass-through certificates		592,514		—		(17,221	)		575,293
FHLMC pass-through certificates		135,424		—		(3,011	)		132,413
Total available for sale	$	2,436,793	$	638	$	(33,010	)	$	2,404,421
2005
Held to Maturity:
GNMA pass-through certificates	$	293,680	$	1,089	$	(437	)	$	294,332
FNMA pass-through certificates		2,535,361		2,685		(48,944	)		2,489,102
FHLMC pass-through certificates		1,108,195		758		(26,389	)		1,082,564
FHLMC and FNMA — REMICs		452,628		13		(29,867	)		422,774
Total held to maturity	$	4,389,864	$	4,545	$	(105,637	)	$	4,288,772
Available for Sale:
GNMA pass-through certificates	$	1,726,111	$	72	$	(26,051	)	$	1,700,132
FNMA pass-through certificates		683,604		—		(17,119	)		666,485
FHLMC pass-through certificates		156,835		—		(2,819	)		154,016
Total available for sale	$	2,566,550	$	72	$	(45,989	)	$	2,520,633

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The following tables summarize the fair value and unrealized losses of those mortgage-backed securities which reported an unrealized loss at December 31, 2006 and 2005, and if the unrealized loss position was continuous for the twelve months prior to December 31, 2006 and 2005.

	Less Than 12 Months					12 Months or Longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(In thousands)
2006
Held to Maturity:
GNMA pass-through certificates	$	156	$	(1	)	$	27,078	$	(147	)	$	27,234	$	(148	)
FNMA pass-through certificates		130,800		(357	)		2,008,981		(48,967	)		2,139,781		(49,324	)
FHLMC pass-through certificates		138,348		(214	)		858,612		(58,872	)		996,960		(59,086	)
FHLMC and FNMA — REMIC’s		—		—			376,245		(29,542	)		376,245		(29,542	)
Total held to maturity		269,304		(572	)		3,270,916		(137,528	)		3,540,220		(138,100	)
Available for Sale:
GNMA pass-through certificates	$	311,551	$	(1,044	)	$	1,196,044	$	(11,734	)	$	1,507,595	$	(12,778	)
FNMA pass-through certificates		—		—			575,293		(17,221	)		575,293		(17,221	)
FHLMC pass-through certificates		—		—			132,413		(3,011	)		132,413		(3,011	)
Total available for sale		311,551		(1,044	)		1,903,750		(31,966	)		2,215,301		(33,010	)
Total	$	580,855	$	(1,616	)	$	5,174,666	$	(169,494	)	$	5,755,521	$	(171,110	)
2005
Held to Maturity:
GNMA pass-through certificates	$	67,545	$	(249	)	$	11,732	$	(188	)	$	79,277	$	(437	)
FNMA pass-through certificates		2,214,642		(48,760	)		6,056		(184	)		2,220,698		(48,944	)
FHLMC pass-through certificates		953,410		(25,267	)		42,889		(1,122	)		996,299		(26,389	)
FHLMC and FNMA — REMIC’s		401,538		(29,361	)		20,192		(506	)		421,730		(29,867	)
Total held to maturity		3,637,135		(103,637	)		80,869		(2,000	)		3,718,004		(105,637	)
Available for Sale:
GNMA pass-through certificates	$	1,625,731	$	(25,391	)	$	40,082	$	(660	)	$	1,665,813	$	(26,051	)
FNMA pass-through certificates		622,989		(15,546	)		43,496		(1,573	)		666,485		(17,119	)
FHLMC pass-through certificates		154,016		(2,819	)		—		—			154,016		(2,819	)
Total available for sale		2,402,736		(43,756	)		83,578		(2,233	)		2,486,314		(45,989	)
Total	$	6,039,871	$	(147,393	)	$	164,447	$	(4,233	)	$	6,204,318	$	(151,626	)

The unrealized losses are primarily due to the changes in market interest rates subsequent to purchase. At December 31, 2006, a total of 317 securities were in a continuous unrealized loss position for more than 12 months (45 at December 31, 2005). We have not classified these securities as other-than temporarily impaired as the scheduled principal and interest payments have been made, we anticipate collecting the entire principal balance as scheduled, we believe the price variation is temporary in nature and we have the intent and ability to hold these securities to maturity or for a sufficient amount of time to recover the recorded principal.

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The amortized cost and estimated fair market value of mortgage-backed securities held to maturity and available for sale at December 31, 2006, by contractual maturity, are shown below.

			Estimated
	Amortized		Fair Market
	Cost		Value
	(In thousands)
Held to Maturity:
Due in one year or less	$	262	$	263
Due after one year through five years		7,167		7,279
Due after five years through ten years		7,456		7,708
Due after ten years		6,910,325		6,789,348
Total held to maturity	$	6,925,210	$	6,804,598
Available for Sale:
Due after ten years	$	2,436,793	$	2,404,421
Total available for sale	$	2,436,793	$	2,404,421

There were no gross realized gains on sales of mortgage-backed securities available for sale during 2006. There were gross unrealized gains on sales of mortgage-backed securities of $2,738,000 and $11,429,000 during 2005 and 2004, respectively. There were no sales of mortgage-backed securities held-to-maturity during the years ended December 31, 2006, 2005 and 2004.

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5. Investment Securities

The amortized cost and estimated fair market value of investment securities at December 31 are as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair Market
	Cost		Gains		Losses			Value
	(In thousands)
2006
Held to Maturity:
United States government-sponsored agencies	$	1,533,059	$	—	$	(31,045	)	$	1,502,014
Municipal bonds		910		10		—			920
Total held to maturity	$	1,533,969	$	10	$	(31,045	)	$	1,502,934
Available for Sale:
United States government-sponsored agencies	$	4,422,300	$	94	$	(50,099	)	$	4,372,295
Corporate bonds		58		—		(1	)		57
Equity securities		6,935		328		—			7,263
Total available for sale	$	4,429,293	$	422	$	(50,100	)	$	4,379,615
2005
Held to Maturity:
United States government-sponsored agencies	$	1,533,050	$	—	$	(26,185	)	$	1,506,865
Municipal bonds		1,166		24		—			1,190
Total held to maturity	$	1,534,216	$	24	$	(26,185	)	$	1,508,055
Available for Sale:
United States government-sponsored agencies	$	4,022,316	$	—	$	(60,138	)	$	3,962,178
Corporate bonds		67		—		—			67
Equity securities		168		98		—			266
Total available for sale	$	4,022,551	$	98	$	(60,138	)	$	3,962,511

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The following tables summarize the fair value and unrealized losses of those investment securities which reported an unrealized loss at December 31, 2006 and 2005, and if the unrealized loss position was continuous for the twelve months prior to December 31, 2006 and 2005.

	Less Than 12 Months					12 Months or Longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(In thousands)
2006
Held to Maturity:
United States government - -sponsored agencies	$	—	$	—		$	1,502,014	$	(31,045	)	$	1,502,014	$	(31,045	)
Total held to maturity securities		—		—			1,502,014		(31,045	)		1,502,014		(31,045	)
Available for Sale:
United States government - -sponsored agencies	$	453,267	$	(1,421	)	$	3,668,934	$	(48,678	)	$	4,122,201	$	(50,099	)
Corporate bonds		57		(1	)		—		—			57		(1	)
Total available for sale securities		453,324		(1,422	)		3,668,934		(48,678	)		4,122,258		(50,100	)
Total	$	453,324	$	(1,422	)	$	5,170,948	$	(79,723	)	$	5,624,272	$	(81,145	)
2005
Held to Maturity:
United States government - -sponsored agencies	$	1,213,548	$	(19,501	)	$	293,317	$	(6,684	)	$	1,506,865	$	(26,185	)
Total held to maturity securities		1,213,548		(19,501	)		293,317		(6,684	)		1,506,865		(26,185	)
Available for Sale:
United States government - -sponsored agencies	$	2,961,446	$	(24,332	)	$	1,000,732	$	(35,806	)	$	3,962,178	$	(60,138	)
Total available for sale securities		2,961,446		(24,332	)		1,000,732		(35,806	)		3,962,178		(60,138	)
Total	$	4,174,994	$	(43,833	)	$	1,294,049	$	(42,490	)	$	5,469,043	$	(86,323	)

The unrealized losses are primarily due to changes in market interest rates subsequent to purchase. At December 31, 2006, a total of 128 securities were in a continuous unrealized loss position for more than 12 months (34 at December 31, 2005). We have not classified these securities as other-than temporarily impaired as the scheduled coupon payments have been made, we anticipate collecting the entire principal balance as scheduled, we believe the price variation is temporary in nature and we have the intent and ability to hold these securities to maturity or for a sufficient amount of time to recover the recorded principal.

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The amortized cost and estimated fair market value of investment securities held to maturity and available for sale at December 31, 2006, by contractual maturity, are shown below. The expected maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations. Equity securities have been excluded from this table.

			Estimated
	Amortized		Fair Market
	Cost		Value
	(In thousands)
Held to Maturity:
Due in one year or less	$	5	$	5
Due after one year through five years		846,161		831,402
Due after five years through ten years		66,273		65,181
Due after ten years		621,530		606,346
Total held to maturity	$	1,533,969	$	1,502,934
Available for Sale:
Due in one year or less	$	1,325,047	$	1,320,715
Due after one year through five years		2,828,150		2,792,536
Due after five years through ten years		269,161		259,101
Total available for sale	$	4,422,358	$	4,372,352

There were no gains or losses from investment securities transactions during 2006. Gross realized losses on sales of investment securities available for sale during 2005 were $20,000. Gross realized gains on calls of investment securities available for sale were $4,000 and $22,000 during 2006 and 2005, respectively. There were no gains or losses from investment securities transactions during 2004. There were no sales of investment securities held to maturity during the years ended December 31, 2006, 2005, and 2004. The carrying value of securities pledged as required security for deposits and for other purposes required by law amounted to $15,191,000 and $15,205,000 at December 31, 2006 and 2005, respectively.

6. Loans and Allowance for Loan Losses

Loans at December 31 are summarized as follows:

	2006		2005
	(In thousands)
First mortgage loans:
One- to four-family	$	18,561,467	$	14,780,819
FHA/VA		29,573		43,672
Multi-family and commercial		69,322		2,320
Construction		41,150		—
Total first mortgage loans		18,701,512		14,826,811
Consumer and other loans:
Fixed–rate second mortgages		274,028		205,826
Home equity credit lines		97,644		29,150
Other		10,433		662
Total consumer and other loans		382,105		235,638
Total loans	$	19,083,617	$	15,062,449

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The ultimate ability to collect the loan portfolio is subject to changes in the real estate market and future economic conditions. There are no loans classified as impaired at December 31, 2006. There were no loans held for sale at December 31, 2006.

The following is a comparative summary of loans on which the accrual of income has been discontinued and loans that are contractually past due 90 days or more but have not been classified non-accrual at December 31:

	2006		2005
	(In thousands)
Non-accrual loans	$	24,368	$	9,651
Accruing loans delinquent 90 days or more		5,630		9,661
Total non-performing loans	$	29,998	$	19,312

The total amount of interest income received during the year on non-accrual loans outstanding and additional interest income on non-accrual loans that would have been recognized if interest on all such loans had been recorded based upon original contract terms is immaterial. Hudson City is not committed to lend additional funds to borrowers on non-accrual status.

An analysis of the allowance for loan losses at December 31 follows:

	2006			2005			2004
	(In thousands)
Balance at beginning of year	$	27,393		$	27,319		$	26,547
Charge-offs		(79	)		(10	)		(20	)
Recoveries		3			19			2
Net (charge-offs) recoveries		(76	)		9			(18	)
Provision for loan losses		—			65			790
Allowance transferred in Acquisition		3,308			—			—
Balance at end of year	$	30,625		$	27,393		$	27,319

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7. Banking Premises and Equipment, net

A summary of the net carrying value of banking premises and equipment at December 31 is as follows:

	2006			2005
	(In thousands)
Land	$	5,806		$	5,215
Buildings		50,889			34,199
Leasehold improvements		33,921			23,435
Furniture, fixtures and equipment		67,601			53,722
Total acquisition cost		158,217			116,571
Accumulated depreciation and amortization		(84,288	)		(67,439	)
Total banking premises and equipment, net	$	73,929		$	49,132

Amounts charged to net occupancy expense for depreciation and amortization of banking premises and equipment amounted to $8,562,000, $5,833,000 and $3,978,000 in 2006, 2005 and 2004, respectively.

Hudson City has entered into non-cancelable operating lease agreements with respect to banking premises and equipment. It is expected that many agreements will be renewed at expiration in the normal course of business.

Future minimum rental commitments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows:

	Amount
Year	(In thousands)
2007	$	7,317
2008		7,588
2009		7,523
2010		7,068
2011		6,757
Thereafter		85,990
Total	$	122,243

Net occupancy expense included gross rental expense for certain bank premises of $7,004,000, $5,566,000, and $4,279,000 in 2006, 2005, and 2004, respectively, and rental income of $344,000, $301,000, and $358,000 for the respective years.

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8. Deposits

Deposits at December 31 are summarized as follows:

	2006					2005
	Balance		Percent			Balance		Percent
			(Dollars in thousands)
Savings	$	805,278		6.00	%	$	808,325		7.10	%
Noninterest-bearing demand		498,301		3.71			442,042		3.88
Interest-bearing transaction		2,095,811		15.62			3,616,644		31.77
Money market		918,549		6.85			342,021		3.00
Time deposits		9,097,648		67.82			6,174,268		54.25
Total deposits	$	13,415,587		100.00	%	$	11,383,300		100.00	%

Time deposits of $100,000 or more amounted to $2,565,020,000 and $1,378,340,000 at December 31, 2006 and 2005, respectively. Interest expense on time deposits of $100,000 or more for the years ended December 31, 2006, 2005 and 2004 was $79,133,000, $30,690,000, and $18,182,000, respectively. Included in noninterest-bearing demand accounts are mortgage escrow deposits of $77,576,000 and $60,506,000 at December 31, 2006 and 2005, respectively.

Scheduled maturities of time deposits are as follows:

Year	Amount
	(In thousands)
2007	$	8,332,860
2008		485,895
2009		183,351
2010		84,476
2011		11,066
Total	$	9,097,648

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9. Borrowed Funds

Borrowed funds at December 31 are summarized as follows:

	2006					2005
			Weighted					Weighted
			Average					Average
	Principal		Rate			Principal		Rate
			(Dollars in thousands)
Securities sold under agreements to repurchase:
FHLB	$	823,000		4.96	%	$	850,000		4.96	%
Other brokers		8,100,000		3.86			7,050,000		3.45
Total securities sold under agreements to repurchase		8,923,000		3.96			7,900,000		3.61
Advances from the FHLB		8,050,000		4.21			3,450,000		3.95
Total borrowed funds	$	16,973,000		4.08		$	11,350,000		3.72

The average balances of borrowings and the maximum amount outstanding at any month-end are as follows:

	At or for the Year Ended December 31,
	2006			2005			2004
	(Dollars in thousands)
Repurchase Agrements:
Average balance outstanding during the year	$	8,313,321		$	6,447,560		$	4,182,197
Maximum balance outstanding at any month-end during the year	$	8,923,000		$	7,900,000		$	5,300,000
Weighted average rate during the period		3.81	%		3.52	%		3.41	%
FHLB Advances:
Average balance outstanding during the year	$	5,977,115		$	2,469,529		$	1,916,085
Maximum balance outstanding at any month-end during the year	$	8,050,000		$	3,450,000		$	1,950,000
Weighted average rate during the period		4.17	%		3.89	%		3.79	%

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At December 31, 2006, borrowed funds had scheduled maturities and potential call dates as follows:

						Borrowings by Earlier
	Borrowings by Scheduled					of Maturity or Next
	Maturity Date					Potential Call Date
			Weighted					Weighted
			Average					Average
Year	Principal		Rate			Principal		Rate
			(Dollars in thousands)
2007	$	7,000		2.65	%	$	7,667,000		4.04	%
2008		16,000		4.94			6,156,000		4.10
2009		—		—			2,550,000		4.09
2010		300,000		5.68			350,000		4.01
2011		250,000		4.90			250,000		4.90
2012		900,000		4.16			—		—
2013		350,000		5.09			—		—
2014		1,850,000		2.94			—		—
2015		4,175,000		3.84			—		—
2016		9,125,000		4.30			—		—
Total	$	16,973,000		4.08		$	16,973,000		4.08

The amortized cost and fair value of the underlying securities used as collateral for securities sold under agreements to repurchase, at or for the years ended December 31 are as follows:

	At or for the Years Ended December 31,
	2006		2005		2004
			(In thousands)
Amortized cost of collateral:
United States government-sponsored agency securities	$	3,329,639	$	2,849,947	$	2,030,978
Mortgage-backed securities		5,937,758		5,224,648		3,198,768
REMICs		319,920		356,579		455,598
Total amortized cost of collateral	$	9,587,317	$	8,431,174	$	5,685,344
Fair value of collateral:
United States government-sponsored agency securities	$	3,195,765	$	2,778,462	$	2,008,710
Mortgage-backed securities		5,846,562		5,119,225		3,188,386
REMICs		296,661		332,532		434,249
Total fair value of collateral	$	9,338,988	$	8,230,219	$	5,631,345

10. Employee Benefit Plans

a) Retirement and Other Postretirement Benefits

Non-contributory retirement and postretirement plans are maintained to cover employees hired prior to August 1, 2005, 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. In 2005, participation in the non-contributory retirement plan was restricted to those employees hired on or before July 31, 2005. Employees hired on or after August 1, 2005 will not participate in the plan. Also in 2005, the plan for post-retirement benefits, other than pensions, was changed to restrict participation to those employees hired on or before July 31, 2005, and

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placed a cap on the premium value of the non-contributory coverage provided at the 2007 premium rate, beginning in 2008, for those eligible employees who retire after December 31, 2005.

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, for certain executive officers, is unfunded and had a projected benefit obligation of $8,352,000 at December 31, 2006 and $7,484,000 at December 31, 2005. Certain health care and life insurance benefits are provided to eligible retired employees (“other benefits”). Participants generally become eligible for retiree health care and life insurance benefits after ten years of service. The measurement date for year-end disclosure information is December 31 and the measurement date for net periodic benefit cost is January 1.

We adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R” as of December 31, 2006. This statement requires an employer to: (a) recognize in its statement of financial condition an asset for a plan’s overfunded status or a liability for a plan’s underfunded status; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year; and (c) recognize, in comprehensive income, changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for the Company as of December 31, 2008.

The following table illustrates the incremental effect of applying SFAS No. 158 on individual line items in the statement of financial condition at December 31, 2006:

	Before						After
	Application of						Application of
	SFAS No. 158			Adjustments			SFAS No. 158
	(In thousands)
Accrued expenses and other liabilities	$	186,708		$	1,030		$	187,738
Total liabilities		30,575,205			1,030			30,576,325
Accumulated other comprehensive income		(48,533	)		(1,030	)		(49,563	)
Total stockholders’ equity		4,931,286			(1,030	)		4,930,256

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The following table shows the change in benefit obligation, the change in plan assets, and the funded status for the retirement plans and other benefits at December 31:

	Retirement Plans						Other Benefits
	2006			2005			2006			2005
				(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	90,093		$	83,268		$	36,254		$	46,396
Benefit obligation assumed in Acquisition		13,515			—			—			—
Service cost		3,404			3,048			1,076			1,921
Interest cost		5,766			4,784			1,996			2,492
Plan amendments		(2,007	)		1,884			—			(28,171	)
Participant contributions		—			—			39			40
Actuarial (gain) loss		(1,008	)		(176	)		(1,257	)		15,003
Benefits paid		(3,694	)		(2,715	)		(2,258	)		(1,427	)
Benefit obligation at end of year		106,069			90,093			35,850			36,254
Change in Plan Assets:
Fair value of plan assets at beginning of year		80,091			78,901			—			—
Assets received in Acquisition		12,503			—			—			—
Actual return on plan assets		9,725			3,411			—			—
Employer contribution		943			493			2,219			1,387
Participant contributions		—			—			39			40
Benefits paid		(3,694	)		(2,715	)		(2,258	)		(1,427	)
Fair value of plan assets at end of year		99,568			80,090			—			—
Funded Status		(6,501	)		(10,003	)		(35,850	)		(36,254	)
Unrecognized prior service cost		—			1,874			—			(27,193	)
Unrecognized net actuarial loss		—			15,851			—			15,615
Prepaid (accrued) benefit cost		(6,501	)		7,722			(35,850	)		(47,832	)

Amounts recognized in the consolidated statements of financial condition at December 31 consist of:

	Retirement Plans						Other Benefits
	2006			2005			2006			2005
				(In thousands)
Assets	$	401		$	13,090		$	—		$	—
Liabilities		(6,902	)		(5,368	)		(35,850	)		(47,832	)

Amounts recognized in accumulated other comprehensive loss at December 31 consist of:

	Retirement Plans				Other Benefits
	2006		2005		2006			2005
			(In thousands)
Net loss(gain)	$	11,131	$	—	$	13,713		$	—
Prior service cost(credit)		2,525		—		(25,628	)		—

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The accumulated benefit obligation for all defined benefit retirement plans was $92,063,000 and $76,096,000 at December 31, 2006 and 2005, respectively.

Net periodic benefit cost for the years ended December 31 included the following components:

	Retirement Plans									Other Benefits
	2006			2005			2004			2006			2005			2004
							(In thousands)
Net periodic benefit cost:
Service cost	$	3,863		$	3,048		$	2,945		$	1,076		$	1,921		$	2,120
Interest cost		6,452			4,784			4,527			1,996			2,492			2,318
Expected return on assets		(8,447	)		(6,774	)		(6,532	)		—			—			—
Amortization of:
Net loss (gain)		943			435			59			645			621			(40	)
Unrecognized prior service cost		168			25			(16	)		(1,565	)		(978	)		—
Net periodic benefit cost	$	2,979		$	1,518		$	983		$	2,152		$	4,056		$	4,398

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2007 are $51,000 and $96,000, respectively. The estimated net loss and prior service cost for other defined benefit post-retirement plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost during 2007 is $575,000 and $1,600,000, respectively.

The following are the weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:

	Retirement Plans									Other Benefits
	2006			2005			2004			2006			2005			2004
Discount rate		5.75	%		5.75	%		6.25	%		6.00	%		5.75	%		6.25
Expected return on assets		8.75			8.75			8.75			—			—			—
Rate of compensation increase.		4.25			4.25			4.75			—			—			—

The following are the weighted-average assumptions used to determine benefit obligations at December 31:

	Retirement Plans						Other Benefits
	2006			2005			2006			2005
Discount rate		6.00	%		5.75	%		5.75	%		5.75	%
Rate of compensation increase		4.25			4.25			—			—

The overall expected return on assets assumption is based on the historical performance of the pension fund. The average return over the past ten years was determined for the market value of assets, which is the value used in the calculation of annual net periodic benefit cost.

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The assumed health care cost trend rate used to measure the expected cost of other benefits for 2007 was 9.25%. The rate was assumed to decrease gradually to 4.75% for 2013 and remain at that level thereafter. A 1% change in the assumed health care cost trend rate would have the following effects on other benefits:

	1% Increase		1% Decrease
	(In thousands)
Effect on total service cost and interest cost	$	73	$	(66	)
Effect on other benefit obligations		1,547		(1,375	)

The retirement plan’s weighted-average asset allocations by asset category were as follows at December 31:

Asset Category	2006			2005
Equity securities		60.9	%		60.2	%
Fixed Income		28.5			25.2
Cash		10.6			14.6
Total		100.0			100.0

Funds in Hudson City’s qualified retirement plan are invested in a commingled asset allocation fund (the “Fund”) of a well-established asset management company and in Hudson City Bancorp, Inc. common stock. The purpose of the Fund is to provide a diversified portfolio of equities, fixed income instruments and cash. Its trustee, in the trustee’s absolute discretion, manages the Fund. The Fund is maintained with the objective of providing investment results that outperform a static mix of 55% equity, 35% bond and 10% cash, as well as the median manager of balanced funds. In order to achieve the Fund’s return objective, the Fund will combine fundamental analysis and a quantitative proprietary model to allocate and reallocate assets among the three broad investment categories of equities, money market instruments and other fixed income obligations. As market and economic conditions change, these ratios will be adjusted in moderate increments of about five percentage points. It is intended that the equity portion will represent approximately 40% to 70%, the bond portion approximately 25% to 55% and the money market portion 0% to 25%. Performance results are reviewed at least annually with the asset management company of the Fund.

Equity securities held by the Fund include Hudson City Bancorp, Inc. common stock in the amount of $9.7 million (11.1% of total plan assets) as of December 31, 2006, and $8.5 million (10.6% of total plan assets) as of December 31, 2005. This stock was purchased at an aggregate cost of $6.0 million using a cash contribution made by Hudson City in July 2003. Our plan may not purchase our common stock if the fair value of our common stock held by the plan equals or exceeds 10% of the fair value of plan assets. We review with the plan administrator the rebalancing of plan assets if the fair value our common stock held by the plan exceeds 20% of the fair value of the total plan assets.

We contributed $625,000 to the plan assets in 2006. We expect to contribute $2,100,000 during 2007.

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The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid under the current provisions of the plans.

	Retirement		Other
	Plans		Benefits
	(In thousands)
2007	$	3,763	$	2,242
2008		3,829		2,378
2009		4,103		2,595
2010		4,265		2,747
2011		4,633		2,955
2012 through 2016		31,491		17,249

     b) Employee Stock Ownership Plan

The ESOP is a tax-qualified plan designed to invest primarily in Hudson City common stock that provides employees with the opportunity to receive an employer-funded retirement benefit based primarily on the value of Hudson City common stock. The ESOP was authorized to purchase 27,879,385 shares following our initial public offering and an additional 15,719,223 shares following our second-step conversion. The ESOP administrator did purchase, in aggregate, 43,598,608 shares of Hudson City common stock at an average price of $5.69 per share with loans from Hudson City Bancorp.

The combined outstanding loan principal at December 31, 2006 was $238.8 million. Those shares purchased were pledged as collateral for the loan and are released from the pledge for allocation to participants as loan payments are made. The loan will be repaid and the shares purchased will be allocated to employees in equal installments of shares over a forty-year period.

At December 31, 2006, shares allocated to participants were 7,035,589. For the plan year ending December 31, 2007, there are 962,185 shares that are committed to be released and will be allocated to participants at the end of the plan year. Unallocated ESOP shares held in suspense totaled 36,563,019 at December 31, 2006 and had a fair market value of $507.5 million. ESOP compensation expense for the years ended December 31, 2006, 2005 and 2004 was $16,157,000, $11,119,000, and $10,505,000, respectively.

The ESOP restoration plan is a non-qualified plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the employee stock ownership plan’s benefit formula. The supplemental cash payments consist of payments representing shares that cannot be allocated to participants under the ESOP due to the legal limitations imposed on tax-qualified plans and, in the case of participants who retire before the repayment in full of the ESOP’s loan, payments representing the shares that would have been allocated if employment had continued through the full term of the loan. Compensation expense related to this plan amounted to $14,211,000, $6,560,000, and $4,173,000 in 2006, 2005, and 2004, respectively.

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     c) Recognition and Retention Plans

Effective January 1, 2006, Hudson City Bancorp adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” using the modified prospective method. Expense for the recognition and retention plans (“RRP”) in the amount of the fair value of the common stock at the date of grant is recognized ratably over the vesting period. There was no material effect on the accounting for the RRP upon the adoption of SFAS No. 123(R). The unearned common stock held by the RRP within stockholders’ equity was reclassified to additional paid-in capital upon the adoption of SFAS No. 123(R).

The purpose of the RRP is to promote the growth and profitability of Hudson City Bancorp by providing directors, officers and employees with an equity interest in Hudson City Bancorp as an incentive to achieve corporate goals. The RRP have invested money primarily in shares of Hudson City common stock that were used to make restricted stock awards.

The RRP were authorized, in the aggregate, to purchase not more than 14,901,480 shares of common stock, and have purchased 14,887,855 shares on the open market at an average price of $2.91 per share.

As a general rule, restricted stock grants are held in escrow for the benefit of the award recipient until vested. Awards outstanding generally vest in five annual installments commencing one year from the date of the award. As of December 31, 2006, common stock that had not been awarded totaled 13,625 shares. Expense attributable to the RRP amounted to $2.2 million, $3.6 million, and $9.0 million, net of related tax effects of $836,000, $1.4 million and $3.4 million for 2006, 2005, and 2004, respectively.

A summary of the status of the granted, but unvested shares under the RRP as of December 31, and changes during those years, is presented below:

	Resticted Stock Awards
	2006					2005					2004
				Weighted					Weighted					Weighted
				Average					Average					Average
	Number of			Grant Date		Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Outstanding at beginning of period		951,761		$	9.69		2,973,759		$	4.66		5,601,236		$	2.47
Granted		—			—		150,682			11.18		762,868			11.40
Vested		(410,910	)		7.22		(2,172,680	)		2.91		(3,390,345	)		2.56
Outstanding at end of period		540,851			11.57		951,761			9.69		2,973,759			4.66

The per share weighted-average vesting date fair value of the shares vested during 2006, 2005, and 2004 was $13.44, $10.36, and $10.72.

     d) Stock Option Plans

We adopted the provisions of SFAS No. 123(R), using the modified prospective method. Stock-based compensation expense is recognized for new stock-based awards granted after January 1, 2006, awards modified, repurchased or cancelled after January 1, 2006, and the remaining portion of the requisite service under previously granted unvested awards outstanding as of January 1, 2006 based upon the grant-date fair value of those awards. There was no impact of the adoption on previously reported periods, in

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accordance with the transition guidance in SFAS No. 123(R). Prior to January 1, 2006, Hudson City accounted for employee stock options and restricted stock grants using the intrinsic value method of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under this method, Hudson City did not recognize any stock-based compensation expense for employee stock options, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.

If Hudson City had accounted for all employee stock options and restricted stock granted prior to January 1, 2006 under the fair value based accounting method of SFAS No. 123, net income and earnings per share for the years ended December 31 would have been as follows:

	2005			2004
	(In thousands, except per share data)
Net income, as reported	$	276,055		$	239,266
Add: expense recognized for the recognition and retention plans, net of related tax effect		2,249			5,623
Less: total stock option and recognition and retention plans expense, determined under the fair value method, net of related tax effect		(3,738	)		(8,939	)
Pro forma net income	$	274,566		$	235,950
Basic            As reported	$	0.49		$	0.41
Pro forma		0.48			0.41
Diluted:       As reported	$	0.48		$	0.40
Pro forma		0.47			0.40

The fair value of the option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31:

	2005			2004
Expected dividend yield		2.23	%		1.69	%
Expected volatility		21.57			19.66
Risk-free interest rate		3.64			3.05
Expected option life	5 years			5 years
Fair value of options granted	$	2.20		$	2.23

Each stock option granted entitles the holder to purchase one share of Hudson City’s common stock at an exercise price not less than the fair market value of a share of common stock at the date of grant. Options granted generally vest over a five year period from the date of grant and will expire no later than 10 years following the grant date. Under the Hudson City stock option plans existing prior to 2006, 36,323,960 shares of Hudson City Bancorp, Inc. common stock have been reserved for issuance. Directors and employees have been granted 36,503,507 stock options, including 207,106 shares previously issued, but forfeited by plan participants prior to exercise.

In June 2006, our shareholders approved the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan (the “SIP Plan”) authorizing us to grant up to 30,000,000 shares of common stock. In July 2006, the Compensation Committee of the Board of Directors of Hudson City Bancorp, Inc., authorized grants to each non-employee director, executive officers and other employees to purchase shares of the Company’s common stock, pursuant to the SIP Plan. Initial grants were made pursuant to the SIP Plan for 7,960,000 options at an exercise price equal to the fair value of our common stock on the “grant date”, based on

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quoted market prices. Of these options, 4,400,000 have vesting periods ranging from one to five years and an expiration period of 10 years. The remaining 3,560,000 shares vest on December 31, 2008 if certain financial performance measures relating to efficiency and credit quality are met. We have determined it is probable these performance measures will be met and have therefore begun to record an expense for the entire SIP Plan. The performance options have an expiration period of 10 years.

The fair value of the option grants, for those grants awarded during the year 2006, were estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions. The per share weighted-average fair value of the options granted during year 2006 was $2.71.

	2006
Expected dividend yield		2.35	%
Expected volatility		19.96	%
Risk-free interest rate		4.98	%
Expected option life	5.4 years

In total we have granted 44,463,507 stock options with 22,067,559 shares not granted. As a result of the adoption of SFAS No. 123(R), Hudson City recorded stock-based compensation expense related to its outstanding and unvested stock options in the amount of $3.8 million, net of related tax effect of $1.7 million, for the year ended December 31, 2006.

A summary of the status of the granted, but unexercised stock options as of December 31, and changes during those years, is presented below:

	2006					2005					2004
				Weighted					Weighted					Weighted
	Number of			Average		Number of			Average		Number of			Average
	Stock			Exercise		Stock			Exercise		Stock			Exercise
	Options			Price		Options			Price		Options			Price
Outstanding at beginning of year		21,659,869		$	4.21		22,425,161		$	3.95		22,009,657		$	2.53
Granted		7,960,000			12.76		496,930			11.17		3,305,393			11.93
Exercised		(2,629,621	)		2.60		(1,247,475	)		2.26		(2,886,042	)		2.24
Forfeited		(10,259	)		4.21		(14,747	)		8.13		(3,847	)		3.10
Outstanding at end of year		26,979,989			6.89		21,659,869			4.21		22,425,161			3.95

Shares issued upon the exercise of stock options are issued from treasury stock. Hudson City has an adequate number of treasury shares available for sale for future stock option exercises. The total intrinsic value of the options exercised during 2006, 2005 and 2004 was $26.8 million, $11.1 million, and $27.3 million, respectively.

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The following table summarizes information about our stock options outstanding at December 31, 2006:

Options Outstanding					Options Exercisable
		Weighted
		Average	Weighted				Weighted
Number		Remaining	Average		Number		Average
Of Options		Contractual	Exercise		Of Options		Exercise
Outstanding		Life	Price		Exercisable		Price
	12,347,659	3 years	$	2.16		12,347,659	$	2.16
	235,283	4 years		3.09		235,283		3.09
	411,801	4 years		3.40		411,801		3.40
	820,736	4 years		3.59		820,736		3.59
	283,051	5 years		4.20		195,208		4.20
	689,440	5 years		5.53		689,440		5.53
	242,964	6 years		5.96		128,828		5.96
	206,480	6 years		6.35		206,480		6.35
	448,840	7 years		10.33		179,536		10.33
	485,389	8 years		11.17		95,543		11.17
	371,890	7 years		11.91		148,745		11.91
	2,476,456	7 years		12.22		591,344		12.22
	7,960,000	9.5 years		12.76		—		—
	26,979,989			6.89		16,050,603		3.14

The total intrinsic value of the options outstanding and options exercisable were $186.6 million and $172.4 million, respectively as of December 31, 2006. At December 31, 2006, unearned compensation costs related to all nonvested awards of options and restricted stock not yet recognized totaled $26.3 million, and will be recognized over a weighted-average period of approximately 1.55 years.

     e) Incentive Plans

A tax-qualified profit sharing and savings plan is maintained based on Hudson City’s profitability. All employees are eligible after one year of employment and the attainment of age 21. The expense was $1,600,000, $1,440,000, and $1,380,000 in 2006, 2005 and 2004, respectively.

Certain incentive plans are maintained to recognize key executives who are able to make substantial contributions to the long-term success and financial strength of Hudson City. At the end of each performance period, the value of the award is determined in accordance with established criteria. Participants can elect cash payment or elect to defer the award until retirement. The expense related to these plans was $4,102,000, $5,742,000, and $2,988,000 in 2006, 2005 and 2004, respectively.

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11. Income Taxes

Income tax expense (benefit) is summarized as follows for the years ended December 31:

	2006			2005			2004
				(In thousands)
Federal:
Current	$	161,558		$	160,263		$	139,839
Deferred		(2,443	)		(5,573	)		(4,838	)
Total federal		159,115			154,690			135,001
State:
Current		14,091			12,560			10,218
Deferred		(1,216	)		(932	)		(2,074	)
Total state		12,875			11,628			8,144
Total income tax expense	$	171,990		$	166,318		$	143,145

Not included in the above table are deferred income tax expense (benefits) of $9,763,000, ($37,003,000), and ($2,166,000) for 2006, 2005 and 2004, respectively, which represent the deferred income tax benefits of the changes in the net unrealized losses of securities available for sale.

The amounts reported as income tax expense vary from the amounts that would be reported by applying the statutory federal income tax rate to income before income taxes due to the following:

	2006			2005			2004
	(Dollars in thousands)
Income before income tax expense	$	460,569		$	442,373		$	382,411
Statutory income tax rate		35	%		35	%		35
Computed expected income tax expense		161,199			154,831			133,844
State income taxes, net of federal income tax benefit		8,369			7,558			5,294
Tax-exempt interest		(51	)		(67	)		(71	)
Incentive stock option expense		244			—			—
Dividends on allocated ESOP shares		(426	)		(308	)		(110	)
ESOP fair market value adjustment		2,345			1,971			2,990
Other, net		310			2,333			1,198
Income tax expense	$	171,990		$	166,318		$	143,145

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     The net deferred tax asset consists of the following at December 31:

	2006		2005
	(In thousands)
Deferred tax asset:
Deferred loan origination fees	$	1,329	$	1,985
Postretirement benefits		20,502		20,028
Allowance for loan loss reserve		11,888		10,146
Mortgage premium amortization		6,787		5,417
Non-accrual interest income		254		156
Non-qualified benefit plans		21,807		15,999
Net unrealized loss on securities available for sale		33,517		43,283
Funded status of pension plan		6,633		—
ESOP expense		7,931		5,488
Fair value adjustment on mortgages recorded in Acquisition		4,719		—
Other		3,835		2,464
		119,202		104,966
Deferred tax liabilities:
Discount accretion		124		257
Retirement plan		5,268		5,282
Principal payments on ESOP loans		3,736		1,105
Fair value adjustments related to the Acquisition:
Core deposit intangible		5,395		—
Deposits		408		—
Buildings		2,232		—
Other		694		2,055
		17,857		8,699
Net deferred tax asset	$	101,345	$	96,267

The net deferred tax asset represents the anticipated federal and state tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. In management’s opinion, in view of Hudson City’s previous, current and projected future earnings trends, such net deferred tax asset will more likely than not be fully realized. Accordingly, no valuation allowance was deemed to be required at December 31, 2006 and 2005.

Retained earnings at December 31, 2006 included approximately $58.0 million for which no deferred income taxes have been provided. This amount represents the base year allocation of income to bad debt deduction for tax purposes. Under SFAS No. 109, this amount is treated as a permanent difference and deferred taxes are not recognized unless it appears that it will be reduced and result in taxable income in the foreseeable future. Events that would result in taxation of these reserves include failure to qualify as a bank for tax purposes or distributions in complete or partial liquidation.

12. Fair Value of Financial Instruments

The fair value of financial instruments represents the estimated amounts at which the asset or liability could be exchanged in a current transaction between willing parties, other than in a forced liquidation sale. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Further, certain tax implications related to the realization of the unrealized gains and losses could have a substantial impact on these fair value estimates and have not been incorporated into any of the estimates.

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Carrying amounts of cash, due from banks and federal funds sold are considered to approximate fair value. The fair value of one- to four-family mortgages and home equity loans are generally estimated using the present value of expected future cash flows. For time deposits and borrowed funds, the fair value is estimated by discounting estimated future cash flows using currently offered rates. For deposit liabilities payable on demand, the fair value is the carrying value at the reporting date. There is no material difference between the fair value and the carrying amounts recognized with respect to our off-balance sheet commitments.

Other important elements that are not deemed to be financial assets or liabilities and, therefore, not considered in these estimates include the value of Hudson City’s retail branch delivery system, its existing core deposit base and banking premises and equipment.

The estimated fair value of Hudson City’s financial instruments are summarized as follows at December 31:

	2006				2005
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
			(In thousands)
Assets:
Cash and due from banks	$	125,630	$	125,630	$	97,672	$	97,672
Federal funds sold		56,616		56,616		4,587		4,587
Investment securities held to maturity		1,533,969		1,502,934		1,534,216		1,508,055
Investment securities available for sale		4,379,615		4,379,615		3,962,511		3,962,511
Federal Home Loan Bank of New York stock		445,006		445,006		226,962		226,962
Mortgage-backed securities held to maturity		6,925,210		6,804,598		4,389,864		4,288,772
Mortgage-backed securities available for sale		2,404,421		2,404,421		2,520,633		2,520,633
Loans		19,083,617		19,235,250		15,036,709		15,183,250
Liabilities:
Deposits		13,415,587		13,424,527		11,383,300		11,376,587
Borrowed funds		16,973,000		17,069,882		11,350,000		11,237,494

13. Regulatory Matters

Hudson city Savings is subject to comprehensive regulation, supervision and periodic examination by the Office of Thrift Supervision (“OTS”). Deposits at Hudson City Savings are insured up to standard limits of coverage provided by the Bank Insurance Fund (“BIF”) of the Federal Deposit Insurance Corporation (“FDIC”).

OTS regulations require federally chartered savings banks to meet three minimum capital ratios: a 1.5% tangible capital ratio, a 4% leverage (core capital) ratio and an 8% total risk-based capital ratio. In assessing an institution’s capital adequacy, the OTS takes into consideration not only these numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where necessary. Management believes that, as of December 31, 2006, Hudson City Savings met all capital adequacy requirements to which it is subject and would have been categorized as a well-capitalized institution under the prompt corrective action regulations.

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The following is a summary of Hudson City Savings’ actual capital amounts and ratios as of December 31, 2006 and 2005, compared to the OTS minimum capital adequacy requirements and the OTS requirements for classification as a well-capitalized institution:

						OTS Requirements
						Minimum Capital					For Classification as
	Bank Actual					Adequacy					Well-Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
						(Dollars in thousands)
December 31, 2006
Tangible capital	$	4,000,577		11.30	%	$	530,878		1.50	%		n/a		n/a
Leverage (core) capital		4,000,577		11.30			1,415,674		4.00		$	1,769,592		5.00	%
Total-risk-based capital		4,031,202		30.99			1,040,513		8.00			1,300,642		10.00
December 31, 2005
Tangible capital	$	4,129,937		14.68	%	$	422,069		1.50	%		n/a		n/a
Leverage (core) capital		4,129,937		14.68			1,125,518		4.00		$	1,406,897		5.00	%
Total-risk-based capital		4,157,330		41.31			805,040		8.00			1,006,300		10.00

The OTS may take certain supervisory actions under the prompt corrective action regulations of FDICIA with respect to an undercapitalized institution. Such actions could have a direct material effect on the institution’s financial statements. The regulations establish a framework for the classification of savings institutions into five categories: well-capitalized, adequately-capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the OTS regulations, an institution is considered well-capitalized if it has a leverage (Tier 1) capital ratio of at least 5.0% and a total risk-based capital ratio of at least 10.0%. Hudson City Savings may not pay dividends to Hudson City Bancorp if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements.

The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OTS about capital components, risk-weightings and other factors.

Hudson City Bancorp is regulated, supervised and examined by the OTS as a savings and loan holding company and, as such, is not subject to regulatory capital requirements.

     Upon completion of the second-step conversion, Hudson City Bancorp established a “liquidation account” in an amount equal to the total equity of Hudson City Savings as of the latest practicable date prior to the second-step conversion. The liquidation account was established to provide a limited priority claim to the assets of Hudson City Savings to “eligible account holders” and “supplemental eligible account holders”, as defined in the Plan, who continue to maintain deposits in Hudson City Savings after the second-step conversion. In the unlikely event of a complete liquidation of Hudson City Savings at a time when Hudson City Savings has a positive net worth, and only in such event, each eligible account holder and supplemental eligible account holder would be entitled to receive a liquidation distribution, prior to any payment to the stockholders of Hudson City Bancorp. This distribution would be based upon each eligible account holder’s and supplemental account holder’s proportionate share of the then total remaining qualifying deposits. In the unlikely event of a complete liquidation of Hudson City Savings and Hudson City Bancorp does not have sufficient assets (other than the stock of Hudson City Savings) to fund the

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obligation under the liquidation account, Hudson City Savings will fund the remaining obligation as if Hudson City Savings had established the liquidation account rather than Hudson City Bancorp; provided, however, that this obligation of Hudson City Savings to fund the liquidation account on behalf of Hudson City Bancorp will not become effective until three years following the completion of the second-step conversion. Any assets remaining after the liquidation rights of eligible account holders and supplemental eligible account holders are satisfied would be distributed to Hudson City Bancorp as the sole stockholder of Hudson City Savings.

14. Commitments and Contingencies

Hudson City Savings is a party to commitments to extend credit in the normal course of business to meet the financial needs of its customers and commitments to purchase loans and mortgage-backed securities to meet our growth initiatives. 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 or other termination clauses, whereas home equity lines of credit have no expiration date. 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.

At December 31, 2006, Hudson City Savings had fixed- and variable-rate first mortgage loan commitments to extend credit of approximately $121.7 million and $55.0 million, respectively, commitments to purchase fixed-rate first mortgage loans of $951.0 million, commitments to purchase variable rate mortgage-backed securities of $846.9 million and unused home equity, overdraft and commercial/construction lines of credit of approximately $140.5 million, $3.3 million, and $57.6 million, respectively. These commitment amounts are not included in the accompanying financial statements. There is no exposure to credit loss in the event the other party to commitments to extend credit does not exercise its rights to borrow under the commitment.

In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, the consolidated financial statements of Hudson City will not be materially affected as a result of such legal proceedings.

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15. Parent Company Only Financial Statements

Set forth below are the condensed financial statements for Hudson City Bancorp, Inc.:

Statements of Financial Condition

	December 31, 2006		December 31, 2005
	(In thousands)
Assets:
Cash and due from subsidiary bank	$	576,263	$	894,128
Investment in subsidiary		4,116,112		4,067,146
ESOP loan receivable		238,846		240,958
Other assets		—		83
Total Assets	$	4,931,221	$	5,202,315
Liabilities and Stockholders’ Equity:
Accrued expenses	$	965	$	839
Total stockholders’ equity		4,930,256		5,201,476
Total Liabilities and Stockholders’ Equity	$	4,931,221	$	5,202,315

Statements of Income

	Year Ended December 31,
	2006			2005		2004
				(In thousands)
Income:
Dividends received from subsidiary	$	282,929		$	259,329	$	226,592
Interest on ESOP loan receivable		12,048			6,954		4,128
Interest on deposit with subsidiary		6,674			5,964		423
Total income		301,651			272,247		231,143
Expenses		1,273			1,733		673
Income before income tax expense and equity in undistributed earnings of subsidiary		300,378			270,514		230,470
Income tax expense		6,515			4,205		1,464
Income before equity in undistributed earnings of subsidiary		293,863			266,309		229,006
Equity in (overdistributed)undistributed earnings of subsidiary		(5,284	)		9,746		10,260
Net Income	$	288,579		$	276,055	$	239,266

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Statements of Cash Flows

	Year Ended December 31,
	2006			2005			2004
	(In thousands)
Cash Flows from Operating Activities:
Net income	$	288,579		$	276,055		$	239,266
Adjustments to reconcile net income to cash provided by operating activities:
Equity in overdistributed(undistributed) earnings of subsidiary		5,284			(9,746	)		(10,260	)
Decrease (increase) in other assets		83			(2	)		14
Increase in accrued expenses		126			713			96
Net Cash Provided by Operating Activities		294,072			267,020			229,116
Cash Flows from Investing Activities:
Capital contribution to subsidiary		—			(3,000,000	)		—
Loan to ESOP		—			(189,348	)		—
Principal collected on ESOP loan		2,112			1,105			726
Net Cash Provided by (Used in) Investing Activities		2,112			(3,188,243	)		726
Cash Flows from Financing Activities:
Proceeds from second-step conversion and stock offering, net		—			3,953,001			—
Purchases of treasury stock		(448,237	)		(107,499	)		(161,662	)
Exercise of stock options		6,819			2,827			6,460
Cash dividends paid on unallocated ESOP shares		(11,257	)		(7,636	)		(5,120	)
Cash dividends paid		(161,374	)		(102,103	)		(40,482	)
Net Cash (Used in) Provided by Financing Activities		(614,049	)		3,738,590			(200,804	)
Net (Decrease) Increase in Cash Due from Bank		(317,865	)		817,367			29,038
Cash Due from Bank at Beginning of Year		894,128			76,761			47,723
Cash Due from Bank at End of Year	$	576,263		$	894,128		$	76,761

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16. Selected Quarterly Financial Data (Unaudited)

The following tables are a summary of certain quarterly financial data for the years ended December 31, 2006 and 2005.

	2006 Quarter Ended
	March 31		June 30		September 30		December 31
	(In thousands except per share data)
Interest and dividend income	$	359,688	$	384,140	$	422,045	$	448,970
Interest expense		202,009		230,551		268,917		300,133
Net interest income		157,679		153,589		153,128		148,837
Provision for loan losses		—		—		—		—
Net interest income after provision for loan losses		157,679		153,589		153,128		148,837
Non-interest income		1,264		1,455		1,669		1,903
Non-interest expense		38,285		38,515		40,588		41,567
Income before income tax expense		120,658		116,529		114,209		109,173
Income tax expense		45,430		43,361		43,238		39,961
Net income	$	75,228	$	73,168	$	70,971	$	69,212
Basic earnings per share	$	0.14	$	0.14	$	0.13	$	0.13
Diluted earnings per share	$	0.13	$	0.13	$	0.13	$	0.13

	2005 Quarter Ended
	March 31		June 30		September 30		December 31
Interest and dividend income	$	253,619	$	279,204	$	313,787	$	332,298
Interest expense		127,733		147,517		161,611		179,913
Net interest income		125,886		131,687		152,176		152,385
Provision for loan losses		65		—		—		—
Net interest income after provision for loan losses		125,821		131,687		152,176		152,385
Non-interest income		3,873		1,245		1,413		1,476
Non-interest expense		30,765		30,256		32,923		33,759
Income before income tax expense		98,929		102,676		120,666		120,102
Income tax expense		37,000		38,385		45,635		45,298
Net income	$	61,929	$	64,291	$	75,031	$	74,804
Basic earnings per share	$	0.11	$	0.11	$	0.13	$	0.13
Diluted earnings per share	$	0.11	$	0.11	$	0.13	$	0.13

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17. Earnings Per Share

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

	For the Year Ended December 31,
	2006						2005						2004
					Per						Per						Per
					Share						Share						Share
	Income		Shares		Amount		Income		Shares		Amount		Income		Shares		Amount
	(In thousands, except per share data)
Net income	$	288,579					$	276,055					$	239,266
Basic earnings per share:
Income available to common stockholders	$	288,579		536,215	$	0.54	$	276,055		567,789	$	0.49	$	239,266		576,621	$	0.41
Effect of dilutive common stock equivalents		—		10,576				—		13,274				—		16,380
Diluted earnings per share:
Income available to common stockholders	$	288,579		546,791	$	0.53	$	276,055		581,063	$	0.48	$	239,266		593,001	$	0.40

18. Recent Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FASB Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The application of FASB Interpretation No. 48 is not expected to have an impact on our financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”. This statement provides guidance for using fair value to measure assets and liabilities. The FASB believes the standard also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The application of SFAS No. 157 is not expected to have a material impact on our financial condition or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin “SAB” No. 108 which expresses the SEC staff’s views regarding the process of quantifying financial statement misstatements. The approaches

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used in practice to accumulate and quantify misstatements are referred to as the “rollover” and “iron curtain” approaches. The rollover approach quantifies a misstatement based on the amount of the error originating in the current year income statement. The iron curtain approach quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement’s year of origination. The staff believes registrants must quantify the impact of correcting all misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. This can be accomplished by quantifying an error under both the rollover and iron curtain approaches and by evaluating the error measured under each approach. SAB No. 108 became effective for the Company as of December 31, 2006. The application of SAB No. 108 did not have a material impact on our financial condition or results of operations.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
Ronald E. Hermance, Jr., our Chairman, President and Chief Executive Officer, and James C. Kranz, our Senior Vice President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2006. Based upon their evaluation, they each found that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the fourth quarter of 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting and we identified no material weaknesses requiring corrective action with respect to those controls.

Management Report on Internal Control Over Financial Reporting
The management of Hudson City Bancorp, Inc. (“Hudson City”) is responsible for establishing and maintaining adequate internal control over financial reporting. Hudson City’s internal control system is a

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process designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of Hudson City; and provide reasonable assurance regarding prevention or timely detection of unauthorized Acquisition, use or disposition of Hudson City’s assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Hudson City’s management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2006. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2006, the company’s internal control over financial reporting is effective based on those criteria.

Hudson City’s independent registered public accounting firm that audited the consolidated financial statements has issued an audit report on our assessment of, and the effective operation of, the company’s internal control over financial reporting as of December 31, 2006. This report appears on page 82.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information regarding directors, executive officers and corporate governance of the Company is presented under the headings “Proposal 1 — Election of Directors-General,” “-Who Our Directors Are,” “-Our Directors Backgrounds,” “-Nominees for Election as Directors,” “-Continuing Directors,” “-Meetings of the Board of Directors and Its Committees,” “-Executive Officers,” “-Director Compensation,” “-Executive Officer Compensation,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference.

Audit Committee Financial Expert

Information regarding the audit committee of the Company’s Board of Directors, including information regarding audit committee financial expert serving on the audit committee, is presented under the heading “Corporate Governance – Meetings of the Board of Directors and its Committees” in the Company’s

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definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference.

Code of Ethics

We have adopted a written code of ethics that applies to our principal executive officer and senior financial officers, which is available free of charge by contacting Susan Munhall, Investor Relations, at (201) 967-8290.

Item 11. Executive Compensation.

Information regarding executive compensation is presented under the headings “Election of Directors-Director Compensation,” “ –Executive Officer Compensation,” “-Summary Compensation Table,” “Employment Agreements,” “Change of Control Agreements,” and “Benefit Plans” in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information regarding security ownership of certain beneficial owners and management is presented under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference. Information regarding equity compensation plans is presented in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders, to be held on April 24, 2007, and incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information regarding certain relationships and related transactions, and director independence is presented under the heading “Certain Transactions with Members of our Board of Directors and Executive Officers” and “Corporate Governance” in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

Information regarding principal accounting fees and services is presented under the heading “Proposal 2 – Ratification of Appointment of Independent Registered Public Accounting Firm” in Hudson City Bancorp’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be held on April 24, 2007 and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) List of Documents Filed as Part of this Annual Report on Form 10-K

(1)	The following consolidated financial statements are in Item 8 of this annual report:
•	Reports of Independent Registered Public Accounting Firm
•	Consolidated Statements of Financial Condition as of December 31, 2006 and 2005
•	Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004
•	Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004
•	Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004
•	Notes to Consolidated Financial Statements
(2)	Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto in Item 8 of this annual report.

(b) Exhibits Required by Item 601 of Regulation S-K

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EXHIBIT	DESCRIPTION
2.1	Amended and Restated Plan of Conversion and Reorganization of Hudson City, MHC, Hudson City Bancorp, Inc. and Hudson City Savings Bank (1)
2.2	Agreement and Plan of Merger by and between Hudson City Bancorp, Inc. and Sound Federal Bancorp, Inc. (2)
3.1	Certificate of Incorporation of Hudson City Bancorp, Inc. (1)
3.2	Amended and Restated Bylaws of Hudson City Bancorp, Inc. (4)
4.1	Certificate of Incorporation of Hudson City Bancorp, Inc. (See Exhibit 3.1)
4.2	Amended and Restated Bylaws of Hudson City Bancorp, Inc. (See Exhibit 3.2)
4.3	Form of Stock Certificate of Hudson City Bancorp, Inc. (3)
10.1	Employee Stock Ownership Plan of Hudson City Savings Bank (Incorporating amendments No. 1,2,3,4,and 5) (5)
10.2	Profit Incentive Bonus Plan of Hudson City Savings Bank (5)
10.3	Form of One-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson City Bancorp, Inc. and certain officers (3)
10.4	Form of Two-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson City Bancorp, Inc. and certain officers (5)
10.5	Severance Pay Plan of Hudson City Savings Bank (3)
10.6	Hudson City Savings Bank Outside Directors Consultation Plan (3)
10.7	Hudson City Bancorp, Inc. 2000 Stock Option Plan (6)
10.8	Hudson City Bancorp, Inc. 2000 Recognition and Retention Plan (6)
10.9	Hudson City Bancorp, Inc. Denis J. Salamone Stock Option Plan (7)
10.10	Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Ronald E. Butkovich (8)
10.11	Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Christopher Nettleton (8)
10.12	Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Ronald E. Hermance, Jr. (9)
10.13	Amended and Restated Employment Agreement between Hudson City Savings Bank and Ronald E. Hermance, Jr. (9)
10.14	Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and John M. Tassillo (9)
10.15	Amended and Restated Employment Agreement between Hudson City Savings Bank and John M. Tassillo (9)
10.16	Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Denis J. Salamone (9)
10.17	Amended and Restated Employment Agreement between Hudson City Savings Bank and Denis J. Salamone (9)
10.18	Executive Officer Annual Incentive Plan of Hudson City Savings Bank (9)
10.19	Amended and Restated Loan Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)

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EXHIBIT	DESCRIPTION
10.20 10.21	Amended and Restated Promissory Note between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9) Amended and Restated Pledge Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.22	Form of Amended and Restated Assignment between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.23	Loan Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.24	Promissory Note between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.25	Pledge Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.26	Form of Assignment between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.27	Hudson City Bancorp, Inc. 2006 Stock Incentive Plan (10)
10.28	Form of Hudson Bancorp, Inc. 2006 Stock Incentive Plan Performance Stock Option Agreement (11)
10.29	Form of Hudson Bancorp, Inc. 2006 Stock Incentive Plan Retention Stock Option Agreement (11)
10.30	Form of Hudson Bancorp, Inc. 2006 Stock Incentive Plan Director Stock Option Agreement (11)
10.31	Benefit Maintenance Plan of Hudson City Savings Bank (11)
10.32	Summary of Material Terms of Directed Charitable Contribution Program (11)
10.33	Summary of Director Compensation (11)
11.1	Statement Re: Computation of Per Share Earnings*
21.1	Subsidiaries of Hudson City Bancorp, Inc.*
23.1	Consent of KPMG LLP (11)
31.1	Certification of Disclosure of Ronald E. Hermance, Jr.*
31.2	Certification of Disclosure of James C. Kranz*
32.1	Statement Furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350*

(1)	Incorporated herein by reference to the Exhibits to the Registrant’s Registration Statement No. 333-122989 on Form S-3 filed with the Securities and Exchange Commission on February 25, 2005, as amended.
(2)	Incorporated herein by reference to the Exhibits to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 10, 2006.
(3)	Incorporated herein by reference to the Exhibits to the Registrant’s Registration Statement No. 333-74383 on Form S-1, filed with the Securities and Exchange Commission on March 15, 1999, as amended.
(4)	Incorporated herein by reference to the Exhibits to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 27, 2003.
(5)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission on February 25, 2005.
(6)	Incorporated herein by reference to the Exhibits to the Registrant’s Registration Statement No. 333-95193 on Form S-8, filed with the Securities and Exchange Commission on January 21, 2000.
(7)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001 filed with the Securities and Exchange Commission on March 28, 2002.
(8)	Incorporated herein by reference to the Exhibits to the Registrant’s Registration Statement No. 333-114536 on Form S-8, filed with the Securities and Exchange Commission on April 16, 2004.
(9)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission on March 14, 2006.
(10)	Incorporated herein by reference to the Proxy Statement No. 000-26001 filed with the Securities and Exchange Commission on April 28, 2006
(11)	Filed herewith (Submitted only with filing in electronic format).
(*)	Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in Paramus, New Jersey, on February 28, 2007.

Hudson City Bancorp, Inc.

By:	/s/ Ronald E. Hermance, Jr.	/s/ James C. Kranz
	Ronald E. Hermance, Jr.	James C. Kranz
	Chairman, President and Chief Executive Officer	Senior Vice President and Chief Financial Officer
	(Principal Executive Officer)	(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

NAME	TITLE	DATE
/s/ Ronald E. Hermance, Jr.	Director, Chairman, President and	February 28, 2007
Ronald E. Hermance, Jr.	Chief Executive Officer (principal executive officer)
/s/ Denis J. Salamone Denis J. Salamone	Director, Senior Executive Vice President and  Chief Operating Officer	February 28, 2007
/s/ Michael W. Azzara	Director	February 28, 2007
Michael W. Azzara
/s/ William G. Bardel	Director	February 28, 2007
William G. Bardel
/s/ Scott A. Belair	Director	February 28, 2007
Scott A. Belair
/s/ Victoria H. Bruni	Director	February 28, 2007
Victoria H. Bruni
/s/ William J. Cosgrove	Director	February 28, 2007
William J. Cosgrove
/s/ Donald O. Quest	Director	February 28, 2007
Donald O. Quest
/s/ Joseph G. Sponholz	Director	February 28, 2007
Joseph G. Sponholz

Page 129

EX-10.28

Exhibit 10.28

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Performance Stock Option Agreement

Name:
Employee No:

Address:

This Performance Stock Option Agreement is intended to set forth the terms and conditions on which a Performance Stock Option (an “Option”) has been granted under the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan (the “Plan”). Set forth below are the specific terms and conditions applicable to this Performance Stock Option. Attached as Exhibit A are its general terms and conditions.

Option Grant
Grant Date	7/21/2006
Option Expiration Date*	7/20/2016
Class of Optioned Shares*	Common
No. of Optioned Shares*	«PERFORMANCE»
Exercise Price per Share*	$12.76
Option Type (ISO or NQSO)	NQSO
VESTING:
Earliest Exercise Date*	12/31/2008
Performance Condition(s)	See Appendix B to Exhibit A

* Subject to adjustment as provided in the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan and Exhibit A attached hereto.

By signing where indicated below, Hudson City Bancorp, Inc. (the ”Company”) grants this Performance Stock Option on the specified terms and conditions, and the Recipient acknowledges receipt of this Performance Stock Option Agreement, including Exhibit A, and agrees to observe and be bound by the terms and conditions set forth herein.

Hudson City Bancorp, Inc.		Recipient
By
	Ronald E. Hermance, Jr.	«FIRST_NAME» «LAST_NAME»
	Chairman, President and CEO

EXHIBIT A

Hudson City Bancorp, Inc. 2006 Stock Incentive Plan

Performance Stock Option Agreement

General Terms and Conditions

     Section 1. Option Size and Type. The number of shares of Common Stock, par value $.01 per share (AShares@), that have been optioned to you is specified in this Performance Stock Option Agreement. If the ”Option Type’ shown for your Options is ”ISO”, then your Options have been designed with the intent that they qualify to the maximum permissible extent for the special tax benefits applicable to incentive stock options under the Internal Revenue Code of 1986. If the ”Option Type” shown for your Options is ”NQSO” or is blank, incentive stock option tax treatment is not applicable.

     Section 2. Exercise Price. The Exercise Price for your Options is the price per Share at which you may acquire the Shares that have been optioned to you and is specified in this Performance Stock Option Agreement. As a general rule, the Exercise Price for your Option will not change unless there is a stock split, stock dividend, merger or other major corporate event that justifies an adjustment under section 15.3 of the Plan.

     Section 3. Vesting.

     (a) Vesting Conditions. You may not exercise your Options until they are vested. Your Options will be vested if and when you have satisfied BOTH of the following conditions:

• You must remain in the continuous service of the Company, Hudson City Savings Bank or an affiliate of the Company by which you are employed (your “Employer”) through the Earliest Exercise Date shown in this Performance Stock Option Agreement (“Service Conditions”).

• You must satisfy any Performance Condition(s) specified in this Performance Stock Option Agreement (“Performance Conditions”).

     As a general rule, if you have satisfied BOTH the Service Conditions and the Performance Conditions, you may acquire the Shares that have been optioned to you by exercising your Options. Otherwise, you may not. You exercise your Options by following exercise procedures prescribed by the Compensation Committee of the Company and available on request through the Company’s Human Resources Department.

     (b) Accelerated Vesting. If your service terminates with your Employer due to your death or Disability (as defined in the Plan) within six (6) months prior to the Earliest Exercise Date, the Options that are scheduled to vest on the Earliest Exercise Date, will become fully and immediately vested, without any further action on your part, upon your death or Disability. In addition, in the event of Change in Control (as defined in the Plan) followed by your discharge without Cause (as defined in the Plan) or your resignation with Good Reason, your Options will be fully and immediately vested on the date your employment with your Employer terminates. You will be considered to have Good Reason for a voluntary resignation if: the effective date of resignation occurs within ninety (90) days after any of the following: (a) the failure of your Employer (whether by act or omission of its Board of Directors, or otherwise) to appoint or re-appoint or elect or re-elect you to the position(s) which you held immediately prior to the Change in Control (other than to any such position as an officer of its Board of Directors), or to a more senior office; (b) if you are or become a member of the Board of Directors of your Employer, the failure of the shareholders (whether in an election in which you stand as a nominee or in an election where you are not a nominee) to elect or re-elect you to membership at the expiration of your term of membership, unless such failure is a result of your refusal to stand for election; (c) a material failure by your Employer, whether by amendment of its certificate of incorporation or organization, by-laws, action of its Board of Directors or otherwise, to vest in you the functions, duties, or responsibilities prescribed in an employment or retention agreement (other than such functions, duties or responsibilities associated with a position as an officer of the Board of Directors); provided that you shall have given notice of such failure to the Company and your Employer and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; (d) any reduction of your rate of base salary in effect from time to time, whether or not material, or any failure (other than due to reasonable administrative error that is cured promptly upon notice) to pay any portion of your compensation as and when due; (e) any change in the terms and conditions of any compensation or benefit program in which you participate which, either individually or together with other changes, has a material adverse effect on the aggregate value of your total compensation package, disregarding for this purpose any change that results from an across-the-board reduction that affects all similarly situated employees in a similar manner; provided that you shall have given notice of such material adverse effect to the Company and your Employer, and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; (f) any material breach by your Employer of any material term, condition or covenant contained in an employment or retention agreement; provided that you shall have given notice of such material breach to the Company and your Employer, and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; or (g) a change in your principal place of employment, without your consent, to a place that is not the principal executive office of your Employer or a relocation of your Employer’s principal executive office to a location that is both more than twenty-five (25) miles away from your principal residence and more than twenty-five (25) miles away from the location of your Employer’s principal executive office on the date of the Change in Control; or (h) if you are the Chief Executive Officer of the Company immediately prior to the Change in Control, any event or series of events that results in your ceasing to be the Chief Executive Officer (or most senior executive officer, however denominated) of a successor company (I) whose common equity securities are traded on a national securities exchange and (II) is the owner of 100% of the outstanding common stock of Hudson City Savings Bank or its successor and (III) is not controlled (within the meaning of the federal Change in Bank Control Act) by any other person or entity. You do not have to satisfy any Performance Conditions to qualify for accelerated vesting. Options that vest on an accelerated basis will, in general be exercisable as soon as they are vested.

     (c) Forfeitures. When you terminate service, you will forfeit all Options that have not vested, and do not vest on an accelerated basis on your termination date due to the circumstances of your termination. When you forfeit Options, you relinquish any and all rights that you have to acquire the Shares underlying the Options.

     (d) Definition of Service. For purposes of determining the vesting of your Options, you will be deemed to be in the service of your Employer for so long as you serve in any capacity as a common-law employee, non-employee director or consultant of your Employer.

     Section 4. Exercise Period.

     (a) General. You will have the right to purchase all or any portion of your Option at any time during the period (“Exercise Period”) beginning on the applicable Earliest Exercise Date (or any earlier date when the Option has vested on an accelerated basis) and ending on the earliest to occur of the following dates:

     (i) the Option Expiration Date specified in this Performance Stock Option Agreement;

     (ii) the last day of the three month period after your (A) voluntary resignation that is not in anticipation of a Termination for Cause (as defined in the Plan) or (B) discharge that is not a Termination for Cause (as defined in the Plan);

     (iii) the first anniversary of your termination of service due to Disability;

     (iv) if section 4(a)(ii) and (iii) above do not apply, the date and time of your termination of service with the Company for any other reason other than termination of service due to death; and

     (v) the last day of the ten-year period commencing on the date on which the Option was granted.

     (b) Special Circumstances in which the Exercise Period Will Be Extended.

     (i) If you hold vested Options and there is a Change in Control (as defined in the Plan) on or before the Option Expiration Date, the date on which the Exercise Period expires will be extended to the earliest of (A) the third (3^rd) anniversary of the date of the Change in Control; and (B) the tenth (10^th) anniversary of the Grant Date; or (C) any later date determined under section 4(b)(ii) of this Performance Stock Option Agreement.

     (ii) If on the date the vested Options are scheduled to expire, you are unable to exercise the Options or sell the Shares on a national securities exchange without violating applicable federal, state or local securities laws or the terms of a securities trading blackout or other trading suspension described in section 5.4(b)(iii) of the Plan, the Exercise Period will be extended to the earliest of (A) ninety (90) days after the last day of the trading suspension; and (B) the tenth (10^th) anniversary of the Grant Date; or (C) any later date determined under section 4(b)(i) of this Stock Option Agreement.

     (c) ISOs. To qualify for the favorable tax treatment accorded to incentive stock options, you must exercise any Options that are designated as ISOs within three months after you terminate service as a common-law employee of the Company and its subsidiaries for any reason other than disability and within one year after you terminate service as a common-law employee due to your death or disability. If they are exercised later, they will be subject to tax as if they were designated as NQSOs. If you die while you are a common-law employee of the Company and its subsidiaries, within three months after termination of service as a common-law employee for any reason other than your disability or within one year after your termination due to your disability, your estate or designated beneficiaries may be eligible for the favorable tax treatment accorded to Options designated as incentive stock options upon their exercise at any time during the remaining unexpired Exercise Period. Please refer to your Prospectus for a more detailed summary of tax consequences.

     Section 5. No Right to Continued Service. Nothing in this Performance Stock Option Agreement or any action of the Board or Committee with respect to this Performance Stock Option Agreement shall be held or construed to confer upon you any right to a continuation of service by your Employer. You may be dismissed or otherwise dealt with as though this Performance Stock Option Agreement had not been entered into.

     Section 6. Taxes. Where any person is entitled to receive Shares pursuant to the exercise of the Option granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

     Section 7. Notices. Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party:

If to the Company:

Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652
Attention: Corporate Secretary

     If to your Employer, to the Employer in care of Hudson City Bancorp, Inc., at the Company’s address specified for notices under this Performance Stock Option Agreement

     If to the Recipient, to the Recipient’s address as shown in the Company’s records.

     Section 8. Restrictions on Transfer. The Options granted hereunder shall not be transferable by the Recipient other than by will or by the laws of descent and distribution, to a Family Member (as defined in the Plan) or as otherwise permitted by the Plan. To designate a Beneficiary to receive any Options that remain outstanding at the time of your death, you must complete and file the Beneficiary Designation attached to this Retention Stock Option Agreement as Appendix A or another form provided by the Human Resource Department.

     Section 9. Successors and Assigns. This Performance Stock Option Agreement shall inure to the benefit of and shall be binding upon the Company and you and the Company’s successors and assigns and your respective heirs, successors and assigns.

     Section 10. Construction of Language. Whenever appropriate in the Performance Stock Option Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Performance Stock Option Agreement, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan, as amended from time to time.

     Section 11. Governing Law. This Performance Stock Option Agreement shall be construed, administered and enforced according to the laws of the State of New Jersey without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts located in the Counties of New Jersey shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of this Performance Stock Option Agreement. By accepting this Performance Stock Option Agreement, you agree to submit yourself, and any such legal action as you shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

     Section 12. Amendment. This Performance Stock Option Agreement may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and you.

     Section 13. Plan Provisions Control. This Performance Stock Option Agreement and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan. In the event of any conflict between the provisions of the Plan and the provisions of this Performance Stock Option Agreement, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Performance Stock Option Agreement, you acknowledge receipt of a copy of the Plan. You acknowledge that you may not and will not rely on any statement of account or other communication or document issued in connection with the Plan other than the Plan, this Performance Stock Option Agreement, and any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Performance Stock Option Agreement.

Appendix A to Performance Stock Option Agreement

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Beneficiary Designation Form

GENERAL INFORMATION	Use this form to designate the Beneficiary(ies) who will receive vested Performance Stock Options outstanding to you at the time of your death.
Name of Person Making Designation:	Employee No.:
BENEFICIARY DESIGNATION	Complete sections A and B. If no percentage shares are specified, each Beneficiary in the same class (primary or contingent) shall have an equal share. If any designated Beneficiary predeceases you, the shares of each remaining Beneficiary in the same class (primary or contingent) shall be increased proportionately.
A. PRIMARY BENEFICIARY(IES) I hereby designate the following person(s) as my primary Beneficiary(ies), reserving the right to change or revoke this designation at any time prior to my death:

Name	Address	Relationship	Birth Date	Share
					%
					%
					%
				Total = 100	%

B. CONTINGENT BENEFICIARY(IES) I hereby designate the following person(s) as my contingent Beneficiary(ies) to receive benefits only if all of my primary Beneficiaries should predecease me, reserving the right to change or revoke this designation at any time prior to my death with respect to all outstanding Performance Stock Options:

Name	Address	Relationship	Birth Date	Share
					%
					%
					%
				Total = 100	%

S I	H E	I understand that this Beneficiary Designation shall be effective only if properly completed and received by Hudson City Bancorp, Inc. prior to my death. I also understand that an effective Beneficiary Designation revokes my prior designation(s) with respect to all stock options outstanding to me under the 2006 Stock Incentive Plan and any other prior or subsequent stock option plan, program or arrangement of Hudson City Bancorp, Inc.
G	R
N	E	Your Signature	Date

Internal Use Only

This Beneficiary Designation was received by Hudson City Bancorp, Inc. on the date indicated.		Comments
Authorized Signature	Date

Appendix B to Performance Stock Option Agreement

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Performance Conditions for Performance Stock Options Granted on July 21, 2006:

1.	Operating Efficiency
	Measurement Period:	the period beginning July 1, 2006 and ending December 31, 2008
	Performance Criterion:	the Company’s Efficiency Ratio calculated quarterly on a consolidated basis and equal to the ratio of (1) total non-interest expense to (2) the sum of interest income plus total non-interest income, as reported in the Company’s Selected Financial Ratios
	Performance Condition:	the Company’s average quarterly Efficiency Ratio for the Measurement Period must be less than or equal to 30%
2.	Credit Quality
	Measurement Period:	the period beginning July 1, 2006 and ending December 31, 2008
	Performance Criterion:	the Company’s Credit Quality calculated quarterly on a consolidated basis equal to the ratio of non-performing assets to total assets, determined on the basis of generally accepted accounting principles consistently applied in the preparation of the Company’s financial statements as of July 21, 2006, as reported in the Company’s Selected Financial Ratios
	Performance Condition:	the Company’s quarterly Credit Quality for the Measurement Period must not exceed 15 basis points

Whether or not the Performance Conditions have been satisfied will be determined by the Committee on or as soon as practicable following the last day of the Measurement Period. In the event of unforeseen or extraordinary circumstances (including but not limited to increases in non-performing assets that to do not result in actual losses) that affect the Performance Criteria, the Committee shall adjust the Performance Conditions in such manner as it, in its discretion, may determine to be necessary or appropriate to prevent such unforeseen or extraordinary circumstances from materially affecting the rights of holders of Performance Stock Options.

EX-10.29

Exhibit 10.29

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Retention Stock Option Agreement

Name:
Employee No.:

Address:

This Retention Stock Option Agreement is intended to set forth the terms and conditions on which a Retention Stock Option (an “Option”) has been granted under the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan (the “Plan”). Set forth below are the specific terms and conditions applicable to this Option. Attached as Exhibit A are its general terms and conditions.

Option Grant					Total
Grant Date		7/21/2006		7/21/2006
Option Expiration Date*		7/20/2016		7/20/2016
Class of Optioned Shares*	Common		Common
No. of Optioned Shares*		«M_60»		«M_40»	«Total_Ret»
Exercise Price per Share*		$ 12.76		$ 12.76
Option Type (ISO or NQSO)	ISO		ISO
VESTING:
Earliest Exercise Date*		7/21/2009		7/21/2011

* Subject to adjustment as provided in the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan and Exhibit A attached hereto.

By signing where indicated below, Hudson City Bancorp, Inc. (the ”Company“) grants this Retention Stock Option upon the specified terms and conditions, and the Recipient acknowledges receipt of this Retention Stock Option Agreement, including Exhibit A, and agrees to observe and be bound by the terms and conditions set forth herein.

Hudson City Bancorp, Inc.		Recipient
By
	Ronald E. Hermance, Jr.	«FIRST» «LAST»
	Chairman, President and CEO

EXHIBIT A

Hudson City Bancorp, Inc. 2006 Stock Incentive Plan

Retention Stock Option Agreement

General Terms and Conditions

     Section 1. Option Size and Type. The number of shares of Common Stock, par value $.01 per share (“AShares“), that have been optioned to you is specified in this Retention Stock Option Agreement. If the ”Option Type” shown for your Options is “AISO’, then your Options have been designed with the intent that they qualify to the maximum permissible extent for the special tax benefits applicable to incentive stock options under the Internal Revenue Code of 1986. If the ”Option Type’ shown for your Options is ”NQSO’ or is blank, incentive stock option tax treatment is not applicable.

     Section 2. Exercise Price. The Exercise Price for your Options is the price per Share at which you may acquire the Shares that have been optioned to you and is specified in this Stock Option Agreement. As a general rule, the Exercise Price for your Option will not change unless there is a stock split, stock dividend, merger or other major corporate event that justifies an adjustment under section 15.3 of the Plan.

     Section 3. Vesting.

     (a) Earliest Exercise Date. You may not exercise your Options until they are vested. The date on which your Options become vested is specified in this Retention Stock Option Agreement as the Earliest Exercise Date. As a general rule, you must be in the service of the Company on an Earliest Exercise Date in order to be vested in the Options that vest on that date. You may acquire the Shares that have been optioned to you by exercising your Options at any time during the period beginning on the Earliest Exercise Date and continuing throughout the Exercise Period, by following exercise procedures prescribed by the Compensation Committee of the Company and available on request through the Company’s Human Resources Department.

     (b) Accelerated Vesting. If your service terminates with the Company, Hudson City Savings Bank or an affiliate of the Company by which you are employed (your “Employer”) due to your death or Disability (as defined in the Plan) within six (6) months prior to the Earliest Exercise Date, the Options that are scheduled to vest on the Earliest Exercise Date, will become fully and immediately vested, without any further action on your part, upon your death or Disability. In addition, in the event of Change in Control (as defined in the Plan) followed by your discharge without Cause (as defined in the Plan) or your resignation with Good Reason, your Options will be fully and immediately vested on the date your employment with your Employer terminates. You will be considered to have Good Reason for a voluntary resignation if: the effective date of resignation occurs within ninety (90) days after any of the following: (a) the failure of your Employer (whether by act or omission of its Board of Directors, or otherwise) to appoint or re-appoint or elect or re-elect you to the position(s) which you held immediately prior to the Change in Control (other than to any such position as an officer of its Board of Directors), or to a more senior office; (b) if you are or become a member of the Board of Directors of your Employer, the failure of the shareholders (whether in an election in which you stand as a nominee or in an election where you are not a nominee) to elect or re-elect you to membership at the expiration of your term of membership, unless such failure is a result of your refusal to stand for election; (c) a material failure by your Employer, whether by amendment of its certificate of incorporation or organization, by-laws, action of its Board of Directors or otherwise, to vest in you the functions, duties, or responsibilities prescribed in an employment or retention agreement (other than such functions, duties or responsibilities associated with a position as an officer of the Board of Directors); provided that you shall have given notice of such failure to the Company and your Employer and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; (d) any reduction of your rate of base salary in effect from time to time, whether or not material, or any failure (other than due to reasonable administrative error that is cured promptly upon notice) to pay any portion of your compensation as and when due; (e) any change in the terms and conditions of any compensation or benefit program in which you participate which, either individually or together with other changes, has a material adverse effect on the aggregate value of your total compensation package, disregarding for this purpose any change that results from an across-the-board reduction that affects all similarly situated employees in a similar manner; provided that you shall have given notice of such material adverse effect to the Company and your Employer, and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; (f) any material breach by your Employer of any material term, condition or covenant contained in an employment or retention agreement; provided that you shall have given notice of such material breach to the Company and your Employer, and your Employer has not fully cured such failure within thirty (30) days after such notice is deemed given; or (g) a change in your principal place of employment, without your consent, to a place that is not the principal executive office of your Employer or a relocation of your Employer’s principal executive office to a location that is both more than twenty-five (25) miles away from your principal residence and more than twenty-five (25) miles away from the location of your Employer’s principal executive office on the date of the Change in Control; or (h) if you are the Chief Executive Officer of the Company immediately prior to the Change in Control, any event or series of events that results in your ceasing to be the Chief Executive Officer (or most senior executive officer, however denominated) of a successor company (I) whose common equity securities are traded on a national securities exchange and (II) is the owner of 100% of the outstanding common stock of Hudson City Savings Bank or its successor and (III) is not controlled (within the meaning of the federal Change in Bank Control Act) by any other person or entity. You do not have to satisfy any Performance Conditions to qualify for accelerated vesting. Options that vest on an accelerated basis will, in general be exercisable as soon as they are vested.

     (c) Forfeitures. If you terminate service, you will forfeit all Options that have not vested, and do not vest on an accelerated basis on your termination date due to the circumstances of your termination. When you forfeit Options, you relinquish any and all rights that you have to acquire the Shares underlying the Options.

     (d) Definition of Service. For purposes of determining the vesting of your Options, you will be deemed to be in the service of

your Employer for so long as you serve in any capacity as a common-law employee, non-employee director or consultant of your Employer.

     Section 4. Exercise Period.

     (a) General. You will have the right to purchase all or any portion of your Option at any time during the period (“Exercise Period”) beginning on the applicable Earliest Exercise Date (or any earlier date when the Option has vested on an accelerated basis) and ending on the earliest to occur of the following dates:

     (i) the Option Expiration Date specified in this Retention Stock Option Agreement;

     (ii) the last day of the three month period after your (A) voluntary resignation that is not in anticipation of a Termination for Cause (as defined in the Plan) or (B) discharge that is not a Termination for Cause (as defined in the Plan);

     (iii) the first anniversary of your termination of service due to death or Disability; and

     (iv) if section 4(a)(ii) and (iii) above do not apply, the date and time of your termination of service with your Employer for any other reason;

     (v) the last day of the ten-year period commencing on the date on which the Option was granted.

     (b) Special Circumstances in which the Exercise Period Will Be Extended.

     (i) If you hold vested Options and there is a Change in Control (as defined in the Plan) on or before the Option Expiration Date, the date on which the Exercise Period expires will be extended to the earliest of (A) the third (3^rd) anniversary of the date of the Change in Control; and (B) the tenth (10^th) anniversary of the Grant Date; or (C) any later date determined under section 4(b)(ii) of this Retention Stock Option Agreement.

     (ii) If on the date the vested Options are scheduled to expire, you are unable to exercise the Options or sell the Shares on a national securities exchange without violating applicable federal, state or local securities laws or the terms of a securities trading blackout or other trading suspension described in section 5.4(b)(iii) of the Plan, the Exercise Period will be extended to the earliest of (A) ninety (90) days after the last day of the trading suspension; and (B) the tenth (10^th) anniversary of the Grant Date; or (C) any later date determined under section 4(b)(i) of this Retention Stock Option Agreement.

     (c) ISOs. To qualify for the favorable tax treatment accorded to incentive stock options, you must exercise any Options that are designated as ISOs within three months after you terminate service as a common-law employee of the Company and its subsidiaries for any reason other than disability and within one year after you terminate service as a common-law employee due to your death or disability. If they are exercised later, they will be subject to tax as if they were designated as NQSOs. If you die while you are a common-law employee of the Company and its subsidiaries, within three months after termination of service as a common-law employee for any reason other than your disability or within one year after your termination due to your disability, your estate or designated beneficiaries may be eligible for the favorable tax treatment accorded to Options designated as incentive stock options upon their exercise at any time during the remaining unexpired Exercise Period. Please refer to your Prospectus for a more detailed summary of tax consequences.

     Section 5. No Right to Continued Service. Nothing in this Retention Stock Option Agreement or any action of the Board or Committee with respect to this Retention Stock Option Agreement shall be held or construed to confer upon you any right to a continuation of service by your Employer. You may be dismissed or otherwise dealt with as though this Retention Stock Option Agreement had not been entered into.

     Section 6. Taxes. Where any person is entitled to receive Shares pursuant to the exercise of the Option granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

     Section 7 . Notices. Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party:

     If to the Company:

Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652
Attention: Corporate Secretary

     If to your Employer, to the Employer in care of Hudson City Bancorp, Inc., at the Company’s address specified for notices under this Retention Stock Option Agreement.

     If to the Recipient, to the Recipient’s address as shown in the Company’s records.

     Section 8. Restrictions on Transfer. The Options granted hereunder shall not be transferable by the Recipient other than by will or by the laws of descent and distribution, to a Family Member (as defined in the Plan) or as otherwise permitted by the Plan. To designate a Beneficiary to receive any Options that remain outstanding at the time of your death, you must complete and file the Beneficiary Designation attached to this Retention Stock Option Agreement as Appendix A or another form provided by the Human Resource Department.

     Section 9. Successors and Assigns. This Retention Stock Option Agreement shall inure to the benefit of and shall be binding upon the Company and you and the Company’s successors and assigns and your respective heirs, successors and assigns.

     Section 10. Construction of Language. Whenever appropriate in the Retention Stock Option Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Retention Stock Option Agreement, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan, as amended from time to time.

     Section 11. Governing Law. This Retention Stock Option Agreement shall be construed, administered and enforced according to the laws of the State of New Jersey without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts located in the Counties of New Jersey shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of this Retention Stock Option Agreement. By accepting this Retention Stock Option Agreement, you agree to submit yourself, and any such legal action as you shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

     Section 12. Amendment. This Retention Stock Option Agreement may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and you.

     Section 13. Plan Provisions Control. This Retention Stock Option Agreement and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan. In the event of any conflict between the provisions of the Plan and the provisions of this Retention Stock Option Agreement, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Retention Stock Option Agreement, you acknowledge receipt of a copy of the Plan. You acknowledge that you may not and will not rely on any statement of account or other communication or document issued in connection with the Plan other than the Plan, this Retention Stock Option Agreement, and any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Retention Stock Option Agreement.

EX-10.30

Exhibit 10.30

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Stock Option Agreement for Non-Employee Directors

Name:
Social Security No.:

Address:

This Stock Option Agreement is intended to set forth the terms and conditions on which a Stock Option (an “Option”) has been granted under the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan. Set forth below are the specific terms and conditions applicable to this Option. Attached as Exhibit A are its general terms and conditions.

Option Grant
Grant Date		7/21/2006
Class of Optioned Shares*	Common
No. of Optioned Shares*		50,000
Exercise Price per Share*		$ 12.76
Option Type (ISO or NQSO)	NQSO
VESTING:
Earliest Exercise Date*		7/21/2007
Option Expiration Date*		7/20/2016

* Subject to adjustment as provided in the Hudson City Bancorp, Inc. 2006 Stock Incentive Plan and Exhibit A attached hereto.

By signing where indicated below, Hudson City Bancorp, Inc. (the Company) grants this Option upon the specified terms and conditions, and the Recipient acknowledges receipt of this Stock Option Agreement, including Exhibit A, and agrees to observe and be bound by the terms and conditions set forth herein.

Hudson City Bancorp, Inc.		Recipient
By
	Ronald E. Hermance, Jr.	«FIRST_NAME» «LAST_NAME»
	Chairman, President and CEO

EXHIBIT A

Hudson City Bancorp, Inc. 2006 Stock Incentive Plan

Stock Option Agreement for Non-Employee Directors

General Terms and Conditions

     Section 1. Option Size and Type. The number of shares of Common Stock, par value $.01 per share (“Shares”), that have been optioned to you is specified in this Stock Option Agreement. Your Options are non-qualified stock options, or “NQSOs” and do not qualify for the special tax benefits applicable to incentive stock options under the Internal Revenue Code of 1986.

     Section 2. Exercise Price. The Exercise Price for your Option is the price per Share at which you may acquire the Shares that have been optioned to you and is specified in this Stock Option Agreement. As a general rule, the Exercise Price for your Option will not change unless there is a stock split, stock dividend, merger or other major corporate event that justifies an adjustment under section 15.3 of the Plan.

     Section 3. Vesting.

     (a) Earliest Exercise Date. You may not exercise your Options until they are vested. The date on which your Options become vested is specified in this Stock Option Agreement as the Earliest Exercise Date. As a general rule, you must be in the service of the Company on an Earliest Exercise Date in order to be vested in the Options that vest on that date. You may acquire the Shares that have been optioned to you by exercising your Options at any time during the period beginning on the Earliest Exercise Date and continuing throughout the Exercise Period, by following exercise procedures prescribed by the Compensation Committee of the Company and available on request through the Company’s Human Resources Department.

     (b) Accelerated Vesting. If your service terminates with the Company, Hudson City Savings Bank or an affiliate of the Company for which you serve as an non-employee director (the “Employer”) due to your death or Disability (as defined in the Plan) within six (6) months prior to the Earliest Exercise Date, the Options that are scheduled to vest on the Earliest Exercise Date will become fully and immediately vested, without any further action on your part, upon your death or Disability. In addition, in the event of Change in Control (as defined in the Plan), your Options will be fully and immediately vested on the date of the Change in Control.

     (c) Forfeiture. If you terminate service, you forfeit all Options that have not vested and do not vest on an accelerated basis on your termination date due to the circumstances of your termination. When you forfeit Options, you relinquish any and all rights that you have to acquire the Shares underlying the options.

     (d) Definition of Service. For purposes of determining the vesting of your Options, you will be deemed to be in the service of the Company for so long as you serve in any capacity as a common-law employee, non-employee director or consultant of your Employer.

     Section 4. Exercise Period.

     (a) General. You will have the right to purchase all or any portion of your Option at any time during the period (“Exercise Period”) beginning on the applicable Earliest Exercise Date (or any earlier date when the Option has vested on an accelerated basis) and ending on the earliest to occur of the following dates:

     (i) the Option Expiration Date specified in this Stock Option Agreement;

     (ii) the last day of the three-month period after your (A) voluntary resignation that is not in anticipation of a Termination for Cause (as defined in the Plan) or (B) discharge that is not a Termination for Cause (as defined in the Plan);

     (iii) the first anniversary of your termination of service due to Death or Disability;

     (iv) if section 4(a)(ii) and (iii) above do not apply, the date and time of your termination of service with your Employer for any other reason; and

     (v) the last day of the ten-year period commencing on the date on which the Option was granted.

     (b) Special Circumstances in which the Exercise Period Will Be Extended.

     (i) If you hold vested Options and there is a Change in Control (as defined in the Plan) on or before the Option Expiration Date, the date on which the Exercise Period expires will be extended to the earliest of (A) the third (3^rd) anniversary of the date of the Change in Control; and (B) the tenth (10^th) anniversary of the Grant Date; or (C) any later date determined under section 4(b)(ii) of this Stock Option Agreement.

     (ii) If on the date the vested Options are scheduled to expire, you are unable to exercise the Options or sell the Shares on a national securities exchange without violating applicable federal, state or local securities laws, the terms of a securities trading blackout or other trading suspension described in section 5.4(b)(iii) of the Plan, the Exercise Period will be extended to the earliest of (A) ninety (90) days after the last day of the trading suspension; and (B) the tenth (10^th) anniversary of the date the Grant Date; or (C) any later date determined under section 4(b)(i) of this Stock Option Agreement.

     Section 5. No Right to Continued Service. Nothing in this Stock Option Agreement or any action of the Board or Committee with respect to this Stock Option Agreement shall be held or construed to confer upon you any right to a continuation of service by your Employer. You may be dismissed or otherwise dealt with as though this Stock Option Agreement had not been entered into.

     Section 6. Taxes. Where any person is entitled to receive Shares pursuant to the exercise of the Option granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

     Section 7. Notices. Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party:

If to the Company:

Hudson City Bancorp, Inc.
West 80 Century Road
Paramus, New Jersey 07652
Attention: Corporate Secretary

     If to your Employer, to the Employer in care of Hudson City Bancorp, Inc., at the Company’s address specified for notices under this Stock Option Agreement.

     If to the Recipient, to the Recipient’s address as shown in the Company’s records.

     Section 8. Restrictions on Transfer. The Options granted hereunder shall not be transferable by the Recipient other than by will or by the laws of descent and distribution, to a Family Member (as defined in the Plan) or as otherwise permitted by the Plan. To designate a Beneficiary to receive any Options that remain outstanding at the time of your death, you must complete and file the Beneficiary Designation attached to this Retention Stock Option Agreement as Appendix A or another form provided by the Human Resource Department.

     Section 9. Successors and Assigns. This Stock Option Agreement shall inure to the benefit of and shall be binding upon the Company and you and the Company’s successors and assigns and your respective heirs, successors and assigns.

     Section 10. Construction of Language. Whenever appropriate in the Stock Option Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Stock Option Agreement, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan, as amended from time to time.

     Section 11. Governing Law. This Stock Option Agreement shall be construed, administered and enforced according to the laws of the State of New Jersey without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts located in the Counties of New Jersey shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of this Stock Option Agreement. By accepting this Stock Option Agreement, you agree to submit yourself, and any such legal action as you shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

     Section 12. Amendment. This Stock Option Agreement may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and you.

     Section 13. Plan Provisions Control. This Stock Option Agreement and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan. In the event of any conflict between the mandatory provisions of the Plan and the provisions of this Stock Option Agreement, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Stock Option Agreement, you acknowledge receipt of a copy of the Plan. You acknowledge that you may not and will not rely on any statement of account or other communication or document issued in connection with the Plan other than the Plan, this Stock Option Agreement, and any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Stock Option Agreement.

Appendix A to Stock Option Agreement

Hudson City Bancorp, Inc.

2006 Stock Incentive Plan

Beneficiary Designation Form

GENERAL INFORMATION	Use this form to designate the Beneficiary(ies) who will receive vested Performance Stock Options outstanding to you at the time of your death.
Name of Person Making Designation	Social Security No.
BENEFICIARY DESIGNATION	Complete sections A and B. If no percentage shares are specified, each Beneficiary in the same class (primary or contingent) shall have an equal share. If any designated Beneficiary predeceases you, the shares of each remaining Beneficiary in the same class (primary or contingent) shall be increased proportionately.
A. PRIMARY BENEFICIARY(IES) I hereby designate the following person(s) as my primary Beneficiary(ies), reserving the right to change or revoke this designation at any time prior to my death:

Name	Address	Relationship	Birth Date	Share
					%
					%
					%
				Total = 100	%

B. CONTINGENT BENEFICIARY(IES) I hereby designate the following person(s) as my contingent Beneficiary(ies) to receive benefits only if all of my primary Beneficiaries should predecease me, reserving the right to change or revoke this designation at any time prior to my death with respect to all outstanding Performance Stock Options:

Name	Address	Relationship	Birth Date	Share
					%
					%
					%
				Total = 100	%

S I	H E	I understand that this Beneficiary Designation shall be effective only if properly completed and received by Hudson City Bancorp, Inc. prior to my death. I also understand that an effective Beneficiary Designation revokes my prior designation(s) with respect to all stock options outstanding to me under the 2006 Stock Incentive Plan and any other prior or subsequent stock option plan, program or arrangement of Hudson City Bancorp, Inc.
G	R
N	E	Your Signature	Date

Internal Use Only

This Beneficiary Designation was received by Hudson City Bancorp, Inc. on the date indicated.		Comments
Authorized Signature	Date

EX-10.31

Exhibit 10.31

BENEFIT MAINTENANCE PLAN

OF

HUDSON CITY SAVINGS BANK

Effective December 19, 2006

TABLE OF CONTENTS

	Page
ARTICLE I
DEFINITIONS
Section 1.1 Acceleration Event		1
Section 1.2 Affiliated Employer		1
Section 1.3 Applicable Limitation		1
Section 1.4 Bank		2
Section 1.5 Beneficiary		2
Section 1.6 Board		2
Section 1.7 Change in Control		2
Section 1.8 Change in Control Event		3
Section 1.9 Code		3
Section 1.10 Committee		3
Section 1.11 Company		3
Section 1.12 Disability		3
Section 1.13 Eligible Employee		4
Section 1.14 Employee		4
Section 1.15 Employer		4
Section 1.16 Employer Contributions		4
Section 1.17 ERISA		4
Section 1.18 ESOP		4
Section 1.19 Exchange Act		4
Section 1.20 Fair Market Value of a Share		4
Section 1.21 Former Member		5
Section 1.22 Member		5
Section 1.23 Plan		5
Section 1.24 Restored ESOP Benefit		5
Section 1.25 Restored ESOP Death Benefit		5
Section 1.26 Retirement Plan		5
Section 1.27 Savings Plan		5
Section 1.28 Service Recipient		5
Section 1.29 Share		5
Section 1.30 Stock Unit		5
Section 1.31 Supplemental ESOP Account		5
Section 1.32 Supplemental ESOP Benefit		5
Section 1.33 Supplemental ESOP Death Benefit		5
Section 1.34 Supplemental Retirement Benefit		6
Section 1.35 Supplemental Retirement Death Benefit		6
Section 1.36 Supplemental Savings Account		6
Section 1.37 Supplemental Savings Benefit		6
Section 1.38 Supplemental Savings Death Benefit		6
Section 1.39 Termination of Service		6

	Page
Section 1.40 Unforeseeable Emergency		6
ARTICLE II
MEMBERSHIP
Section 2.1 Eligibility for Membership		6
Section 2.2 Commencement of Membership		7
Section 2.3 Termination of Membership		7
ARTICLE III
BENEFITS TO MEMBERS
Section 3.1 Supplemental ESOP Benefit		7
Section 3.2 Restored		9
Section 3.3 Supplemental Retirement Benefit		10
Section 3.4 Supplemental Savings Benefit		12
ARTICLE IV
DEATH BENEFITS
Section 4.1 Supplemental ESOP Death Benefit		13
Section 4.2 Restored ESOP Death Benefit		13
Section 4.3 Supplemental Retirement Death Benefit		13
Section 4.4 Supplemental Savings Death Benefit		13
Section 4.5 Beneficiaries		14
ARTICLE V
early distributions and other distribution requirements
Section 5.1 Unforeseeable Emergency		14
Section 5.2 Disability		14
Section 5.3 Domestic Relations Order		14
Section 5.4 Compliance with Certificate of Divestiture		14
Section 5.5 Mandatory Cashout of Small Balances		15
Section 5.6 Restrictions on Payments to Key Employees		15
Section 5.7 Payment in Shares		15
ARTICLE VI
TRUST FUND
Section 6.1 Establishment of Trust		15
Section 6.2 Contributions to Trust		16
Section 6.3 Unfunded Character of Plan		16

(ii)

	Page
ARTICLE VII
ADMINISTRATION
Section 7.1 The Committee		16
Section 7.2 Liability of Committee Members and Their Delegates		17
Section 7.3 Plan Expenses		17
Section 7.4 Facility of Payment		17
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Amendment by the Bank		18
Section 8.2 Termination		18
Section 8.3 Amendment or Termination by Other Employers		19
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Construction and Language		19
Section 9.2 Headings		20
Section 9.3 Non-Alienation of Benefits		20
Section 9.4 Indemnification		20
Section 9.5 Severability		20
Section 9.6 Waiver		20
Section 9.7 Governing Law		21
Section 9.8 Withholding		21
Section 9.9 No Deposit Account		21
Section 9.10 Rights of Employees		21
Section 9.11 Status of Plan Under ERISA		21
Section 9.12 Successors and Assigns		21
Section 9.13 Compliance with Section 409A of the Code		22

(iii)

BENEFIT MAINTENANCE PLAN

OF

HUDSON CITY SAVINGS BANK

INTRODUCTION

          This Benefit Maintenance Plan of Hudson City Savings Bank combines, amends and restates the ESOP Restoration Plan of Hudson City Savings Bank, the Hudson City Savings Bank Supplemental Executive Retirement Plan and the Supplementary Savings Plan of Hudson City Savings Bank, on December 19, 2006, effective as of January 1, 2005.

ARTICLE I

DEFINITIONS

          Wherever appropriate to the purposes of the Plan, capitalized terms shall have the meanings assigned to them under the Retirement Plan, Savings Plan or ESOP, as applicable; provided, however, that the following special definitions shall apply for purposes of the Plan, unless a different meaning is clearly indicated by the context:

          Section 1.1 Acceleration Event means, with respect to a Member, any of the events described in sections 5.1, 5.2, 5.3 and 5.4 on the basis of which the plan administrator may permit acceleration of the payment of the balance credited to the Member’s Account.

          Section 1.2 Affiliated Employer means the Bank; any corporation which is a member of a controlled group of corporations (as defined in section 414(b) of the Code) that includes the Bank; any trade or business (whether or not incorporated) that is under common control (as defined in section 414(c) of the Code) with the Bank; any organization (whether or not incorporated) that is a member of an affiliated service group (as defined in section 414(m) of the Code) that includes the Bank; any leasing organization (as defined in section 414(n) of the Code) to the extent that any of its employees are required pursuant to section 414(n) of the Code to be treated as employees of the Bank; and any other entity that is required to be aggregated with the Bank pursuant to regulations under section 414(o) of the Code.

          Section 1.3 Applicable Limitation means any of the following: (a) the limitation on annual compensation that may be recognized under a tax-qualified plan for benefit computation purposes pursuant to section 401(a)(17) of the Code; (b) the maximum limitation on annual benefits payable by a tax-qualified defined benefit plan pursuant to section 415(b) of the Code; (c) the maximum limitation on annual additions to a tax-qualified defined contribution plan pursuant to section 415(c) of the Code; (d) the maximum limitation on aggregate annual benefits and annual additions under a combination of tax-qualified defined benefit and defined contribution plans maintained by a single employer pursuant to section 415(e) of the Code; (e) the maximum limitation on annual elective deferrals to a qualified cash or deferred arrangement pursuant to section 402(g) of the Code; (f) the annual limitation on elective deferrals under a

qualified cash or deferred arrangement by highly compensated employees pursuant to section 401(k) of the Code; and (g) the annual limitation on voluntary employee contributions by, and employer matching contributions for, highly compensated employees pursuant to section 401(m) of the Code.

          Section 1.4 Bank means Hudson City Savings Bank and any successor thereto.

          Section 1.5 Beneficiary means any person, other than a Member or Former Member, who is determined to be entitled to benefits under the terms of the Plan.

          Section 1.6 Board means the Board of Directors of the Bank.

          Section 1.7 Change in Control means the happening of any of the following events:

     (a) the occurrence of any event upon which any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan maintained for the benefit of employees of Hudson City Bancorp, Inc.; (ii) a corporation owned, directly or indirectly, by the stockholders of the Hudson City Bancorp, Inc. in substantially the same proportions as their ownership of stock of Hudson City Bancorp, Inc.; or (iii) any group constituting a person in which employees of Hudson City Bancorp, Inc. are substantial members, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities issued by Hudson City Bancorp, Inc. representing 25% or more of the combined voting power of all of Hudson City Bancorp, Inc.’s then outstanding securities; or

     (b) the occurrence of any event upon which the individuals who were members of the Board as of the date this Plan was adopted, together with individuals whose election by the Board or nomination for election by Hudson City Bancorp, Inc.’s shareholders was approved by the affirmative vote of at least two-thirds of the members of the Board then in office who were either members of the Board on the date this Plan is adopted or whose nomination or election was previously so approved, cease for any reason to constitute a majority of the members of the Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Hudson City Bancorp, Inc. (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or

     (c) the shareholders of Hudson City Bancorp, Inc. approve either:

     (i) a merger or consolidation of Hudson City Bancorp, Inc. with any other corporation, other than a merger or consolidation following which both of the following conditions are satisfied:

2

     (A) either (1) the members of the Board of Hudson City Bancorp, Inc. immediately prior to such merger or consolidation constitute at least a majority of the members of the governing body of the institution resulting from such merger or consolidation; or (2) the shareholders of Hudson City Bancorp, Inc. own securities of the institution resulting from such merger or consolidation representing 80% or more of the combined voting power of all such securities then outstanding in substantially the same proportions as their ownership of voting securities of Hudson City Bancorp, Inc. before such merger or consolidation; and

     (B) the entity which results from such merger or consolidation expressly agrees in writing to assume and perform Hudson City Bancorp, Inc.’s obligations under the Plan; or

     (ii) a plan of complete liquidation of Hudson City Bancorp, Inc. or an agreement for the sale or disposition by Hudson City Bancorp, Inc. of all or substantially all of its assets; and

     (d) any event that would be described in section 1.7(a), (b) or (c) if “Hudson City Savings Bank” were substituted for “Hudson City Bancorp, Inc.” therein.

          Section 1.8 Change in Control Event means, with respect to a Member: (a) a change in ownership of the Member’s Service Recipient; (b) a change in effective control of the Member’s Service Recipient; or (c) a change in the ownership of a substantial portion of the assets of the Member’s Service Recipient. The existence of a Change in Control Event shall be determined by the plan administrator in accordance with section 409A of the Code and the regulations thereunder.

          Section 1.9 Code means the Internal Revenue Code of 1986 (including the corresponding provisions of any prior law or succeeding law).

          Section 1.10 Committee means the Employee Benefit Plans Committee of the Board, or such other person, committee or other entity as shall be designated by or on behalf of the Board to perform the duties set forth in Article VII.

          Section 1.11 Company means Hudson City Bancorp, Inc. or any successor thereto.

          Section 1.12 Disability means, with respect to a Member, any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of at least twelve (12) months and as a result of which either: (a) the Member is unable to engage in any substantial gainful activity or (b) the Member has been receiving income replacement benefits for a period of at least three (3) months under an accident and health plan covering employees of the Member’s Employer. The existence of a Disability

3

shall be determined by the plan administrator in accordance with section 409A of the Code and the regulations thereunder.

          Section 1.13 Eligible Employee means an Employee who is eligible for participation in the Plan in accordance with the provisions of Article II.

          Section 1.14 Employee means any person, including an officer, who is employed by any Affiliated Employer.

          Section 1.15 Employer means the Company and the Bank and any Affiliated Employer which, with the prior written approval of the Board of Directors of the Company and subject to such terms and conditions as may be imposed by the Board of Directors of the Company, shall adopt this Plan.

          Section 1.16 Employer Contributions means contributions by any Employer to the ESOP other than contributions that result in the allocation of Shares.

          Section 1.17 ERISA means the Employee Retirement Income Security Act of l974, as amended from time to time (including the corresponding provisions of any succeeding law).

          Section 1.18 ESOP means the Employee Stock Ownership Plan of Hudson City Savings Bank, as amended from time to time (including the corresponding provisions of any successor qualified employee stock ownership plan adopted by the Bank).

          Section 1.19 Exchange Act means the Securities Exchange Act of 1934, as amended from time to time (including the corresponding provisions of any succeeding law).

          Section 1.20 Fair Market Value of a Share means, with respect to a Share on a specified date:

     (a) the final quoted sales price on the date in question (or if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) as reported in the principal consolidated reporting system with respect to securities listed or admitted to trading on the principal United States securities exchange on which like Shares are listed or admitted to trading; or

     (b) if the Shares are not listed or admitted to trading on any such exchange, the closing bid quotation with respect to a Share on such date on the National Association of Securities Dealers Automated Quotations System, or, if no such quotation is provided, on another similar system, selected by the Committee, then in use; or

     (c) if sections 1.20(a) and (b) are not applicable, the fair market value of a Share as determined by an appraiser independent of any Employer and experienced and expert in the field of corporate appraisal.

4

          Section 1.21 Former Member means a person whose membership in the Plan has terminated as provided under section 2.3.

          Section 1.22 Member means any person who is participating in the Plan in accordance with its terms.

          Section 1.23 Plan means the Benefit Maintenance Plan of Hudson City Savings Bank, as amended from time to time (including the corresponding provisions of any successor plan adopted by the Bank or Company).

          Section 1.24 Restored ESOP Benefit means the benefit payable pursuant to section 3.2 of the Plan.

          Section 1.25 Restored ESOP Death Benefit means the death benefit payable pursuant to section 4.2 of the Plan.

          Section 1.26 Retirement Plan means the Employees’ Retirement Plan of Hudson City Savings Bank as amended from time to time (including the corresponding provisions of any successor qualified defined benefit pension plan adopted by the Bank).

          Section 1.27 Savings Plan means the Profit Incentive Bonus Plan of Hudson City Savings Bank as amended from time to time (including the corresponding provisions of any successor qualified 401(k) plan adopted by the Bank).

          Section 1.28 Service Recipient means with respect to a Member on any date: (a) the corporation for which the Member is performing services on such date; (b) all corporations that are liable to the Member for the benefits due to him under the Plan; (c) a corporation that is a majority shareholder of a corporation described in section 1.28(a) or (b); or (d) any corporation in the chain, ending in a corporation described in section 1.28(a) or (b).

          Section 1.29 Share means a share of common stock, par value $.01 per share, of Hudson City Bancorp, Inc.

          Section 1.30 Stock Unit means a right to receive a payment under the Plan in an amount equal, on the date as of which such payment is made, to the Fair Market Value of a Share.

          Section 1.31 Supplemental ESOP Account means a bookkeeping account that is credited with Stock Units and Employer Contributions to reflect all Shares and Employer Contributions (including any reallocation of amounts forfeited upon the termination of employment of others participating in the ESOP), respectively, that cannot be allocated to a Member’s account under the ESOP due to the Applicable Limitations.

          Section 1.32 Supplemental ESOP Benefit means the benefit payable pursuant to section 3.1 of the Plan.

          Section 1.33 Supplemental ESOP Death Benefit means the death benefit payable pursuant to section 4.1 of the Plan.

5

          Section 1.34 Supplemental Retirement Benefit means the benefit payable pursuant to section 3.3 of the Plan.

          Section 1.35 Supplemental Retirement Death Benefit means the death benefit payable pursuant to section 4.3 of the Plan.

          Section 1.36 Supplemental Savings Account means a bookkeeping account established a Member for purposes of measuring the Member’s benefit (including interest earned before or after the date hereof on any contributions) under the frozen Supplementary Savings Plan of Hudson City Savings Bank.

          Section 1.37 Supplemental Savings Benefit means the benefit payable pursuant to section 3.4 of the Plan.

          Section 1.38 Supplemental Savings Death Benefit means the death benefit payable pursuant to section 4.4 of the Plan.

          Section 1.39 Termination of Service means the later of (i) the date of the Employee’s separation from service (as defined in section 409A of the Code) with all Employers as an Employee, whether by resignation, discharge, death, disability, retirement or otherwise, or (ii) the date that a former Employee who is a Member ceases to be a member of the Board.

          Section 1.40 Unforeseeable Emergency means, with respect to a Member, a severe financial hardship to the Member resulting from illness or accident of the Member, the Member’s spouse or a dependent (within the meaning of section 152(e) of the Code) of the Member, loss of the Member’s property due to casualty, or other similar, extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Member. The existence of an Unforeseeable Emergency shall be determined by the plan administrator in accordance with section 409A of the Code and the regulations thereunder.

ARTICLE II

MEMBERSHIP

          Section 2.1 Eligibility for Membership.

          Only Eligible Employees may be or become Members. An Employee shall become an Eligible Employee if:

     (a) he has been designated an Eligible Employee by resolution of the Board; and

     (b) he is a Member of the ESOP and/or Retirement Plan and/or a Participant in the Savings Plan and the benefits to which he is entitled thereunder are limited by one or more of the Applicable Limitations;

provided, however, that no person shall be named an Eligible Employee, nor shall any person who has been an Eligible Employee continue as an Eligible Employee, to the extent that such

6

person’s participation, or continued participation, in the Plan would cause the Plan to fail to be considered maintained for the primary purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of ERISA. The Board may, in its sole discretion, designate that an Employee become an Eligible Employee as to any or all of (i) the Supplemental ESOP Benefit under section 3.1 and Supplemental ESOP Death Benefit under section 4.1, (ii) the Restored ESOP Benefit under section 3.2 and the Restored ESOP Death Benefit under section 4.2, (iii) the Supplemental Retirement Benefit under section 3.3 and the Supplemental Retirement Death Benefit under section 4.3 and/or (iv) the Supplemental Savings Benefit under section 3.4 and the Supplemental Savings Death Benefit under section 4.4. Effective as of January 1, 2004, Supplemental Savings Benefits have been frozen, with the effect that after such date, no additional additions or adjustments shall be made to such benefits, except to reflect earnings adjustments on existing balances.

          Section 2.2 Commencement of Membership.

          An Employee shall become a Member on the date when he is first designated as an Eligible Employee by the Board, unless the Board shall, by resolution, establish an earlier or later effective date of participation for a Member.

          Section 2.3 Termination of Membership.

          Membership in the Plan shall cease on the earlier of (a) the date of the Member’s Termination of Service or (b) the date on which he ceases to be an Eligible Employee.

ARTICLE III

BENEFITS TO MEMBERS

          Section 3.1 Supplemental ESOP Benefit.

          (a) A Member who has been designated by the Board under section 2.1 for a Supplemental ESOP Benefit under this Plan shall be eligible for such benefit in an amount equal to the sum of:

     (i) a number of Stock Units equal to the excess (if any) of (A) the aggregate number of Shares (including any reallocation of Shares forfeited upon the termination of employment of others participating in the ESOP) that would have been credited to the Member’s account under the ESOP in the absence of the Applicable Limitations over (B) the number of Shares actually credited to his account under the ESOP; plus

     (ii) if and to the extent that Employer Contributions to the ESOP result in allocations to the Member’s account of assets other than Shares, an amount equal to the excess (if any) of (A) the aggregate amount of Employer Contributions (including any reallocation of amounts forfeited upon the termination of employment of others participating in the ESOP) that would have been credited to the Member’s account under the ESOP in the absence of the Applicable Limitations over (B) the aggregate amount of Employer Contributions

7

(including any reallocation of amounts forfeited upon the termination of employment of others participating in the ESOP) actually credited to the Member’s account under the ESOP;

adjusted for earnings and losses as provided section 3.1(b); provided, however, that if the Member dies before the payment of such Supplemental ESOP Benefit begins, no benefit shall be payable under this section 3.1 and the Supplemental ESOP Death Benefit, if any, which may be payable shall be determined under section 4.1, if applicable to such Member.

          (b) In the case of a Member who is eligible for the Supplemental ESOP Benefit, the Committee shall cause to be maintained a Supplemental ESOP Account. Each Supplemental ESOP Account shall be credited with Stock Units (in respect of Shares) and Employer Contributions as of the date on which such Shares and Employer Contributions would have been credited to the Member’s account in the ESOP in the absence of the Applicable Limitations. The balance credited to the Supplemental ESOP Account shall be adjusted for earnings or losses as follows:

     (i) all Stock Units shall be adjusted from time to time so that the value of a Stock Unit on any date is equal to the Fair Market Value of a Share on such date, and the number of Stock Units shall be adjusted as and when appropriate to reflect any stock dividend, stock split, reverse stock split, exchange, conversion, or other event generally affecting the number of Shares held by all holders of Shares; and

     (ii) (A) except as provided in section 3.1(b)(ii)(B), the balance credited to the Supplemental ESOP Account that does not consist of Stock Units shall be credited with interest as of the last day of each calendar quarter at the highest rate of interest credited on certificates of deposit issued by the Bank during that calendar quarter; or

     (B) if and to the extent permitted by the Committee, the balance credited to Supplemental ESOP Account that does not consist of Stock Units shall be adjusted as though such Employer Contributions had been contributed to a trust fund and invested, for the benefit of the Member, in such investments at such time or times as the Member shall have designated in such form and manner as the Committee shall prescribe;

provided, however, that to the extent that the Member shall receive on a current basis any dividend paid with respect to Shares credited to his account under the ESOP, the bookkeeping account established for him under this Plan shall not be adjusted to reflect such dividend and, instead, the Member shall be paid an amount per Stock Unit equal to the dividend per Share received by the Member under the ESOP at substantially the same time as such dividend is paid under the ESOP.

          (c) The Supplemental ESOP Benefit payable to a Member hereunder shall be paid in a single lump sum as soon as practicable following the last day of the calendar year in which the Member’s Termination of Service occurs and shall be in an amount equal to the

8

balance of his Supplemental ESOP Account. Notwithstanding the foregoing, a Member may, within 30 days after first becoming eligible to participate in the Plan for purposes of receiving a Supplemental ESOP Benefit, specify that the Supplemental ESOP Benefit be paid in a different form or commencing at a different time by filing a written election, in such form and manner as the Committee may prescribe, within such 30-day period; provided, however, that such election shall be applicable only with respect to compensation payable for services to be performed subsequent to the election.

          (d) Notwithstanding anything in the Plan to the contrary, any Member who will be seventy (70) years old or older as of December 31, 2006 may, by written election on or before December 31, 2006 and in such form and manner as the Committee may prescribe, elect to terminate participation in the Plan with respect to the Supplemental ESOP Benefit and receive payment in an amount equal to the balance of his Supplemental ESOP Account on a specified date or pursuant to a specified schedule; provided, however, that no such payment(s) shall be made prior to January 1, 2007.

          Section 3.2 Restored ESOP Benefit.

          (a) A Member who has been designated by the Board under section 2.1 to recover the Restored ESOP Benefit shall be entitled, upon his Termination of Service upon or after attaining normal retirement age or being eligible for an early retirement benefit under the terms of the Retirement Plan, to an unfunded, unsecured promise from the Bank to receive an amount determined by:

     (i) projecting the total number of Shares that would have been allocated to the Member’s account under the terms of the ESOP and the ESOP Restoration Plan had the Member continued in the employ of the Bank measured from the date the Member was first eligible to participate in the ESOP until the ESOP loan was repaid in full and all of the Shares acquired when the ESOP loan was made were allocated; and then

     (ii) reducing the number of Shares projected in section 3.2(a)(i) above, by the actual number of Shares allocated to the Member under the terms of the ESOP and the ESOP Restoration Plan as of the last day of the final plan year of the ESOP in which the Member was an active Member for purposes of allocations under the ESOP; and

     (iii) multiplying the number of Shares determined in section 3.2(a)(ii) above by the average of the closing prices of such Shares at the end of each fiscal quarter during the preceding twelve fiscal quarters immediately preceding (or such fewer quarters as the Member has been a Member) the Member’s Termination of Service;

provided, however, that if the Member dies before the payment of such Restored ESOP Benefit begins, no benefit shall be payable under this section 3.2 and the Restored ESOP Death Benefit, if any, which may be payable shall be determined under section 4.2, if applicable to such Member.

9

          (b) The projection of Shares required by section 3.2(a)(i) above shall be performed by a public accountant based on assumptions which the Committee has approved as reasonable at the time the calculation of the benefit payable to the Member is performed.

          (c) The Restored ESOP Benefit payable to a Member hereunder shall be paid in a single lump sum as soon as practicable following the last day of the calendar year in which the Member’s Termination of Service occurs and shall be in an amount determined pursuant to section 3.2(a) above. Notwithstanding the foregoing, a Member may, within 30 days after first becoming eligible to participate in the Plan for purposes of receiving a Restored ESOP Benefit, specify that the Restored ESOP Benefit be paid in a different form or commencing at a different time by filing a written election, in such form and manner as the Committee may prescribe, within such 30-day period; provided, however, that such election shall be applicable only with respect to compensation payable for services to be performed subsequent to the election.

          (d) Notwithstanding anything in the Plan to the contrary, any Member who will be seventy (70) years old or older as of December 31, 2006 may, by written election on or before December 31, 2006 and in such form and manner as the Committee may prescribe, elect to terminate participation in the Plan with respect to the Restored ESOP Benefit and receive payment of the Restored ESOP Benefit in an amount determined pursuant to section 3.2(a) above on a specified date or pursuant to a specified schedule; provided, however, that no such payment(s) shall be made prior to January 1, 2007.

          Section 3.3 Supplemental Retirement Benefit.

          (a) A Member who has been designated by the Board under section 2.1 to receive the Supplemental Retirement Benefit shall be eligible for a Supplemental Retirement Benefit under this Plan in an amount equal to the excess of :

     (i) The normal retirement allowance, early retirement allowance or disability retirement allowance (as applicable) to which he would be entitled under the Retirement Plan in the absence of the Applicable Limitations; over

     (ii) The actual normal retirement allowance, early retirement allowance or disability retirement allowance (as applicable) to which he is entitled under the Retirement Plan;

in each case computed as of the date on which his benefit under the Retirement Plan is scheduled to commence. The Committee may, in its discretion grant additional years of credited service for purposes of computing the Supplemental Retirement Benefit; in such event the calculation in section 3.3(a)(i) shall reflect such additional years of credited service.

          (b) The Supplemental Retirement Benefit shall become 100% vested and nonforfeitable if a Member terminates employment on or after the date he attains age 65, has ten (10) years of service, dies or becomes disabled (within the meaning of the Retirement Plan). If a Member terminates employment while the Plan is still in effect and prior to any of the foregoing events, he shall forfeit all rights to a Supplemental Retirement Benefit.

10

          (c) In the event of a Change in Control, the Supplemental Retirement Benefit shall become 100% vested and nonforfeitable and no actuarial reductions shall be applied.

          (d) The Supplemental Retirement Benefit shall be paid:

     (i) To a married Member, in a monthly 100% joint and survivor annuity payable for the life of the Member, beginning on the first day of the month coincident with or next following the date of his retirement and upon his death, the monthly payment shall continue to his surviving spouse for her life, or to his child up to age 21 if his surviving spouse dies;

     (ii) To an unmarried Member, in a monthly single life annuity, beginning on the first day of the month coincident with or next following the date of his retirement and ending with the monthly payment immediately preceding his date of death;

provided, however, that if the Member dies before the payment of such Supplemental Retirement Benefit begins, no benefit shall be payable under this section 3.3 and the Supplemental Retirement Death Benefit, if any, which may be payable shall be determined under section 4.3, if applicable to such Member.

          (d) With the consent of the Committee, a Member may, within thirty (30) days after first becoming eligible to participate in the Plan for purposes of receiving the Supplemental Retirement Benefit, elect that the Supplemental Retirement Benefit be paid in a different form or commencing at a different time by filing a written election, in such form and manner as the Committee may provide, within such thirty (30) day period, and the amount of such benefit shall be the actuarial equivalent of the benefit payable in the absence of such election; provided, however, that such election shall be applicable only with respect to compensation payable for services to be performed subsequent to the election. The actuarial equivalent shall be computed on the basis of an eight percent (8%) interest rate assumption and the Unisex Pension Mortality Table for 1984 with ages set back two (2) years.

          (e) Notwithstanding section 3.3(d), each Member may elect at any time that the Supplemental Retirement Benefit be paid in a different form or commencing at a different time by filing a written election, in such form and manner as the Committee may provide; provided, however, that

     (i) Any such election shall not take effect until twelve (12) months after it is received by the Committee; and

     (ii) In the case of an election to defer a payment to be made on account of an event other than the Member’s death, Disability or Unforeseeable Emergency, the first payment made under such election shall not occur until at least five (5) years later than such payment would otherwise have been made; and

     (iii) In the case of an election to defer a payment to be made at a specified time or pursuant to a fixed schedule, such election shall be made at least

11

twelve (12) months prior to the date the payment (or the first payment, if applicable), is scheduled to be made.

          Section 3.4 Supplemental Savings Benefit.

          (a) A Member who has been designated by the Board under section 2.1 to receive the Supplemental Retirement Benefit shall be entitled to the amount credited to his Supplemental Savings Account as of December 31, 2004, plus interest credited as of the end of each calendar quarter until the date of payment at the highest rate of interest credited on certificates of deposit issued by the Bank during that calendar quarter or according to such other interest crediting or investment earnings mechanism as the Committee may authorize. The Supplemental Savings Benefit shall be paid in a single lump sum as soon as practicable following the last day of the calendar year in which (i), (ii), (iii) or (iv) below occurs, as designated by the Member on his membership form prior to the date he became a Member:

     (i) The Member’s Termination of Service,

     (ii) The Member attains a designated age not less than age 59¹/2 or greater than age 70¹/2,

     (iii) The earlier of (i) or (ii), or

     (iv) The later of (i) or (ii);

provided, however, that if the Member dies before payment of the Supplemental Savings Benefit begins, no benefit shall be payable under this section 3.4 and the Supplemental Savings Death Benefit, if any, which may be payable shall be determined under section 4.4, if applicable to such Member. In the event that a Member failed to designate a commencement date in accordance with the foregoing, payment shall be made in accordance with section 3.4(a)(i).

          (b) Notwithstanding anything to the contrary in section 3.4(a), a Member or former Member may, subject to the Committee’s approval, by written election given in such form and manner as the Committee may prescribe, make an irrevocable election to receive distribution of his Supplemental Savings Account in annual installments over a period not to exceed fifteen (15) years; provided, however, that

     (i) Any such election shall not take effect until twelve (12) months after it is received by the Committee; and

     (ii) Such election shall be made at least twelve (12) months prior to the date the payment (or the first payment, if applicable), is scheduled to be made.; and

     (iii) Such election shall conform to the requirements of section 409A of the Code.

          (c) The Committee shall maintain, or cause to be maintained, records showing the individual balances of each Member’s Supplemental Savings Account. At least once a year,

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each Member shall be furnished with a statement setting forth the value of his Supplemental Savings Account.

ARTICLE IV

DEATH BENEFITS

          Section 4.1 Supplemental ESOP Death Benefit.

          If a Member who is eligible for a Supplemental ESOP Benefit under section 3.1 dies before the payment of such benefit begins, a Supplemental ESOP Death Benefit shall be payable to the Member’s Beneficiary under this Plan in amount equal to the balance credited to the Supplemental ESOP Account established for the Member under section 3.1(b). Such benefit shall be paid in a single lump as soon as practicable following the death of the Member, and the Supplemental ESOP Account established for such Member pursuant to section 3.1(b) shall continue to be adjusted as provided therein through the last day of the last calendar month to end prior to the date of payment.

          Section 4.2 Restored ESOP Death Benefit.

          If a Member who is eligible for a Restored ESOP Benefit under section 3.2 dies before the payment of such benefit begins, a Restored ESOP Death Benefit shall be payable to the Member’s Beneficiary under this Plan in amount determined pursuant to section 3.2(a). Such benefit shall be paid in a single lump as soon as practicable following the death of the Member.

          Section 4.3 Supplemental Retirement Death Benefit.

          If a Member who is eligible for a Supplemental Retirement Benefit under section 3.3 has completed ten (10) years of service and dies before the payment of such benefit begins, a Supplemental Retirement Death Benefit shall be payable to such Member’s spouse, or child up to age 21 if his surviving spouse dies, in the form of a 100% joint and survivor annuity such that his spouse (or child, if applicable) shall receive 100% of the annuity that the Member would have received if the Member had retired on the day before his death and began to receive a 100% joint and survivor annuity. Written election (which may, subject to the requirements of section 409A of the Code, be revoked at any time) may be made to waive this preretirement joint and survivor annuity. Such waiver will not be valid unless endorsed by the Member’s spouse’s notarized (or witnessed) consent.

          Section 4.4 Supplemental Savings Death Benefit

          If a Member who is eligible for a Supplemental Savings Benefit under section 3.4 dies before payment of any or all of the balance of his Supplemental Savings Account, a Supplemental Savings Death Benefit shall be payable in a single lump sum to the Member’s Beneficiary under this Plan in the amount of the balance of his Supplemental Savings Account.

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          Section 4.5 Beneficiaries.

          A Member or Former Member may designate a Beneficiary or Beneficiaries to receive any survivor benefits payable under the Plan upon his death. Any such designation, or change therein or revocation thereof, shall be made in writing in the form and manner prescribed by the Committee, shall be revocable until the death of the Member, and shall thereafter be irrevocable; provided, however, that any change or revocation shall be effective only if received by the Committee prior to the Member’s or Former Member’s death. If a Member or Former Member shall die without having effectively named a Beneficiary, he shall be deemed to have named his estate as his sole Beneficiary. If a Member or Former Member and his designated Beneficiary shall die in circumstances which give rise to doubt as to which of them shall have been the first to die, the Member or Former Member shall be deemed to have survived the Beneficiary. If a Member or Former Member designates more than one Beneficiary, all shall be deemed to have equal shares unless the Member or Former Member shall expressly provide otherwise.

ARTICLE V

EARLY DISTRIBUTIONS AND OTHER DISTRIBUTION REQUIREMENTS

          Section 5.1 Unforeseeable Emergency.

          In the event that a Member has suffered an Unforeseeable Emergency, the Committee may, in its sole discretion and to the extent permitted under section 409A of the Code, allow such Member to obtain a lump sum withdrawal of an amount credited to him under the Plan that does not exceed the amount necessary to alleviate the Unforeseeable Emergency.

          Section 5.2 Disability.

          In the event of a Member’s Disability, the Committee may, in its sole discretion and to the extent permitted under section 409A of the Code, allow the Member to obtain a lump sum withdrawal of the entire amount credited to him under the Plan.

          Section 5.3 Domestic Relations Order.

          To the extent required to comply with the terms of a domestic relations order (within the meaning of section 414(p) of the Code) directed to and served upon the Plan, the Committee may direct the payment of all or any portion of the amount credited to him under the Plan at any time or in accordance with any payment schedule set forth in such order.

          Section 5.4 Compliance with Certificate of Divestiture.

          To the extent necessary to effect compliance with a certificate of divestiture (within the meaning of section 1043(b)(2) of the Code), the Committee may permit the distribution of all or a portion of the amount credited to him under the Plan earlier than the times otherwise provided in the Plan.

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          Section 5.5 Mandatory Cashout of Small Balances.

          Notwithstanding anything in the Plan to the contrary if, as of December 31^st of any calendar year in which the Member’s Termination of Service occurs, (i) the aggregate amount payable in respect of the Supplemental ESOP Benefit, the Restored ESOP Benefit and the Supplemental Savings Benefit is $10,000 or less, and/or (ii) the amount payable in respect of the Supplemental Retirement Benefit is $10,000 or less, in each case, the entire amount credited to him in respect of such benefit(s) shall be distributed in a single lump sum payment as soon as practicable during the immediately following calendar year (but in no event later than the later of December 31^st of the year in which the Member’s Termination of Service occurs and the fifteenth (15^th) day of the third (3^rd) month following the Member’s Termination of Service).

          Section 5.6 Restrictions on Payments to Key Employees.

          Notwithstanding anything in the Plan to the contrary, to the extent required under section 409A of the Code, no payment to be made to a key employee (within the meaning of section 409A of the Code) on or after the date of his Termination of Service shall be made sooner than six (6) months after such Termination of Service.

          Section 5.7 Payment in Shares.

          Notwithstanding anything in the Plan to the contrary, any benefit payable under the Plan that is denominated in Stock Units or other phantom Shares or adjusted for earnings based on changes in the value of a Share may, at the discretion of the Committee be paid by distribution to the payment recipient of a number of Shares of equivalent value.

ARTICLE VI

TRUST FUND

          Section 6.1 Establishment of Trust.

          The Company may establish a trust fund which may be used to accumulate funds to satisfy benefit liabilities to Members, Former Members and their Beneficiaries under the Plan; provided, however, that the assets of such trust shall be subject to the claims of the creditors of the Company in the event that it is determined that the Company is insolvent; and provided, further, that the trust agreement shall contain such terms, conditions and provisions as shall be necessary to cause the Company to be considered the owner of the trust fund for federal, state or local income tax purposes with respect to all amounts contributed to the trust fund or any income attributable to the investments of the trust fund. The Company shall pay all costs and expenses incurred in establishing and maintaining such trust. Any payments made to a Member, Former Member or Beneficiary from a trust established under this section 6.1 shall offset payments which would otherwise be payable by the Company in the absence of the establishment of such trust. Any such trust will conform to the terms of the model trust described in Revenue Procedure 92-64, as the same may be modified from time to time.

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          Section 6.2 Contributions to Trust.

          If a trust is established in accordance with section 6.1, the Company shall make contributions to such trust in such amounts and at such times as may be specified by the Committee or as may be required pursuant to the terms of the agreement governing the establishment and operation of such trust.

          Section 6.3 Unfunded Character of Plan.

          Notwithstanding the establishment of a trust pursuant to section 6.1, the Plan shall be unfunded for purposes of the Code and ERISA. Any liability of the Bank, the Company or another Employer to any person with respect to benefits payable under the Plan shall be based solely upon such contractual obligations, if any, as shall be created by the Plan, and shall give rise only to a claim against the general assets of the Bank, the Company or such other Employer. No such liability shall be deemed to be secured by any pledge or any other encumbrance on any specific property of the Bank, the Company or any other Employer.

ARTICLE VII

ADMINISTRATION

          Section 7.1 The Committee.

          Except for the functions reserved to the Bank or the Board, the administration of the Plan shall be the responsibility of the Committee. The Committee shall have the power and the duty to take all actions and to make all decisions necessary or proper to carry out the Plan. The determination of the Committee as to any question involving the general administration and interpretation of the Plan shall be final, conclusive and binding. Any discretionary actions to be taken under the Plan by the Committee shall be uniform in their nature and applicable to all persons similarly situated. Without limiting the generality of the foregoing, the Committee shall have the following powers:

     (a) to furnish to all Members, upon request, copies of the Plan and to require any person to furnish such information as it may request for the purpose of the proper administration of the Plan as a condition to receiving any benefits under the Plan;

     (b) to make and enforce such rules and regulations and prescribe the use of such forms as it shall deem necessary for the efficient administration of the Plan;

     (c) to interpret the Plan, and to resolve ambiguities, inconsistencies and omissions, and the determinations of the Committee in respect thereof shall be binding, final and conclusive upon all interested parties;

     (d) to decide on questions concerning the Plan in accordance with the provisions of the Plan;

16

     (e) to determine the amount of benefits which shall be payable to any person in accordance with the provisions of the Plan, to hear and decide claims for benefits, and to provide a full and fair review to any Member whose claim for benefits has been denied in whole or in part;

     (f) to designate a person, who may or may not be a member of the Committee, as “plan administrator” for purposes of the ERISA;

     (g) to allocate any such powers and duties to or among individual members of the Committee; and

     (h) to designate persons other than Committee members to carry out any duty or power which would otherwise be a responsibility of the Committee or administrator under the terms of the Plan.

          Section 7.2 Liability of Committee Members and Their Delegates.

          To the extent permitted by law, the Committee and any person to whom it may delegate any duty or power in connection with administering the Plan, the Bank, the Company, any Employer, and the officers and directors thereof, shall be entitled to rely conclusively upon, and shall be fully protected in any action taken or suffered by them in good faith in the reliance upon, any actuary, counsel, accountant, other specialist, or other person selected by the Committee, or in reliance upon any tables, valuations, certificates, opinions or reports which shall be furnished by any of them. Further, to the extent permitted by law, no member of the Committee, nor the Bank, the Company, any Employer, nor the officers or directors thereof, shall be liable for any neglect, omission or wrongdoing of any other members of the Committee, agent, officer or employee of the Bank, the Company or any Employer. Any person claiming benefits under the Plan shall look solely to the Employer for redress.

          Section 7.3 Plan Expenses.

          All expenses incurred prior to the termination of the Plan that shall arise in connection with the administration of the Plan (including, but not limited to administrative expenses, proper charges and disbursements, compensation and other expenses and charges of any actuary, counsel, accountant, specialist, or other person who shall be employed by the Committee in connection with the administration of the Plan), shall be paid by the Bank.

          Section 7.4 Facility of Payment.

          If the Company is unable to make payment to any Member, Former Member Beneficiary, or any other person to whom a payment is due under the Plan because it cannot ascertain the identity or whereabouts of such Member, Former Member, Beneficiary, or other person after reasonable efforts have been made to identify or locate such person (including a notice of the payment so due mailed to the last known address of such Member, Former Member, Beneficiary, or other person shown on the records of the Employer), such payment and all subsequent payments otherwise due to such Member, Former Member, Beneficiary or other person shall be forfeited 24 months after the date such payment first became due; provided, however, that such payment and any subsequent payments shall be reinstated, retroactively, no

17

later than 60 days after the date on which the Member, Former Member, Beneficiary, or other person is identified or located.

ARTICLE VIII

AMENDMENT AND TERMINATION

          Section 8.1 Amendment by the Bank.

          The Bank reserves the right, in its sole and absolute discretion, at any time and from to time, by action of the Board, to amend the Plan in whole or in part. In no event, however, shall any such amendment adversely affect the right of any Member, Former Member or Beneficiary to receive any benefits under the Plan in respect of participation for any period ending on or before the later of the date on which such amendment is adopted or the date on which it is made effective.

          Section 8.2 Termination.

          (a) The Company also reserves the right, in its sole and absolute discretion, by action of the Board, to terminate the Plan, but only in the following circumstances:

     (i) Within twelve (12) months of any Change in Control Event; and

     (ii) At such other time and in such other circumstances as may be permitted under section 409A of the Code.

In such event, all benefits theretofore accrued shall be 100% vested, no further benefits shall accrue, and undistributed benefits attributable to participation prior to the date of termination shall, to the extent not in pay status, be distributed in lump sum payments as soon as practicable following the effective date of termination and, to the extent already in pay status, be maintained and distributed in accordance with the payment election in effect, unless the Board of Directors specifies otherwise in its resolution of termination in accordance with the requirements of section 409A of the Code.

          (b) Notwithstanding anything to the contrary in the Plan, the Plan shall terminate automatically upon the occurrence of a Change in Control Event, or, with respect to a Change in Control Event that is contemplated by a definitive written agreement, upon the delivery to the plan administrator of a written certification of the President and Chief Executive Officer of the Company that all material conditions to the consummation of the Change in Control Event contemplated by such definitive agreement have been satisfied or waived. In such event, undistributed benefits attributable to participation prior to the date of termination shall be distributed as though each Member terminated employment with the Bank, the Company and all other Employers as of the effective date of termination of the Plan.

          (c) The Company reserves the right, in its sole and absolute discretion, by action of the Board, to suspend the operation of the Plan, but only in the following circumstances:

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     (i) With respect to Supplemental ESOP Benefits, Restored ESOP Benefits, Supplemental Retirement Benefits and/or Supplemental Savings Benefits to be contributed and/or earned, as applicable, for the calendar years beginning after the date of adoption of the resolution suspending the operation of the Plan; and

     (ii) At such other time and in such other circumstances as may be permitted under section 409A of the Code.

In such event, no further benefits shall accrue following the effective date of the suspense and any accounts in existence or other amounts payable prior to such date shall continue to be maintained, and payments shall continue to be made, in accordance with the provisions of the Plan.

          (d) Except for any automatic termination provided for in the Plan, the Plan may only be terminated by resolution of the Board or by written instrument signed by an officer of the Company authorized by resolution of the Board to effect such termination.

          Section 8.3 Amendment or Termination by Other Employers.

          In the event that a corporation or trade or business other than the Bank shall adopt this Plan, such corporation or trade or business shall, by adopting the Plan, empower the Bank to amend or terminate the Plan, insofar as it shall cover employees of such corporation or trade or business, upon the terms and conditions set forth in sections 8.1 and 8.2; provided, however, that any such corporation or trade or business may, by action of its board of directors or other governing body, amend or terminate the Plan, insofar as it shall cover employees of such corporation or trade or business, at different times and in a different manner. In the event of any such amendment or termination by action of the board of directors or other governing body of such a corporation or trade or business, a separate plan shall be deemed to have been established for the employees of such corporation or trade or business, and any amounts set aside to provide for the satisfaction of benefit liabilities with respect to Employees of such corporation or trade or business shall be segregated from the assets set aside for the purposes of this Plan at the earliest practicable date and shall be dealt with in accordance with the documents governing such separate plan.

ARTICLE IX

MISCELLANEOUS PROVISIONS

          Section 9.1 Construction and Language.

          Wherever appropriate in the Plan, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and the masculine gender may be read to refer to the feminine gender or the neuter. Any reference to an Article or section shall refer to an Article or section of the Plan, unless otherwise indicated.

19

          Section 9.2 Headings.

          The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Agreement, the text shall control.

          Section 9.3 Non-Alienation of Benefits.

          Except as may otherwise be required by law, no distribution or payment under the Plan to any Member, Former Member or Beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; nor shall any such distribution or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to such distribution or payment. If any Member, Former Member or Beneficiary is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge encumber or charge any such distribution or payment, voluntarily or involuntarily, the Committee, in its sole discretion, may cancel such distribution or payment or may hold or cause to be held or applied such distribution or payment, or any part thereof, to or for the benefit of such Member, Former Member or Beneficiary, in such manner as the Committee shall direct; provided, however, that no such action by the Committee shall cause the acceleration or deferral of any benefit payments from the date on which such payments are scheduled to be made.

          Section 9.4 Indemnification.

          The Bank shall indemnify, hold harmless and defend each Member, Former Member and Beneficiary, against their reasonable costs, including legal fees, incurred by them or arising out of any action, suit or proceeding in which they may be involved, as a result of their efforts, in good faith, to defend or enforce the obligation of the Bank, the Company and any other Employer under the terms of the Plan.

          Section 9.5 Severability.

          A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

          Section 9.6 Waiver.

          Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

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          Section 9.7 Governing Law.

          The Plan shall be construed, administered and enforced according to the laws of the State of New Jersey without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by federal law. The federal and state courts located in Bergen County, New Jersey shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any payment under this Plan, the Member and any other person claiming any rights under the Plan, agrees to submit himself, and any such legal action as he shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes. Any payments made pursuant to this Plan are subject to and conditioned upon their compliance with 12 U.S.C. section 1828(k) and any regulations promulgated thereunder.

          Section 9.8 Withholding.

          Payments from this Plan shall be subject to all applicable federal, state and local income withholding taxes.

          Section 9.9 No Deposit Account.

          Nothing in this Plan shall be held or construed to establish any deposit account for any Member or any deposit liability on the part of the Bank. Members’ rights hereunder shall be equivalent to those of a general unsecured creditor of each Employer.

          Section 9.10 Rights of Employees.

          No Employee shall have any right or claim to any benefit under the Plan except in accordance with the provisions of the Plan. The establishment of the Plan shall not be construed as conferring upon any Employee or other person any legal right to a continuation of employment or to any terms or conditions of employment, nor as limiting or qualifying the right of an Employer to discharge any Employee.

          Section 9.11 Status of Plan Under ERISA.

          The Plan is intended to be (a) to the maximum extent permitted under applicable laws, an unfunded, non-qualified excess benefit plan as contemplated by section 3(36) of ERISA for the purpose of providing benefits in excess of the limitations imposed under section 415 of the Code, and (b) to the extent not so permitted, an unfunded, non-qualified plan maintained primarily for the purpose of providing deferred compensation for highly compensated employees, as contemplated by sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan is not intended to comply with the requirements of section 401(a) of the Code or to be subject to Parts 2, 3 and 4 of Title I of ERISA. The Plan shall be administered and construed so as to effectuate this intent.

          Section 9.12 Successors and Assigns.

          The provisions of the Plan will inure to the benefit of and be binding upon the Members and their respective legal representatives and testate or intestate distributees, and each

21

Employer and their respective successors and assigns, including any successor by merger or consolidation or statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of any Employer may otherwise be sold or otherwise transferred.

          Section 9.13 Compliance with Section 409A of the Code.

          The Plan is intended to be a non-qualified deferred compensation plan described in section 409A of the Code. The Plan shall be operated, administered and construed to give effect to such intent. In addition, the Plan shall be subject to amendment, with or without advance notice to Members and other interested parties, and on a prospective or retroactive basis, including but not limited to amendment in a manner that adversely affects the rights of Members and other interested parties, to the extent necessary to effect such compliance.

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EX-10.32

Exhibit 10.32

The Compensation Committee then discussed the Company’s current charitable giving matching program. After this discussion the Committee approved that the following levels be approved by the full Board of Directors:

•	Chairman	$50,000 calendar year limit (from current $30,000)
•	Board of Directors	$30,000 calendar year limit (from $20,000)
•	Senior Vice Presidents and 1st Vice Presidents	$10,000 calendar year limit (from zero)

Charitable contributions will continue to be matched dollar for dollar for charitable organization(s) recognized by the Internal Revenue Service (deductions allowed under section 501(c) 3 if the IRS code) The Committee asked that management review for discussion after the public offering is complete the possible design of a charitable matching program for all employees.

EX-10.33

Exhibit 10.33

On June 8, 2006, the Compensation Committee of the Board of Directors of Hudson City Bancorp, Inc. (the “Company”), a Delaware corporation and Hudson City Savings Bank, a wholly owned subsidiary of the Company (the “Bank”), reviewed the compensation paid to its directors for their service as directors of the Company and the Bank and approved the following compensation program for non-employee directors, effective July 1, 2006. Effective July 1, 2006, non-employee directors will receive the following cash compensation for service on the Boards of Directors of Hudson City Bancorp, Inc. and Hudson City Savings Bank and the respective Board committees:

Non-Employee Board Member Compensation
Annual Retainer	$	50,000
Meeting Fee	$	1,000
Lead Independent Director Compensation
Annual Retainer	$	35,000
Non-Employee Committee Member Compensation
Meeting Fee	$	1,000
Committee Chair Annual Retainers
Audit Committee	$	15,000
Compensation Committee	$	10,000
Nominating & Governance Committee	$	5,000

The cash compensation described above represents combined compensation for non-employee directors’ service to both Hudson City Bancorp, Inc. and Hudson City Savings Bank. Compensation is paid by the Bank and Hudson City Bancorp, Inc. reimburses the Bank for a part of the compensation paid to each director that is proportionate to the amount of time which he or she devotes to the performance of services for the Company. A single fee is paid when the Company and the Bank hold joint board or committee meetings. The Lead Independent Director is an ex officio member of all Board committees and presides over executive sessions of the Independent Directors of the Board but does not receive meeting fees for his attendance at committee meetings or executive sessions.

EX-11.1

EXHIBIT 11.1

STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

For the Year Ended December 31, 2006

1	Net income	$	288,579,000
2	Total weighted average common shares outstanding-basic		536,215,000
3	Basic earnings per share	$	0.54
4	Total weighted average common shares outstanding-diluted		546,791,000
5	Diluted earnings per share	$	0.53

Exhibits Page 1

EX-21.1

EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT

The following is a list of the subsidiaries of Hudson City Bancorp, Inc.:

Hudson City Savings Bank	United States of America
Name	Jurisdiction of Incorporation

The following is a list of the subsidiaries of Hudson City Savings Bank:

HudCiti Service Corporation	New Jersey
Name	State of Incorporation
HC Value Broker Services, Inc	New Jersey
Name	State of Incorporation

The following is a list of the subsidiaries of HudCiti Service Corporation:

Hudson City Preferred Funding Corp.	Delaware
Name	State of Incorporation
Sound REIT, Inc.	New York
Name	State of Incorporation

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Hudson City Bancorp, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333-73090, No. 333-95193, No. 333-78969 and No. 333-114536) on Form S-8 of Hudson City Bancorp, Inc. of our reports dated February 28, 2007, with respect to the consolidated statements of financial condition of Hudson City Bancorp, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Hudson City Bancorp, Inc.

(signed) KPMG LLP

New York, New York
February 28, 2007

EX-31.1

EXHIBIT 31.1
CERTIFICATION OF DISCLOSURE

I, Ronald E. Hermance, Jr., certify that :

1.	I have reviewed this Annual Report on Form 10-K of Hudson City Bancorp, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2007	By:	/s/ Ronald E. Hermance, Jr.
		Ronald E. Hermance, Jr.
		Chairman, President and Chief Executive Officer

Exhibits Page 2

EX-31.2

EXHIBIT 31.2
CERTIFICATION OF DISCLOSURE

I, James C. Kranz, certify that:

1. I have reviewed this Annual Report on Form 10-K of Hudson City Bancorp, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2007	By:	/s/ James C. Kranz
		James C. Kranz
		Senior Vice President and Chief Financial Officer

Exhibits Page 3

EX-32.1

EXHIBIT 32.1

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

The undersigned, Ronald E. Hermance, Jr., is the Chief Executive Officer of Hudson City Bancorp, Inc. (the “Company”), and James C. Kranz, is the principal financial officer of the Company.

This statement is being furnished in connection with the filing by the Company of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “Report”).

By execution of this statement, we certify that:

A)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and
B)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

Date: February 28, 2007	By:	/s/ Ronald E. Hermance, Jr.
		Ronald E. Hermance, Jr.
		Chairman, President and Chief Executive Officer
Date: February 28, 2007	By:	/s/ James C. Kranz
		James C. Kranz
		Senior Vice President and Chief Financial Officer

Exhibits Page 4