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, 2009

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 15(d) 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 whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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. þ

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

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

Yes o     Noþ

As of February 19, 2010, the registrant had 741,466,555 shares of common stock, $0.01 par value, issued and 526,870,502 shares outstanding. The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2009 was $6,370,482,000. This figure was based on the closing price by the NASDAQ Global Market for a share of the registrant’s common stock, which was $13.29 as reported by the NASDAQ Global Market on June 30, 2009.

Documents Incorporated by Reference:

1.	Sections of Annual Report to Shareholders for the year ended December 31, 2009 are incorporated by reference into Part II.
2.	Portions of the definitive Proxy Statement to be used in connection with the Annual Meeting of Shareholders to be held on April 21, 2010 and any adjournment thereof which is expected to be filed with the Securities and Exchange Commission no later than March 18, 2010, are incorporated by reference into Part III.

Hudson City Bancorp, Inc.

Form 10-K

Table of Contents

	Page
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT		1
PART I		2
Item 1. Business		2
Item 1A. Risk Factors		48
Item 1B. Unresolved Staff Comments		54
Item 2. Properties		54
Item 3. Legal Proceedings		54
Item 4. Submission of Matters to a Vote of Security Holders		54
PART II		55
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		55
Item 6. Selected Financial Data		56
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		56
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		56
Item 8. Financial Statements and Supplementary Data		56
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		56
Item 9A. Controls and Procedures		56
Item 9B. Other Information		57
PART III		58
Item 10. Directors, Executive Officers and Corporate Governance		58
Item 11. Executive Compensation		58
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		58
Item 13. Certain Relationships and Related Transactions, and Director Independence		58
Item 14. Principal Accounting Fees and Services		59
PART IV		59
Item 15. Exhibits, Financial Statement Schedules		59
SIGNATURES		62
EX-3.1
EX-13.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

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, including unemployment rates, 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 adverse changes to credit quality, including changes in the level of loan delinquencies and non-performing assets and charge-offs, the duration of our non-performing assets remain in our portfolio and changes in estimates of the adequacy of the allowance for loan losses;

• difficulties associated with achieving expected future financial results;

• our ability to diversity our funding sources and to continue to access the wholesale borrowing market and the capital markets; and

• the risk of a continued 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.

As used in this Form 10-K, unless we specify otherwise, “Hudson City Bancorp,” “Company,” “we,” “us,” and “our” refer to Hudson City Bancorp, Inc., a Delaware corporation. “Hudson City Savings” and “Bank” refer 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, the former mutual holding company of Hudson City Bancorp.

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PART I

Item 1. Business

Hudson City Bancorp, Inc. Hudson City Bancorp is a Delaware corporation organized in 1999 and serves as the holding company of its only subsidiary, Hudson City Savings Bank. The principal asset of Hudson City Bancorp is its investment in 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.

Hudson City Savings. 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 its customers since 1868. We conduct our operations out of our corporate offices in Paramus in Bergen County, New Jersey and through 131 branches in the New York metropolitan area. We operate 95 branches located in 17 counties throughout the State of New Jersey. In New York State, we operate 10 branch offices in Westchester County, 9 branch offices in Suffolk County, 1 branch office each in Putnam and Rockland Counties and 6 branch offices in Richmond County (Staten Island). We also operate 9 branch offices in Fairfield County, Connecticut. In addition, we began to open deposit accounts through our internet banking service in December 2008.

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 and mortgage-backed securities and other securities issued by U.S. government-sponsored enterprises (“GSEs”) as well as other investments permitted by applicable laws and regulations. We retain substantially all of the loans we originate in our portfolio. We do not originate or purchase sub-prime loans, negative amortization loans or option adjustable-rate mortgage loans. 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 a small portfolio of these loans.

Our business model and product offerings allow us to serve a broad range of customers with varying demographic characteristics. Our traditional consumer products such as conforming one- to four-family residential mortgages, time deposits, checking and savings accounts appeal to a broad customer base. Our jumbo mortgage lending proficiency and our time deposit and money market 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.

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,

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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 100 F Street, NE, 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

Through our branch offices, we have operations in 10 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 expect to open 6 additional branches in 2010. We continually evaluate new locations in areas that present the greatest opportunity to promote our deposit and mortgage products. We also purchase first mortgage loans in states located in the Northeast quadrant of the country. We define the Northeast quadrant of the country generally as those states that are east of the Mississippi River and as far south as South Carolina. The wholesale loan purchase program complements our retail loan origination by enabling us to diversify our assets outside of our local market area.

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 a 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 New York counties of Richmond, Westchester, Suffolk, Rockland and Putnam as well as Fairfield County, Connecticut have similar demographic and economic characteristics to the northern New Jersey market area. Our entry into these counties, which started in 2004, allows us to continue to expand our retail operations and geographic footprint. We entered the Fairfield County market in 2006 with the acquisition of Sound Federal. Deposits in Fairfield County, Connecticut as of December 31, 2006 amounted to $255.4 million in 4 branches and as of December 31, 2009, we have 9 branches and a total of $1.03 billion in deposits. This market also accounted for 28.2% of our 2009 mortgage originations.

In December 2008, we began to open deposit accounts through our internet banking service which allows us to serve customers throughout the United States. As of December 31, 2009, we had $224.3 million of deposits that were opened through our internet banking service.

Our future growth opportunities will be influenced by the growth and stability of the regional economy, other demographic population trends and the competitive environment in the New York metropolitan area (which we define to include New York, New Jersey and Connecticut). The national economy has been in a recessionary cycle for approximately two years with the housing and real estate markets suffering significant losses in value. Housing market conditions in the Northeast quadrant of the United States, where most of our lending activity occurs, deteriorated as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices, increasing home foreclosures and an increase in the length of time houses remain on the market. House price declines slowed during the second half of 2009 with most markets experiencing slight gains in prices during the 2009 fourth quarter as indicated by the S&P/Case-Shiller Home Price Indices. Approximately 73.8% of our mortgage loans are located in the New York metropolitan area. The Office of Federal Housing Enterprises Oversight (“OFHEO”), an independent entity within the Department of Housing and Urban Development, publishes housing market data on a quarterly basis. According to the data published by OFHEO for the third quarter of 2009, the most recent data available, house prices in New Jersey decreased

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4.93% from the third quarter of 2008. For New York and Connecticut, house prices decreased 2.81% and 4.60%, respectively. Additionally, according to the OFHEO report, the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania experienced decreases in house prices of 3.67%, 4.14%, 5.43%, 1.46%, 4.16%, 4.21% and 2.33%, respectively for those same periods. These seven states account for 19.4% of our total mortgage portfolio. While the declines in economic and housing conditions in the New York metropolitan area have slowed, we can give no assurance that the economic and housing market conditions will improve further or will not continue to worsen in the near future.

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 primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases. We intend to grow customer deposits by continuing to offer desirable products at competitive rates and by opening new branch offices.

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 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, 2009, we had total loans of $31.78 billion, of which $31.43 billion, or 98.9%, were first mortgage loans. Of the first mortgage loans outstanding at that date, 69.1% were fixed-rate mortgage loans and 30.9% were adjustable-rate mortgage (“ARM”) loans. At December 31, 2009, multi-family and commercial mortgage loans totaled $54.7 million, or 0.2% of the loan portfolio, construction loans totaled $13.0 million, and consumer and other loans, primarily fixed-rate second mortgage loans and home equity credit lines, amounted to $350.4 million, or 1.1%, of total loans.

We do not originate or purchase sub-prime loans, negative amortization loans or option ARM loans. The market does not apply a uniform definition of what constitutes “sub-prime” lending. Our reference to sub-prime lending relies upon the “Statement on Subprime Mortgage Lending” issued by the OTS and the other federal bank regulatory agencies (the “Agencies”), on June 29, 2007, which further references the “Expanded Guidance for Subprime Lending Programs” (the “Expanded Guidance”), issued by the Agencies by press release dated January 31, 2001. In the Expanded Guidance, the Agencies indicated that sub-prime lending does not refer to individual sub-prime loans originated and managed, in the ordinary course of business, as exceptions to prime risk selection standards. The Agencies recognize that many prime loan portfolios will

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contain such loans. The Agencies also excluded prime loans that develop credit problems after acquisition and community development loans from the sub-prime arena. According to the Expanded Guidance, sub-prime loans are other loans to borrowers which display one or more characteristics of reduced payment capacity. Five specific criteria, which are not intended to be exhaustive and are not meant to define specific parameters for all sub-prime borrowers and may not match all markets or institutions’ specific sub-prime definitions, are set forth, including having a Fair Isaac Corporation (“FICO”) score of 660 or below. Based upon the definition and exclusions described above, we are a prime lender. However, as we are a portfolio lender, we review all data contained in borrower credit reports and do not base our underwriting decisions solely on FICO scores. We believe our loans, when made, were amply collateralized and otherwise conformed to our prime lending standards.

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.

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,
	2009						2008						2007						2006						2005
				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	$	31,076,829			97.79	%	$	28,931,237			98.34	%	$	23,671,712			97.86	%	$	18,561,467			97.27	%	$	14,780,819			98.13	%
FHA/VA		285,003			0.90			20,197			0.07			22,940			0.09			29,573			0.15			43,672			0.29
Multi-family and commercial		54,694			0.17			57,829			0.20			58,874			0.24			69,322			0.36			2,320			0.02
Construction		13,030			0.04			24,830			0.08			34,064			0.14			41,150			0.22			—			—
Total first mortgage loans		31,429,556			98.90			29,034,093			98.69			23,787,590			98.33			18,701,512			98.00			14,826,811			98.44
Consumer and other loans:
Fixed-rate second mortgages		201,375			0.63			262,538			0.89			284,406			1.18			274,028			1.44			205,826			1.37
Home equity credit lines		127,987			0.40			101,751			0.35			104,567			0.43			97,644			0.51			29,150			0.19
Other		21,003			0.07			20,506			0.07			15,718			0.06			10,433			0.05			662			—
Total consumer and other loans		350,365			1.10			384,795			1.31			404,691			1.67			382,105			2.00			235,638			1.56
Total loans		31,779,921			100.00	%		29,418,888			100.00	%		24,192,281			100.00	%		19,083,617			100.00	%		15,062,449			100.00	%
Deferred loan costs		81,307						71,670						40,598						16,159						1,653
Allowance for loan losses		(140,074	)					(49,797	)					(34,741	)					(30,625	)					(27,393	)
Net Loans	$	31,721,154					$	29,440,761					$	24,198,138					$	19,069,151					$	15,036,709

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The following table presents the geographic distribution of loans in our portfolio:

	At December 31, 2009			At December 31, 2008
	Percenatge of Loans by			Percenatge of Loans by
	State to Total loans			State to Total loans
New Jersey		43.0	%		44.8	%
New York		18.2			15.6
Connecticut		12.6			9.3
Total New York metropolitan area		73.8			69.7
Virginia		4.6			5.5
Illinois		3.9			4.3
Maryland		3.5			4.2
Massachusetts		2.7			3.0
Pennsylvania		2.0			1.5
Minnesota		1.4			1.8
Michigan		1.3			1.7
All others		6.8			8.3
Total outside the New York metropolitan area		26.2			30.3
		100.0	%		100.0	%

Loan Maturity. The following table presents the contractual maturity of our loans at December 31, 2009. The table does not include the effect of prepayments or scheduled principal amortization. Prepayments and scheduled principal amortization on first mortgage loans totaled $6.67 billion for 2009, $2.76 billion for 2008 and $2.10 billion for 2007.

At December 31, 2009
			Multi-family
	First Mortgage		and Commercial				Consumer and
	Loans		Mortgages		Construction		Other Loans		Total
	(In thousands)
Amounts Due:
One year or less	$	5,595	$	4,056	$	13,030	$	3,765	$	26,446
After one year:
One to three years		9,247		4,956		—		16,708		30,911
Three to five years		55,328		22,190		—		12,791		90,309
Five to ten years		771,277		13,433		—		49,555		834,265
Ten to twenty years		1,895,733		8,390		—		261,102		2,165,225
Over twenty years		28,624,652		1,669		—		6,444		28,632,765
Total due after one year		31,356,237		50,638		—		346,600		31,753,475
Total loans	$	31,361,832	$	54,694	$	13,030	$	350,365		31,779,921
Deferred loan costs										81,307
Allowance for loan losses										(140,074	)
Net loans									$	31,721,154

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The following table presents, as of December 31, 2009, the dollar amounts of all fixed-rate and adjustable-rate loans that are contractually due after December 31, 2010.

	Due After December 31, 2010
	Fixed		Adjustable		Total
	(In thousands)
First mortgage loans	$	21,659,496	$	9,696,741	$	31,356,237
Multi-family and commercial mortgages		48,691		1,947		50,638
Consumer and other loans		210,321		136,279		346,600
Total loans due after one year	$	21,918,508	$	9,834,967	$	31,753,475

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

	For the Year Ended December 31,
	2009			2008			2007
	(In thousands)
Total loans:
Balance outstanding at beginning of period	$	29,418,888		$	24,192,281		$	19,083,617
Originations:
One- to four-family first mortgage loans		5,963,365			4,949,024			3,206,695
Multi-family and commercial mortgage loans		—			250			4,125
Construction loans		950			9,038			8,593
Consumer and other loans		99,555			81,909			133,098
Total originations		6,063,870			5,040,221			3,352,511
Purchases:
One- to four-family first mortgage loans		3,161,401			3,061,859			3,971,273
Total purchases		3,161,401			3,061,859			3,971,273
Less:
Principal payments:
First mortgage loans		(6,665,162	)		(2,754,973	)		(2,103,814	)
Consumer and other loans		(134,015	)		(101,744	)		(110,455	)
Total principal payments		(6,799,177	)		(2,856,717	)		(2,214,269	)
Premium amortization and discount accretion, net		8,743			4,580			1,585
Transfers to foreclosed real estate		(26,581	)		(18,892	)		(1,752	)
Net charge-offs:
First mortgage loans		(47,253	)		(4,383	)		(629	)
Consumer and other loans		30			(61	)		(55	)
Balance outstanding at end of period	$	31,779,921		$	29,418,888		$	24,192,281

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. We originate and purchase substantially all of our one- to four-family first mortgage loans for retention in our portfolio. We

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specialize in residential mortgage loans with principal balances in excess of the current FannieMae, single-family limit which has typically been $417,000 (“non-conforming” or “jumbo” loans). Beginning in 2008, FannieMae instituted two sets of loan limits — a “general” loan limit at $417,000 and “high-cost” loan limit at $729,750. Thereafter, the “Housing and Economic Recovery Act of 2008” permanently changed FannieMae’s charter to expand the definition of a “conforming loan” to include “high-cost” loans originated on or after January 1, 2009. Pursuant to the “American Recovery and Reinvestment Act of 2009,” FannieMae may purchase loans up to $729,750 for a one-unit dwelling in designated high-cost areas. However, since we do not generally sell loans in the secondary markets, we continue to use $417,000 as our conforming loan limit for all loans. 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, 2009, $14.19 billion, or 45.1%, of our first mortgage loans were purchased loans.

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 and acceptable property locations. 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 weighted average 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. We generally perform full credit reviews of 10% to 20% of the mortgage loans in each package 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, and 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. However, we maintain custody of the legal documents. The servicing of purchased loans is governed by the servicing agreement entered into with each servicer. These servicing agreements are structured to ensure that we have ongoing involvement with collection and loss mitigation procedures. 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, in writing or through on-site visits to clarify or correct our concerns, taken as required. We also require that all servicers provide end-of-year financial statements and must deliver industry certifications substantiating that they have in place appropriate controls to ensure their mode of administration is in accordance with regulatory standards. 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 six to eight of the largest nationwide mortgage producers. We

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purchased first mortgage loans of $3.16 billion in 2009, $3.06 billion in 2008 and $3.97 billion in 2007. The average size of our one-to four-family mortgage loans purchased during 2009 was approximately $504,000.

Most of our retail loan originations are from licensed mortgage bankers or brokers, existing or past customers, members of our local communities or referrals from local real estate agents, attorneys and builders. Our extensive branch network is also 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 limited extent, no income 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 30 years. The non-conforming loans generally follow FannieMae guidelines, except for the loan amount. FannieMae guidelines, for the most part, 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 2009 was approximately $539,000. The overall average size of our one- to four-family first mortgage loans held in portfolio was approximately $416,000 and $401,000 at December 31, 2009 and 2008, respectively. We are an approved seller/servicer for FannieMae and an approved servicer for FreddieMac. We generally hold loans for our portfolio but have, from time to time, sold loans in the secondary market. We sold no loans in 2009, 2008 or 2007 and had no loans classified as held for sale at December 31, 2009.

Our originations of first mortgage loans amounted to $5.96 billion in 2009, $4.96 billion in 2008 and $3.22 billion in 2007. Included in these totals are refinancings of our existing first mortgage loans as follows:

			Percent of
			First Mortgage
	Amount		Loan Originations
	(In thousands)
2009	$	553,026		9.5	%
2008		197,266		4.1
2007		107,481		3.3

We also allow certain existing customers to modify their mortgage loans, for a fee, with the intent of maintaining our customer relationship in periods of extensive refinancing due to a low interest rate environment. The modification changes the existing interest rate to the market rate for a product currently offered by us with a similar or reduced term. We generally do not extend the maturity date of the loan. To qualify for a modification, the loan should be current and our review of past payment performance should indicate that no payments were past due in any of the 12 preceding months. 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)
2009	$	2,245,498
2008		88,702
2007		15,272

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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. Loans on owner-occupied one- to four-family homes of up to $1.0 million are generally subject to a maximum loan-to-value ratio of 80%. Loan-to-value ratios of 75% or less are generally required for one- to four-family loans in excess 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.

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, seven 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 30-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 or decrease of 2% per adjustment period and a limitation on the aggregate adjustment of 5% over the life of the loan. Generally, the ARM loans that we offer have initial interest rates below the fully indexed rate. However, as a result of generally low market interest rates for ARM loans, the initial offered rate on these loans was 125 to 225 basis points above the current fully indexed rate at December 31, 2009. We originated $2.77 billion of one- to four-family ARM loans in 2009. At December 31, 2009, 30.9% 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.

We also purchase and originate interest-only mortgage loans. These loans are designed for customers who desire flexible amortization schedules. These loans are originated as ARM loans with initial terms of five, seven or ten years 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 the loan 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 based on our underwriting criteria and the average loan-to-value ratios on the loans originated in this program. During 2009, we originated $1.32 billion of interest-only loans with an average loan-to-value ratio of 57.4% based on the appraised value at the time of origination. The outstanding principal balance of interest-only loans in our portfolio was approximately $4.59 billion as of December 31, 2009 with an average loan-to-value ratio of approximately 62.5% using the appraised value at time of origination. We have not in the past, nor do we currently, originate or purchase 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 loans to certain eligible borrowers as limited documentation loans. We have originated these types of loans for over 15 years. Loans eligible for limited documentation processing are ARM loans, interest-only first mortgage loans and 10-, 15-, 20-, and 30-year fixed-rate loans to owner-occupied primary and second home applicants. These loans are available in amounts up to 70% of the lower of the appraised value or purchase price of the property. Generally the maximum loan amount for limited documentation loans is $750,000 and these loans are subject to higher interest rates than our full documentation loan products. 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 verify asset holdings and obtain credit reports from outside vendors on all borrowers to ascertain the credit history of the borrower. Applicants with delinquent credit histories usually do not qualify for the limited documentation processing, although delinquencies that are adequately explained will not prohibit processing as a limited documentation loan. We reserve the right to verify income and do require asset verification but we may elect not to verify or corroborate certain income information where we believe circumstances warrant. We also allow certain borrowers to obtain mortgage loans without disclosing income levels and without any verification of income. In these cases, we require verification of the borrowers’ assets. Similar to the limited documentation loan product listed earlier, these loans are also subject to somewhat higher interest rates than our regular products, and are generally limited to a maximum loan-to-value ratio of 60%. We originated approximately $1.09 billion of limited and no income documentation loans during 2009. These loans had an average loan-to-value ratio of 56%. 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 offer mortgage programs designed to address the credit needs of low- and moderate-income home mortgage applicants 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. Among the features of the low- and moderate-income home mortgage 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 have generally provided for loans with up to 80% loan-to-value ratios and rates which are 25 to 50 basis points lower than our traditional mortgage loans. In 2009, we originated $24.5 million in mortgage loans under these programs.

Multi-family and Commercial Mortgage Loans. At December 31, 2009, $54.7 million, or 0.17%, of the total loan portfolio consisted of multi-family and commercial mortgage loans. Commercial mortgage loans are secured by office buildings, religious facilities and other commercial properties. Multi-family mortgage loans generally are secured by multi-family rental properties (including mixed-use buildings and walk-up apartments). Substantially all of these loans were acquired in the Acquisition. Since our primary lending product is one-to four-family mortgage loans, we have not actively pursued the origination of commercial and multi-family mortgage loans. We did not originate any multi-family or commercial mortgage loans in 2009. At December 31, 2009, the largest commercial mortgage loan had a principal balance of $6.0 million and was adequately secured by a storage unit facility. This borrower also had an additional $2.1 million of commercial mortgage loans outstanding with us at December 31, 2009. These loans are current as of December 31, 2009.

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 to monitor and evaluate.

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Construction Lending. Substantially all of our construction loans were acquired in the Acquisition. Since our primary lending product is one-to four-family mortgage loans, we have not actively pursued the origination of construction loans and have removed them from our product offerings. While we did not originate any construction loans in 2009, there were principal advances on existing construction loans of $950,000 during 2009. Our construction loans are secured by residential and commercial properties located in our market area. At December 31, 2009, we had 9 construction loans totaling $13.0 million, or 0.04% of total loans. Our largest construction loan is a participation loan for a 90 unit condominium project. Our outstanding portion of the loan amounted to $3.1 million at December 31, 2009. This loan is included in our loans that are past due 90 days or more as of December 31, 2009 and has a specific reserve associated with it.

Our 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 were made on either a pre-sold or speculative (unsold) basis. We generally allow the borrower to extend the term of the loan if the project is not yet complete or, in the case of a speculative construction loan, if the borrower has not yet sold the property. To extend the maturity of the loan, the loan generally must be current and we assess if the project is being adequately managed and the borrower’s ability to continue to keep the loan current. Construction loans to individuals were 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 disbursed as certain portions of the project are 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, we 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. We attempted to minimize the foregoing risks by, among other things, generally requiring personal guarantees from the principals of our corporate borrowers.

Consumer Loans. At December 31, 2009, $350.4 million, or 1.10%, 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 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 generally in amounts up to $250,000 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, 2009 these loans totaled $201.4 million, or 0.63% 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 at time of origination.

Our home equity credit line loans totaled $128.0 million or 0.40% of total loans at December 31, 2009. These loans are either fixed-rate or adjustable-rate loans secured by a second mortgage on owner-occupied one- to

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four-family residences located in our market area. The interest rates on adjustable-rate home equity credit lines are based on the “prime rate” as published in 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 $250,000. The underwriting terms and procedures applicable to these loans are substantially the same as for our fixed-rate second mortgage loans.

Other loans totaled $21.0 million at December 31, 2009 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 our Mortgage Origination Department. Loans in excess of $600,000 and up to $1.0 million require that one of the two officers approving the loan bear the title of First Vice President – Mortgage Officer, Executive Vice President – Lending, Chief Operating Officer or Chief Executive Officer. Loans in excess of $1.0 million up to $3.0 million require that two of the officers approving the loan bear the title of the First Vice President, Mortgage Officer, Executive Vice President, Lending, Chief Operating Officer or Chief Executive Officer prior to issuance of a commitment letter. Loans in excess of $3.0 million up to $5.0 million require that two of the officers approving the loan bear the title of the Executive Vice President, Lending, Chief Operating Officer or Chief Executive Officer prior to issuance of a commitment letter. The aggregate of all residential loans, existing and/or committed to any one borrower, generally shall not exceed $5.0 million. Aggregate loan balances exceeding this limit must be approved by at least two of the following senior officers; Executive Vice President, Lending, Chief Operating Officer or Chief Executive Officer and will be reported to the Board of Directors at the next regularly scheduled Board meeting.

Home equity credit lines and fixed-rate second mortgage loans in principal amounts of $50,000 or less require approval by one of our designated Consumer Loan Department underwriters. Home equity credit lines and fixed-rate second mortgages in excess of $50,000, up to the $250,000 maximum, require approval by an underwriter and either our Consumer Loan Officer, Executive Vice President-Lending, Chief Executive Officer or Chief Operating Officer. Home equity credit lines and fixed-rate second mortgages involving mortgage liens where the combined first and second mortgage principal balances exceed $750,000 require approval by an underwriter, our Consumer Loan Officer and either our Executive 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 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 require borrowers to obtain flood insurance prior to closing, if appropriate. 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 disbursements for items such as real estate taxes, flood insurance and private mortgage insurance premiums, if required. Presently, we do not escrow for real estate taxes on properties located in the states of New York, Pennsylvania and Connecticut.

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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 we have been proactive in addressing problem loans and non-performing assets. These strategies, as well as our concentration on one- to four-family mortgage lending and our maintenance of sound credit standards for new loan originations have resulted in relatively low levels of charge-offs. Charge-offs, net of recoveries amounted to $47.2 million in 2009 and $4.4 million in 2008. The national economy has been in a recessionary cycle for approximately two years. The faltering economy has been marked by contractions in the availability of business and consumer credit, falling home prices, increasing home foreclosures and rising unemployment levels. As a result, the financial, capital and credit markets experienced significant adverse conditions. These conditions caused significant deterioration in the activity of the secondary residential mortgage market and a lack of available liquidity. The disruptions were exacerbated by the acceleration of the decline of the real estate and housing markets. By the fourth quarter of 2009, house prices appear to have stabilized. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. We do not participate in sub-prime mortgage lending which has been the riskiest sector of the residential housing market.

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. Our loan growth was primarily concentrated in one- to four-family mortgage loans with loan-to-value ratios of less than 80%. As a result of our underwriting policies, our borrowers typically have a significant amount of equity, at the time of origination, in the underlying real estate that we use as collateral for our loans. The average loan-to-value (“LTV”) ratio of our 2009 one- to four-family first mortgage loan originations and our total one- to four-family first mortgage loan portfolio were 60.5% and 60.8%, respectively using the appraised value at the time of origination. It has been our experience that when a loan became delinquent, the borrower would attempt to sell the property to satisfy the loan rather than go to foreclosure or, if another bank held a second mortgage on the property, there was likelihood they would purchase the property to protect their interest thereby resulting in full payment of principal and interest to Hudson City Savings. However, current conditions in the housing market have made it more difficult for borrowers to sell homes to satisfy the mortgage. In addition, second lien holders are less likely to repay our loan if the value of the property is not enough to satisfy their loan. The value of the property used as collateral for our loans is dependent upon local market conditions. We monitor changes in the values of homes in each market using indices published by various organizations. Based on our analysis of the data for 2009, we concluded that home values in the Northeast quadrant of the United States, where most of our lending activity occurs, have deteriorated since the beginning of 2007 as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices and an increase in the length of time houses remain on the market. In addition, general economic conditions in the United States continued to worsen as the recession continued during 2009.

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The following table presents the geographic distribution of our loan portfolio as a percentage of total loans and of our non-performing loans as a percentage of total non-performing loans. The LTV ratio is for non-performing first mortgage loans and is based on appraised value at the time of origination.

	At December 31, 2009
							Average LTV ratio
				Non-performing			of non-performing
	Total loans			loans			mortgage loans
New Jersey		43.0	%		41.6	%		69	%
New York		18.2			18.0			70
Connecticut		12.6			4.2			72
Total New York metropolitan area		73.8			63.8			69
Virginia		4.6			6.2			78
Illinois		3.9			5.6			78
Maryland		3.5			5.1			76
Massachusetts		2.7			2.3			75
Pennsylvania		2.0			1.9			75
Minnesota		1.4			1.8			82
Michigan		1.3			4.2			75
All others		6.8			9.1			71
Total outside the New York metropolitan area		26.2			36.2			75
		100.0	%		100.0	%		72	%

Due to the recent deterioration of real estate values, the loan-to-value ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure.

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 may be sent to make 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.

We send foreclosure notices when a loan is 90 days delinquent. 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 and any accrued interest is reversed. 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 federal agencies follow the collection guidelines outlined by those agencies.

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We monitor delinquencies on our serviced loan portfolio 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 monitor, 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.

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 Executive Vice President-Lending, our Chief Executive Officer or Chief Operating Officer.

Foreclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure. Write-downs to fair value (net of estimated costs to sell) at the time of acquisition are charged to the allowance for loan losses. After acquisition, foreclosed properties are held for sale and carried at the lower of fair value minus estimated cost to sell, 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 or our servicer sells the property as soon thereafter as practicable.

Management continuously monitors the status of the loan portfolio and reports to the Board of Directors on a monthly basis. Our Asset Quality Committee (“AQC”) is responsible for monitoring our loan portfolio, delinquencies and foreclosed real estate. This committee includes members of senior management from the loan origination, loan servicing, appraisal and finance departments.

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

At December 31,
	2009										2008										2007
	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		408	$	171,913			1,480	$	581,786			265	$	100,604			527	$	200,642			103	$	32,448			198	$	71,614
FHA/VA first mortgages		35		8,650			115		31,855			5		874			30		6,407			12		1,995			21		4,157
Multi-family and commercial mortgages		2		1,088			1		1,414			1		1,417			4		1,854			3		1,393			2		2,028
Construction loans		—		—			6		9,764			—		—			5		7,610			3		4,457			1		647
Consumer and other loans		14		882			34		2,876			11		1,850			14		1,061			7		329			12		956
Total delinquent loans (60 days and over)		459	$	182,533			1,636	$	627,695			282	$	104,745			580	$	217,574			128	$	40,622			234	$	79,402
Delinquent loans (60 days and over) to total loans				0.57	%				1.98	%				0.36	%				0.74	%				0.17	%				0.33	%

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Non-performing loans amounted to $627.7 million at December 31, 2009 as compared to $217.6 million at December 31, 2008. Non-performing loans at December 31, 2009 included $613.6 million of one- to four-family first mortgage loans as compared to $207.0 million at December 31, 2008. The ratio of non-performing loans to total loans was 1.98% at December 31, 2009 compared with 0.74% at December 31, 2008.

At December 31, 2009 and 2008, commercial and construction loans evaluated for impairment in accordance with Financial Accounting Standards Board (“FASB”) guidance amounted to $11.2 million and $9.5 million, respectively. Based on this evaluation, we established an allowance for loan losses of $2.1 million and $818,000 for loans classified as impaired at December 31, 2009 and 2008, respectively.

We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. Current economic conditions have been exacerbated by the decline in the housing and real estate markets. In addition, the continued increase in the unemployment rate during 2009 may have adverse implications for an already weak housing market.

The decline in the real estate and housing markets resulted in higher charge-offs in 2009, although the overall amount of our charge-offs has been moderate because of our underwriting standards and the geographical areas in which we lend. The weighted average LTV in our one- to four-family mortgage loan portfolio at December 31, 2009 was approximately 61%, using appraised values at the time of origination. In addition, the average LTV ratio of our non-performing loans was approximately 72% at December 31, 2009 based on the appraised value at the time of origination. As a result, the amount of equity that borrowers have in the underlying properties or that other lenders have in the form of second mortgages that are subordinate to Hudson City Savings, has helped to protect us from declining conditions in the housing market and the economy. However, current conditions in the housing market have made it more difficult for borrowers to sell homes to satisfy the mortgage and second lien holders are less likely to purchase the property to protect their interest if the value of the property is not enough to satisfy their loan. Due to the recent deterioration of real estate values, the LTV ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure.

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 collectability 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 collectability of principal is no longer in doubt. We return a non-accrual loan to accrual status when factors indicating doubtful collection no longer exist.

Foreclosed real estate consists of property we acquired through foreclosure or deed in lieu of foreclosure. After acquisition, foreclosed properties held for sale are carried at the lower of fair value minus estimated cost to sell, or at cost. Subsequent provisions for losses, which may result from the ongoing periodic valuation of these properties, are charged to income in the period in which they are identified. Fair market value is generally based on recent appraisals.

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

	At December 31,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Non-accrual first mortgage loans	$	583,200		$	202,496		$	71,932		$	20,053		$	9,649
Non-accrual construction loans		6,624			7,610			647			3,098			—
Non-accrual consumer and other loans		1,916			626			956			1,217			2
Accruing loans delinquent 90 days or more		35,955			6,842			5,867			5,630			9,661
Total non-performing loans		627,695			217,574			79,402			29,998			19,312
Foreclosed real estate, net		16,736			15,532			4,055			3,161			1,040
Total non-performing assets	$	644,431		$	233,106		$	83,457		$	33,159		$	20,352
Non-performing loans to total loans		1.98	%		0.74	%		0.33	%		0.16	%		0.13	%
Non-performing assets to total assets		1.07			0.43			0.19			0.09			0.07

Included in accruing loans delinquent 90 days or more are $31.9 million of FHA loans. We continue to accrue interest on these loans since they are guaranteed by the FHA. At December 31, 2009, approximately $402.8 million of our non-performing loans were in the New York metropolitan area and $224.9 million were outside of the New York metropolitan area. At December 31, 2008, approximately $144.0 million of our non-performing loans were in the New York metropolitan area and $73.6 million were outside of the New York metropolitan area. Non-accrual first mortgage loans at December 31, 2009 included $82.2 million of interest-only loans and $68.0 million of reduced documentation loans with average LTV ratios of approximately 69% and 75%, respectively, based on appraised values at time of origination. Non-accrual first mortgage loans at December 31, 2008 included $16.6 million of interest-only loans and $7.6 million of reduced documentation loans with average LTV ratios of approximately 70% and 61%, respectively, based on appraised values at time of origination. 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.

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

	At or for the Year December 31,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Balance at beginning of year	$	49,797		$	34,741		$	30,625		$	27,393		$	27,319
Provision for loan losses		137,500			19,500			4,800			—			65
Allowance transferred in Acquisition		—			—			—			3,308			—
Charge-offs:
First mortgage loans		(48,097	)		(4,458	)		(701	)		(72	)		(2	)
Consumer and other loans		(36	)		(64	)		(62	)		(7	)		(8	)
Total charge-offs		(48,133	)		(4,522	)		(763	)		(79	)		(10	)
Recoveries		910			78			79			3			19
Net (charge-offs) recoveries		(47,223	)		(4,444	)		(684	)		(76	)		9
Balance at end of year	$	140,074		$	49,797		$	34,741		$	30,625		$	27,393
Allowance for loan losses to total loans		0.44	%		0.17	%		0.14	%		0.16	%		0.18	%
Allowance for loan losses to non-performing loans		22.32			22.89			43.75			102.09			141.84

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The allowance for loan losses (“ALL”) 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.

The ALL amounted to $140.1 million and $49.8 million at December 31, 2009 and 2008, respectively. We recorded our provision for loan losses during 2009 based on our ALL methodology that considers a number of quantitative and qualitative factors, including the amount of non-performing loans, our loss experience on non-performing loans, conditions in the real estate and housing markets, current economic conditions, particularly increasing levels of unemployment, and growth in the loan portfolio. See Critical Accounting Policies – Allowance for Loan Losses in Item 7, “Management’s Discussion and Analysis”.

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. Our loan growth is primarily concentrated in one- to four-family mortgage loans with original LTV ratios of less than 80%. The average LTV ratio of our 2009 one- to four-family first mortgage loan originations and our total one- to four-family first mortgage loan portfolio were 60.5% and 60.8%, respectively using the appraised value at the time of origination. The value of the property used as collateral for our loans is dependent upon local market conditions. As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations. Based on our analysis of the data for the fourth quarter of 2009, we concluded that home values in the Northeast quadrant of the United States, where most of our lending activity occurs, have continued to decline from 2008 levels, as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices and an increase in the length of time houses remain on the market. However, home values appear to have stabilized during the second half of 2009 as indicated by the S&P/Case-Shiller Home Price Index.

We define the Northeast quadrant of the country generally as those states that are east of the Mississippi River and as far south as South Carolina. At December 31, 2009, approximately 73.8% of our total loans were in the New York metropolitan area. Additionally, the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania accounted for 4.6%, 3.9%, 3.5%, 2.7%, 1.4%, 1.3% and 2.0%, respectively, of total loans. The remaining 6.8% of the loan portfolio is secured by real estate primarily in the remainder of the Northeast quadrant of the United States. With respect to our non-performing loans, approximately 63.8% are in the New York metropolitan area and 6.2%, 5.6%, 5.1%, 2.3%, 1.8%, 4.2% and 1.9% are located in the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania, respectively. The remaining 9.1% of our non-performing loans are secured by real estate primarily in the remainder of the Northeast quadrant of the United States.

The national economy has been in a recessionary cycle for approximately 2 years with the housing and real estate markets suffering significant losses in value. The faltering economy has been marked by contractions in the availability of business and consumer credit, increases in corporate borrowing rates, falling home prices, increasing home foreclosures and rising levels of unemployment. Economic conditions have improved slightly during the second half of 2009 although unemployment rates continued to increase. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. We determined the provision for loan losses for 2009 based on our evaluation of the foregoing factors, the growth of the loan portfolio, our loss experience on non-performing loans, the recent increases in delinquent loans, non-performing loans and net loan charge-offs, and the increasing trend in the unemployment rate.

At December 31, 2009, first mortgage loans secured by one-to four-family properties accounted for 98.7% of total loans. Fixed-rate mortgage loans represent 69.1% of our first mortgage loans. Compared to adjustable-rate loans, fixed-rate loans possess less inherent credit risk since loan payments do not change in response to changes in interest rates. In addition, we do not originate or purchase option ARM loans, negative amortization loans or sub-prime loans.

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Non-performing loans amounted to $627.7 million at December 31, 2009 as compared to $217.6 million at December 31, 2008. Non-performing loans at December 31, 2009 included $613.6 million of one- to four-family first mortgage loans as compared to $207.0 million at December 31, 2008. The ratio of non-performing loans to total loans was 1.98% at December 31, 2009 compared with 0.74% at December 31, 2008. Loans delinquent 60 to 89 days amounted to $182.5 million at December 31, 2009 as compared to $104.7 million at December 31, 2008. Foreclosed real estate amounted to $16.7 million at December 31, 2009 as compared to $15.5 million at December 31, 2008. As a result of our underwriting policies, our borrowers typically have a significant amount of equity, at the time of origination, in the underlying real estate that we use as collateral for our loans. Due to the steady deterioration of real estate values over the last three years, the LTV ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure. However, our lower average LTV ratios have helped to moderate our charge-offs as there has generally been adequate equity behind our first lien as of the foreclosure date to satisfy our loan.

As a result of the increase in non-performing loans, the ratio of the ALL to non-performing loans decreased from 102.09% at December 31, 2006 to 22.32% at December 31, 2009. During this same period, the ratio of the ALL to total loans increased from 0.16% to 0.44%. Historically, our non-performing loans have been a negligible percentage of our total loan portfolio and, as a result, our ratio of the ALL to non-performing loans was high and did not serve as a reasonable measure of the adequacy of our ALL. The decline in the ratio of the ALL to non-performing loans is not, absent other factors, an indication of the adequacy of the ALL since there is not necessarily a direct relationship between changes in various asset quality ratios and changes in the ALL and non-performing loans. In the current economic environment, a loan generally becomes non-performing when the borrower experiences financial difficulty. In many cases, the borrower also has a second mortgage or home equity loan on the property. In substantially all of these cases, we do not hold the second mortgage or home equity loan as this is not a business we have actively pursued.

The Company’s losses on non-performing loans increased in 2009, but overall have been modest due to our first lien position and relatively low average LTV ratios. We generally obtain new collateral values for loans after 180 days of delinquency. If the estimated fair value of the collateral (less estimated selling costs) is less than the recorded investment in the loan, we charge-off an amount to reduce the loan to the fair value of the collateral less estimated selling costs. As a result, certain losses inherent in our non-performing loans are being recognized as charge-offs which may result in a lower ratio of the ALL to non-performing loans when accompanied by a concurrent increase in total non-performing loans (i.e. due to the addition of new non-performing loans). Charge-offs amounted to $47.2 million, consisting of 517 loans, for 2009 and $4.4 million, consisting of 47 loans, in 2008. These charge-offs were primarily due to the results of our reappraisal process for our non-performing residential first mortgage loans with only 55 loans disposed of through the foreclosure process during 2009 with a final loss on sale (after previous charge-offs) of $2.4 million. The results of our reappraisal process and our recent charge-off history are also considered in the determination of the ALL. At December 31, 2009 the average LTV ratio (using appraised values at the time of origination) of our non-performing loans was 72.4% and was 60.8% for our total mortgage loan portfolio. Thus, the ratio of the ALL to non-performing loans needs to be viewed in the context of the underlying LTV’s of the non-performing loans and the relative decline in home values.

As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations including the Office of Federal Housing Enterprise Oversight and Case-Shiller. Our AQC uses these indices and a stratification of our loan portfolio by state as part of its quarterly determination of the ALL. We do not apply different loss factors based on geographic locations since, at December 31, 2009, 73.8% of our loan portfolio and 63.8% of our non-performing loans are located in the New York metropolitan area. In addition, we obtain updated collateral values when a loan becomes 180 days past due which we believe identifies potential charge-offs more accurately than a house price index that is

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based on a wide geographic area and includes many different types of houses. However, we use the house price indices to identify geographic areas experiencing weaknesses in housing markets to determine if an overall adjustment to the ALL is required based on loans we have in those geographic areas and to determine if changes in the loss factors used in the ALL quantitative analysis are necessary. Our quantitative analysis of the ALL accounts for increases in non-performing loans by applying progressively higher risk factors to loans as they become more delinquent.

Due to the nature of our loan portfolio, our evaluation of the adequacy of our ALL is performed primarily on a “pooled” basis. 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, commercial, construction, 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, delinquency trends, portfolio growth and the status of the regional economy and housing market, in order to ascertain that the loss factors cover probable and estimable losses inherent in the portfolio. Based on our recent loss experience on non-performing loans, we increased the loss factors used in our quantitative analysis of the ALL for our one- to four-family first mortgage loans during 2009. If our future loss experience requires additional increases in our loss factors, this may result in increased levels of loan loss provisions.

In addition to our quantitative systematic methodology, we also use qualitative analyses to determine the adequacy of our ALL. Our qualitative analyses include further evaluation of economic factors, such as trends in the unemployment rate, as well as a ratio analysis to evaluate the overall measurement of the ALL. This analysis includes a review of delinquency ratios, net charge-off ratios and the ratio of the ALL to both non-performing loans and total loans. This qualitative review is used to reassess the overall determination of the ALL and to ensure that directional changes in the ALL and the provision for loan losses are supported by relevant internal and external data.

We consider the average LTV of our non-performing loans and our total portfolio in relation to the overall changes in house prices in our lending markets when determining the ALL. This provides us with a “macro” indication of the severity of potential losses that might be expected. Since substantially all our portfolio consists of first mortgage loans on residential properties, the LTV is particularly important to us when a loan becomes non-performing. The weighted average LTV in our one- to four-family mortgage loan portfolio at December 31, 2009 was 60.8%, using appraised values at the time of origination. The average LTV ratio of our non-performing loans was 72.4% at December 31, 2009. Based on the valuation indices, house prices have declined in the New York metropolitan area, where 63.8% of our non-performing loans were located at December 31, 2009, by approximately 20% from the peak of the market in 2006 through November 2009 and by 29% nationwide during that period. Changes in house values may affect our loss experience which may require that we change the loss factors used in our quantitative analysis of the ALL. There can be no assurance whether significant further declines in house values may occur and result in higher loss experience and increased levels of charge-offs and loan loss provisions.

Net charge-offs amounted to $47.2 million for 2009 as compared to net charge-offs of $4.4 million for 2008. Our charge-offs on non-performing loans have historically been low relative to the size of our portfolio due to the amount of underlying equity in the properties collateralizing our first mortgage loans. Until this current recessionary cycle, it was our experience that as a non-performing loan approached foreclosure, the borrower sold the underlying property or, if there was a second mortgage or other subordinated lien, the subordinated lien holder would purchase the property to protect their interest thereby resulting in the full payment of principal and interest to Hudson City Savings. This process normally took approximately 12 months. However, due to the unprecedented level of foreclosures and the desire by most states to slow the foreclosure process, we are now experiencing a time frame to repayment or foreclosure ranging from 24 to 30 months from the initial non-performing period. If real estate prices decline further, this extended time may result in further charge-offs. In addition, current conditions

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in the housing market have made it more difficult for borrowers to sell homes to satisfy the mortgage and second lien holders are less likely to purchase the property and repay our loan if the value of the property is not enough to satisfy their loan. We continue to monitor closely the property values underlying our non-performing loans during this timeframe and take appropriate charge-offs when the loan balances exceed the underlying property values.

At December 31, 2009 and December 31, 2008, commercial and construction loans evaluated for impairment in accordance with FASB guidance amounted to $11.2 million and $9.5 million, respectively. Based on this evaluation, we established an ALL of $2.1 million for loans classified as impaired at December 31, 2009 compared to $818,000 at December 31, 2008.

The markets in which we lend have experienced significant declines in real estate values which we have taken into account in evaluating our ALL. Although we believe that we have established and maintained the ALL at adequate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Increases in our loss experience on non-performing loans, the loss factors used in our quantitative analysis of the ALL and continued increases in overall loan delinquencies can have a significant impact on our need for increased levels of loan loss provisions in the future. No assurance can be given in any particular case that our LTV ratios will provide full protection in the event of borrower default. Although we use the best information available, the level of the ALL remains an estimate that is subject to significant judgment and short-term change. See Critical Accounting Policies - Allowance for Loan Losses in Item 7, “Management’s Discussion and Analysis”.

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

	At December 31,
	2009					2008					2007					2006					2005
			Percentage					Percentage					Percentage					Percentage					Percentage
			of Loans in					of Loans in					of Loans in					of Loans in					of Loans in
			Category to					Category to					Category to					Category to					Category to
	Amount		Total Loans			Amount		Total Loans			Amount		Total Loans			Amount		Total Loans			Amount		Total Loans
											(Dollars in thousands)
First mortgage loans:
One- to four-family	$	133,927		98.69	%	$	45,642		98.43	%	$	29,511		97.95	%	$	24,578		97.42	%	$	25,474		98.13	%
Other first mortgages		3,169		0.21			2,065		0.26			1,883		0.38			999		0.58			23		0.31
Total first mortgage loans		137,096		98.90			47,707		98.69			31,394		98.33			25,577		98.00			25,497		98.44
Consumer and other loans		2,978		1.10			2,090		1.31			3,347		1.67			3,618		2.00			1,774		1.56
Unallocated		—		—			—		—			—		—			1,430		—			122		—
Total allowance for loan losses	$	140,074		100.00	%	$	49,797		100.00	%	$	34,741		100.00	%	$	30,625		100.00	%	$	27,393		100.00	%

Investment Activities

The Board of Directors reviews and approves our investment policy on an annual basis. The Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and other officers are authorized to purchase, sell, or loan securities. The Board of Directors reviews our investment activity on a quarterly 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

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activities and to provide and maintain liquidity within established guidelines. In establishing our investment strategies, we consider our asset/liability position, asset concentrations, interest rate risk, credit risk, liquidity, market volatility and desired rate of return. We may invest in securities in accordance with the regulations of the OTS. We 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 also provides that we will not engage in any practice that the Federal Financial Institutions Examination Council considers to be an unsuitable investment practice.

We invest primarily in mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, as well as other securities issued by GSEs. These securities account for substantially all of our securities. We do not purchase unrated or private label mortgage-backed securities or other higher risk securities such as those backed by sub-prime loans. There were no debt securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the security.

We have two collateralized borrowings in the form of repurchase agreements totaling $100.0 million with Lehman Brothers, Inc. Lehman Brothers, Inc. is currently in liquidation under the Securities Industry Protection Act. Mortgage-backed securities with an amortized cost of approximately $114.5 million are pledged as collateral for these borrowings. We intend to pursue full recovery of the pledged collateral in accordance with the contractual terms of the repurchase agreements. There can be no assurances that the final settlement of this transaction will result in the full recovery of the collateral or the full amount of the claim. We have not recognized a loss in our financial statements related to these repurchase agreements.

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.

We classify investments 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 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 securities.

Investment Securities. At December 31, 2009, investment securities classified as held to maturity amounted to $4.19 billion while $1.10 billion were classified as available for sale. At December 31, 2009, the investment securities portfolio had a weighted-average rate of 4.38% and a fair value of approximately $5.17 billion. During 2009, we purchased $5.87 billion of investment securities compared with $2.10 billion during 2008. These securities were all issued by U.S. GSEs. Of the securities held as of December 31, 2009, $4.15 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 no-call period of three months to two years, and assist in our management of interest rate risk (“IRR”). The above step-up features are not accounted for separately from the underlying securities as we have concluded that they are clearly and closely related to the step-up note in accordance with FASB guidance. Approximately $1.30 billion of these step-up notes are scheduled to reset within the next two years. At December 31, 2009, investment securities with an amortized cost of $2.43 billion were used as collateral for securities sold under agreements to repurchase. Also, at December 31, 2009, we had $874.8 million in Federal Home Loan Bank of New York (“FHLB”) stock. See “- Regulation of Hudson City Savings Bank and Hudson City Bancorp.”

Mortgage-backed Securities. All of our mortgage-backed securities are issued by GinnieMae, FannieMae or FreddieMac. At December 31, 2009, mortgage-backed securities classified as held to maturity totaled $9.96 billion, or 16.5% of total assets, while $11.12 billion, or 18.5% of total assets, were classified as available for

23

sale. At December 31, 2009, the mortgage-backed securities portfolio had a weighted-average rate of 4.70% and a fair value of approximately $21.44 billion. Of the mortgage-backed securities we held at December 31, 2009, $14.91 billion, or 70.7% of total mortgage-backed securities, had adjustable rates and $6.17 billion, or 29.3% 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, 2009, we held $3.63 billion of fixed-rate REMICs, which constituted 17.2% of our mortgage-backed securities portfolio. Mortgage-backed security purchases totaled $6.87 billion during 2009 compared with $7.14 billion during 2008. At December 31, 2009, mortgage-backed securities with an amortized cost of $14.48 billion were used as collateral for securities sold under agreements to repurchase.

Mortgage-backed securities generally yield less than the underlying loans 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 GinnieMae, 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 are subject to 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, 2009, we did not own any principal-only, REMIC residuals, private label mortgage-backed securities or other higher risk securities such as those backed by sub-prime loans.

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

	For the Year Ended December 31,
	2009			2008			2007
	(In thousands)
Investment securities:
Carrying value at beginning of year	$	3,463,719		$	4,173,992		$	5,913,584
Purchases:
Held to maturity		4,540,329			—			—
Available for sale		1,331,300			2,100,000			2,148,705
Calls:
Held to maturity		(400,000	)		(1,358,485	)		(125,480	)
Available for sale		(3,622,225	)		(1,449,902	)		(2,100,060	)
Maturities:
Available for sale		—			(4	)		(1,725,000	)
Sales:
Available for sale		(168	)		—			—
Premium (amortization) and discount accretion, net		(4,292	)		164			1,025
Change in unrealized gain or (loss)		(25,719	)		(2,046	)		61,218
Net increase (decrease) in investment securities		1,819,225			(710,273	)		(1,739,592	)
Carrying value at end of year	$	5,282,944		$	3,463,719		$	4,173,992

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

	For the Year Ended December 31,
	2009			2008			2007
	(In thousands)
Mortgage-backed securities:
Carrying value at beginning of year	$	19,487,811		$	14,570,935		$	9,329,631
Purchases:
Held to maturity		3,017,730			1,360,861			3,861,633
Available for sale		3,849,268			5,777,777			3,248,326
Principal payments:
Held to maturity		(2,609,338	)		(1,348,304	)		(1,215,867	)
Available for sale		(2,123,330	)		(956,710	)		(696,560	)
Sales:
Available for sale		(761,557	)		—			—
Premium amortization and discount accretion, net		(27,972	)		(11,722	)		(10,257	)
Change in unrealized gain or (loss)		247,473			94,974			54,029
Net increase in mortgage-backed securities		1,592,274			4,916,876			5,241,304
Carrying value at end of year	$	21,080,085		$	19,487,811		$	14,570,935

25

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. The table also presents the mortgage-backed securities portfolio by coupon type.

	At December 31,
	2009							2008							2007
			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	$	362,449		100.00	%	$	362,449	$	76,896		100.00	%	$	76,896	$	106,299		100.00	%	$	106,299
Investment securities:
Held to maturity:
United States government- sponsored enterprises	$	4,187,599		79.27	%	$	4,070,900	$	49,981		1.45	%	$	50,406	$	1,408,071		33.74	%	$	1,409,814
Municipal bonds		105		0.01			105		105		0.01			106		430		0.01			432
Total held to maturity		4,187,704		79.28			4,071,005		50,086		1.46			50,512		1,408,501		33.75			1,410,246
Available for sale:
United States government- sponsored enterprises		1,088,165		20.59			1,088,165		3,406,248		98.33			3,406,248		2,758,193		66.08			2,758,193
Corporate bonds		—		—			—		—		—			—		4		—			4
Equity securities		7,075		0.13			7,075		7,385		0.21			7,385		7,294		0.17			7,294
Total available for sale		1,095,240		20.72			1,095,240		3,413,633		98.54			3,413,633		2,765,491		66.25			2,765,491
Total investment securities	$	5,282,944		100.00	%	$	5,166,245	$	3,463,719		100.00	%	$	3,464,145	$	4,173,992		100.00	%	$	4,175,737
Mortgage-backed securities:
By issuer:
Held to maturity:
GNMA pass-through certificates	$	112,019		0.53	%	$	114,787	$	128,906		0.66	%	$	127,309	$	157,716		1.08	%	$	158,999
FNMA pass-through certificates		2,510,095		11.91			2,616,604		3,203,799		16.44			3,247,847		3,214,509		22.06			3,205,922
FHLMC pass-through certificates		4,764,429		22.60			4,995,782		5,859,297		30.07			5,943,155		5,808,288		39.87			5,849,744
FHLMC and FNMA REMICs		2,577,011		12.22			2,597,658		380,255		1.95			377,134		385,013		2.64			351,647
Total held to maturity		9,963,554		47.26			10,324,831		9,572,257		49.12			9,695,445		9,565,526		65.65			9,566,312
Available for sale:
GNMA pass-through certificates		1,270,074		6.02			1,270,074		915,995		4.70			915,995		1,257,893		8.62			1,257,893
FNMA pass-through certificates		3,907,368		18.54			3,907,368		3,300,888		16.94			3,300,888		1,098,072		7.54			1,098,072
FHLMC pass-through certificates		4,888,326		23.20			4,888,326		5,698,671		29.24			5,698,671		2,649,444		18.18			2,649,444
FHLMC and FNMA REMICs		1,050,763		4.98			1,050,763		—		—			—		—		—			—
Total available for sale		11,116,531		52.74			11,116,531		9,915,554		50.88			9,915,554		5,005,409		34.35			5,005,409
Total mortgage-backed securities	$	21,080,085		100.00	%	$	21,441,362	$	19,487,811		100.00	%	$	19,610,999	$	14,570,935		100.00	%	$	14,571,721
By coupon type:
Adjustable-rate	$	14,912,735		70.74	%	$	15,211,271	$	16,277,336		83.53	%	$	16,377,257	$	11,995,377		82.32	%	$	12,055,525
Fixed-rate		6,167,350		29.26			6,230,091		3,210,475		16.47			3,233,742		2,575,558		17.68			2,516,196
Total mortgage-backed securities	$	21,080,085		100.00	%	$	21,441,362	$	19,487,811		100.00	%	$	19,610,999	$	14,570,935		100.00	%	$	14,571,721
Total investment portfolio	$	26,725,478				$	26,970,056	$	23,028,426				$	23,152,040	$	18,851,226				$	18,853,757

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

26

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, 2009. Mortgage-backed securities are presented by issuer and by coupon type. The table does not include the effect of prepayments or scheduled principal amortization. Equity securities have been excluded from this table.

	At December 31, 2009
						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	$	362,449		0.25	%	$	—		—	%	$	—		—	%	$	—		—	%	$	362,449		0.25	%
Investment securities:
Held to maturity:
United States government- sponsored enterprises	$	—		—	%	$	—		—	%	$	1,299,130		3.80	%	$	2,888,469		4.56	%	$	4,187,599		4.32	%
Municipal bonds		105		7.58			—		—			—		—			—		—			105		7.58
Total held to maturity		105		7.58			—		—			1,299,130		3.80			2,888,469		4.56			4,187,704		4.32
Available for sale:
United States government- sponsored enterprises		—		—			—		—			396,941		3.53			691,224		5.19			1,088,165		4.58
Corporate bonds		—		—			—		—			—		—			—		—			—		—
Total available for sale		—		—			—		—			396,941		3.53			691,224		5.19			1,088,165		4.58
Total investment securities	$	105		7.58	%	$	—		—	%	$	1,696,071		3.74	%	$	3,579,693		4.68	%	$	5,275,869		4.38	%
Mortgage-backed securities:
By issuer:
Held to maturity:
GNMA pass-through certificates	$	10		10.96	%	$	36		11.10	%	$	204		4.25	%	$	111,769		4.13	%	$	112,019		4.13	%
FNMA pass-through certificates		—		—			225		6.84			8,350		6.35			2,501,520		5.05			2,510,095		5.05
FHLMC pass-through certificates		63		6.80			266		5.38			5,150		3.97			4,758,950		5.23			4,764,429		5.23
FHLMC and FNMA REMIC’s		—		—			—		—			—		—			2,577,011		4.15			2,577,011		4.15
Total held to maturity		73		7.37			527		6.39			13,704		5.42			9,949,250		4.89			9,963,554		4.89
Available for sale:
GNMA pass-through certificates		—		—			—		—			—		—			1,270,074		3.76			1,270,074		3.76
FNMA pass-through certificates		—		—			—		—			—		—			3,907,368		4.11			3,907,368		4.11
FHLMC pass-through certificates		—		—			—		—			—		—			4,888,326		5.17			4,888,326		5.17
FHLMC and FNMA REMIC’s		—		—			—		—			—		—			1,050,763		4.02			1,050,763		4.02
Total available for sale		—		—			—		—			—		—			11,116,531		4.53			11,116,531		4.53
Total mortgage-backed securities	$	73		7.37	%	$	527		6.39	%	$	13,704		5.42	%	$	21,065,781		4.70	%	$	21,080,085		4.70	%
By coupon type:
Adjustable-rate	$	—		—	%	$	82		2.31	%	$	5,042		3.21	%	$	14,907,611		4.79	%	$	14,912,735		4.79	%
Fixed-rate		73		7.37			445		7.15			8,662		6.71			6,158,170		4.50			6,167,350		4.50
Total mortgage-backed securities	$	73		7.37	%	$	527		6.39	%	$	13,704		5.42	%	$	21,065,781		4.70	%	$	21,080,085		4.70	%
Total investment portfolio	$	362,627		0.25	%	$	527		6.39	%	$	1,709,775		3.75	%	$	24,645,474		4.70	%	$	26,718,403		4.58	%

27

Sources of Funds

General. 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 our operations. Retail deposits generated through our branch network and wholesale borrowings have been our primary means of funding our growth initiatives. We intend to fund our future growth primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases. 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, 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 branch offices. In December 2008, we began to open deposit accounts through the internet for customers throughout the United States. 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. During 2009, we opened 4 new branches. 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. In response to the economic recession, we believe that households during 2009 increased their personal savings and customers sought insured bank deposit products as an alternative to investments such as equity securities and bonds. We believe these factors contributed to our deposit growth.

Total deposits increased $6.12 billion, or 33.2%, during 2009 due primarily to a $3.12 billion increase in total time deposits, a $2.34 billion increase in our money market accounts and a $575.5 million increase in our interest-bearing transaction accounts and savings accounts. Total core deposits (defined as non-time deposit accounts) represented approximately 34.6% of total deposits as of December 31, 2009 compared with 29.9% as of December 31, 2008. This increase is due to the growth in our money market accounts as a result of our favorable rates as compared to our competitors. The aggregate balance in our time deposit accounts was $16.07 billion as of December 31, 2009 compared with $12.95 billion as of December 31, 2008. Time deposits with remaining maturities of less than one year amounted to $13.08 billion at December 31, 2009 compared with $12.48 billion at December 31, 2008. These time deposits are scheduled to mature as follows: $6.11 billion with an average cost of 1.86% in the first quarter of 2010, $4.53 billion with an average cost of 1.86% in the second quarter of 2010, $1.51 billion with an average cost of 1.98% in the third quarter of 2010 and $930.4 million with an average cost of 1.84% in the fourth quarter of 2010. The current yields offered on our six month and one year time deposits are 1.35% and 1.55%, respectively. 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 as transfers to other deposit products at the prevailing rate.

28

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

	For the Year Ended December 31,
	2009			2008			2007
	(Dollars in thousands)
Total deposits at beginning of year	$	18,464,042		$	15,153,382		$	13,415,587
Net increase in deposits		5,630,538			2,729,303			1,130,859
Interest credited		483,468			581,357			606,936
Total deposits at end of year	$	24,578,048		$	18,464,042		$	15,153,382
Net increase	$	6,114,006		$	3,310,660		$	1,737,795
Percent increase		33.11	%		21.85	%		12.95	%

At December 31, 2009, we had $5.94 billion in time deposits with balances of $100,000 and over maturing as follows:

Maturity Period	Amount
	(In thousands)
3 months or less	$	2,233,482
Over 3 months through 6 months		1,573,942
Over 6 months through 12 months		908,756
Over 12 months		1,228,406
Total	$	5,944,586

29

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,
	2009								2008								2007
						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	$	786,559		3.20	%		0.74	%	$	712,420		3.86	%		0.76	%	$	737,813		4.87	%		0.74	%
Interest-bearing demand		2,075,175		8.44			1.36			1,573,771		8.52			2.47			1,588,084		10.48			3.26
Money market		5,058,842		20.59			1.38			2,716,429		14.72			2.87			1,575,097		10.39			4.26
Noninterest-bearing demand		586,041		2.38			—			514,196		2.78			—			517,970		3.42			—
Total		8,506,617		34.61			1.22			5,516,816		29.88			2.22			4,418,964		29.16			2.81
Time deposits:
Time deposits $100,000 and over		5,944,586		24.20			2.02			4,599,228		24.92			3.66			3,336,049		22.02			4.97
Time deposits less than $100,000 with original maturities of:
3 months or less		485,518		1.98			1.19			356,822		1.93			3.17			1,057,289		6.98			4.98
Over 3 months to 12 months		3,212,728		13.06			1.41			5,520,470		29.89			3.74			4,558,298		30.07			5.04
Over 12 months to 24 months		3,753,700		15.27			2.23			1,200,957		6.50			3.56			524,722		3.46			4.57
Over 24 months to 36 months		952,722		3.88			2.51			71,707		0.39			3.65			79,613		0.53			3.87
Over 36 months to 48 months		236,551		0.96			2.94			34,469		0.19			3.89			77,185		0.51			3.93
Over 48 months to 60 months		35,505		0.14			3.18			14,498		0.08			4.08			32,299		0.21			3.94
Over 60 months		126,281		0.51			3.59			109,666		0.59			4.27			138,738		0.92			3.98
Qualified retirement plans		1,323,840		5.39			2.37			1,039,409		5.63			3.78			930,225		6.14			4.70
Total time deposits		16,071,431		65.39			2.01			12,947,226		70.12			3.69			10,734,418		70.84			4.93
Total deposits	$	24,578,048		100.00	%		1.74	%	$	18,464,042		100.00	%		3.25	%	$	15,153,382		100.00	%		4.31	%

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

	At December 31,
	2009		2008		2007
	(In thousands)
Time deposit accounts:
2.00% or less	$	8,123,453	$	322	$	2,032
2.01% to 2.50%		4,688,010		—		22
2.51% to 3.00%		2,444,254		1,672,600		343
3.01% to 3.50%		549,624		3,513,581		44,450
3.51% to 4.00%		91,665		7,278,114		514,022
4.01% and over		174,425		482,609		10,173,549
Total	$	16,071,431	$	12,947,226	$	10,734,418

30

The following table presents, by rate category, the remaining period to maturity of time deposit accounts outstanding as of December 31, 2009.

	Period to Maturity from December 31, 2009
	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:
2.00% or less	$	4,142,327	$	2,046,619	$	1,657,638	$	276,568	$	224	$	77	$	8,123,453
2.01% to 2.50%		59,752		2,357,107		712,989		1,500,227		37,933		20,002		4,688,010
2.51% to 3.00%		1,684,873		36,092		15,422		260,901		439,908		7,058		2,444,254
3.01% to 3.50%		68,134		60,004		17,022		90,333		1,475		312,656		549,624
3.51% to 4.00%		73,410		4,323		6,136		5,088		416		2,292		91,665
4.01% and over		82,158		21,807		35,904		13,074		17,090		4,392		174,425
Total	$	6,110,654	$	4,525,952	$	2,445,111	$	2,146,191	$	497,046	$	346,477	$	16,071,431

Borrowings. We have entered into agreements with selected brokers and the FHLB to repurchase securities sold to these parties. 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.

Borrowed funds at December 31 are summarized as follows:

	2009					2008
			Weighted					Weighted
			Average					Average
	Principal		Rate			Principal		Rate
	(Dollars in thousands)
Securities sold under agreements to repurchase:
FHLB	$	2,400,000		4.44	%	$	2,400,000		4.44	%
Other brokers		12,700,000		3.93			12,700,000		3.91
Total securities sold under agreements to repurchase		15,100,000		4.01			15,100,000		3.99
Advances from the FHLB		14,875,000		3.99			15,125,000		3.94
Total borrowed funds	$	29,975,000		4.00	%	$	30,225,000		3.97	%
Accrued interest payable	$	141,828				$	138,351

31

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,
	2009			2008			2007
	(Dollars in thousands)
Repurchase Agreements:
Average balance outstanding during the year	$	15,100,221		$	13,465,540		$	10,305,216
Maximum balance outstanding at any month-end during the year	$	15,100,000		$	15,100,000		$	12,016,000
Weighted average rate during the period		4.05	%		4.17	%		4.20	%
FHLB Advances:
Average balance outstanding during the year	$	15,035,798		$	13,737,057		$	10,286,869
Maximum balance outstanding at any month-end during the year	$	15,575,000		$	15,125,000		$	12,125,000
Weighted average rate during the period		4.01	%		4.14	%		4.28	%

Substantially all of our borrowed funds are callable at the discretion of the issuer after an initial no-call period. As a result, if interest rates were to decrease, these borrowings would probably not be called and our average cost of existing borrowings would not decrease even as market interest rates decrease. Conversely, if interest rates increase above the market interest rate for similar borrowings, these borrowings would likely be called at their next call date and our cost to replace these borrowings would increase. These call features are generally quarterly, after an initial no-call period of three months to five years from the date of borrowing. We believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be called will not increase substantially unless interest rates were to increase by at least 300 basis points.

Our borrowings have traditionally consisted of structured callable borrowings with ten year final maturities and initial no-call periods of one to five years. We have used this type of borrowing primarily to fund our loan growth because they have a longer duration than shorter-term non-callable borrowings and have a slightly lower cost than a non-callable borrowing with a maturity date similar to the initial call date of the callable borrowing. Our new borrowings in 2009 consisted of non-callable borrowings of $400.0 million with maturities of one to three months and $350.0 million of non-callable borrowings with maturities of two to three years.

During 2009, we were able to fund our asset growth primarily with deposit inflows. In order to effectively manage our interest rate risk and liquidity risk resulting from our current callable borrowing position, we are pursuing a variety of strategies to reduce callable borrowings while continuing to pursue our growth plans. We intend to continue focusing on funding our growth primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases which will allow us to achieve a greater balance between deposits and borrowings. If necessary to fund our growth and provide for liquidity, we may borrow a combination of short- term borrowings with maturities of three to six months and longer-term fixed-maturity borrowings with terms of two to five years. We also intend to modify certain borrowings to extend their call dates, which we began to do during 2009. During 2009, we modified approximately $1.73 billion of callable borrowings to extend the call dates of the borrowings by between three and four years as part of this strategy. In addition, we are considering prepayment of certain borrowings; however, at this time, we have no immediate plans to make any such prepayments, and we anticipate that any prepayment of borrowings will be limited.

32

The scheduled maturities and potential call dates of our borrowings as of December 31, 2009 are as follows:

	Borrowings by Scheduled					Borrowings by Earlier of Scheduled
	Maturity Date					Maturity or Next Potential Call Date
			Weighted					Weighted
			Average					Average
Year	Principal		Rate			Principal		Rate
	(Dollars in thousands)
2010	$	300,000		5.68	%	$	22,250,000		4.14	%
2011		450,000		3.71			5,350,000		3.20
2012		250,000		3.55			1,050,000		4.15
2013		250,000		5.30			1,325,000		4.69
2014		350,000		3.37			—		—
2015		3,725,000		3.85			—		—
2016		7,100,000		4.31			—		—
2017		9,975,000		4.20			—		—
2018		5,850,000		3.13			—		—
2019		1,725,000		4.63			—		—
Total	$	29,975,000		4.00		$	29,975,000		4.00

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

	At December 31,
	2009		2008		2007
	(Dollars in thousands)
Amortized cost of collateral:
United States government-sponsored enterprise securities	$	2,429,640	$	2,150,000	$	3,620,083
Mortgage-backed securities		14,482,533		15,572,838		9,308,551
Total amortized cost of collateral	$	16,912,173	$	17,722,838	$	12,928,634
Fair value of collateral:
United States government-sponsored enterprise securities	$	2,363,328	$	2,159,471	$	3,626,572
Mortgage-backed securities		15,115,964		15,759,490		9,294,264
Total fair value of collateral	$	17,479,292	$	17,918,961	$	12,920,836

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 $6.96 billion and $29.7 million, respectively, of residential mortgage loans outstanding at December 31, 2009.

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.

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Personnel

As of December 31, 2009, we had 1,387 full-time employees and 165 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 FDIC under the Deposit Insurance Fund (“DIF”). Under its charter, Hudson City Savings is subject to extensive regulation, examination and supervision by the OTS 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 OTS. Each of Hudson City Bancorp and Hudson City Savings must file reports with the OTS concerning its activities and financial condition, and must obtain regulatory approval from the OTS prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions. The OTS will conduct periodic examinations to assess Hudson City Bancorp’s and Hudson City Savings’ compliance with various regulatory requirements. The OTS 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 OTS 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 DIF 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 (including laws concerning taxes, banking, securities, accounting and insurance), whether by the OTS, the FDIC or through legislation, could have a material adverse impact on Hudson City Bancorp and Hudson City Savings and their operations and shareholders.

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 OTS 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

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(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 OTS 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 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. 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.

Generally, under the Agencies’ existing risk-based and leverage capital rules, banks, bank holding companies and savings associations (collectively, banking organizations) are required to deduct certain assets from Tier 1 capital, and though a banking organization is permitted to net any associated deferred tax liability against some of such assets prior to making the deduction from Tier 1 capital, such netting generally is not permitted for goodwill and other intangible assets arising from a taxable business combination. In these cases, the full or gross carrying amount of the asset is deducted. However, banking organizations may reduce the amount of goodwill arising from a taxable business combination that they may deduct from Tier 1 capital by the amount of any deferred tax liability associated with that goodwill. We have no deferred tax liabilities associated with goodwill and, as a result, the full amount of our goodwill is deducted from Tier 1 capital.

For banking organizations that elect to apply this rule, the amount of goodwill deducted from Tier 1 capital would reflect the maximum exposure to loss in the event that the entire amount of goodwill is impaired or derecognized for financial reporting purposes. A banking organization that reduces the amount of goodwill deducted from Tier 1 capital by the amount of the deferred tax liability is not permitted to net this deferred tax liability against deferred tax assets when determining regulatory capital limitations on deferred tax assets.

At December 31, 2009, 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, 2009
Tangible capital	$	4,539,630		7.59	%	$	897,374		1.50	%		n/a		n/a
Leverage (core) capital		4,539,630		7.59			2,392,955		4.00		$	2,991,245		5.00	%
Total-risk-based capital		4,679,843		21.02			1,781,277		8.00			2,226,597		10.00
December 31, 2008
Tangible capital	$	4,290,316		7.99	%	$	805,475		1.50	%		n/a		n/a
Leverage (core) capital		4,290,316		7.99			2,147,935		4.00		$	2,684,918		5.00	%
Total-risk-based capital		4,340,315		21.52			1,613,657		8.00			2,017,071		10.00

Interest Rate Risk. The OTS monitors the IRR of individual institutions through the OTS requirements for IRR management, the ability of the OTS 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.

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The OTS 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 OTS has also used this NPV analysis as part of its evaluation of certain applications or notices submitted by thrift institutions. The OTS, 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 OTS regarding NPV analysis. The OTS has not imposed any such additional minimum capital requirements on Hudson City Savings.

In January 2010, the Agencies released an Advisory on Interest Rate Risk Management (the “IRR Advisory”) to remind institutions of the supervisory expectations regarding sound practices for managing IRR. While some degree of IRR is inherent in the business of banking, the Agencies expect institutions to have sound risk management practices in place to measure, monitor and control IRR exposures, and IRR management should be an integral component of an institution’s risk management infrastructure. The Agencies expect all institutions to manage their IRR exposures using processes and systems commensurate with their earnings and capital levels, complexity, business model, risk profile and scope of operations, and the IRR Advisory reiterates the importance of effective corporate governance, policies and procedures, risk measuring and monitoring systems, stress testing, and internal controls related to the IRR exposures of institutions.

The IRR Advisory encourages institutions to use a variety of techniques to measure IRR exposure, including simple maturity gap analysis, income measurement and valuation measurement for assessing the impact of changes in market rates, as well as simulation modeling to measure IRR exposure. Institutions are encouraged to use the full complement of analytical capabilities of their IRR simulation models. The IRR Advisory also reminds institutions that stress testing, which includes both scenario and sensitivity analysis, is an integral component of IRR management. The IRR Advisory indicates that institutions should regularly assess IRR exposures beyond typical industry conventions, including changes in rates of greater magnitude (e.g., up and down 300 and 400 basis points, as compared to up and down 200 basis points, which has been the general practice) across different tenors to reflect changing slopes and twists of the yield curve.

The IRR Advisory emphasizes that effective IRR management not only involves the identification and measurement of IRR, but also provides for appropriate actions to control this risk. The adequacy and effectiveness of an institution’s IRR management process and the level of its IRR exposure are critical factors in the Agencies’ evaluation of an institution’s sensitivity to changes in interest rates and capital adequacy.

Safety and Soundness Standards. Pursuant to the requirements of the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”), as amended by the Riegle Community Development and Regulatory Improvement Act of 1994, each federal banking agency, including the OTS, 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 shareholder.

In addition, the OTS adopted regulations to require a savings bank that is given notice by the OTS that it is not satisfying any of such safety and soundness standards to submit a compliance plan to the OTS. 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 OTS 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 OTS may seek to enforce such an order in judicial proceedings and to impose civil monetary penalties.

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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 five categories of capitalization which FDICIA created: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” 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 OTS 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 OTS 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 OTS to meet a specific capital level. As of December 31, 2009, Hudson City Savings was considered “well capitalized” by the OTS.

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. The FDIC merged the BIF and the Savings Association Insurance Fund to form the DIF on March 31, 2006. Hudson City Savings is a member of the DIF and pays its deposit insurance assessments to the DIF.

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 for the assessment for the FICO payments was $2.1 million in 2009.

Under the Federal Deposit Insurance Act, as amended (“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.

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As a result of the recent failures of a number of banks and thrifts, there has been a significant increase in the loss provisions of the DIF of the FDIC. This has resulted in a decline in the DIF reserve ratio. Because the DIF reserve ratio declined below 1.15% the FDIC was required to establish a restoration plan to restore the reserve ratio to 1.15% within five years. In order to restore the reserve ratio to 1.15%, the FDIC increased risk-based assessment rates uniformly by 7 basis points (annualized) during the first quarter of 2009. Thereafter, the FDIC further increased the initial base assessment rates, beginning with the second quarter of 2009, depending on an institution’s risk category, with adjustments resulting in increased assessment rates for institutions with a significant reliance on secured liabilities and brokered deposits. In addition, the FDIC extended the period of the restoration plan from five to seven years due to extraordinary circumstances. In May of 2009 the FDIC imposed a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The special assessment was $21.1 million for Hudson City and was collected on September 30, 2009.

On September 29, 2009, the FDIC adopted an amendment to the restoration plan that increases the deposit insurance assessment rate schedule uniformly across all four risk categories by three basis points (annualized) of insured deposits beginning January 1, 2011. In addition, on November 17, 2009 the FDIC adopted a final rule which required insured depository institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The prepaid assessment for these periods was collected on December 30, 2009 and our prepaid assessment was $162.5 million which was recorded as a prepaid expense.

For 2009, Hudson City Savings had an assessment rate of approximately 18.25 basis points resulting in a deposit insurance assessment of $33.0 million. 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. Total expense for 2009, including the FICO assessment, was $35.1 million (excluding the special assessment).

On October 3, 2008, the FDIC announced a temporary increase in the standard maximum deposit insurance amount from $100,000 to $250,000 per depositor through December 31, 2009, in response to the financial crises affecting the banking system and financial markets. On May 20, 2009, President Obama signed the Helping Families Save Their Homes Act of 2009, which, among other provisions, extended the expiration date of the temporary increase in the standard maximum deposit insurance amount from December 31, 2009 to December 31, 2013. To reflect Congress’s extension, on September 17, 2009, the FDIC adopted a final rule extending the increase in deposit insurance from $100,000 to $250,000 per depositor through December 31, 2013.

Temporary Liquidity Guarantee Program. On November 21, 2008, the FDIC adopted the Temporary Liquidity Guarantee Program (“TLGP”) pursuant to its authority to prevent “systematic risk” in the U.S banking system. Under the TLGP the FDIC will fully insure non-interest bearing transaction deposit accounts held at participating FDIC-insured institutions (“Transaction Account Guarantee Program”). The Transaction Account Guarantee Program was to expire on December 31, 2009; however, on August 26, 2009, the FDIC extended the Transaction Account Guarantee Program for six months until June 30, 2010. Each institution that participates in the extended Transaction Account Guarantee Program will be subject to increased fees during the extension period. However, all participating institutions were given an opportunity to opt out of the extended program.

In addition, under the TLGP, the FDIC will guarantee, through the earlier of maturity or December 31, 2012, certain newly issued senior unsecured debt issued by participating institutions on or after October 14, 2008, and before October 31, 2009 (“Debt Guarantee Program”). While the Debt Guarantee Program concluded on October 31, 2009, the FDIC has established a limited emergency guarantee facility, for debt issued on or before April 30, 2010, that will be available on an application basis to TLGP participants that are unable to issue non-guaranteed debt to replace maturing senior unsecured debt because of market disruptions or other circumstances beyond their control.

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We do not participate in either the Transaction Account Guarantee or the Debt Guarantee Program.

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 FRB, as well as additional limitations as adopted by the Director of the OTS. OTS 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 shareholders, directors and executive officers.

In addition, the OTS 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. OTS regulations also include certain specific exemptions from these prohibitions. The FRB and the OTS require each depository institution that is subject to Sections 23A and 23B of the FRA to implement policies and procedures to ensure compliance with Regulation W and the OTS 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 OTS 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.

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.

Community Reinvestment Act. Under the Community Reinvestment Act (“CRA”), as implemented by OTS 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 OTS, 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.

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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 Agencies adopted regulations implementing the requirement 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 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, 2009, Hudson City Savings’ largest aggregate amount of loans to one borrower totaled $8.1 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.

On June 29, 2007, the OTS and other federal bank regulatory agencies issued a final Statement on Subprime Mortgage Lending (the “Statement”) to address the growing concerns facing the sub-prime mortgage market, particularly with respect to rapidly rising sub-prime default rates that may indicate borrowers do not have the ability to repay adjustable-rate sub-prime loans originated by financial institutions. In particular, the Agencies express concern in the Statement that current underwriting practices do not take into account that many subprime borrowers are not prepared for “payment shock” and that the current subprime lending practices compound risk for financial institutions. The Statement describes the prudent safety and soundness and consumer protection standards that financial institutions should follow to ensure borrowers obtain loans that they can afford to repay. The Statement also reinforces the April 17, 2007 Interagency Statement on Working with Mortgage Borrowers, in which the federal bank regulatory agencies encouraged institutions to work constructively with residential borrowers who are financially unable or reasonably expected to be unable to meet their contractual payment obligations on their home loans.

Currently, we originate both interest-only and interest-only limited documentation loans. We also purchase interest-only loans. We do not originate or purchase sub-prime loans, negative amortization loans or option ARM loans. During 2009, originations of interest-only loans totaled $1.32 billion, of which all were one-to-four family loans. At December 31, 2009, our mortgage loan portfolio included $4.59 billion of interest-only loans, all of which were one- to four-family loans. See “Residential Mortgage Lending.”

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We have evaluated the Guidance and the Statement to determine our compliance and, as necessary, modified our risk management practices, underwriting guidelines and consumer protection standards. The Guidance does not apply to all mortgage lenders with whom we compete for loans. We do not believe the Guidance will have a material adverse impact on our loan origination volumes in future periods.

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, commercial real estate loans have not become a material component of our loan portfolio or resulted in a concentration.

On October 30, 2009, the Agencies adopted a policy statement supporting CRE loan workouts, or the CRE Policy Statement. The CRE Policy Statement provides guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The CRE Policy Statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition. Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined. The CRE Policy Statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.

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, 2009, Hudson City Savings held 90.3% 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, 2009. 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.

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Limitation on Capital Distributions. The OTS 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 OTS 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 holding company, Hudson City Savings currently must file a notice with the OTS 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 OTS 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 OTS notifies Hudson City Savings Bank that it is in need of more than normal supervision. Under the 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 shareholders’ 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 OTS regulations.

Assessments. OTS 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 $5.5 million in 2009 based on the size of the Bank.

Branching. The OTS regulations authorize federally chartered savings banks to branch nationwide to the extent allowed by federal statute. This permits federal savings and loan associations to more easily diversify their loan portfolios and lines of business geographically. OTS 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 OTS 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 Act takes measures intended to encourage information sharing among bank regulatory

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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 OTS regulations impose the following requirements on 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 Federal Home Loan Bank system, which consists of twelve regional Federal Home Loan Banks, each subject to supervision and regulation by the Federal Housing Finance Board, or FHFB. The Federal Home Loan Bank 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 Federal Home Loan Banks. 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 Federal Home Loan Banks. 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 the FHLB, is currently required to acquire and hold shares of FHLB 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 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, 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 borrowings from the FHLB; (2) 4.5% of the outstanding principal balance of Acquired Member Assets, as defined by the FHLB, 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’s balance sheet of derivative contracts between the FHLB and its members, which for Hudson City Savings is also zero. The FHLB can adjust the specified percentages and dollar amount from time to time within the ranges established by the FHLB capital plan. At December 31, 2009, the amount of FHLB stock held by us satisfies the requirements of the FHLB capital plan.

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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 net transaction accounts between $10.7 million and $55.2 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 $55.2 million. The first $10.7 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. Federal Home Loan Bank system members are also authorized to borrow from the Federal Reserve “discount window,” but FRB regulations require institutions to exhaust all Federal Home Loan Bank sources before borrowing from a Federal Reserve Bank.

Pursuant to the Emergency Economic Stabilization Act of 2008 (“EESA”), the FRB announced on October 6, 2008, that the Federal Reserve Banks will begin to pay interest on depository institutions’ required and excess reserve balances. Paying interest on required reserve balances should essentially eliminate the opportunity cost of holding required reserves, promoting efficiency in the banking sector. The interest rate paid on required reserve balances is currently the average target federal funds rate over the reserve maintenance period. The rate on excess balances will be set equal to the lowest Federal Open Market Committee of the FRB (“FOMC”) target rate in effect during the reserve maintenance period. The payment of interest on excess reserves will permit the Federal Reserve to expand its balance sheet as necessary to provide the liquidity necessary to support financial stability.

Federal Holding Company Regulation

Hudson City Bancorp is a unitary savings and loan holding company within the meaning of HOLA. As such, Hudson City Bancorp is registered with the OTS and is subject to OTS regulation, examination, supervision and reporting requirements. In addition, the OTS has enforcement authority over Hudson City Bancorp and its savings bank subsidiary. Among other things, this authority permits the OTS 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 the savings institution subsidiary of such holding company;

• conducting an insurance agency or escrow business;

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

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• holding or managing properties used or occupied by the savings institution subsidiary of such holding 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 Act”), unless the Director of the OTS, 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 March 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 OTS; and

• any activity permissible for financial holding companies under section 4(k) of the BHC Act.

Activities permissible for financial holding companies 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 OTS 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 OTS 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 OTS).

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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 March 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 savings and loan holding company (“SLHC”) fails to meet the QTL test set forth in Section 10(m) of HOLA and regulations of the OTS, 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 OTS; 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 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 OTS 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.

In general, a SLHC, with the prior approval of the OTS, may engage in all activities that bank holding companies may engage in under any regulation that the FRB has promulgated under Section 4(c) of the BHC Act. Current regulations limit such authority to those activities that the FRB has, by regulation, determined to be permissible under Section 4(c)(8) of the BHC Act, as noted above. Prior approval from the OTS is not required, however, if: (1) the SLHC received a rating of satisfactory or above prior to January 1, 2008, or a composite rating of “1” or “2” thereafter, in its most recent examination, and its not in troubled condition, and the holding company does not propose to commence the activity by an acquisition of a going concern, or (2) the activity is otherwise permissible under another provision of HOLA, for which prior notice to or approval from the OTS is not required.

In addition, a SLHC is precluded from acquiring more than 5% of a non-subsidiary thrift unless the SLHC receives prior approval from the OTS. No savings and loan holding company may, directly or indirectly, or through one or more subsidiaries or through one or more transactions, acquire control of an uninsured institution or retain, for more than one year after the date any savings association subsidiary becomes uninsured, control of such association.

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.

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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 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 Internal Revenue Service during the past five years.

Distributions. To the extent that Hudson City Savings makes “non-dividend distributions” to Shareholders, 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

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than the AMA paid in prior years, Hudson City Savings may apply the 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 9.00% 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 9.00% 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 7.1%. 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 9.00% (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 is derived from outside the New York City jurisdiction which has the effect of significantly reducing the New York City taxable income of Hudson City Savings.

Item 1A. Risk Factors

The Geographic Concentration Of Our Loan Portfolio And Lending Activities Makes Us Vulnerable To A Downturn In The Economy. Originating loans secured by residential real estate is our 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 a result of our lending practices, we have a concentration of loans secured by real property located primarily in New Jersey, New York and Connecticut. At December 31, 2009, approximately 73.8% of our total loans are in the New York metropolitan area.

Financial institutions continue to be affected by the sharp declines in the real estate market that occurred over the last three years as well as the effects of the recent recessionary economy. Declines in real estate values, home sales volumes and financial stress on borrowers as a result of the uncertain economic environment, including job losses, have had and may continue to have an adverse effect on our borrowers or their customers, which could adversely affect our financial condition and results of operations. In addition, decreases in real estate values have adversely affected the value of property used as collateral for our loans and result in higher loss experience on our non-performing

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loans. Adverse changes in the economy, particularly in employment conditions, 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. If poor economic conditions result in decreased demand for real estate loans, our profits may decrease because our investment alternatives may earn less income for us than real estate loans.

We continued to see increases in loan delinquencies and charge-offs in 2009. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $627.7 million at December 31, 2009 and $217.6 million at December 31, 2008. The ratio of non-performing loans to total loans was 1.98% at December 31, 2009 compared with 0.74% at December 31, 2008. The provision for loan losses amounted to $137.5 million at December 31, 2009 as compared to $19.5 million at December 31, 2008. Net charge-offs amounted to $47.2 million for 2009 as compared to net charge-offs of $4.4 million for 2008. Further deterioration in local economic conditions in our markets could drive losses beyond that which is provided for in our allowance for loan losses and result in the following other consequences: loan delinquencies, problem assets and foreclosures may increase; demand for our products and services may decline; deposits may decrease, which would adversely impact our liquidity position; and collateral for our loans, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans which may result in increased levels of loan loss provisions.

Proposed tax on liabilities could adversely affect our financial condition. On January 14, 2010, President Obama announced his proposal to Congress for a Financial Crisis Responsibility Fee that would require financial firms to repay the projected cost of the Troubled Asset Relief Program (“TARP”). The proposed fee, which would go into effect on June 30, 2010, would apply to banks, thrifts, bank holding companies, thrift holding companies and insurance or other companies that own insured depository institutions, in each case with more than $50 billion in consolidated assets. The proposed fee would equal approximately 15 basis points (0.15%) of covered liabilities per year. Covered liabilities are equal to assets minus Tier 1 capital minus FDIC assessed deposits (and/or insurance policy reserves, as appropriate). The fee would remain in place for ten years, and is expected to raise $90 billion over the next ten years, but would remain in force longer if all costs of the TARP have not been recovered at that time. After the first five years, the United States Treasury Department (the “Treasury”), would report on the effectiveness of the fee. The fee would be collected by the Internal Revenue Service. The outcome of final legislation by Congress on this proposal cannot be determined at this time. If the fee is adopted as proposed by President Obama, Hudson City would be assessed a fee of approximately $46.4 million for 2010.

The potential adoption of significant aspects of proposed regulatory reform legislation may have a material effect on our operations. On December 11, 2009, the House of Representatives passed H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009, or the Reform Bill. The Reform Bill is intended to address perceived weaknesses in the U.S. financial regulatory system and prevent future economic and financial crises. The Reform Bill, among other things, creates three new governmental agencies: the Financial Services Oversight Council, the Federal Insurance Office and the Consumer Financial Protection Agency, or the CFPA. The CFPA will have the authority to implement and enforce a variety of existing consumer protection statutes and to issue new regulations. In addition, the Reform Bill amends the HOLA to abolish the OTS and transfer its functions and personnel to a newly created Division of Thrift Supervision within the OCC. The Reform Bill preserves the thrift charter for thrifts, such as Hudson City Savings. Most significantly for us, the Reform Bill contains provisions which would result in thrift holding companies, such as Hudson City Bancorp, becoming bank holding companies subject to consolidated capital requirements, BHC Act limitations and supervision by the FRB. Similar legislation is being currently considered by the Senate’s Banking Committee. The Senate’s proposed legislation, however, contemplates elimination of the federal thrift charter with federal thrifts being regulated by a proposed new federal banking agency. In addition, although the Reform Bill purports to broaden federal preemption of state consumer protection laws the current Senate version virtually eliminates federal preemption of state consumer protection laws.

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The exact requirements and timing of any final legislation cannot be determined at this time. If the more significant provisions of the Reform Bill or the Senate’s proposed legislation become final, our operations could be significantly affected.

The impact on us of recently enacted and proposed legislation and government programs to stabilize the financial markets cannot be predicted at this time. During 2008 and 2009, there was unprecedented government intervention in response to the financial crises affecting the banking system and financial markets, including:

• The enactment of the Emergency Economic Stabilization Act of 2008, or EESA, in October 2008, which gave the Treasury the authority to, among other things, purchase up to $700 billion of troubled assets from financial institutions;

• The announcements shortly thereafter by the Treasury, the FDIC and the FRB, respectively, of (i) the Capital Purchase Program, or CPP, a $250 billion voluntary capital purchase program under which qualifying financial institutions were given the ability to sell preferred shares to the Treasury, (ii) the TLGP and (iii) further details of the Commercial Paper Funding Facility, or CPFF, which provides a broad backstop for the commercial paper market;

• The announcement by the Treasury in February 2009 of the Capital Assistance Program, or CAP, under which qualifying financial institutions were provided access to contingent common equity provided by the U.S. government as a bridge to private capital in the future;

• The announcement by the federal banking regulators of the Supervisory Capital Assessment Program, under which the federal banking regulators measured how much of an additional capital buffer, if any, each of the 19 largest U.S. bank holding companies would need to establish to ensure that it would have sufficient capital to comfortably exceed minimum regulatory requirements at December 31, 2010, as a result of which many of the nineteen institutions underwent capital raising or restructuring transactions to improve their capital base; and

• The announcement by the Treasury in March 2009, in conjunction with the FDIC and the FRB, of the Public-Private Investment Program, or PPIP, which consists of two discrete components: (1) the Legacy Loan Program, which was designed to facilitate the sale of commercial and residential whole loans and other assets currently held by U.S. banks, and (2) the Legacy Securities Program, which was designed to facilitate the sale of legacy residential mortgage backed securities and commercial mortgage backed securities initially rated AAA and currently held by Financial Institutions (as defined under the EESA).

We currently do not participate in the TLGP and we did not participate in the CPP, the CPFF or the CAP, and we do not expect to participate in either PPIP program.

Although it appears that there has been some stabilization of the U.S. financial markets as a result of the foregoing programs and other actions taken by the U.S. government, there can be no assurance as to the actual impact that such programs or any other governmental program will have on the financial markets and the economy in the future. The financial market and economic conditions that existed during 2008 and 2009 have had, and to the extent that such conditions continue or worsen, will continue to have, an adverse effect on our financial condition and results of operations and could also materially and adversely affect our business, access to credit or the trading price of our common stock. In addition, we expect to face increased regulation and supervision of our industry as a result of the financial crisis in the banking and financial markets, and, to the extent that we participate in any of the programs established or to be established by the Treasury or by the federal bank regulatory agencies, there will be additional requirements and conditions imposed on us. Such additional regulation and supervision may increase our costs and limit our ability to pursue business opportunities.

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The FDIC’s restoration plan and the related increased assessment rate schedule may have a further material effect on our results of operations. In February 2009, the FDIC adopted a final rule which set the initial base assessment rates beginning April 1, 2009 and provided for the following adjustments to an institution’s assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt, specifically, an institution’s base assessment rate will be reduced from the initial rate using the institution’s ratio of long-term unsecured debt to domestic deposits, though any such decrease will be limited to 5 basis points; (2) an increase for secured liabilities above a threshold amount, specifically, if an institution’s ratio of secured liabilities to domestic deposits is greater than 25 percent, the institution’s assessment rate will increase, but the resulting base assessment rate will be no more than 50 percent greater than it was before the adjustment; and (3) for non-Risk Category I institutions, an increase for brokered deposits above a threshold amount, specifically, if an institution has a ratio of brokered deposits to domestic deposits that is greater than 10 percent, the institution’s assessment rate will be increased, though never by more than 10 basis points. Our federal deposit insurance premiums totaled $35.1 million for the year ended December 31, 2009, compared to $4.3 million for the year ended December 31, 2008.

The FDIC also adopted a final rule in May 2009 imposing a five basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009, which was collected on September 30, 2009. Our FDIC special assessment totaled $21.1 million for the year ended December 31, 2009.

On September 29, 2009, the FDIC adopted an amendment to the restoration plan that increases the deposit insurance assessment rate uniformly across all four risk categories by three basis points (annualized) of insured deposits beginning January 1, 2011. In addition, on November 17, 2009, the FDIC adopted a final rule which required insured depository institutions to prepay their quarterly deposit insurance assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012 on December 30, 2009, together with their regular deposit insurance assessment for the third quarter of 2009. Our payment on December 30, 2009 totaled $162.5 million.

There is no guarantee that the higher premiums, special assessment and assessment prepayment described above will be sufficient for the DIF to meet its funding requirements, which may necessitate further special assessments or increases in deposit insurance premiums. Any such future assessments or increases could have a further material impact on our results of operations.

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. In contrast, a majority of our interest-bearing liabilities are expected to reprice as interest rates increase. At December 31, 2009, 69.03% of our loans with contractual maturities of greater than one year had fixed rates of interest, and 99.62% of our total loans had contractual maturities of five or more years. Overall, at December 31, 2009, 98.6% 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 portion of our deposits as of December 31, 2009, including $7.13 billion in interest-bearing demand accounts and money market accounts, have no contractual maturities and are likely to reprice quickly as short-term interest rates increase. As of December 31, 2009, 81.4% of our time deposits will mature within one year. In the past we funded our asset growth using callable borrowings. If we experience a rising interest rate environment where interest rates increase above the interest rate for the borrowings, these borrowings will likely be called at their next call date and our cost to replace these borrowings would likely increase. As of December 31, 2009, 74.23% of our borrowed funds may be called by the lenders within one year. Therefore, in a significantly increasing rate environment, our cost of funds is expected to increase more rapidly than the yields earned on our

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loan portfolio and securities portfolio. An increasing rate 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 Board of Governors of the Federal Reserve System (the “FOMC”) noted that economic activity has continued to improve during the fourth quarter of 2009. The FOMC also noted that the housing sector has shown signs of improvement. However, the national unemployment rate increased to 10.0% in December 2009 as compared to 9.8% in September 2009 and 7.4% in December 2008. Lower household wealth and tight credit conditions in addition to the increase in the national unemployment rate has resulted in the FOMC maintaining the overnight lending rate at zero to 0.25% during 2009. As a result, short-term market interest rates have remained at low levels during 2009. This allowed us to continue to re-price our short-term deposits thereby reducing our cost of funds. While longer-term market interest rates increased during 2009, rates on mortgage-related assets declined slightly, although to a lesser extent than the decline in our cost of funds. As a result, our net interest rate spread and net interest margin increased for 2009 as compared to 2008.

We expect the operating environment to remain very challenging as the Federal Reserve Board continues to focus their efforts on the economy. Interest rates will continue to fluctuate, and we cannot predict future Federal Reserve Board actions or other factors that will cause rates to change.

If the yield curve were to flatten, the spread between our cost of funds and the interest received on our loan and securities portfolios would shrink. The yield curve would begin to flatten in the event that long term interest rates declined or if short term market interest rates were to begin to increase through the actions of the FOMC without a corresponding increase in long term rates. In the case of an inverted yield curve, the cost of funds would be higher than the earnings generated from these portfolios. As a result of the decreased spread from a flat or inverted yield curve, our net interest income would decrease.

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 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. NPV is analyzed using a model that 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. If the OTS, using its model, were to determine that our IRR is significantly higher than our internal estimates indicate, the OTS may seek to have us operate at higher regulatory capital ratios than we anticipate under our current growth strategy. Should that occur, we may not be able to continue our historical pace of stock repurchases and our anticipated future growth could be limited. We expect the OTS will continue to closely monitor the interest rate risk of Hudson City Savings.

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

52

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. 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.

During 2009, the Federal Reserve continued to purchase securities issued by Fannie Mae or Freddie Mac to provide these government-sponsored enterprises with a source of liquidity and thereby reduce the interest rates they offer on mortgage loans. While the intent of these actions was to stimulate the housing market, it also resulted in additional price competition for mortgage loans which are our primary lending product.

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.

We may not be able to successfully implement our plans for growth. Since our initial public offering in 1999, we have experienced rapid and significant growth. Our assets have grown from $8.52 billion at December 31, 1999 to $60.27 billion at December 31, 2009. We acquired a significant amount of capital from the second-step conversion, which we have used to continue implementing our growth strategy of building our core banking business by originating and purchasing mortgage loans and funding this growth with customer deposits and borrowings.

We also plan to continue with our de novo branching strategy and will consider expansion opportunities through the acquisition of branches and other financial institutions. 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 our 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, particularly in the current economic environment, or that we will not have to incur additional expenditures beyond current projections to support such growth.

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 shareholders. 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

53

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.

We expect to face increased regulation and supervision of our industry as a result of the existing financial crisis, and there will be additional requirements and conditions imposed on us to the extent that we participate in any of the programs established or to be established by the Treasury under the EESA or by the Agencies. Such additional regulation and supervision may increase our costs and limit our ability to pursue business opportunities.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

During 2009, we conducted our business through our two owned executive office buildings located in Paramus, New Jersey, our leased operations center located in Glen Rock, New Jersey, and 131 branch offices. At December 31, 2009, we owned 36 of our locations and leased the remaining 95. 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 operations.

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

No matter was submitted during the quarter ended December 31, 2009 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

Hudson City Bancorp common stock is traded on the Nasdaq Global Select Market under the symbol “HCBK.” The table below shows the reported high and low sales prices of the common stock during the periods indicated.

	Sales Price				Dividend Information
					Amount
	High		Low		Per Share		Date of Payment
2008
First quarter		18.65		13.28		0.090	March 1, 2008
Second quarter		19.78		16.07		0.110	May 31, 2008
Third quarter		25.05		15.55		0.120	August 29, 2008
Fourth quarter		19.41		14.00		0.130	November 29, 2008
2009
First quarter		15.89		7.46		0.140	February 28, 2009
Second quarter		13.75		11.22		0.150	May 30, 2009
Third quarter		14.77		12.29		0.150	August 29, 2009
Fourth quarter		13.88		12.65		0.150	November 27, 2009

On January 19, 2010, the Board of Directors of Hudson City Bancorp declared a quarterly cash dividend of $0.15 per common share outstanding that is payable on March 2, 2010 to shareholders of record as of the close of business on February 5, 2010. 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 19, 2010, there were approximately 29,370 holders of record of Hudson City Bancorp common stock.

55

The following table reports information regarding repurchases of our common stock during the fourth quarter of 2009 under 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		per Share		or Programs		Programs (1)
October 1-October 31, 2009		—	$	—		—		50,123,550
November 1-November 30, 2009		—		—		—		50,123,550
December 1-December 31, 2009		—		—		—		50,123,550
Total		—		—		—

(1) On July 25, 2007, Hudson City Bancorp announced the adoption of its eighth Stock Repurchase Program, which authorized the repurchase of up to 51,400,000 shares of common stock. This program has no expiration date.

Item 6. Selected Financial Data

The “Selected Consolidated Financial Information” section of the Company’s Annual Report to Shareholders is incorporated herein by reference.

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

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report to Shareholders is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s Annual Report to Shareholders, is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The financial statements identified in Item 15(a)(1) hereof are incorporated herein by reference.

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 Executive 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 (the “Exchange Act”)) as of December 31, 2009. 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

56

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 2009 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 is responsible for establishing and maintaining adequate internal control over financial reporting. Hudson City’s internal control system is a 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, 2009. 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, 2009, 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 the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 incorporated herein by reference to the Company’s Annual Report to Shareholders.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information regarding directors, executive officers and the corporate governance of the Company is presented under the headings “Proposal 1 — Election of Directors -General,” “-Who Our Directors Are,” “-Nominees for Election as Directors,” “-Continuing Directors,” “-Executive Officers,” “-Section 16(a) Beneficial Ownership Reporting Compliance,” and “Corporate Governance” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 21, 2010 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 the 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 definitive Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 21, 2010 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 on our website at www.hcbk.com, and will be provided 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 “Compensation Discussion and Analysis – Key Elements of the Compensation Package,” “-Material Policies and Procedures,” “-Compensation of Executive Officers and Directors- Executive Officer Compensation,” “-Director Compensation,” “Corporate Governance – Compensation Committee Interlocks and Insider Participation” and “-Compensation Committee Report” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 21, 2010 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 2010 Annual Meeting of Shareholders to be held on April 21, 2010 and is incorporated herein by reference. Information regarding equity compensation plans is presented under the heading “Compensation of Executive Officers and Directors – Compensation Plans” in the Company’s definitive Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 21, 2010 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 2010 Annual Meeting of Shareholders to be held on April 21, 2010 and is incorporated herein by reference.

58

Item 14. Principal Accounting Fees and Services

Information regarding principal accounting fees and services is presented under the heading “Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm” in Hudson City Bancorp’s definitive Proxy Statement for the 2010 Annual Meeting of Shareholders to be held on April 21, 2010 and is incorporated herein by reference.

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, 2009 and 2008
•	Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007
•	Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2009, 2008 and 2007
•	Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007
•	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.

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

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. (*)
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. 1,2,3,4,5 and 6) (13)
10.2	Profit Incentive Bonus Plan of Hudson City Savings Bank (5)
10.3	Form of Amended and Restated Two-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson City Bancorp, Inc. and certain officers (together with Schedule pursuant to Instruction 2 of Item 601 of Regulation S-K) (14)
10.4	Severance Pay Plan of Hudson City Savings Bank (3)
10.5	Hudson City Savings Bank Outside Directors Consultation Plan (3)
10.6	Hudson City Bancorp, Inc. 2000 Stock Option Plan (6)

59

EXHIBIT	DESCRIPTION
10.7	Hudson City Bancorp, Inc. 2000 Recognition and Retention Plan (6)
10.8	Hudson City Bancorp, Inc. Denis J. Salamone Stock Option Plan (7)
10.9	Hudson City Bancorp, Inc. 2005 Employment Inducement Stock Program with Ronald E. Butkovich (8)
10.10	Hudson City Bancorp, Inc. 2005 Employment Inducement Stock Program with Christopher Nettleton (8)
10.11	Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Ronald E. Hermance, Jr. (14)
10.12	Amended and Restated Employment Agreement between Hudson City Savings Bank and Ronald E. Hermance, Jr. (14)
10.13	Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Denis J. Salamone (14)
10.14	Amended and Restated Employment Agreement between Hudson City Savings Bank and Denis J. Salamone (14)
10.15	Executive Officer Annual Incentive Plan of Hudson City Savings Bank (9)
10.16	Amended and Restated Loan Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.17	Amended and Restated Promissory Note between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.18	Amended and Restated Pledge Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.19	Form of Amended and Restated Assignment between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.20	Loan Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.21	Promissory Note between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.22	Pledge Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
10.23	Form of Assignment between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)
10.24	Hudson City Bancorp, Inc. 2006 Stock Incentive Plan (10)
10.25	Form of Hudson City Bancorp, Inc. 2006 Stock Incentive Plan Performance Stock Option Agreement (11)
10.26	Form of Hudson City Bancorp, Inc. 2006 Stock Incentive Plan Retention Stock Option Agreement (11)
10.27	Form of Hudson City Bancorp, Inc. 2006 Stock Incentive Plan Director Stock Option Agreement (11)
10.28	Benefit Maintenance Plan of Hudson City Savings Bank (14)
10.29	Summary of Material Terms of Directed Charitable Contribution Program (11)
10.30	Summary of Director Compensation (11)
10.31	Directors’ Deferred Compensation Plan of Hudson City Bancorp, Inc. (14)
10.32	Officers’ Deferred Compensation Plan of Hudson City Bancorp, Inc. (14)
10.33	Form of Hudson City Bancorp, Inc. 2006 Stock Incentive Plan Performance - Based Restricted Stock Award Notice (15)
13.1	2010 Annual Report to Shareholders*
21.1	Subsidiaries of Hudson City Bancorp, Inc.*
23.1	Consent of KPMG LLP *
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*
101	The following information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission on February 26, 2010, has been formatted in eXtensible Business Reporting Language: (i) Consolidated Statements of Financial Condition at December 31, 2009 and 2008, (ii) Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007, (iii) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2009, 2008 and 2007 , (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 and (v) Notes to the Unaudited Consolidated Financial Statements (tagged as blocks of text). (16)

60

(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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed with the Securities and Exchange Commission on August 8, 2007 and the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008.
(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, 2004 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 16, 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)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed with the Securities and Exchange Commission on March 1, 2007.
(12)	Incorporated herein by reference to the Exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed with the Securities and Exchange Commission on August 8, 2007.
(13)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed with the Securities and Exchange Commission on February 29, 2008.
(14)	Incorporated herein by reference to the Exhibits to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the Securities and Exchange Commission on February 27, 2009.
(15)	Incorporated herein by reference to the Exhibits to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 filed with the Securities and Exchange Commission on May 8, 2009.
(16)	Pursuant to the rules of the Securities and Exchange Commission, this exhibit will not be deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section.
(*)	Filed herewith.

61

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 26, 2010.

Hudson City Bancorp, Inc.
By:	/s/ Ronald E. Hermance, Jr. Ronald E. Hermance, Jr.	/s/ James C. Kranz James C. Kranz
	Chairman, President and Chief Executive Officer	Executive 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. Ronald E. Hermance, Jr.	Director, Chairman, President and  Chief Executive Officer (Principal Executive Officer)	February 26, 2010
/s/ Denis J. Salamone Denis J. Salamone	Director, Senior Executive Vice President and  Chief Operating Officer (Principal Accounting Officer)	February 26, 2010
/s/ Michael W. Azzara Michael W. Azzara	Director	February 26, 2010
/s/ William G. Bardel William G. Bardel	Director	February 26, 2010
/s/ Scott A. Belair Scott A. Belair	Director	February 26, 2010
/s/ Victoria H. Bruni Victoria H. Bruni	Director	February 26, 2010
/s/ William J. Cosgrove William J. Cosgrove	Director	February 26, 2010
/s/ Donald O. Quest Donald O. Quest	Director	February 26, 2010
/s/ Joseph G. Sponholz Joseph G. Sponholz	Director	February 26, 2010

62

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

HUDSON CITY BANCORP, INC.

UNDER SECTIONS 242 AND 245 OF

THE GENERAL CORPORATION LAW

OF THE STATE OF DELAWARE

TABLE OF CONTENTS

	Page
TABLE OF CONTENTS
ARTICLE I
NAME		1
ARTICLE II
REGISTERED OFFICE AND AGENT		1
ARTICLE III
PURPOSE		2
ARTICLE IV
CAPITAL STOCK		2
Section 1. Shares, Classes and Series Authorized		2
Section 2. Designations, Powers, Preferences, Rights, Qualifications, Limitations and Restrictions Relating to the Capital Stock		2
ARTICLE V
LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK		4
Section 1. Applicability of Article		4
Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock		4
Section 3. Excess Shares		4
Section 4. Powers of the Board of Directors.		5
Section 5. Severability		6
Section 6. Exclusions		6
ARTICLE VI
BOARD OF DIRECTORS		6
Section 1. Number of Directors		6
Section 2. Classification of Board		6
Section 3. Vacancies		7
Section 4. Removal of Directors		7
Section 5. Directors Elected by Preferred Shareholders		7
Section 6. Evaluation of Acquisition Proposals		8
Section 7. Power to Call Special Meeting of Shareholders		8
ARTICLE VII
ACTION BY SHAREHOLDERS WITHOUT A MEETING		8

-i-

	Page
ARTICLE VIII
CERTAIN BUSINESS COMBINATIONS		8
Section 1. Higher Vote Required for Certain Business Combinations		8
Section 2. When Higher Vote is Not Required		9
Section 3. Definitions		11
Section 4. Powers of the Disinterested Directors		15
Section 5. Effect on Fiduciary Obligations of Interested Shareholders		15
Section 6. Amendment, Repeal, etc		16
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY		16
ARTICLE X
INDEMNIFICATION		16
Section 1. Actions, Suits or Proceedings Other than by or in the Right of the Corporation		16
Section 2. Actions or Suits by or in the Right of the Corporation		17
Section 3. Indemnification for Costs, Charges and Expenses of a Successful Party		18
Section 4. Indemnification for Expenses of a Witness		18
Section 5. Determination of Right to Indemnification		18
Section 6. Advancement of Costs, Charges and Expenses		19
Section 7. Procedure for Indemnification		19
Section 8. Settlement		20
Section 9. Other Rights; Continuation of Right to Indemnification; Individual Contracts		20
Section 10. Savings Clause		20
Section 11. Insurance		20
Section 12. Definitions		21
Section 13. Subsequent Amendment and Subsequent Legislation		22
ARTICLE XI
AMENDMENTS		22
Section 1. Amendments of Certificate of Incorporation		22
Section 2. Amendments of Bylaws		23
ARTICLE XII
NOTICES		23

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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

OF

HUDSON CITY BANCORP, INC.

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

          I, Ronald E. Hermance, Jr., Chairman, President and Chief Executive Officer of Hudson City Bancorp, Inc. (hereinafter called the “Corporation”), do hereby certify:

     1. The name of the Corporation is Hudson City Bancorp, Inc.

     2. The date of filing of the Corporation’s original certificate of incorporation is March 4, 1999. The name under which the Corporation was originally incorporated was Hudson City Bancorp, Inc.

     3. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware (the “GCL”) by resolution of the Board of Directors of the Corporation on February 15, 2005 and by the holders of a majority of the Corporation’s Capital Stock (as defined in Article IV) on May 27, 2005.

     4. This Amended and Restated Certificate of Incorporation shall be effective June 7, 2005.

     5. The Corporation’s Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:

ARTICLE I

NAME

          The name of the corporation is HUDSON CITY BANCORP, INC. (the “Corporation”).

ARTICLE II

REGISTERED OFFICE AND AGENT

          The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

          The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the GCL.

ARTICLE IV

CAPITAL STOCK

          Section 1. Shares, Classes and Series Authorized. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Four Billion (4,000,000,000) shares, of which Eight Hundred Million (800,000,000) shares shall be preferred stock, par value one cent ($.01) per share (the “Preferred Stock”), and Three Billion Two Hundred Million (3,200,000,000) shares shall be common stock, par value one cent ($.01) per share (the “Common Stock”). The Preferred Stock and Common Stock are sometimes hereinafter, collectively, referred to as the “Capital Stock.”

          Section 2. Designations, Powers, Preferences, Rights, Qualifications, Limitations and Restrictions Relating to the Capital Stock. The following is a statement of the designations, powers, preferences and rights in respect of the classes of the Capital Stock, and the qualifications, limitations or restrictions thereof, and of the authority with respect thereto expressly vested in the Board of Directors of the Corporation (the “Board of Directors”):

          (a) Preferred Stock. The Preferred Stock may be issued from time to time in one or more series, the number of shares and any designation of each series and the powers, preferences and rights of the shares of each series, and the qualifications, limitations or restrictions thereof, to be as stated and expressed in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors, subject to the limitations prescribed by law. The Board of Directors in any such resolution or resolutions is expressly authorized to state for each such series:

     (i) the voting powers, if any, of the holders of shares of such series in addition to any voting rights affirmatively required by law;

     (ii) the rights of shareholders in respect of dividends, including, without limitation, the rate or rates per annum and the time or times at which (or the formula or other method pursuant to which such rate or rates and such time or times may be determined) and conditions upon which the holders of shares of such series shall be entitled to receive dividends and other distributions, and whether any such dividends shall be cumulative or non-cumulative and, if cumulative, the terms upon which such dividends shall be cumulative;

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     (iii) whether any shares of the stock of each such series shall be redeemable by the Corporation at the option of the Corporation or the holder thereof and, if redeemable, the terms and conditions upon which any shares of the stock of such series may be redeemed;

     (iv) the amount payable and the rights or preferences to which the holders of the stock of such series shall be entitled upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

     (v) the terms, if any, upon which shares of stock of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes or of any other series of the same or any other class or classes, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and

     (vi) any other powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, so far as they are not inconsistent with the provisions of this Certificate of Incorporation and to the full extent now or hereafter permitted by the laws of the State of Delaware.

          Subject to any limitations or restrictions stated in the resolution or resolutions of the Board of Directors originally fixing the number of shares constituting a series, the Board of Directors may by resolution or resolutions likewise adopted increase (but not above the total number of authorized shares of Preferred Stock) or decrease (but not below the number of shares of the series then outstanding) the number of shares of the series subsequent to the issue of shares of that series; and, in case the number of shares of any series shall be so decreased, the shares constituting the decrease shall resume that status that they had prior to the adoption of the resolution originally fixing the number of shares constituting such series.

          (b) Common Stock. Subject to Article V hereof and except as otherwise provided for by law, the shares of Common Stock shall entitle the holders thereof to one vote for each share on all matters on which shareholders have the right to vote. The holders of shares of Common Stock shall not be permitted to cumulate their votes for the election of directors. Notwithstanding the foregoing, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) or pursuant to the GCL.

          Subject to the preferences, privileges and powers with respect to each class or series of Preferred Stock having any priority over the Common Stock, and the qualifications, limitations or restrictions thereof, the holders of the Common Stock shall have and possess all rights pertaining to the Capital Stock; provided however, that in the event of any liquidation, dissolution, or winding up of the Corporation, the holders of the Common Stock (and the holders of any class or series of stock entitled to participate with the Common Stock in the distribution of assets) shall be entitled to receive, in cash or in kind, the assets of the Corporation available for

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distribution remaining after: (i) payment or provision for payment of the Corporation’s debts and liabilities; (ii) distributions or provision for distributions in settlement of the liquidation account, if any, established in connection with the reorganization of Hudson City Savings Bank, a New Jersey savings bank (the “Bank”), into the mutual savings bank holding company structure pursuant to which the Bank became a wholly-owned subsidiary of the Corporation (the “Reorganization”); and (iii) distributions or provisions for distributions to holders of any class or series of Capital Stock having preference over the Common Stock in the liquidation, dissolution, or winding up of the Corporation.

          (c) No Class Vote On Changes In Authorized Number Of Shares Of Preferred Stock. Subject to the rights of the holders of any series of Preferred Stock pursuant to the terms of this Certificate of Incorporation or any resolution or resolutions providing for the issuance of such series of stock adopted by the Board of Directors, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the capital stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the GCL.

ARTICLE V

LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK

          Section 1. Applicability of Article. The provisions of this Article V shall become effective upon (i) the consummation of the Reorganization and (ii) the concurrent acquisition by the Corporation of all of the outstanding capital stock of the Bank (the “Effective Date”). All terms used in this Article V and not otherwise defined herein shall have the meanings ascribed to such terms in Section 3 of Article VIII, below.

          Section 2. Prohibitions Relating to Beneficial Ownership of Voting Stock. No Person (other than the Corporation, any Subsidiary or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation, or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of the employees of the Corporation, or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan) shall directly or indirectly acquire or hold the beneficial ownership of more than ten percent (10%) of the issued and outstanding shares of Voting Stock of the Corporation. Any Person so prohibited who directly or indirectly acquires or holds the beneficial ownership of more than ten percent (10%) of the issued and outstanding shares of Voting Stock, in violation of this Section 2 shall be subject to the provisions of Sections 3 and 4 of this Article V, below. The Corporation is authorized to refuse to recognize a transfer or attempted transfer of any shares of Voting Stock to any Person who beneficially owns, or who the Corporation believes would become by virtue of such transfer the beneficial owner of, more than ten percent (10%) of shares of the Voting Stock.

          Section 3. Excess Shares. If, notwithstanding the foregoing prohibition, a Person subject to the foregoing prohibition shall voluntarily or involuntarily become or attempt

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to become the purported beneficial owner (the “Purported Owner”) of shares of Voting Stock in excess of ten percent (10%) of the issued and outstanding shares of Voting Stock, the number of shares in excess of ten percent (10%) shall be deemed to be “Excess Shares,” and the holder thereof shall be entitled to cast only one one-hundredth (1/100) of one vote per share for each Excess Share.

          The restrictions set forth in this Article V shall be noted conspicuously on all certificates evidencing ownership of shares of Voting Stock.

          Section 4. Powers of the Board of Directors.

          (a) The Board of Directors may, to the extent permitted by law, from time to time establish, modify, amend or rescind, by Bylaw or otherwise, regulations and procedures not inconsistent with the express provisions of this Article V for the orderly application, administration and implementation of the provisions of this Article V. Such procedures and regulations shall be kept on file with the Corporate Secretary of the Corporation and with the Transfer Agent, shall be made available for inspection by the public and, upon request, shall be mailed to any holder of shares of Voting Stock of the Corporation.

          (b) When it appears that a particular Person has become a Purported Owner of Excess Shares in violation of Section 2 of this Article V, or of the regulations or procedures of the Board of Directors with respect to this Article V, and that the provisions of this Article V require application, interpretation or construction, then a majority of the directors of the Corporation shall have the power and duty to interpret all of the terms and provisions of this Article V and to determine on the basis of information known to them after reasonable inquiry all facts necessary to ascertain compliance with this Article V, including, without limitation, (i) the number of shares of Voting Stock beneficially owned by any Person or Purported Owner, (ii) whether a Person or Purported Owner is an Affiliate or Associate of, or is acting in concert with, any other Person or Purported Owner, (iii) whether a Person or Purported Owner has an agreement, arrangement or understanding with any other Person or Purported Owner as to the voting or disposition of any shares of the Voting Stock, (iv) the application of any other definition or operative provision of this Article V to the given facts or (v) any other matter relating to the applicability or effect of this Article V.

          The Board of Directors shall have the right to demand that any Person who is reasonably believed to be a Purported Owner of Excess Shares (or who holds of record shares of Voting Stock beneficially owned by any Person reasonably believed to be a Purported Owner in excess of such limit) supply the Corporation with complete information as to (i) the record owner(s) of all shares of Voting Stock beneficially owned by such Person or Purported Owner and (ii) any other factual matter relating to the applicability or effect of this Article V as may reasonably be requested of such Person or Purported Owner.

          Any applications, interpretations, constructions or any other determinations made by the Board of Directors pursuant to this Article V, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its shareholders, and neither the Corporation

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nor any of its shareholders shall have the right to challenge any such application, interpretation, construction or determination.

          Section 5. Severability. In the event any provision (or portion thereof) of this Article V shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Article V shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its shareholders that each such remaining provision (or portion thereof) of this Article V remain, to the fullest extent permitted by law, applicable and enforceable as to all shareholders, including Purported Owners, if any, notwithstanding any such finding.

          Section 6. Exclusions. This Article V shall not apply to (a) any offer or sale with a view towards public resale made exclusively by the Corporation to any underwriter or underwriters acting on behalf of the Corporation, or to the selling group acting on such underwriter’s or underwriters’ behalf, in connection with a public offering of the Common Stock; or (b) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction or reorganization that does not have the effect, directly or indirectly, of changing the beneficial ownership interests of the Corporation’s shareholders, other than pursuant to the exercise of any dissenters’ appraisal rights, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, one percent (1%) of the issued and outstanding shares of such class of equity or convertible securities.

ARTICLE VI

BOARD OF DIRECTORS

          Section 1. Number of Directors. The number of directors of the Corporation shall be as determined only by resolution of the Board of Directors, but shall not be less than five (5) nor more than twenty-one (21) (other than directors elected by holders of shares of one or more series of Preferred Stock).

          Section 2. Classification of Board. Subject to the rights of any holders of shares of any series of Preferred Stock that may be issued by the Corporation pursuant to a resolution or resolutions of the Board of Directors providing for such issuance, and subject to the provisions hereof, the directors of the Corporation shall be divided into three classes with respect to term of office, each class to contain, as near as may be possible, one-third of the entire number of the Board, with the terms of office of one class expiring each successive year. One class of directors shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 2000, another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 2001 and another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 2002. At each annual meeting of shareholders, the successors to the class of directors (other than directors elected by holders of shares of one or

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more series of Preferred Stock) whose term expires at that time shall be elected by the shareholders to serve until the annual meeting of shareholders held three years next following and until their successors shall be elected and qualified.

          In the event of any intervening changes in the authorized number of directors (other than directors elected by holders of shares of one or more series of Preferred Stock), only the Board of Directors shall designate the class or classes to which the increases or decreases in directorships shall be apportioned in order to achieve, as near as may be possible, equality of number of directors among the classes; provided however, that no such apportionment or redesignation shall shorten the term of any incumbent director.

          Unless and to the extent that the Bylaws so provide, elections of directors need not be by written ballot.

          Section 3. Vacancies. Subject to the limitations prescribed by law and this Certificate of Incorporation, all vacancies on the Board of Directors, including vacancies created by newly created directorships resulting from an increase in the number of directors (subject to the provisions of Section 5 of this Article VI relating to directors elected by holders of shares of one or more series of Preferred Stock), shall be filled only by a vote of a majority of the directors then holding office, whether or not a quorum, and any director so elected shall serve for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall be elected and qualified.

          Section 4. Removal of Directors. Any or all of the directors (subject to the provisions of Section 5 of this Article VI relating to directors elected by holders of shares of one or more series of Preferred Stock) may be removed at any time, but only for cause, and any such removal shall require the vote, in addition to any vote required by law, of not less than eighty-percent (80%) of the total votes eligible to be cast by the holders of all of the outstanding shares of Capital Stock entitled to vote generally in the election of directors at a meeting of shareholders expressly called for that purpose. For purposes of this Section 4, conduct worthy of removal for “cause” shall include, but not be limited to (a) conduct as a director of the Corporation or any subsidiary of the Corporation that involves willful material misconduct, breach of fiduciary duty involving personal pecuniary gain or gross negligence in the performance of duties, (b) conduct, whether or not as a director of the Corporation or a subsidiary of the Corporation that involves dishonesty or breach of fiduciary duty and is punishable by imprisonment for a term exceeding one year under state or federal law or (c) removal of such person from the Board of Directors of the Bank, if such person is so serving, in accordance with the Certificate of Incorporation and Bylaws of the Bank.

          Section 5. Directors Elected by Preferred Shareholders. Notwithstanding anything set forth in this Certificate of Incorporation to the contrary, the qualifications, term of office and provisions governing vacancies, removal and other matters pertaining to directors elected by holders of shares of one or more series of Preferred Stock shall be as set forth in a resolution or resolutions adopted by the Board of Directors setting forth the designations, preferences and rights relating to any such series of Preferred Stock pursuant to Article IV, Section 2 hereof.

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          Section 6. Evaluation of Acquisition Proposals. The Board of Directors of the Corporation, when evaluating any offer to the Corporation or to the shareholders of the Corporation from another party to (a) purchase for cash, or exchange any securities or property for, any outstanding equity securities of the Corporation, (b) merge or consolidate the Corporation with another entity or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its shareholders, may give due consideration to the extent permitted by law not only to the price or other consideration being offered, but also to all other relevant factors, including, without limitation, the financial and managerial resources and future prospects of the other party, the possible effects on the business of the Corporation and its subsidiaries and on the employees, customers, suppliers and creditors of the Corporation and its subsidiaries and the effects on the communities in which the Corporation’s and its subsidiaries’ facilities are located.

          Section 7. Power to Call Special Meeting of Shareholders. Special meetings of shareholders for any purpose may be called at any time only by resolution of at least three-fourths of the directors of the Corporation then in office or by the Chairman or by the President. At a special meeting, no business shall be transacted and no corporate action shall be taken other than that stated in the notice of meeting prescribed by the Bylaws of the Corporation.

ARTICLE VII

ACTION BY SHAREHOLDERS WITHOUT A MEETING

          Except as otherwise provided for or fixed pursuant to the provisions of Article IV of this Certificate of Incorporation relating to the rights of holders of shares of any series of Preferred Stock, no action that is required or permitted to be taken by the shareholders of the Corporation at any annual or special meeting of shareholders may be effected by written consent of shareholders in lieu of a meeting of shareholders.

ARTICLE VIII

CERTAIN BUSINESS COMBINATIONS

          Section 1. Higher Vote Required for Certain Business Combinations. In addition to any affirmative vote required by law, this Certificate of Incorporation or by the provisions of any series of Preferred Stock that may at the time be outstanding, and except as otherwise expressly provided for in Section 2 of this Article VIII, any Business Combination, as hereinafter defined, shall require the affirmative vote of not less than eighty percent (80%) (to the extent permitted by law) of the total number of votes eligible to be cast by the holders of all outstanding shares of Voting Stock, voting together as a single class (it being understood, that for purposes of this Article VIII, each share of Voting Stock shall have the number of votes granted to it pursuant to Article IV and Article V of this Certificate of Incorporation or in any resolution or resolutions of the Board of Directors for issuance of shares of Preferred Stock), together (to

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the extent permitted by law) with the affirmative vote of at least fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of Voting Stock not beneficially owned by the Interested Shareholder involved or any Affiliate or Associate thereof, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.

          Section 2. When Higher Vote is Not Required. The provisions of Section 1 of this Article VIII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law or any other provision of this Certificate of Incorporation, if either (i) the Business Combination shall have been approved by a majority of the Disinterested Directors then in office or (ii) all of the conditions specified in the following subsections (a) through (g) are met:

          (a) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following:

     (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes, soliciting dealers’ fees, dealer-management compensation and other expenses, including, but not limited to, costs of newspaper advertisements, printing expenses and attorneys’ fees and expenses) paid by the Interested Shareholder for any shares of Common Stock acquired by it (A) within the two-year period immediately prior to the Announcement Date, or (B) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or other major bank headquartered in New York City selected by a majority of the Disinterested Directors then in office) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid and the Fair Market Value of any dividends paid, other than in cash, per share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of Common Stock; or

     (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher.

          (b) The aggregate amount of the cash and the Fair Market Value as of the Consummation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Voting Stock, other than Common Stock, in such Business Combination shall be at least equal to the highest of the following (such requirement being applicable to each such class or series of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of such class or series of Voting Stock):

     (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes, soliciting dealers’ fees, dealer-management compensation,

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and other expenses, including, but not limited to, costs of newspaper advertisements, printing expenses and attorneys’ fees and expenses) paid by the Interested Shareholder for any shares of such class or series of Voting. Stock acquired by it (A) within the two-year period immediately prior to the Announcement Date, or (B) in the transaction in which it became an Interested Shareholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of Citibank, N.A. (or other major bank headquartered in New York City selected by a majority of the Disinterested Directors then in office) from time to time in effect in New York City, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid other than in cash, per share of such class or series of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of such interest payable per share of such class or series of Voting Stock;

     (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or

     (iii) the Fair Market Value per share of such class or series of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher.

          (c) The consideration to be received by holders of any particular class or series of outstanding Voting Stock (including Common Stock) in such Business Combination shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class or series of Voting Stock. If the Interested Shareholder has paid for shares of any class or series of Voting Stock with varying forms of consideration, the form of consideration for such class or series of Voting Stock in such Business Combination shall be either cash or the form used to acquire the largest number of shares of such class or series of Voting Stock previously acquired by it.

          (d) The holders of all outstanding shares of Voting Stock not beneficially owned by the Interested Shareholder immediately prior to the Consummation Date shall be entitled to receive in such Business Combination cash or other consideration for their shares in compliance with subsections (a), (b) and (c) of this Section 2.

          (e) After the Determination Date and prior to the Consummation Date:

     (i) except as approved by a majority of the Disinterested Directors then in office, there shall have been no failure to declare and pay, or set aside for payment, at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock;

     (ii) there shall have been (A) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors then in office, and (B) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any

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similar transaction that has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors then in office; and

     (iii) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except (a) as part of the transaction that results in such Interested Shareholder becoming an Interested Shareholder, (b) as the result of a stock dividend paid by the Corporation or (c) upon the exercise or conversion of securities of the Corporation issued pro rata to all holders of Common Stock which are exercisable for or convertible into shares of Voting Stock.

          (f) After the Determination Date, the Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by or through the Corporation or an Affiliate of the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

          (g) A proxy or information statement describing the proposed Business Combination in accordance with the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Corporation is then subject to such requirements, and the rules and regulations thereunder (or any subsequent provisions replacing such Exchange Act, rules or regulations) shall be mailed to shareholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Exchange Act or subsequent provisions). The first page of such proxy or information statement shall prominently display the recommendation, if any, that a majority of the Disinterested Directors then in office may choose to make to the holders of Voting Stock regarding the proposed Business Combination. Such proxy or information statement shall also contain, if a majority of the Disinterested Directors then in office so requests, an opinion of a reputable investment banking firm (which firm shall be engaged solely on behalf of the shareholders of the Corporation other than the Interested Shareholder and shall be selected by a majority of the Disinterested Directors then in office, furnished with all information it reasonably requests and paid a reasonable fee for its services by the Corporation upon the Corporation’s receipt of such opinion) as to the fairness (or lack of fairness) of the terms of the proposed Business Combination from the point of view of the holders of Voting Stock other than the Interested Shareholder.

          Section 3. Definitions. For purposes of this Article VIII, the following terms shall have the following meanings:

          (a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of filing by the Secretary of State of the State of Delaware of this Certificate of Incorporation, whether or not the Corporation was then subject to such rile.

          (b) “Announcement Date” shall mean the date of the first public announcement of the proposal of the Business Combination.

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          (c) A Person shall be deemed the “beneficial owner,” or to have “beneficial ownership,” of any shares of Voting Stock that:

     (i) such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

     (ii) such Person or any or its Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (but a Person shall not be deemed to be the beneficial owner of any Voting Stock solely by reason of an agreement, arrangement or understanding with the Corporation to effect a Business Combination) or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote, or to direct the vote of, pursuant to any agreement, arrangement or understanding (but neither such Person nor any Affiliate or Associate shall be deemed to be the beneficial owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of shareholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such Person nor any Affiliate or Associate is otherwise deemed the beneficial owner); or

     (iii) is beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except to the extent contemplated by the parenthetical clause of Section 3(c)(ii)(B)) or disposing of any shares of Voting Stock;

provided, however, that no director or officer of the Corporation (nor any Affiliate or Associate of any such director or officer) (y) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Voting Stock of the Corporation beneficially owned by any other such director or officer (or any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own any Voting Stock of the Corporation owned by any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation and/or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan, not specifically allocated to such Person’s personal account.

          (d) The term “Business Combination” shall mean any transaction that is referred to in any one or more of the following paragraphs (i) through (vi):

     (i) any merger or consolidation of the Corporation or any Subsidiary (other than a merger pursuant to Section 253 of the GCL) with (A) any Interested Shareholder or (B) any other entity (whether or not such other entity is itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of any Interested Shareholder; or

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     (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value equal to five percent (5%) or more of the total assets of the Corporation or the Subsidiary in question, as of the end of its most recent fiscal year ending prior to the time the determination is being made; or

     (iii) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder other than (A) on a pro rata basis to all holders of Voting Stock, (B) in connection with the exercise or conversion of securities issued pro rata that are exercisable for, or convertible into, securities of the Corporation or any Subsidiary or (C) the issuance or transfer of such securities having an aggregate Fair Market Value equal to less than one percent (1%) of the aggregate Fair Market Value of all of the outstanding Capital Stock; or

     (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

     (v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any Subsidiary that is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, 1% of the issued and outstanding shares of such class or series of equity or convertible securities; or

     (vi) the acquisition by the Corporation or a Subsidiary of any securities of an Interested Shareholder or its Affiliates or Associates.

          (e) “Consummation Date” shall mean the date of the consummation of the Business Combination.

          (f) “Determination Date” shall mean the date on which the Interested Shareholder became an Interested Shareholder.

          (g) “Disinterested Director” shall mean any member of the Board of Directors of the Corporation who is not an Affiliate or Associate of, or otherwise affiliated with, the Interested Shareholder and who either was a member of the Board of Directors prior to the Determination Date, or was recommended for election by a majority of the Disinterested Directors in office at the time such director was nominated for election. If there is no Interested Shareholder, each member of the Board of Directors shall be a Disinterested Director.

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          (h) “Fair Market Value” shall mean (i) in the case of stock, the highest closing price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks or, if such stock is not quoted on such Composite Tape, or if such stock is not listed on such Exchange, then on the principal United States securities exchange registered under the Exchange Act, on which such stock is listed, or, if such stock is not listed on any such exchange, then the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the Nasdaq Stock Market or any system then in use, or, if no such quotation is available, then the fair market value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office.

          (i) References to “highest per share price” shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock.

          (j) “Interested Shareholder” shall mean any Person (other than the Corporation, any Subsidiary or any pension, profit-sharing, stock bonus or other compensation or employee benefit plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation and/or any Subsidiary, or any trust or custodial arrangement established in connection with any such plan or holding Voting Stock for the purpose of funding any such plan or funding employee lending for employees of the Corporation or any Subsidiary) who or which:

     (i) is the beneficial owner of ten percent (10%) or more of the Voting Stock; or

     (ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of ten percent (10%) or more of the then outstanding shares of Voting Stock; or

     (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended, and not executed on any exchange or in the over-the-counter market through a registered broker or dealer.

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In determining whether a Person is an Interested Shareholder pursuant to this subsection (j), the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subsection (c) of this Section 3 but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

          (k) “Person” shall mean any corporation, partnership, trust, unincorporated organization or association, syndicate, any other entity or a natural person, together with any Affiliate or Associate of such Person or any other Person acting in concert with such Person.

          (l) “Subsidiary” shall mean any corporation or entity of which a majority of any class or series of equity securities is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in subsection (j) of this Section 3, the term “Subsidiary” shall mean only a corporation or entity of which a majority of each class or series of outstanding voting securities is owned, directly or indirectly, by the Corporation.

          (m) “Voting Stock” shall mean all of the outstanding shares of Capital Stock entitled to vote generally in the election of directors.

          Section 4. Powers of the Disinterested Directors. When it appears that a particular Person may be an Interested Shareholder and that the provisions of this Article VIII need to be applied or interpreted, then a majority of the directors of the Corporation who would qualify as Disinterested Directors shall have the power and duty to interpret all of the terms and provisions of this Article VIII, and to determine on the basis of information known to them after reasonable inquiry of all facts necessary to ascertain compliance with this Article VIII, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of shares of Voting Stock beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another, (d) the Fair Market Value of (i) the assets that are the subject of any Business Combination, (ii) the securities to be issued or transferred by the Corporation or any Subsidiary in any Business Combination, (iii) the consideration other than cash to be received by holders of shares of any class or series of Common Stock or Voting Stock other than Common Stock in any Business Combination, (iv) the outstanding Capital Stock or (v) any other item the Fair Market Value of which requires determination pursuant to this Article VIII and (e) whether all of the applicable conditions set forth in Section 2 of this Article VIII have been met with respect to any Business Combination.

          Any construction, application or determination made by the Board of Directors or the Disinterested Directors pursuant to this Article VIII, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its shareholders, and neither the Corporation nor any of its shareholders shall have the right to challenge any such construction, application or determination.

          Section 5. Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article VIII shall be construed to relieve any Interested Shareholder from any fiduciary obligations imposed by law.

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          Section 6. Amendment, Repeal, etc. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), in addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of Preferred Stock, any amendment, alteration, repeal or rescission of any provision of this Article VIII must also be approved by either (i) a majority of the Disinterested Directors or (ii) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock, voting together as a single class, together with the affirmative vote of not less than fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Voting Stock not beneficially owned by any Interested Shareholder or Affiliate or Associate thereof, voting together as a single class.

ARTICLE IX

LIMITATION OF DIRECTOR LIABILITY

          A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is expressly prohibited by the GCL as the same exists or may hereafter be amended.

          Any amendment, termination or repeal of this Article IX or any provisions hereof shall not adversely affect or diminish in any way any right or protection of a director of the Corporation existing with respect to any act or omission occurring prior to the time of the final adoption of such amendment, termination or repeal.

ARTICLE X

INDEMNIFICATION

          Section 1. Actions, Suits or Proceedings Other than by or in the Right of the Corporation. To the fullest extent permitted by the GCL, the Corporation shall indemnify any person who is or was or has agreed to become a director or officer of the Corporation who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and the Corporation may indemnify any other person who is or was or has agreed to become an employee or agent of the Corporation who was or is made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or

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investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys’ fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Notwithstanding anything contained in this Article X, but subject to Section 7 hereof, the Corporation shall not be obligated to indemnify any director or officer in connection with an action, suit or proceeding, or part thereof, initiated by such person against the Corporation unless such action, suit or proceeding, or part thereof, was authorized or consented to by the Board of Directors.

          Section 2. Actions or Suits by or in the Right of the Corporation. To the fullest extent permitted by the GCL, the Corporation shall indemnify any person who is or was or has agreed to become a director or officer of the Corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and the Corporation may indemnify any other person who is or was or has agreed to become an employee or agent of the Corporation who was or is made a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys’ fees and expenses) actually and reasonably incurred by him or her or on his or her behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, except no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably

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entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Notwithstanding anything contained in this Article X, but subject to Section 7 hereof, the Corporation shall not be obligated to indemnify any director or officer in connection with an action or suit, or part thereof, initiated by such person against the Corporation unless such action or suit, or part thereof, was authorized or consented to by the Board of Directors.

          Section 3. Indemnification for Costs, Charges and Expenses of a Successful Party. To the extent that a present or former director or officer of the Corporation has been successful, on the merits or otherwise (including, without limitation, the dismissal of an action without prejudice), in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article X, or in defense of any claim, issue or matter therein, such person shall be indemnified against all costs, charges and expenses (including attorneys’ fees and expenses) actually and reasonably incurred by such person or on such person’s behalf in connection therewith.

          Section 4. Indemnification for Expenses of a Witness. To the extent that any person who is or was or has agreed to become a director or officer of the Corporation is made a witness to any action, suit or proceeding to which he or she is not a party by reason of the fact that he or she was, is or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the request of the Corporation, such person shall be indemnified against all costs, charges and expenses actually and reasonably incurred by such person or on such person’s behalf in connection therewith.

          To the extent that any person who is or was or has agreed to become an employee or agent of the Corporation is made a witness to any action, suit or proceeding to which he or she is not a party by reason of the fact that he or she was, is or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, at the request of the Corporation, such person may be indemnified against all costs, charges and expenses actually and reasonably incurred by such person or on such person’s behalf in connection therewith.

          Section 5. Determination of Right to Indemnification. Any indemnification under Section 1 or 2 of this Article X (unless ordered by a court) shall be made, if at all, by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article X. Any indemnification under Section 4 of this Article X (unless ordered by a court) shall be made, if at all, by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances. Such determinations shall be made with respect to a person who is a director or officer at the time of such determination (a) by a majority vote of directors who were not parties to such action, suit or proceeding even though less than a quorum of the Board of Directors, (b) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, (c) if there are no such directors, or if such directors so direct, by independent counsel

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in a written opinion or (d) by the shareholders of the Corporation. To obtain indemnification under this Article X, any person referred to in Section 1, 2, 3 or 4 of this Article X shall submit to the Corporation a written request, including therewith such documents as are reasonably available to such person and are reasonably necessary to determine whether and to what extent such person is entitled to indemnification.

          Section 6. Advancement of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys’ fees and expenses) incurred by or on behalf of a director or officer in defending a civil or criminal action, suit or proceeding referred to in Section 1 or 2 of this Article X shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding; provided, however, that the payment of such costs, charges and expenses incurred by or on behalf of a director or officer in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of a written undertaking, by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation as authorized in this Article X or by law. No security shall be required for such undertaking and such undertaking shall be accepted without reference to the recipient’s financial ability to make repayment. The majority of the directors who were not parties to such action, suit or proceeding may, upon approval of such director or officer of the Corporation, authorize the Corporation’s counsel to represent such person, in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

          Section 7. Procedure for Indemnification. Any indemnification under Section 1, 2, 3 or 4 of this Article X or advancement of costs, charges and expenses under Section 6 of this Article X shall be made promptly, and in any event within sixty (60) days (except indemnification to be determined by shareholders which will be determined at the next annual or special meeting of shareholders), upon the written request of the director or officer. The right to indemnification or advancement of expenses as granted by this Article X shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction in the event the Corporation denies such request, in whole or in part, or if no disposition of such request is made within sixty (60) days of the request. Such person’s costs, charges and expenses incurred in connection with successfully establishing his or her right to indemnification or advancement, to the extent successful, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of costs, charges and expenses under Section 6 of this Article X where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 1 or 2 of this Article X, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its directors, its independent counsel and its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article X, nor the fact that there has been an actual determination by the Corporation (including its directors, its independent counsel and its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

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          Section 8. Settlement. The Corporation shall not be obligated to reimburse the costs, charges and expenses of any settlement to which it has not agreed. If, in any action, suit or proceeding (including any appeal) within the scope of Section 1 or 2 of this Article X, the person to be indemnified shall have unreasonably failed to enter into a settlement thereof offered or assented to by the opposing party or parties in such action, suit or proceeding, then, notwithstanding any other provision of this Article X, the indemnification obligation of the Corporation to such person in connection with such action, suit or proceeding shall not exceed the total of the amount at which settlement could have been made and the expenses incurred by or on behalf of such person prior to the time such settlement could reasonably have been effected.

          Section 9. Other Rights; Continuation of Right to Indemnification; Individual Contracts. The indemnification and advancement of costs, charges and expenses provided by or granted pursuant to this Article X shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of costs, charges and expenses may be entitled under law (common or statutory) or any Bylaw, agreement, policy of indemnification insurance or vote of shareholders or directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity while holding office, and shall continue as to any person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the legatees, heirs, distributees, executors and administrators of any such person. Nothing contained in this Article X shall be deemed to prohibit the Corporation from entering into, and the Corporation is specifically authorized to enter into, agreements with directors, officers, employees and agents providing indemnification rights and procedures different from those set forth herein. All rights to indemnification under this Article X shall be deemed to be a contract between the Corporation and each director, officer, employee or agent of the Corporation who serves or served in such capacity (or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) at any time while this Article X is in effect.

          Section 10. Savings Clause. If this Article X or any portion shall be invalidated on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify each director or officer, and may indemnify each employee or agent, of the Corporation as to any costs, charges, expenses (including attorneys’ fees and expenses), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or in the right of the Corporation), to the full extent permitted by any applicable portion of this Article X that shall not have been invalidated and to the fullest extent permitted by applicable law.

          Section 11. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any costs, charges or expenses, liability or loss incurred by such person in any such capacity, or arising out of such persons status as such, whether or not the Corporation would have the power to indemnify such person against such

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costs, charges or expenses, liability or loss under the Certificate of Incorporation or applicable law; provided, however, that such insurance is available on acceptable terms as determined by a vote of the Board of Directors. To the extent that any director, officer, employee or agent is reimbursed by an insurance company under an indemnification insurance policy for any costs, charges, expenses (including attorneys’ fees and expenses), judgments, fines and amounts paid in settlement to the fullest extent permitted by any applicable portion of this Article X, the Bylaws, any agreement, the policy of indemnification insurance or otherwise, the Corporation shall not be obligated to reimburse the person to be indemnified in connection with such proceeding.

          Section 12. Definitions. For purposes of this Article X, the following terms shall have the following meanings:

          (a) “The Corporation” shall include, in addition to the resulting corporation, any constituent corporation or entity (including any constituent of a constituent) absorbed by way of an acquisition, consolidation, merger or otherwise, which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation or entity, or is or was serving at the written request of such constituent corporation or entity as a director or officer of another corporation, entity, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article X with respect to the resulting or surviving corporation or entity as such person would have with respect to such constituent corporation or entity if its separate existence had continued;

          (b) “Other enterprises” shall include employee benefit plans, including, but not limited to, any employee benefit plan of the Corporation;

          (c) “Director or officer” of the Corporation shall include any director or officer of the Corporation who is or was or has agreed to serve at the request of the Corporation as a director, officer, partner or trustee of another corporation, partnership, joint venture, trust or other enterprise;

          (d) “Serving at the request of the Corporation” shall include any service that imposes duties on, or involves services by a director, officer, employee or agent of the Corporation with respect to an employee benefit plan, its participants or beneficiaries, including acting as a fiduciary thereof;

          (e) “Fines” shall include any penalties and any excise or similar taxes assessed on a person with respect to an employee benefit plan;

          (f) To the fullest extent permitted by law, a person shall be deemed to have acted in “good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful,” if his or her action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him or her by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an

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independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise; and

          (g) A person shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation,” as referred to in Sections 1 and 2 of this Article X if such person acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan.

          Section 13. Subsequent Amendment and Subsequent Legislation. Neither the amendment, termination or repeal of this Article X or of relevant provisions of the GCL or any other applicable laws, nor the adoption of any provision of this Certificate of Incorporation or the Bylaws of the Corporation or of any statute inconsistent with this Article X shall eliminate, affect or diminish in any way the rights of any director, officer, employee or agent of the Corporation to indemnification under the provisions of this Article X with respect to any action, suit or proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of any such amendment, termination, repeal, provision or statute.

          If the GCL is amended to expand further the indemnification permitted to directors and officers of the Corporation, then the Corporation shall indemnify such persons to the fullest extent permitted by the GCL, as so amended.

ARTICLE XI

AMENDMENTS

          Section 1. Amendments of Certificate of Incorporation. In addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of shares of any series of Preferred Stock, any alteration, amendment, repeal or rescission (collectively, any “Change”) of any provision of this Certificate of Incorporation must be approved by the Board of Directors and by the affirmative vote of the holders of a majority (or such greater proportion as may otherwise be required pursuant to any specific provision of this Certificate of Incorporation) of the total votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote thereon; provided, however, that if any such Change relates to Section 13 of Article X or Articles V, VI, VII or XI of this Certificate of Incorporation, such Change must also be approved either by (i) not less than a majority of the authorized number of directors and, if one or more Interested Shareholders (as defined in Article VIII hereof) exists, by not less than a majority of the Disinterested Directors (as defined in Article VIII hereof), or (ii) the affirmative vote of the holders of not less than two-thirds of the total votes eligible to be cast by the holders of all outstanding shares of Capital Stock entitled to vote thereon and, if the Change is proposed by or on behalf of an Interested Shareholder or a director who is an Affiliate or Associate (as such terms are defined in Article VIII hereof) of an Interested Shareholder, by the affirmative vote of the holders of not less than a majority of the total votes eligible to be cast by holders of all outstanding shares of Capital Stock entitled to vote thereon not beneficially owned by an Interested Shareholder or an Affiliate or Associate thereof.

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Subject to the foregoing, the Corporation reserves the right to amend this Certificate of Incorporation from time to time in any and as many respects as may be desired and as may be lawfully contained in an original certificate of incorporation filed at the time of making such amendment.

          Except as may otherwise be provided in this Certificate of Incorporation, the Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation and to add or insert herein any other provisions authorized by the laws of the State of Delaware at the time in force, in the manner now or hereafter prescribed by law, and all rights, preferences and privileges of any nature conferred upon shareholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the rights reserved in this Section 1.

          Section 2. Amendments of Bylaws. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation, upon the vote of two-thirds of the members of the entire Board, is expressly authorized to make, alter, amend, rescind or repeal from time to time any of the Bylaws of the Corporation in accordance with the terms thereof; provided, however, that any Bylaw made by the Board of Directors may be altered, amended, rescinded or repealed in accordance with the terms thereof by the holders of two-thirds of the shares of Capital Stock entitled to vote thereon at any annual meeting or at any special meeting called for that purpose. Notwithstanding the foregoing, any provision of the Bylaws that contains a supermajority voting requirement shall only be altered, amended, rescinded or repealed by a vote of the Board of Directors or holders of shares of Capital Stock entitled to vote thereon that is not less than the supermajority specified in such provision.

ARTICLE XII

NOTICES

The name and mailing address of the incorporator of this Corporation is:

Hudson City Savings Bank
West 80 Century Road
Paramus, NJ 07652

[Signature Page Follows]

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          IN WITNESS WHEREOF, I have made, signed and acknowledged this Amended and Restated Certificate of Incorporation, and I affirm the statements contained herein are true.

/s/ Ronald E. Hermance, Jr.  

Ronald E. Hermance, Jr. 

Chairman, President and
     Chief Executive Officer 

Attest:

/s/ Veronica A. Olszewski Veronica A. Olszewski

Senior Vice President and

     Corporate Secretary

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EX-13.1

Exhibit 13.1

Dear Fellow Shareholders:

In the year since our last letter to you, we have witnessed a recession that was deeper and more traumatic than any in recent memory. Unemployment levels entered double digits, mortgage delinquencies in the United States reached record levels, and foreclosure filings followed suit. And yet, despite these occurrences, Hudson City’s proven business model and conservative banking principles sheltered your investment from the worst of the storm. While the current economic conditions brought increasing levels of non-performing loans and charge-offs, they were not significant enough to imperil our 11th straight year of record earnings.

The Secret to Our Success

Hudson City’s financial performance is not the result of precarious financial engineering instruments, such as hedges or derivatives, nor is it an outgrowth of additional fees for investment banking or mortgage banking services. Instead, Hudson City achieved record performance by making sensible residential first mortgage loans, which we continue to keep on our own books. During 2009 we were able to fund substantially all of our loan production with deposit growth.

We believe in doing business “the right way.” Hudson City’s customers can feel confident that “what you see is what you get.” We have never offered payment-option loans or loans with negative amortization. And our deposit customers receive similar benefits of honesty and transparency, as well as assurance that our deposit products do not contain hidden fees and charges. Furthermore, to meet our customers’ service expectations, we manage the small details, such as ensuring that every Hudson City branch has its own phone number (answered by a person willing to help you) rather than requiring customers to talk to a machine or respond to telephone prompts. In turn, our business model and core values have led to a consistent track record of financial strength and a high degree of customer loyalty that increases long-term shareholder value.

Record Earnings and More

Earnings for the year totaled $527.2 million, or $1.07 per diluted share. This is an 18.3% increase over 2008. During 2009, our net interest margin grew to 2.21% from 1.96% in 2008 as funding costs decreased at a faster pace than the yields on our interest-earning assets. One important component of our earnings growth is expense management. Through our industry-leading efficiency ratio, we are able to maintain a competitive advantage in both deposit and loan products. In 2009, our efficiency ratio was 20.80%, meaning that it cost us $0.21 in overhead to produce one dollar of revenue. We maintain our efficiency, in part, because we stay focused on our customers’ mortgage and savings needs rather than trying to be “all things to all people.” We simply target customers looking for exceptional value and deliver competitive deposit yields, low fees, and competitive mortgage rates.

We grew our assets by $6.12 billion during 2009 to $60.27 billion at December 31, 2009, comprising loan growth of $2.28 billion and additions to our securities portfolio of $3.41 billion. This achievement was funded with deposit growth of $6.12 billion. Our loan production in 2009 amounted to $9.22 billion as compared to $8.10 billion in 2008. The increase in loan production was due in large part to customers who refinanced loans from other banks. We regard these as very high-quality loans because they meet our strict underwriting standards based on an updated property appraisal, and they were previously performing loans at other banks that are simply repricing to a lower rate.

Reality Check

With all of the good news to report about our performance during 2009, there is no escaping that the economic recession affected our asset quality, as it did with other banks. Our primary loan products are residential first mortgage loans. As unemployment rates rise, some borrowers find it difficult to make regular loan payments. Compounding the unemployment effects are weak housing markets that make it challenging to sell a home at just the time that declining house prices are reducing borrowers’ equity. Non-performing loans amounted to

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$627.7 million at December 31, 2009, as compared to $217.6 million at December 31, 2008. At December 31, 2009, non-performing loans included $613.6 million of one- to four-family first mortgage loans as compared to $207.0 million at December 31, 2008. Although we experienced increased levels of charge-offs in 2009, which totaled $47.2 million, our charge-offs have been moderated by our loan product philosophy and underwriting standards which resulted in an average loan-to-value ratio, using appraised values at origination, of 61% at year-end which has helped to protect our portfolio.

We are very pleased with our record deposit growth in 2009. Many customers sought out Hudson City as a safe haven for their money during these tumultuous times. Our long-standing reputation and financial strength helped us to increase market share in 96% of our branch locations for the period June 2008 through June 2009. Furthermore, Hudson City branches average more than double the deposits-per-branch of the Bank’s competitors, amounting to $188 million in deposits-per-branch compared to the national average of $76 million for FDIC-insured institutions. We believe this is an important indication of customer satisfaction.

Our financial results since Hudson City’s initial public offering in 1999 demonstrate our ability to leverage capital and provide consistent earnings growth. We believe that as the economy emerges from the recession, there will be further opportunities for Hudson City to continue to grow its franchise and prosper. In December, we filed a shelf registration statement with the Securities and Exchange Commission. The shelf registration statement enables us to easily access the capital markets should an opportunistic transaction arise. In addition, we believe that the banking regulators, as well as the banking committees of the United States Congress, may be calling for increased regulatory capital requirements. While we are currently considered to be well capitalized with a Tier 1 leverage capital ratio of 7.59% and a total risk-based capital ratio of 21.02%, this shelf registration statement affords us greater flexibility to continue to execute our business model and to pursue opportunities that current market conditions may provide.

A Bond of Trust

In summary, Hudson City is performing admirably and is well positioned for the future. While there is uncertainty surrounding banking legislation and regulatory reform, we believe that our financial strength, strong capital position, and customer-focused business model will enable us to benefit from a housing market recovery and strengthening economic conditions when they occur. In the meantime, we expect our business model to continue to serve our shareholders well. It has been this strategy of sticking to our core values and principles that has yielded record earnings and allowed us to continue to prosper without the need for government assistance.

On behalf of the Board of Directors and all of our employees, we thank you for your confidence and pledge to continue to earn your trust. We will continue to lead the Bank in a way that makes you proud—with quality, passion, and integrity.

/s/ Ronald E. Hermance, Jr.

Chairman, President
& Chief Executive Officer

/s/ Denis J. Salamone

Senior Executive Vice President
& Chief Operating Officer

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Selected Consolidated Financial Information

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, Inc. 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 on June 7, 2005.

	At December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Selected Financial Condition Data:
Total assets	$	60,267,760	$	54,145,328	$	44,423,971	$	35,506,581	$	28,075,353
Total loans		31,779,921		29,418,888		24,192,281		19,083,617		15,062,449
Federal Home Loan Bank of New York stock		874,768		865,570		695,351		445,006		226,962
Investment securities held to maturity		4,187,704		50,086		1,408,501		1,533,969		1,534,216
Investment securities available for sale		1,095,240		3,413,633		2,765,491		4,379,615		3,962,511
Mortgage-backed securities held to maturity		9,963,554		9,572,257		9,565,526		6,925,210		4,389,864
Mortgage-backed securities available for sale		11,116,531		9,915,554		5,005,409		2,404,421		2,520,633
Total cash and cash equivalents		561,201		261,811		217,544		182,246		102,259
Foreclosed real estate, net		16,736		15,532		4,055		3,161		1,040
Total deposits		24,578,048		18,464,042		15,153,382		13,415,587		11,383,300
Total borrowed funds		29,975,000		30,225,000		24,141,000		16,973,000		11,350,000
Total stockholders’ equity		5,339,152		4,938,796		4,611,307		4,930,256		5,201,476

	For the Year Ended December 31,
	2009		2008		2007		2006		2005
	(In thousands)
Selected Operating Data:
Total interest and dividend income	$	2,941,786	$	2,653,225	$	2,127,505	$	1,614,843	$	1,178,908
Total interest expense		1,698,308		1,711,248		1,480,322		1,001,610		616,774
Net interest income		1,243,478		941,977		647,183		613,233		562,134
Provision for loan losses		137,500		19,500		4,800		—		65
Net interest income after provision for loan losses		1,105,978		922,477		642,383		613,233		562,069
Non-interest income:
Service charges and other income		9,399		8,485		7,267		6,287		5,267
Gains on securities transactions, net		24,185		—		6		4		2,740
Total non-interest income		33,584		8,485		7,273		6,291		8,007
Total non-interest expense		265,596		198,076		167,913		158,955		127,703
Income before income tax expense		873,966		732,886		481,743		460,569		442,373
Income tax expense		346,722		287,328		185,885		171,990		166,318
Net income	$	527,244	$	445,558	$	295,858	$	288,579	$	276,055

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Selected Consolidated Financial Information (continued)

(Dollars in thousands, except per share data)

	At or for the Year Ended December 31,
	2009			2008			2007			2006			2005
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets		0.92	%		0.91	%		0.74	%		0.91	%		1.14	%
Return on average stockholders’ equity		10.18			9.36			6.23			5.70			7.52
Net interest rate spread (1)		1.92			1.57			1.11			1.31			1.84
Net interest margin (2)		2.21			1.96			1.65			1.96			2.35
Non-interest expense to average assets		0.46			0.41			0.42			0.50			0.53
Efficiency ratio (3)		20.80			20.84			25.66			25.66			22.40
Average interest-earning assets to average interest-bearing liabilities		1.10	x		1.11	x		1.14	x		1.20	x		1.20	x
Share and Per Share Data:
Basic earnings per share	$	1.08		$	0.92		$	0.59		$	0.54		$	0.49
Diluted earnings per share		1.07			0.90			0.58			0.53			0.48
Cash dividends paid per common share		0.59			0.45			0.33			0.30			0.27
Dividend pay-out ratio (4)		54.63	%		48.91	%		55.93	%		55.56	%		54.69	%
Book value per share (5)	$	10.85		$	10.10		$	9.55		$	9.47		$	9.44
Tangible book value per share (5)		10.53			9.77			9.22			9.15			9.44
Weighted average number of common shares outstanding:
Basic		488,908,260			484,907,441			499,607,828			536,214,778			567,789,397
Diluted		491,295,511			495,856,156			509,927,433			546,790,604			581,063,426
Capital Ratios:
Average stockholders’ equity to average assets		9.03	%		9.74	%		11.93	%		16.00	%		15.10	%
Stockholders’ equity to assets		8.86			9.12			10.38			13.89			18.53
Regulatory Capital Ratios of Bank:
Leverage capital		7.59	%		7.99	%		9.16	%		11.30	%		14.68	%
Total risk-based capital		21.02			21.52			24.83			30.99			41.31
Asset Quality Ratios:
Non-performing loans to total loans		1.98	%		0.74	%		0.33	%		0.16	%		0.13	%
Non-performing assets to total assets		1.07			0.43			0.19			0.09			0.07
Allowance for loan losses to non-performing loans		22.32			22.89			43.75			102.09			141.84
Allowance for loan losses to total loans		0.44			0.17			0.14			0.16			0.18
Branch and Deposit Data:
Number of deposit accounts		725,979			638,951			605,018			580,987			484,956
Branches		131			127			119			111			90
Average deposits per branch (thousands)	$	187,619		$	145,386		$	127,339		$	120,861		$	126,481

(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. For 2009, the efficiency ratio includes the FDIC special assessment of $21.1 million and net securities gains of $24.2 million.
(4)	The dividend pay-out ratio for 2005 uses 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.

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Performance Graph

Pursuant to the regulations of the Securities and Exchange Commission, the graph below compares the performance of Hudson City Bancorp, Inc. 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, 2004 through December 31, 2009. 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, 2004.

Hudson City Bancorp, Inc. Total Return Performance

	12/31/04		12/31/05		12/31/06		12/31/07		12/31/08		12/31/09
Hudson City Bancorp, Inc.		100		108		127		140		153		138
SNL Thrift Index		100		104		121		72		46		43
S&P 500 Index		100		105		121		128		81		102

* 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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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We continue to focus on our traditional consumer-oriented business model by growing our franchise through the origination and purchase of one- to four-family mortgage loans. We have traditionally funded this loan production with customer deposits and borrowings. During 2009 we were able to fund substantially all of our loan production with deposit growth.

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 accounts 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, the prepayment rate on our mortgage-related assets and the calls of our borrowings. 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, credit quality, government policies and actions of regulatory authorities. Our results are also affected by the market price of our stock, as the expense of our employee stock ownership plan is related to the current price of our common stock.

The Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the “FOMC”) noted that economic activity improved during the fourth quarter of 2009. The FOMC also noted that the housing sector has shown signs of improvement. However, the national unemployment rate continued to rise to 10.0% in December 2009 as compared to 9.8% in September 2009 and 7.4% in December 2008. The S&P/Case-Shiller Home Price Index for the New York metropolitan area, where most of our lending activity occurs, declined by approximately 7.1% in 2009 and by 9.2% in 2008. The S&P/Case-Shiller U.S. National Home Price Index decreased by 5.2% in 2009 and by 18.2% in 2008. Lower household wealth and tight credit conditions in addition to the increase in the national unemployment rate has resulted in the FOMC maintaining the overnight lending rate at zero to 0.25% during 2009. As a result, short-term market interest rates have remained at low levels during 2009. This allowed us to continue to re-price our short-term deposits thereby reducing our cost of funds. While longer-term market interest rates increased during 2009, rates on mortgage-related assets declined slightly, although to a lesser extent than the decline in our cost of funds. As a result, our net interest rate spread and net interest margin increased for 2009 as compared to 2008.

Net income amounted to $527.2 million for 2009, as compared to $445.6 million for 2008. For the year ended December 31, 2009, our return on average assets and average shareholders’ equity were 0.92% and 10.18%, respectively, as compared to 0.91% and 9.36% for 2008. The increases in our return on average equity and average assets are due primarily to the increase in our net income during 2009 as compared to 2008. The increase in net income occurred despite significantly higher deposit insurance fees, including the special assessment imposed in the second quarter of 2009 by the Federal Deposit Insurance Corporation (the “FDIC”), as well as a significantly higher provision for loan losses.

Net interest income increased $301.5 million, or 32.0%, to $1.24 billion for the 2009 as compared to $942.0 million for 2008. During 2009, our net interest rate spread increased 35 basis points to 1.92% and our net interest margin increased 25 basis points to 2.21% as compared to 2008. The increases in our net interest rate spread and net interest margin were due to a steeper yield curve which allowed us to reduce deposit costs at a faster pace than the decrease in our mortgage yields.

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The provision for loan losses amounted to $137.5 million for 2009 as compared to $19.5 million for 2008. The increase in the provision for loan losses reflects the risks inherent in our loan portfolio due to decreases in real estate values in our lending markets, the increase in non-performing and delinquent loans, the increase in loan charge-offs, the continued weakened economic conditions and rising levels of unemployment during 2009 as well as the growth of the loan portfolio in the past year. Non-performing loans were $627.7 million or 1.98% of total loans at December 31, 2009 as compared to $217.6 million or 0.74% of total loans at December 31, 2008. Significant increases in job losses and unemployment throughout 2009 have had a negative impact on the financial condition of residential borrowers and their ability to remain current on their mortgage loans, which has had a material adverse impact on the quality of our loan portfolio. As a result, we experienced an increase in loan delinquencies, as well as an adverse impact on our loan loss experience, reflected in an increase in our charge-offs. These factors contributed to a significant increase in our provision for loan losses for 2009 and resulted in an increase in our allowance for loan losses.

Total non-interest income was $33.6 million for 2009 as compared to $8.5 million for 2008. Included in non-interest income were net gains on securities transactions of $24.2 million, substantially all of which resulted from the sale of $761.6 million of mortgage-backed securities available-for-sale. Proceeds from the securities sale were primarily used to fund the purchase of first mortgage loans during the second quarter of 2009. In addition, total non-interest income includes service charges and other income which increased slightly for 2009 as compared to 2008.

Total non-interest expense increased $67.5 million, or 34.1%, to $265.6 million for 2009 from $198.1 million for 2008. The increase is primarily due to the FDIC special assessment of $21.1 million and increases of $30.8 million in Federal deposit insurance expense, $9.9 million in compensation and employee benefits expense, and $4.0 million in other non-interest expense.

We grew our assets by 11.3% to $60.27 billion at December 31, 2009 from $54.15 billion at December 31, 2008. We grew our assets by 21.9% during 2008. We slowed our growth rate in 2009 as mortgage refinancing activity caused an increase in loan repayments and available reinvestment yields on securities decreased. We may continue to grow at a slower rate than in the past until market conditions allow us to grow interest-earning assets with higher yields than currently available and at a more favorable interest rate spread to the funding cost of interest-bearing liabilities.

Loans increased $2.28 billion to $31.72 billion at December 31, 2009 from $29.44 billion at December 31, 2008. While the residential real estate markets have weakened considerably during the past year, low market interest rates and an increase in mortgage refinancing caused by market interest rates that are at near-historic lows have resulted in increased loan originations. The increase in refinancing activity has also resulted in an increase in principal repayments.

Total securities increased $3.41 billion to $26.36 billion at December 31, 2009 from $22.95 billion at December 31, 2008. The increase in securities was primarily due to purchases (including purchases recorded in the fourth quarter of 2009 with settlement dates after December 31, 2009) of mortgage-backed and investment securities of $6.87 billion and $5.87 billion, respectively, partially offset by principal collections on mortgage-backed securities of $4.73 billion and sales of mortgage-backed securities of $761.6 million and calls of investment securities of $4.02 billion.

The increase in our total assets during 2009 was funded primarily by an increase in customer deposits. Deposits increased $6.12 billion to $24.58 billion at December 31, 2009 from $18.46 billion at December 31, 2008. The increase in deposits was attributable to growth in our time deposits and money market accounts. Borrowed funds decreased $250.0 million to $29.98 billion at December 31, 2009 from $30.23 billion at December 31, 2008. We anticipate that we will be able to fund our future growth primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases.

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Comparison of Financial Condition at December 31, 2009 and December 31, 2008

During 2009, our total assets increased $6.12 billion, or 11.3%, to $60.27 billion at December 31, 2009 from $54.15 billion at December 31, 2008.

Net loans increased $2.28 billion, or 7.7%, to $31.72 billion at December 31, 2009 from $29.44 billion at December 31, 2008 due primarily to the origination of one-to four- family first mortgage loans in New Jersey, New York and Connecticut as well as our continued loan purchase activity. For 2009, we originated $6.06 billion and purchased $3.16 billion of loans, compared to originations of $5.04 billion and purchases of $3.06 billion for 2008. The origination and purchases of loans were partially offset by principal repayments of $6.77 billion in 2009 as compared to $2.82 billion for 2008. Loan originations have increased primarily due to our competitive rates and an increase in mortgage refinancing caused by market interest rates that are at near-historic lows. The increase in refinancing activity occurring in the marketplace also caused the increase in principal repayments during 2009.

Our first mortgage loan originations and purchases during 2009 were substantially all in one-to four-family mortgage loans. Approximately 47.0% of mortgage loan originations for 2009 were variable-rate loans as compared to approximately 58.0% for 2008. Approximately 61.0% of mortgage loans purchased during 2009 were fixed-rate mortgage loans. Fixed-rate mortgage loans accounted for 69.1% of our first mortgage loan portfolio at December 31, 2009 and 75.7% at December 31, 2008.

Non-performing loans amounted to $627.7 million or 1.98% of total loans at December 31, 2009 as compared to $217.6 million or 0.74% of total loans at December 31, 2008.

Total mortgage-backed securities increased $1.59 million to $21.08 billion at December 31, 2009 from $19.49 billion at December 31, 2008. This increase in total mortgage-backed securities resulted from the purchase of $6.87 billion of variable-rate mortgage-backed securities and collateralized mortgage obligations (“CMOs”), all of which were issued by U.S. government-sponsored enterprises (“GSEs”). The increase was partially offset by repayments of $4.73 billion and sales of $761.6 million. At December 31, 2009, variable-rate mortgage-backed securities accounted for 70.7% of our portfolio compared with 83.5% at December 31, 2008. The purchase of variable-rate mortgage-backed securities is a component of our interest rate risk management strategy. Since our loan portfolio includes a concentration of fixed-rate mortgage loans, the purchase of variable-rate mortgage-backed securities provides us with an asset that reduces our exposure to interest rate fluctuations.

Total investment securities increased $1.82 billion to $5.28 billion at December 31, 2009 as compared to $3.46 billion at December 31, 2008. The increase in investment securities is primarily due to purchases of $5.87 billion. The increase was partially offset by calls of investment securities of $4.02 billion.

Since we invest primarily in securities issued by GSEs, there were no debt securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the security.

Total cash and cash equivalents increased $299.4 million to $561.2 million at December 31, 2009 as compared to $261.8 million at December 31, 2008. This increase is due to liquidity provided by strong deposit growth and increased repayments on mortgage-related assets. In addition, we have maintained a higher level of Federal funds sold since other types of short- and medium-term investments are currently providing relatively low yields. Other assets increased $119.1 million, primarily due to the prepayment of the FDIC insurance assessment for 2010, 2011 and 2012 in the amount of $162.5 million. The required prepayment of the insurance assessment was a measure taken by the FDIC to restore the reserve ratio of the Deposit Insurance Fund (DIF). This increase was partially offset by a decrease in deferred tax assets of $45.8 million.

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Total liabilities increased $5.72 billion, or 11.6%, to $54.93 billion at December 31, 2009 from $49.21 billion at December 31, 2008. The increase in total liabilities primarily reflected a $6.12 billion increase in deposits, partially offset by a $250.0 million decrease in borrowed funds.

Total deposits increased $6.12 billion, or 33.2%, to $24.58 billion at December 31, 2009 as compared to $18.46 billion at December 31, 2008. The increase in total deposits included a $3.12 billion increase in our time deposits, a $2.34 billion increase in our money market checking accounts and a $575.5 million increase in our interest-bearing transaction accounts and savings accounts. The increases in our deposits reflect our growth strategy, competitive pricing and the apparent increases in the U.S. household savings rate during the recent recessionary economy. At December 31, 2009 we had 131 branches as compared to 127 at December 31, 2008. We also began accepting deposits through our internet banking service in December 2008, which had $224.3 million in deposits at December 31, 2009.

Borrowings amounted to $29.98 billion at December 31, 2009 as compared to $30.23 billion at December 31, 2008. The decrease in borrowed funds was the result of repayments of $1.00 billion with a weighted average rate of 1.62%, largely offset by $750.0 million of new borrowings at a weighted-average rate of 1.69%. Borrowed funds at December 31, 2009 were comprised of $14.88 billion of Federal Home Loan Bank of New York (“FHLB”) advances and $15.10 billion of securities sold under agreements to repurchase.

Substantially all of our borrowed funds are callable at the discretion of the lender after an initial no-call period. Our callable borrowings typically have a final maturity of ten years, are callable quarterly and may not be called for an initial period of one to five years. We have used this type of borrowing primarily to fund our loan growth because these borrowings have a longer duration than shorter-term non-callable borrowings and have a lower cost than a non-callable borrowing with a maturity date similar to the initial call date of the callable borrowing. If interest rates were to decrease, or remain consistent with current rates, these borrowings would probably not be called and our average cost of existing borrowings would not decrease even as market interest rates decrease. Conversely, if interest rates increase above the market interest rate for similar borrowings, these borrowings would likely be called at their next call date and our cost to replace these borrowings would increase. We believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be called will not increase substantially unless interest rates were to increase by at least 300 basis points.

During 2009, we have been able to fund our asset growth with deposit inflows. We anticipate that we will be able to continue to use deposit growth to fund our asset growth, however, we may use borrowings as a supplemental funding source if deposit growth decreases. We anticipate that we would use longer term fixed-maturity borrowings with terms of two to five years for this purpose. Our new borrowings during 2009 consisted of non-callable borrowings of $400.0 million with maturities of one to three months and $350.0 million of non-callable borrowings with maturities of two to three years. In addition, during 2009, we modified $1.73 billion of borrowings to extend the call dates of the borrowings by between three and four years while keeping the interest rate consistent.

The Company has two collateralized borrowings in the form of repurchase agreements totaling $100.0 million with Lehman Brothers, Inc. Lehman Brothers, Inc. is currently in liquidation under the Securities Industry Protection Act. Mortgage-backed securities with an amortized cost of approximately $114.5 million are pledged as collateral for these borrowings. We intend to pursue full recovery of the pledged collateral in accordance with the contractual terms of the repurchase agreements. There can be no assurances that the final settlement of this transaction will result in the full recovery of the collateral or the full amount of the claim. We have not recognized a loss in our financial statements related to these repurchase agreements.

Due to brokers amounted to $100.0 million at December 31, 2009 as compared to $239.1 million at December 31, 2008. Due to brokers at December 31, 2009 represents securities purchased in the fourth quarter of 2009 with settlement dates in the first quarter of 2010. Other liabilities decreased to $275.6 million at December 31, 2009 as compared to $278.4 million at December 31, 2008. The decrease is primarily the result of a decrease in

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accrued expenses of $31.6 million, partially offset by an increase in accrued taxes of $25.8 million and in accrued interest payable on borrowings of $3.5 million. The decrease in accrued expenses is due primarily to a $39.9 million decrease in accrued pension liabilities that resulted from an increase in the pension plan’s funded status.

Total shareholders’ equity increased $400.4 million to $5.34 billion at December 31, 2009 from $4.94 billion at December 31, 2008. The increase was primarily due to net income of $527.2 million for 2009 and a $136.9 million increase in accumulated other comprehensive income, primarily due to an increase in the net unrealized gain on securities available-for-sale. The net unrealized gain reflects the general increase in value of our available-for-sale securities portfolio in the generally low prevailing interest rate environment at year-end. These increases to shareholders’ equity were partially offset by cash dividends paid to common shareholders of $288.4 million and repurchases of our common stock of $43.5 million.

As of December 31, 2009, there remained 50,123,550 shares that may be purchased under our existing stock repurchase programs. During 2009, we repurchased 4.0 million shares of our outstanding common stock at a total cost of $43.5 million. The average price per share repurchased in 2009 was $10.95. Our capital ratios remain in excess of the regulatory requirements for a well-capitalized bank. See “Liquidity and Capital Resources”.

The accumulated other comprehensive income of $184.5 million at December 31, 2009 includes a $205.8 million after-tax net unrealized gain on securities available-for-sale ($347.9 million pre-tax) partially offset by a $21.3 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans.

At December 31, 2009, our shareholders’ equity to asset ratio was 8.86% compared with 9.12% at December 31, 2008. For 2009, the ratio of average shareholders’ equity to average assets was 9.03% compared with 9.74% for 2008. The lower equity-to-assets ratios reflect our strategy to grow assets and pay dividends. Our book value per share, using the period-end number of outstanding shares, less purchased but unallocated employee stock ownership plan shares and less purchased but unvested recognition and retention plan shares, was $10.85 at December 31, 2009 and $10.10 at December 31, 2008. Our tangible book value per share, calculated by deducting goodwill and the core deposit intangible from shareholders’ equity, was $10.53 as of December 31, 2009 and $9.77 at December 31, 2008.

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 2009, 2008, and 2007. 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.

	For the Year Ended December 31,
	2009							2008							2007
					Average							Average							Average
	Average				Yield/			Average				Yield/			Average				Yield/
	Balance		Interest		Cost			Balance		Interest		Cost			Balance		Interest		Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
First mortgage loans, net (1)	$	30,126,469	$	1,678,789		5.57	%	$	26,379,724	$	1,523,521		5.78	%	$	21,208,167	$	1,205,461		5.68	%
Consumer and other loans		381,029		21,676		5.69			422,097		26,184		6.20			431,491		28,247		6.55
Federal funds sold		566,079		1,186		0.21			209,607		4,295		2.05			248,201		12,293		4.95
Mortgage-backed securities, at amortized cost		19,768,874		983,658		4.98			16,694,279		875,008		5.24			11,391,487		587,905		5.16
Federal Home Loan Bank stock		876,736		43,103		4.92			790,305		48,009		6.07			586,021		39,492		6.74
Investment securities, at amortized cost		4,577,148		213,374		4.66			3,602,206		176,208		4.89			5,358,155		254,107		4.74
Total interest-earning assets		56,296,335		2,941,786		5.23			48,098,218		2,653,225		5.52			39,223,522		2,127,505		5.42
Noninterest-earning assets		1,044,983							788,032							621,860
Total assets	$	57,341,318						$	48,886,250						$	39,845,382
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Savings accounts	$	749,439		5,640		0.75	%	$	724,943		5,485		0.76	%	$	775,802		6,330		0.82	%
Interest-bearing transaction accounts		1,789,361		31,903		1.78			1,578,419		48,444		3.07			1,806,203		60,641		3.36
Money market accounts		3,823,116		69,008		1.81			2,227,261		73,180		3.29			1,176,185		47,172		4.01
Time deposits		14,771,051		376,917		2.55			11,546,958		454,248		3.93			10,005,377		492,793		4.93
Total interest-bearing deposits		21,132,967		483,468		2.29			16,077,581		581,357		3.62			13,763,567		606,936		4.41
Repurchase agreements		15,100,221		611,776		4.05			13,465,540		561,301		4.17			10,305,216		432,852		4.20
FHLB advances		15,035,798		603,064		4.01			13,737,057		568,590		4.14			10,286,869		440,534		4.28
Total borrowed funds		30,136,019		1,214,840		4.03			27,202,597		1,129,891		4.15			20,592,085		873,386		4.24
Total interest-bearing liabilities		51,268,986		1,698,308		3.31			43,280,178		1,711,248		3.95			34,355,652		1,480,322		4.31
Noninterest-bearing liabilities:
Noninterest-bearing deposits		576,575							554,584							514,685
Other noninterest-bearing liabilities		317,972							289,930							222,760
Total noninterest-bearing liabilities		894,547							844,514							737,445
Total liabilities		52,163,533							44,124,692							35,093,097
Stockholders’ equity		5,177,785							4,761,558							4,752,285
Total liabilities and stockholders’ equity	$	57,341,318						$	48,886,250						$	39,845,382
Net interest income			$	1,243,478						$	941,977						$	647,183
Net interest rate spread (2)						1.92							1.57							1.11
Net interest-earning assets	$	5,027,349						$	4,818,040						$	4,867,870
Net interest margin (3)						2.21	%						1.96	%						1.65	%
Ratio of interest-earning assets to interest-bearing liabilities						1.10	x						1.11	x						1.14	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.

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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.

	2009 Compared to 2008									2008 Compared to 2007
	Increase (Decrease) Due To									Increase (Decrease) Due To
	Volume			Rate			Net			Volume			Rate			Net
	(In thousands)
Interest-earning assets:
First mortgage loans, net	$	211,866		$	(56,598	)	$	155,268		$	296,643		$	21,417		$	318,060
Consumer and other loans		(2,443	)		(2,065	)		(4,508	)		(597	)		(1,466	)		(2,063	)
Federal funds sold		3,014			(6,123	)		(3,109	)		(1,677	)		(6,321	)		(7,998	)
Mortgage-backed securities		153,977			(45,327	)		108,650			277,849			9,254			287,103
Federal Home Loan Bank stock		4,857			(9,763	)		(4,906	)		12,737			(4,220	)		8,517
Investment securities		45,780			(8,614	)		37,166			(85,698	)		7,799			(77,899	)
Total		417,051			(128,490	)		288,561			499,257			26,463			525,720
Interest-bearing liabilities:
Savings accounts		215			(60	)		155			(400	)		(445	)		(845	)
Interest-bearing transaction accounts		5,835			(22,376	)		(16,541	)		(7,241	)		(4,956	)		(12,197	)
Money market accounts		37,937			(42,109	)		(4,172	)		35,760			(9,752	)		26,008
Time deposits		106,911			(184,242	)		(77,331	)		69,745			(108,290	)		(38,545	)
Repurchase agreements		66,928			(16,453	)		50,475			131,568			(3,119	)		128,449
FHLB advances		52,690			(18,216	)		34,474			142,921			(14,865	)		128,056
Total		270,516			(283,456	)		(12,940	)		372,353			(141,427	)		230,926
Net change in net interest income	$	146,535		$	154,966		$	301,501		$	126,904		$	167,890		$	294,794

Comparison of Operating Results for the Years Ended December 31, 2009 and 2008

General. Net income was $527.2 million for 2009, an increase of $81.6 million, or 18.3%, compared with net income of $445.6 million for 2008. Basic and diluted earnings per common share were $1.08 and $1.07, respectively for 2009 as compared to basic and diluted earnings per share of $0.92 and $0.90, respectively for 2008. For 2009, our return on average shareholders’ equity was 10.18%, compared with 9.36% for 2008. Our return on average assets for 2009 was 0.92% as compared to 0.91% for 2008. The increase in the return on average equity and assets is primarily due to the increase in net income during 2009.

Interest and Dividend Income. Total interest and dividend income for 2009 increased $288.6 million, or 10.9%, to $2.94 billion as compared to $2.65 billion for 2008. The increase in total interest and dividend income was primarily due to an $8.20 billion, or 17.0%, increase in the average balance of total interest-earning assets to $56.30 billion for 2009 as compared to $48.10 billion for 2008. The increase in the average balance of total

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interest-earning assets was partially offset by a decrease of 29 basis points in the weighted-average yield on total interest-earning assets to 5.23% for 2009 from 5.52% for 2008.

Interest on first mortgage loans increased $155.3 million, or 10.2%, to $1.68 billion for 2009 as compared to $1.52 billion for 2008. This was primarily due to a $3.75 billion increase in the average balance of first mortgage loans to $30.13 billion during 2009 as compared to $26.38 billion for 2008, which reflected our continued emphasis on the growth of our mortgage loan portfolio and an increase in mortgage originations due to the refinancing activity caused by market interest rates that are at near-historic lows. The positive impact on first mortgage loan interest income from the increase in the average balance was partially offset by a 21 basis point decrease in the weighted-average yield to 5.57% for 2009 as compared to 5.78% for 2008. The decrease in the average yield earned was due to lower market interest rates on mortgage products and also due to the continued mortgage refinancing activity. During 2009, existing mortgage customers refinanced or modified approximately $2.80 billion in mortgage loans with a weighted average rate of 5.78% to a new rate of 5.03%. We allow existing customers to modify their mortgage loans, for a fee, with the intent of maintaining our customer relationship in periods of extensive refinancing due to a low interest rate environment. The modification changes the existing interest rate to the market rate for a product currently offered by us with a similar or reduced term. We generally do not extend the maturity date of the loan. To qualify for a modification, the loan should be current and our review of past payment performance should indicate that no payments were past due in any of the 12 preceding months. In general, all other terms and conditions of the existing mortgage remain the same.

Interest on consumer and other loans decreased $4.5 million to $21.7 million for 2009 from $26.2 million for 2008. The average balance of consumer and other loans decreased $41.1 million to $381.0 million for 2009 as compared to $422.1 million for 2008 and the average yield earned decreased 51 basis points to 5.69% as compared to 6.20% for 2008.

Interest on mortgage-backed securities increased $108.7 million, or 12.4%, to $983.7 million for 2009 as compared to $875.0 million for 2008. This increase was due primarily to a $3.08 billion increase in the average balance of mortgage-backed securities to $19.77 billion during 2009 as compared to $16.69 billion for 2008, partially offset by a 26 basis point decrease in the weighted-average yield to 4.98% as compared to 5.24% for the same respective periods.

The increase in the average balance of mortgage-backed securities is due to purchases of these securities during 2009 which provide us with a source of cash flow from monthly principal and interest payments. The decrease in the weighted average yield on mortgage-backed securities is a result of lower yields on securities purchased during the second half of 2008 and for 2009 compared to the yields on the $4.73 billion of mortgage-backed securities that matured during the year.

Interest on investment securities increased $37.2 million to $213.4 million for 2009 as compared to $176.2 million for 2008. This increase was due primarily to a $974.9 million increase in the average balance of investment securities to $4.58 billion for 2009 from $3.60 billion for 2008. The impact on interest income from the increase in the average balance of investment securities was partially offset by a decrease in the average yield of investment securities of 23 basis points to 4.66% in 2009 as compared to 4.89% in 2008.

Dividends on FHLB stock decreased $4.9 million, or 10.2%, to $43.1 million for 2009 as compared to $48.0 million for 2008. The decrease was due primarily to a 115 basis point decrease in the average yield to 4.92% as compared to 6.07% for 2008. The decrease in the average yield earned was partially offset by an $86.4 million increase in the average balance to $876.7 million for 2009 as compared to $790.3 million for 2008.

Interest Expense. Total interest expense for 2009 decreased $12.9 million to $1.70 billion as compared to $1.71 billion for 2008. This decrease was primarily due to a 64 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.31% for 2009 compared with 3.95% for 2008. The decrease was

Page 13

partially offset by a $7.99 billion, or 18.5%, increase in the average balance of total interest-bearing liabilities to $51.27 billion for the year ended December 31, 2009 as compared to $43.28 billion for 2008.

Interest expense on our time deposit accounts decreased $77.3 million to $376.9 million for 2009 as compared to $454.2 million for 2008. This decrease was due to a decrease in the weighted-average cost of 138 basis points to 2.55% for 2009 from 3.93% for 2008. This decrease was partially offset by a $3.22 billion increase in the average balance of time deposit accounts to $14.77 billion for 2009 from $11.55 billion for 2008. Interest expense on money market accounts decreased $4.2 million to $69.0 million for 2009 as compared to $73.2 million for the same period in 2008. This decrease was due to a 148 basis point decrease in the weighted-average cost to 1.81%, partially offset by a $1.59 billion increase in the average balance to $3.82 billion as compared to $2.23 billion for 2008. Interest expense on our interest-bearing transaction accounts decreased $16.5 million to $31.9 million for 2009 as compared to $48.4 million for 2008. The decrease is due to a 129 basis point decrease in the weighted-average cost to 1.78%, partially offset by a $210.9 million increase in the average balance to $1.79 billion.

The increases in the average balances of interest-bearing deposits reflect our plan to expand our branch network and to grow deposits in our existing branches by offering competitive rates. Also, in response to the economic recession, we believe that households have increased their personal savings and customers have sought insured bank deposit products as an alternative to investments such as equity securities and bonds. We believe these factors contributed to our deposit growth. The decrease in the average cost of deposits for 2009 reflected lower market interest rates.

Interest expense on borrowed funds increased $84.9 million to $1.21 billion for 2009 as compared to $1.13 billion for 2008. This was primarily due to a $2.94 billion increase in the average balance of borrowed funds to $30.14 billion, partially offset by a 12 basis point decrease in the weighted-average cost of borrowed funds to 4.03%.

The decrease in the average cost of borrowings for 2009 reflected new borrowings in 2009 and 2008, when market interest rates were lower than existing borrowings and borrowings that matured. Substantially all of our borrowings are callable quarterly at the discretion of the lender after an initial no-call period of one to five years with a final maturity of ten years. At December 31, 2009, we had $22.25 billion of borrowed funds with a weighted-average rate of 4.14% and with call dates within one year. We believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be called will not increase substantially unless interest rates were to increase by at least 300 basis points. During 2009, we modified $1.73 billion of borrowings to extend the call dates of the borrowings by between three and four years while keeping the interest rates consistent. See “Liquidity and Capital Resources.”

Net Interest Income. Net interest income increased $301.5 million, or 32.0%, to $1.24 billion for 2009 compared to $942.0 million for 2008. Our net interest rate spread increased 35 basis points to 1.92% for 2009 from 1.57% for 2008. Our net interest margin increased 25 basis points to 2.21% for 2009 from 1.96% for 2008.

The increase in our net interest margin and net interest rate spread was primarily due to the decrease in the weighted-average cost of interest-bearing liabilities. The yield curve steepened during 2009, with short-term rates decreasing slightly while longer-term rates increased. Notwithstanding the increase in long-term rates, market rates on mortgage loans remain at near-historic lows, resulting in increased refinancing activity which resulted in a decrease in the yield we earned on mortgage-related assets. However, we were able to reduce deposit costs to a greater extent than the decrease in mortgage yields thereby increasing our net interest rate spread and net interest margin.

Provision for Loan Losses. The provision for loan losses amounted to $137.5 million for 2009 as compared to $19.5 million for 2008. The allowance for loan losses (“ALL”) amounted to $140.1 million and $49.8 million

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at December 31, 2009 and 2008, respectively. We recorded our provision for loan losses during 2009 based on our ALL methodology that considers a number of quantitative and qualitative factors, including the amount of non-performing loans, the loss experience of our non-performing loans, conditions in the real estate and housing markets, current economic conditions, particularly increasing levels of unemployment, and growth in the loan portfolio. See “Critical Accounting Policies — Allowance for Loan Losses.”

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. Our loan growth is primarily concentrated in one- to four-family mortgage loans with original loan-to-value (“LTV”) ratios of less than 80%. The average LTV ratio of our 2009 one- to four-family first mortgage loan originations and our total one- to four-family first mortgage loan portfolio were 60.5% and 60.8%, respectively using the appraised value at the time of origination. The value of the property used as collateral for our loans is dependent upon local market conditions. As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations. Based on our analysis of the data for the fourth quarter of 2009, we concluded that home values in the Northeast quadrant of the United States, where most of our lending activity occurs, have continued to decline from 2008 levels, as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices and an increase in the length of time houses remain on the market. However, the rate of decline in home values decreased during the second half of 2009. We define the Northeast quadrant of the country generally as those states that are east of the Mississippi River and as far south as South Carolina.

The following table presents the geographic distribution of our loan portfolio as a percentage of total loans and of our non-performing loans as a percentage of total non-performing loans. The LTV ratio is for non-performing first mortgage loans and is based on appraised value at the time of origination.

	At December 31, 2009
							Average LTV ratio
							of Non-performing
	Total loans			Non-performing loans			first mortgage loans
New Jersey		43.0	%		41.6	%		69	%
New York		18.2			18.0			70
Connecticut		12.6			4.2			72
Total New York metropolitan area		73.8			63.8			69
Virginia		4.6			6.2			78
Illinois		3.9			5.6			78
Maryland		3.5			5.1			76
Massachusetts		2.7			2.3			75
Pennsylvania		2.0			1.9			75
Minnesota		1.4			1.8			82
Michigan		1.3			4.2			75
All others		6.8			9.1			71
Total Outside New York metropolitan area		26.2			36.2			75
		100.0	%		100.0	%		72	%

The national economy has been in a recessionary cycle for approximately 2 years with the housing and real estate markets suffering significant losses in value. The faltering economy has been marked by contractions in the availability of business and consumer credit, increases in corporate borrowing rates, falling home prices,

Page 15

increasing home foreclosures and rising levels of unemployment. Economic conditions have improved slightly during the second half of 2009 although unemployment rates continued to increase. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. We determined the provision for loan losses for 2009 based on our evaluation of the foregoing factors, the growth of the loan portfolio, the recent increases in delinquent loans, non-performing loans and net loan charge-offs, and the increasing trend in the unemployment rate.

At December 31, 2009, first mortgage loans secured by one-to four-family properties accounted for 98.7% of total loans. Fixed-rate mortgage loans represent 69.1% of our first mortgage loans. Compared to adjustable-rate loans, fixed-rate loans possess less inherent credit risk since loan payments do not change in response to changes in interest rates. In addition, we do not originate or purchase loans with payment options, negative amortization loans or sub-prime loans.

Included in our loan portfolio at December 31, 2009 and December 31, 2008 are interest-only loans of approximately $4.59 billion and $3.47 billion, respectively. These loans are originated as adjustable rate mortgage loans with initial terms of five, seven or ten years 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, the loan 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 the fully-amortizing payment amount. We had $82.2 million and $16.6 million of non-performing interest-only loans at December 31, 2009 and December 31, 2008, respectively.

Non-performing loans amounted to $627.7 million at December 31, 2009 as compared to $217.6 million at December 31, 2008. Non-performing loans at December 31, 2009 included $613.6 million of one- to four-family first mortgage loans as compared to $207.0 million at December 31, 2008. The ratio of non-performing loans to total loans was 1.98% at December 31, 2009 compared with 0.74% at December 31, 2008. Loans delinquent 60 to 89 days amounted to $182.5 million at December 31, 2009 as compared to $104.7 million at December 31, 2008. Foreclosed real estate amounted to $16.7 million at December 31, 2009 as compared to $15.5 million at December 31, 2008. As a result of our conservative underwriting policies, our borrowers typically have a significant amount of equity, at the time of origination, in the underlying real estate that we use as collateral for our loans. Due to the steady deterioration of real estate values over the last three years, the LTV ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure. However, our lower average LTV ratios have helped to moderate our charge-offs as there has generally been adequate equity behind our first lien as of the foreclosure date to satisfy our loan.

As a result of the increase in non-performing loans, the ratio of the ALL to non-performing loans decreased from 102.09% at December 31, 2006 to 22.32% at December 31, 2009. During this same period, the ratio of the ALL to total loans increased from 0.17% to 0.44%. Historically, our non-performing loans have been a negligible percentage of our total loan portfolio and, as a result, our ratio of the ALL to non-performing loans was high and did not serve as a reasonable measure of the adequacy of our ALL. The decline in the ratio of the ALL to non-performing loans is not, absent other factors, an indication of the adequacy of the ALL since there is not necessarily a direct relationship between changes in various asset quality ratios and changes in the ALL and non-performing loans. In the current economic environment, a loan generally becomes non-performing when the borrower experiences financial difficulty. In many cases, the borrower also has a second mortgage or home equity loan on the property. In substantially all of these cases, we do not hold the second mortgage or home equity loan as this is not a business we have actively pursued.

The Company’s losses on non-performing loans increased in 2009 but, overall, have been modest due to our first lien position and relatively low average LTV ratios. We generally obtain new collateral values for loans after 180 days of delinquency. If the estimated fair value of the collateral (less estimated selling costs) is less

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than the recorded investment in the loan, we charge-off an amount to reduce the loan to the fair value of the collateral less estimated selling costs. As a result, certain losses inherent in our non-performing loans are being recognized as charge-offs which may result in a lower ratio of the ALL to non-performing loans when accompanied by a concurrent increase in total non-performing loans (i.e. due to the addition of new non-performing loans). Charge-offs amounted to $47.2 million, consisting of 517 loans, for 2009 and $4.4 million, consisting of 47 loans, in 2008. These charge-offs were primarily due to the results of our reappraisal process for our non-performing residential first mortgage loans with only 55 loans disposed of through the foreclosure process during 2009 with a final loss on sale (after previous charge-offs) of $2.4 million. The results of our reappraisal process and our recent charge-off history are also considered in the determination of the ALL. At December 31, 2009 the average LTV ratio (using appraised values at the time of origination) of our non-performing loans was 72.4% and was 60.8% for our total mortgage loan portfolio. Thus, the ratio of the ALL to non-performing loans needs to be viewed in the context of the underlying LTV’s of the non-performing loans and the relative decline in home values.

As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations including the Office of Federal Housing Enterprise Oversight and Case-Shiller. Our Asset Quality Committee (“AQC”) uses these indices and a stratification of our loan portfolio by state as part of its quarterly determination of the ALL. We do not apply different loss factors based on geographic locations since, at December 31, 2009, 73.8% of our loan portfolio and 63.8% of our non-performing loans are located in the New York metropolitan area. In addition, we obtain updated collateral values when a loan becomes 180 days past due which we believe identifies potential charge-offs more accurately than a house price index that is based on a wide geographic area and includes many different types of houses. However, we use the house price indices to identify geographic areas experiencing weaknesses in housing markets to determine if an overall adjustment to the ALL is required based on loans we have in those geographic areas and to determine if changes in the loss factors used in the ALL quantitative analysis are necessary. Our quantitative analysis of the ALL accounts for increases in non-performing loans by applying progressively higher risk factors to loans as they become more delinquent.

Due to the nature of our loan portfolio, our evaluation of the adequacy of our ALL is performed primarily on a “pooled” basis. 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, commercial, construction, 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, delinquency trends, portfolio growth and the status of the regional economy and housing market, in order to ascertain that the loss factors cover probable and estimable losses inherent in the portfolio. Based on our recent loss experience on non-performing loans, we increased the loss factors used in our quantitative analysis of the ALL for our one- to four-family first mortgage loans during 2009. If our future loss experience requires additional increases in our loss factors, this may result in increased levels of loan loss provisions.

In addition to our quantitative systematic methodology, we also use qualitative analyses to determine the adequacy of our ALL. Our qualitative analyses include further evaluation of economic factors, such as trends in the unemployment rate, as well as a ratio analysis to evaluate the overall measurement of the ALL. This analysis includes a review of delinquency ratios, net charge-off ratios and the ratio of the ALL to both non-performing loans and total loans. This qualitative review is used to reassess the overall determination of the ALL and to ensure that directional changes in the ALL and the provision for loan losses are supported by relevant internal and external data.

We consider the average LTV of our non-performing loans and our total portfolio in relation to the overall changes in house prices in our lending markets when determining the ALL. This provides us with a “macro” indication of the severity of potential losses that might be expected. Since substantially all our portfolio consists

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of first mortgage loans on residential properties, the LTV is particularly important to us when a loan becomes non-performing. The weighted average LTV in our one- to four-family mortgage loan portfolio at December 31, 2009 was 60.8%, using appraised values at the time of origination. The average LTV ratio of our non-performing loans was 72.4% at December 31, 2009. Based on the valuation indices, house prices have declined in the New York metropolitan area, where 63.8% of our non-performing loans were located at December 31, 2009, by approximately 20% from the peak of the market in 2006 through November 2009 and by 29% nationwide during that period. Changes in house values may affect our loss experience which may require that we change the loss factors used in our quantitative analysis of the allowance for loan losses. There can be no assurance whether significant further declines in house values may occur and result in a higher loss experience and increased levels of charge-offs and loan loss provisions.

Net charge-offs amounted to $47.2 million for 2009 as compared to net charge-offs of $4.4 million for 2008. Our charge-offs on non-performing loans have historically been low relative to the size of our portfolio due to the amount of underlying equity in the properties collateralizing our first mortgage loans. Until this current recessionary cycle, it was our experience that as a non-performing loan approached foreclosure, the borrower sold the underlying property or, if there was a second mortgage or other subordinated lien, the subordinated lien holder would purchase the property to protect their interest thereby resulting in the full payment of principal and interest to Hudson City Savings Bank (“Hudson City Savings”). This process normally took approximately 12 months. However, due to the unprecedented level of foreclosures and the desire by most states to slow the foreclosure process, we are now experiencing a time frame to repayment or foreclosure ranging from 24 to 30 months from the initial non-performing period. If real estate prices decline further, this extended time may result in further charge-offs. In addition, current conditions in the housing market have made it more difficult for borrowers to sell homes to satisfy the mortgage and second lien holders are less likely to purchase the property and repay our loan if the value of the property is not enough to satisfy their loan. We continue to monitor closely the property values underlying our non-performing loans during this timeframe and take appropriate charge-offs when the loan balances exceed the underlying property values.

At December 31, 2009 and December 31, 2008, commercial and construction loans evaluated for impairment in accordance with Financial Accounting Standards Board (“FASB”) guidance amounted to $11.2 million and $9.5 million, respectively. Based on this evaluation, we established an ALL of $2.1 million for loans classified as impaired at December 31, 2009 compared to $818,000 at December 31, 2008.

The markets in which we lend have experienced significant declines in real estate values which we have taken into account in evaluating our ALL. Although we believe that we have established and maintained the ALL at adequate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment. Increases in our loss experience on non-performing loans, the loss factors used in our quantitative analysis of the ALL and continued increases in overall loan delinquencies can have a significant impact on our need for increased levels of loan loss provisions in the future. No assurance can be given in any particular case that our LTV ratios will provide full protection in the event of borrower default. Although we use the best information available, the level of the ALL remains an estimate that is subject to significant judgment and short-term change. See “Critical Accounting Policies.”

Non-Interest Income. Total non-interest income was $33.6 million for 2009 as compared to $8.5 million for 2008. Non-interest income primarily consists of service charges on loans and deposits. Included in non-interest income of 2009 were net gains on securities transactions of $24.2 million which resulted primarily from the sale of $761.6 million of mortgage-backed securities available-for-sale. Proceeds from the securities sale were primarily used to fund the purchase of first mortgage loans during the second quarter of 2009.

Non-Interest Expense. Total non-interest expense for the year ended December 31, 2009 was $265.6 million as compared to $198.1 million during 2008. The increase is primarily due to the FDIC special assessment of $21.1 million, a $30.8 million increase in Federal deposit insurance expense, a $9.9 million increase in compensation and employee benefits expense, and a $4.0 million increase in other non-interest expense. The special assessment and the increase in Federal deposit insurance expense were the result of the restoration plan implemented by the FDIC to recapitalize the Deposit Insurance Fund. The increase in compensation and

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employee benefits expense included a $6.0 million increase in compensation costs, due primarily to normal increases in salary as well as additional full time employees, a $3.3 million increase in pension costs and a $3.4 million increase in costs related to our health plan. These increases were partially offset by a $2.8 million decrease in expense related to our stock benefit plans. This decrease was due primarily to a decrease in ESOP expense as a result of changes in the price of our common stock during 2009. Included in other non-interest expense for the year ended December 31, 2009 were write-downs on foreclosed real estate and net losses on the sale of foreclosed real estate, of $2.4 million as compared to $1.3 million for 2008.

Our efficiency ratio was 20.80% for 2009 as compared to 20.84% for 2008. The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income. Our ratio of non-interest expense to average total assets for 2009 was 0.46% as compared to 0.41% for 2008.

Income Taxes. Income tax expense amounted to $346.7 million for 2009 compared with $287.3 million for 2008. Our effective tax rate for 2009 was 39.67% compared with 39.21% for 2008.

Comparison of Operating Results for the Years Ended December 31, 2008 and 2007

General. Net income was $445.6 million for 2008, an increase of $149.7 million, or 50.6%, as compared to $295.9 million for 2007. Basic and diluted earnings per common share were $0.92 and $0.90, respectively, for 2008, as compared to $0.59 and $0.58, respectively, for 2007. For 2008, our return on average shareholders’ equity was 9.36%, compared with 6.23% for 2007. Our return on average assets for 2008 was 0.91% as compared to 0.74% for 2007. The increase in the return on average equity and assets is primarily due to the increase in net income during 2008.

Interest and Dividend Income. Total interest and dividend income for 2008 increased $525.7 million, or 24.7%, to $2.65 billion as compared to $2.13 billion for 2007. The increase in total interest and dividend income was primarily due to an $8.88 billion, or 22.6%, increase in the average balance of total interest-earning assets to $48.10 billion for 2008 as compared to $39.22 billion for 2007. The increase in interest and dividend income was also partially due to an increase of 10 basis points in the weighted-average yield on total interest-earning assets to 5.52% for 2008 from 5.42% for 2007.

Interest on first mortgage loans increased $318.1 million to $1.52 billion for 2008 as compared to $1.21 billion for 2007. This was primarily due to a $5.17 billion increase in the average balance of first mortgage loans to $26.38 billion for 2008 as compared to $21.21 billion for 2007. This increase reflected our continued emphasis on the growth of our mortgage loan portfolio. The increase in first mortgage loan interest income was also due to a 10 basis point increase in the weighted-average yield to 5.78% for 2008. Notwithstanding the decrease in long-term market interest rates noted above, mortgage rates have remained at a wider spread relative to U.S. Treasury securities resulting in higher yields on mortgage loans.

Interest on consumer and other loans decreased $2.0 million to $26.2 million for 2008 as compared to $28.2 million for 2007. The average balance of consumer and other loans decreased $9.4 million to $422.1 million for 2008 as compared to $431.5 million for 2007 and the average yield earned decreased 35 basis points to 6.20% as compared to 6.55% for the same periods.

Interest on mortgage-backed securities increased $287.1 million to $875.0 million for 2008 as compared to $587.9 million for 2007. This increase was due primarily to a $5.30 billion increase in the average balance of mortgage-backed securities to $16.69 billion during 2008 as compared to $11.39 billion for 2007, and an 8 basis point increase in the weighted-average yield to 5.24% for 2008.

The increases in the average balances of mortgage-backed securities were due to purchases of variable-rate mortgage-backed securities as part of our interest rate risk management strategy. Since a substantial portion of our loan production consists of fixed-rate mortgage loans, the purchase of variable-rate mortgage-backed

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securities provides us with an asset that reduces our exposure to interest rate fluctuations while providing a source of cash flow from monthly principal and interest payments. The increase in the weighted average yields for 2008 on mortgage-backed securities is a result of the purchase of new securities during the second half of 2007 and the first half of 2008 when market interest rates were higher than the yield earned on the existing portfolio.

Interest on investment securities decreased $77.9 million to $176.2 million during 2008 as compared to $254.1 million for 2007. This decrease was due primarily to a $1.76 billion decrease in the average balance of investment securities to $3.60 billion for 2008 as compared to $5.36 billion for 2007. The decrease in the average balance of investment securities was due to increased call activity as a result of the decrease in market rates of securities with a shorter duration during 2008. The average yield on investment securities increased 15 basis points to 4.89% during 2008.

Dividends on FHLB stock increased $8.5 million, or 21.5%, to $48.0 million for 2008 as compared to $39.5 million for 2007. This increase was due to a $204.3 million increase in the average balance to $790.3 million for 2008 as compared to $586.0 million for 2007. The increase was partially offset by a 67 basis point decrease in the average yield to 6.07% as compared to 6.74% for 2007.

Interest Expense. Total interest expense for 2008 increased $230.9 million, or 15.6%, to $1.71 billion as compared to $1.48 billion for 2007. This increase was primarily due to an $8.92 billion, or 26.0%, increase in the average balance of total interest-bearing liabilities to $43.28 billion for 2008 compared with $34.36 billion for 2007. The increase in the average balance of total interest-bearing liabilities was partially offset by a 36 basis point decrease in the weighted-average cost of total interest-bearing liabilities to 3.95% for 2008 compared with 4.31% for 2007.

Interest expense on our time deposit accounts decreased $38.6 million to $454.2 million for 2008 as compared to $492.8 million for 2007. This decrease was due primarily to a decrease of 100 basis points in the weighted-average cost to 3.93%. This decrease was partially offset by a $1.54 billion increase in the average balance of time deposit accounts to $11.55 billion for 2008 from $10.01 billion for 2007. Interest expense on money market accounts increased $26.0 million to $73.2 million for 2008 as compared to $47.2 million for 2007. This increase was due to a $1.05 billion increase in the average balance to $2.23 billion, partially offset by a 72 basis point decrease in the weighted-average cost to 3.29% for 2008. The increase in our time deposits and money market checking accounts reflects our competitive pricing, our branch expansion and customer preference for short-term deposit products. In addition, the turmoil in the credit and equity markets has made deposit products in strong financial institutions desirable for many customers.

Interest expense on our interest-bearing transaction accounts decreased $12.2 million to $48.4 million for 2008 as compared to $60.6 million for 2007. This decrease was primarily due to a $227.8 million decrease in the average balance to $1.58 billion and a 29 basis point decrease in the average cost to 3.07% for 2008. The decrease in the average balance reflects customer preferences for short-term time and money market deposit products.

Interest expense on borrowed funds increased $256.5 million to $1.13 billion for 2008 as compared to $873.4 million for 2007 primarily due to a $6.61 billion increase in the average balance of borrowed funds to $27.20 billion as compared to $20.59 billion for 2007. The weighted average cost of borrowed funds decreased 9 basis points to 4.15% for 2008 as compared to 4.24% for 2007.

Borrowed funds were used to fund a significant portion of the growth in interest-earning assets in 2008. The decrease in the average cost of borrowings during 2008 reflected new borrowings in 2008, when market interest rates were lower than existing borrowings and borrowings that were called. Substantially all of our borrowings are callable quarterly at the discretion of the lender after an initial non-call period of one to five years with a final maturity of ten years.

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Net Interest Income. Net interest income increased $294.8 million, or 45.6%, to $942.0 million for 2008 as compared with $647.2 million for 2007. Our net interest rate spread increased 46 basis points to 1.57% for 2008 from 1.11% for 2007. Our net interest margin increased 31 basis points to 1.96% from 1.65% for the same respective periods.

The increase in our net interest margin and net interest rate spread was primarily due to the increase in the weighted-average yield on interest-earning assets and a decrease in the weighted-average cost of interest-bearing liabilities. The decreases in market interest rates that began during the second half of 2007 and continued through 2008 allowed us to lower the cost of our deposits while the yields on our mortgage-related assets remained stable. As a result, our net interest rate margin and net interest rate spread increased during 2008.

Provision for Loan Losses. The provision for loan losses amounted to $19.5 million for 2008 as compared to $4.8 million for 2007. The ALL amounted to $49.8 million and $34.7 million at December 31, 2008 and 2007, respectively. We recorded our provision for loan losses during 2008 based on our ALL methodology that considers a number of quantitative and qualitative factors, including the amount of non-performing loans, which increased to $217.6 million at December 31, 2008 as compared to $79.4 million at December 31, 2007. The higher provision for loan losses during 2008 reflects the risks inherent in our loan portfolio due to weakening real estate markets, the increases in non-performing loans and net charge-offs and the overall growth in the loan portfolio. See “Critical Accounting Policies — Allowance for Loan Losses.”

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. Our loan growth was primarily concentrated in one- to four-family mortgage loans with original loan-to-value ratios of less than 80%. The average loan-to-value ratio of our 2008 first mortgage loan originations and our total first mortgage loan portfolio was 60% and 61%, respectively using the appraised value at the time of origination. The value of the property used as collateral for our loans is dependent upon local market conditions. As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations. Based on our analysis of the data for 2008, we concluded that home values in the Northeast quadrant of the United States, where most of our lending activity occurs, deteriorated during 2007 and 2008 as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices and an increase in the length of time houses remain on the market. In addition, general economic conditions in the United States also worsened and entered a recession by the first quarter of 2008. We considered these trends in economic and market conditions in determining the provision for loan losses also taking into account the continued growth of our loan portfolio.

We define the Northeast quadrant of the country generally as those states that are east of the Mississippi River and as far south as South Carolina. At December 31, 2008, approximately 69.7% of our total loans are in the New York metropolitan area. Additionally, the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania accounted for 5.5%, 4.3%, 4.2%, 3.0%, 1.8%, 1.7% and 1.5%, respectively of total loans. The remaining 8.3% of the loan portfolio is secured by real estate primarily in the remainder of the Northeast quadrant of the United States. With respect to our non-performing loans, approximately 65.3% are in the New York metropolitan area and 4.2%, 3.5%, 5.4%, 2.7%, 3.8%, 3.7% and 1.5% are located in the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania, respectively. The remaining 9.9% of our non-performing loans are secured by real estate primarily in the remainder of the Northeast quadrant of the United States.

During 2008, the fallout from the sub-prime mortgage market continued and the national economy entered a recession with particular emphasis on the deterioration of the housing and real estate markets. The faltering economy was marked by contractions in the availability of business and consumer credit, increases in corporate borrowing rates, falling home prices, increasing home foreclosures and unemployment. As a result, the

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financial, capital and credit markets experienced significant adverse conditions. These conditions caused significant deterioration in the activity of the secondary residential mortgage market and a lack of available liquidity. The disruptions were exacerbated by the acceleration of the decline of the real estate and housing market. We determined the provision for loan losses for 2008 based on our evaluation of the foregoing factors, the growth of the loan portfolio, the recent increases in non-performing loans and net loan charge-offs and expected growth in non-performing loans.

At December 31, 2008, first mortgage loans secured by one-to four-family properties accounted for 98.4% of total loans. Fixed-rate mortgage loans represent 75.7% of our first mortgage loans. Compared to adjustable-rate loans, fixed-rate loans possess less inherent credit risk since loan payments do not change in response to changes in interest rates. In addition, we do not originate or purchase loans with payment options, negative amortization loans or sub-prime loans.

Non-performing loans amounted to $217.6 million at December 31, 2008 as compared to $79.4 million at December 31, 2007. Non-performing loans at December 31, 2008 included $207.0 million of one- to four-family first mortgage loans as compared to $75.8 million at December 31, 2007. The ratio of non-performing loans to total loans was 0.74% at December 31, 2008 compared with 0.33% at December 31, 2007. The ALL as a percent of total loans and non-performing loans was 0.17% and 22.89%, respectively at December 31, 2008 as compared to 0.14% and 43.75%, respectively at December 31, 2007. Loans delinquent 60 to 89 days amounted to $104.7 million at December 31, 2008 as compared to $40.6 million at December 31, 2007. Foreclosed real estate amounted to $15.5 million at December 31, 2008 as compared to $4.1 million at December 31, 2007. As a result of our underwriting policies, our borrowers typically have a significant amount of equity, at the time of origination, in the underlying real estate that we use as collateral for our loans. At December 31, 2008, our non-performing mortgage loans had an average loan-to-value ratio of approximately 68.3% based on the appraised value at the time of origination. Due to the steady deterioration of real estate values, the loan-to-value ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure. In January 2009, our non-performing loans increased by $37.0 million to $254.6 million.

Net charge-offs amounted to $4.4 million for 2008 as compared to net charge-offs of $684,000 for 2007. The increase in charge-offs was primarily related to non-performing residential loans for which current appraised values indicated declines in the value of the underlying collateral. Our charge-offs on non-performing loans have historically been low due to the amount of underlying equity in the properties collateralizing our first mortgage loans. Typically, as a non-performing loan approaches foreclosure, the borrower will sell the underlying property or, if there is a subordinated lien eliminating the borrower’s equity, the subordinated lien holder would purchase the property to protect its interest resulting in the full payment of principal and interest to Hudson City Savings. In normal markets this process takes 6 to 12 months. However, due to the unprecedented level of foreclosures and the desire by most states to slow the foreclosure process, we are now experiencing a time frame to repayment or foreclosure ranging from 18 to 24 months from the initial non-performing period. As real estate prices continue to decline, this extended time may result in further charge-offs. In addition, current conditions in the housing market have made it more difficult for borrowers to sell homes to satisfy the mortgage and second lien holders are less likely to purchase the property and repay our loan if the value of the property is not enough to satisfy their loan. We continue to monitor closely the property values underlying our non-performing loans during this timeframe and take appropriate charge-offs when the loan balances exceed the underlying property values.

At December 31, 2008 and 2007, commercial and construction loans evaluated for impairment in accordance with FASB guidance amounted to $9.5 million and $3.5 million, respectively. Based on this evaluation, we established an ALL of $818,000 for loans classified as impaired at December 31, 2008 compared to $268,000 at December 31, 2007.

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Non-Interest Income. Total non-interest income was $8.5 million for 2008 compared with $7.3 million for 2007. The increase in non-interest income is primarily due to an increase in service charges on deposits as a result of deposit account growth.

Non-Interest Expense. Total non-interest expense increased $30.2 million, or 18.0%, for the year ended December 31, 2008 to $198.1 million compared with $167.9 million during 2007. The increase is primarily due to a $20.6 million increase in compensation and employee benefits expense, a $2.6 million increase in Federal deposit insurance expense and a $5.9 million increase in other non-interest expense. The increase in compensation and employee benefits expense included an $8.4 million increase in expense related to our employee stock ownership plan primarily as a result of increases in our stock price, a $6.3 million increase in compensation costs, due primarily to normal increases in salary and additional full time employees for our new branches, and a $2.3 million increase in stock option plan expense. The increase in the Federal deposit insurance expense is the result of an assessment credit that was used to offset 100% of our 2007 deposit insurance assessment of $7.3 million. During 2008, we used the remaining assessment credit of $5.1 million to offset a portion of our 2008 deposit insurance. Included in other non-interest expense for the year ended December 31, 2008 were write-downs on foreclosed real estate and net losses on the sale of foreclosed real estate, of $1.3 million as compared to $112,000 for 2007.

Our efficiency ratio was 20.84% for 2008 as compared to 25.66% for the year ended December 31, 2007. Our ratio of non-interest expense to average total assets for 2008 was 0.41% as compared to 0.42% for 2007.

Income Taxes. Income tax expense amounted to $287.3 million for 2008 compared with $185.9 million for 2007. Our effective tax rate for 2008 was 39.21% compared with 38.59% for 2007.

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 we have been proactive in addressing problem loans and non-performing assets. The national economy has been in a recessionary cycle for approximately two years. The faltering economy has been marked by contractions in the availability of business and consumer credit, falling home prices, increasing home foreclosures and rising unemployment levels. See “Critical Accounting Policies – Allowance for Loan Losses” and “Comparison of Operating Results for the Years Ended December 31, 2009 and 2008 – Provision for Loan Losses”.

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

	At December 31,
	2009												2008										2007
	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		408	$	171,913			1,480	$	581,786			265	$	100,604			527	$	200,642			103	$	32,448			198	$	71,614
FHA/VA first mortgages		35		8,650			115		31,855			5		874			30		6,407			12		1,995			21		4,157
Multi-family and commercial mortgages		2		1,088			1		1,414			1		1,417			4		1,854			3		1,393			2		2,028
Construction loans		—		—			6		9,764			—		—			5		7,610			3		4,457			1		647
Consumer and other loans		14		882			34		2,876			11		1,850			14		1,061			7		329			12		956
Total delinquent loans (60 days and over)		459	$	182,533			1,636	$	627,695			282	$	104,745			580	$	217,574			128	$	40,622			234	$	79,402
Delinquent loans (60 days and over) to total loans				0.57	%				1.98	%				0.36	%				0.74	%				0.17	%				0.33	%

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

	At December 31,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Non-accrual first mortgage loans	$	583,200		$	202,496		$	71,932		$	20,053		$	9,649
Non-accrual construction loans		6,624			7,610			647			3,098			—
Non-accrual consumer and other loans		1,916			626			956			1,217			2
Accruing loans delinquent 90 days or more		35,955			6,842			5,867			5,630			9,661
Total non-performing loans		627,695			217,574			79,402			29,998			19,312
Foreclosed real estate, net		16,736			15,532			4,055			3,161			1,040
Total non-performing assets	$	644,431		$	233,106		$	83,457		$	33,159		$	20,352
Non-performing loans to total loans		1.98	%		0.74	%		0.33	%		0.16	%		0.13	%
Non-performing assets to total assets		1.07			0.43			0.19			0.09			0.07

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 deposits, borrowings, the proceeds from principal and interest payments on loans and mortgage-backed securities, the maturities and calls of investment securities and funds provided by our operations. 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 receipt of these sources of funds. 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 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. These activities are funded primarily by deposit growth, borrowings and principal and interest payments on loans, mortgage-backed securities and investment securities. We originated $6.06 billion and purchased $3.16 billion of loans during of 2009 as compared to $5.04 billion and $3.06 billion during 2008. While the residential real estate markets have slowed during the past year, our competitive rates and an increase in mortgage refinancing have resulted in increased origination production for 2009. The increase in refinancing activity occurring in the marketplace has also caused an increase in principal repayments which amounted to $6.77 billion for 2009 as compared to $2.82 billion for 2008. At December 31, 2009, commitments to originate and purchase mortgage loans amounted to $538.0 million and $157.5 million, respectively as compared to $337.6 million and $219.1 million, respectively at December 31, 2008. Conditions in the secondary mortgage market have made it more difficult for us to purchase loans that meet our underwriting standards. We expect that the amount of loan purchases may be at reduced levels for the near-term.

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Purchases of mortgage-backed securities during 2009 were $7.11 billion as compared to $7.18 billion during 2008. The slight decrease in the purchases of mortgage-backed securities was due to our ability to utilize deposit growth for the increased mortgage loan production during 2009. In addition, we increased our purchases of investment securities since the yields on these securities were more attractive than the yields currently being earned on mortgage-backed securities. We sold $761.6 million of mortgage-backed securities during 2009, resulting in a gain of $24.0 million. We used the proceeds from the sales to fund the purchase of first mortgage loans. There were no securities sales in 2008.

We purchased $5.87 billion of investment securities during 2009 as compared to $2.10 billion during 2008. Proceeds from the calls of investment securities amounted to $4.02 billion during 2009 as compared to $2.81 billion for 2008.

During 2009, principal repayments on loans totaled $6.77 billion as compared to $2.82 billion for 2008. Principal payments on mortgage-backed securities amounted to $4.73 billion and $2.31 billion for those same respective periods. These increases in principal repayments were due primarily to the refinancing activity caused by market interest rates that are at near-historic lows.

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 mortgage-related assets and borrowings from the FHLB. During 2009, we purchased a net $9.2 million of FHLB common stock compared with net purchases of $170.2 million during 2008.

Our primary financing activities consist of gathering deposits, engaging in wholesale borrowings, repurchases of our common stock and the payment of dividends.

Total deposits increased $6.12 billion during 2009 as compared to an increase of $3.31 billion for 2008. These increases reflect our growth strategy, competitive pricing and the apparent recent increases in the U.S. household savings rate during the recent recessionary economy. Deposit flows are typically affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets, and other factors. Time deposits scheduled to mature within one year were $13.08 billion at December 31, 2009. These time deposits have a weighted average rate of 1.87%. 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 as transfers to other deposit products at the prevailing interest rate.

We have historically used wholesale borrowings to fund our investing and financing activities. However, during 2009, we were able to fund substantially all of our growth with deposit inflows. Principal repayments of borrowed funds totaled $1.00 billion, largely offset by $750.0 million in new borrowings. At December 31, 2009, we had $22.25 billion of borrowed funds with a weighted-average rate of 4.14% and with call dates within one year. We anticipate that none of these borrowings will be called assuming current market interest rates remain stable. We believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be called will not increase substantially unless interest rates were to increase by at least 300 basis points. However, in the event borrowings are called, we anticipate that we will have sufficient resources to meet this funding commitment by borrowing new funds at the prevailing market interest rate, using funds generated by deposit growth or by using proceeds from securities sales. In addition, at December 31, 2009 we had $300.0 million of borrowings with a weighted average rate of 5.68% that are scheduled to mature within one year.

Our borrowings have traditionally consisted of structured callable borrowings with ten year final maturities and initial non-call periods of one to five years. We have used this type of borrowing primarily to fund our loan growth because they have a longer duration than shorter-term non-callable borrowings and have a slightly lower cost than a no-callable borrowing with a maturity date similar to the initial call date of the callable borrowing.

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During 2009, we were able to fund our asset growth primarily with deposit inflows. In order to effectively manage our interest rate risk and liquidity risk resulting from our current callable borrowing position, we are pursuing a variety of strategies to reduce callable borrowings while continuing to pursue our growth plans. We intend to continue focusing on funding our growth primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases which will allow us to achieve a greater balance between deposits and borrowings. If necessary to fund our growth and provide for liquidity, we may borrow a combination of short- term borrowings with maturities of three to six months and longer-term fixed-maturity borrowings with terms of two to five years. We also intend to modify certain borrowings to extend their call dates, which we began to do during 2009. During 2009, we modified approximately $1.73 billion of callable borrowings to extend the call dates of the borrowings by between three and four years as part of this strategy. In addition, we are considering prepayment of certain borrowings; however, at this time, we have no immediate plans to make any such prepayments, and we anticipate that any prepayment of borrowings will be limited. Our new borrowings in 2009 consisted of non-callable borrowings of $400.0 million with maturities of one to three months and $350.0 million of non-callable borrowings with maturities of two to three years.

Total cash and cash equivalents increased $299.4 million to $561.2 million at December 31, 2009 as compared to $261.8 million at December 31, 2008. This increase is due to liquidity being provided by the strong deposit growth and increased repayments on mortgage-related assets. In addition, we have maintained a higher level of Federal funds sold since other types of short- and medium-term investments are currently providing relatively low yields.

Cash dividends paid during 2009 were $288.4 million. During 2009, we purchased 4.0 million shares of our common stock at an aggregate cost of $43.5 million. At December 31, 2009, there remained 50,123,550 shares that may be purchased under existing stock repurchase programs.

The primary source of liquidity for Hudson City Bancorp, the holding company of Hudson City Savings, is capital distributions from Hudson City Savings. During 2009, Hudson City Bancorp received $338.5 million in dividend payments from Hudson City Savings. The primary use of these funds is the payment of dividends to our shareholders and, when appropriate as part of our capital management strategy, the repurchase of our outstanding common stock. Hudson City Bancorp’s ability to continue these activities is dependent upon capital distributions from Hudson City Savings. Applicable federal law may limit the amount of capital distributions Hudson City Savings may make. At December 31, 2009, Hudson City Bancorp had total cash and due from banks of $224.6 million.

At December 31, 2009, 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 7.59%, 7.59% and 21.02%, respectively.

Off-Balance Sheet Arrangements and Contractual Obligations

Hudson City Bancorp 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, 2009.

	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	$	537,997	$	537,997	$	—	$	—	$	—
Mortgage loan purchases		157,476		157,476		—		—		—
Mortgage-backed security purchases		1,251,000		1,251,000		—		—		—
Operating leases		151,453		8,974		18,302		17,695		106,482
Total	$	2,097,926	$	1,955,447	$	18,302	$	17,695	$	106,482

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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 $179.7 million, $2.9 million, and $12.8 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 January 2010, the FASB issued an accounting standards update regarding disclosure requirements for fair value measurement. This update provides amendments to fair value measurement that require new disclosures related to transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. The update also provides amendments clarifying level of disaggregation and disclosures about inputs and valuation techniques along with conforming amendments to the guidance on employers’ disclosures about postretirement benefit plan assets. This update is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010. We do not expect that this accounting standard update will have a material impact on our financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB Codification (the “Codification”) was issued. The Codification is the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The implementation of the Codification did not have an impact on our consolidated financial condition and results of operations.

In June 2009, the FASB issued an accounting standards update to the accounting and disclosure requirements for the consolidation of variable interest entities. The guidance affects the overall consolidation analysis and requires enhanced disclosure on involvement with variable interest entities. The guidance is effective for fiscal years beginning after November 15, 2009. We do not expect that the guidance will have a material impact on our financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB issued an accounting standards update to the accounting and disclosure requirements for transfers of financial assets. The guidance defines the term “participating interest” to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. If the transfer does not meet those conditions, a transferor should account for the transfer as a sale only if it transfers an entire financial asset or a group of entire financial assets and surrenders control over the entire transferred asset(s). The guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We do not expect that the guidance will have a material impact on our financial condition, results of operations or financial statement disclosures.

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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 2 to the Audited Consolidated Financial Statements contains a summary of our significant accounting policies. We believe our policies with respect to the methodology for our determination of the ALL, the measurement of stock-based compensation expense and the measurement of the funded status and cost of our pension and other post-retirement benefit plans 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 ALL has been determined in accordance with GAAP, under which we are required to maintain an adequate ALL at December 31, 2009. We are responsible for the timely and periodic determination of the amount of the allowance required. We believe that our ALL 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, 2009. As a result of our lending practices, we also have a concentration of loans secured by real property located primarily in New Jersey, New York and Connecticut. At December 31, 2009, approximately 73.8% of our total loans were in the New York metropolitan area. Additionally, the states of Virginia, Illinois, Maryland, Massachusetts, Minnesota, Michigan and Pennsylvania accounted for 4.6%, 3.9%, 3.5%, 2.7%, 1.4%, 1.3% and 2.0%, respectively, of total loans. The remaining 6.8% of the loan portfolio is secured by real estate primarily in the remainder of the Northeast quadrant of the United States. 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 the continued weakened economic conditions due to the recent U.S. recession, continued high levels of unemployment, rising interest rates in the markets we lend and a continuing decline in real estate market values. Any one or a combination of these adverse trends may adversely affect our loan portfolio resulting in increased delinquencies, non-performing assets, loan losses and future levels of loan loss provisions. We consider these trends in market conditions in determining the ALL.

Due to the nature of our loan portfolio, our evaluation of the adequacy of our ALL is performed primarily on a “pooled” basis. 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, commercial, construction, 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, delinquency trends,

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portfolio growth and the status of the regional economy and housing market, in order to ascertain that the loss factors cover probable and estimable losses inherent in the portfolio. Based on our recent loss experience on non-performing loans, we increased the loss factors used in our quantitative analysis of the ALL for our one- to four-family first mortgage loans during 2009. We use this analysis, as a tool, together with principal balances and delinquency reports, to evaluate the adequacy of the ALL. 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 results of our foreclosed property transactions, the current state of the local and national economy, changes in interest rates and loan portfolio growth. Any one or a combination of these adverse trends may adversely affect our loan portfolio resulting in increased delinquencies, loan losses and future levels of provisions.

We maintain the ALL through provisions for loan losses that we charge to income. We charge losses on loans against the ALL when we believe the collection of loan principal is unlikely. We establish the provision for loan losses after considering the results of our review as described above. We apply this process and methodology in a consistent manner and we reassess and modify the estimation methods and assumptions used in response to changing conditions. Such changes, if any, are approved by our AQC each quarter.

Hudson City Savings defines the population of potential impaired loans to be all non-accrual construction, 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 analysis.

We believe that we have established and maintained the ALL 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 ALL remains an estimate that is subject to significant judgment and short-term change.

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 for all awards granted, modified, repurchased or cancelled after January 1, 2006 and for the portion of outstanding awards for which the requisite service was not rendered as of January 1, 2006, in accordance with ASC 718-10. We have made annual grants of performance-based stock options since 2006 that vest if certain financial performance measures are met. In accordance with ASC 718-10-30-6, we assess the probability of achieving these financial performance measures and recognize the cost of these performance-based grants if it is probable that the financial performance measures will be met. This probability assessment is subjective in nature and may change over the assessment period for the performance measures.

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 of 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

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decreases. The use of different assumptions or different option pricing models could result in materially different per share fair values of options.

Pension and Other Post-retirement Benefit Assumptions

Non-contributory retirement and post-retirement defined benefit plans are maintained for certain employees, including retired employees hired on or before July 31, 2005 who have met other eligibility requirements of the plans. We adopted ASC 715, Retirement Benefits. This ASC 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 post-retirement plan in the year in which the changes occur.

We provide our actuary with certain rate assumptions used in measuring our benefit obligation. We monitor these rates in relation to the current market interest rate environment and update our actuarial analysis accordingly. 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 bond indices, for reasonableness. A discount rate of 6.00% was selected for the December 31, 2009 measurement date and the 2010 expense calculation.

For our pension plan, we also assumed an annual rate of salary increase of 4.00% for future periods. This rate is corresponding to actual salary increases experienced over prior years. We assumed a return on plan assets of 8.25% 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 12.9% for 2009 and a net loss of 28.2% in 2008. Our net loss on plan assets during 2008 was a result of the economic recession and conditions in the equity and credit markets during that year. There can be no assurances with respect to actual return on plan assets in the future. We continually review and evaluate all actuarial assumptions affecting the pension plan, including assumed return on assets.

For our post-retirement benefit plan, the assumed health care cost trend rate used to measure the expected cost of other benefits for 2009 was 8.50%. The rate was assumed to decrease gradually to 4.75% for 2016 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.

Securities Impairment

Our available-for-sale securities portfolio is carried at estimated fair value with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income/loss in shareholders’ equity. Debt 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. The fair values for our securities are obtained from an independent nationally recognized pricing service.

Substantially all of our securities portfolio is comprised of mortgage-backed securities and debt securities issued by a GSE. The fair value of these securities is primarily impacted by changes in interest rates. We generally view changes in fair value caused by changes in interest rates as temporary, which is consistent with our experience.

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In April 2009, the FASB issued guidance which changes the method for determining whether an other-than-temporary impairment exists for debt securities and the amount of the impairment to be recognized in earnings. This staff position requires that an entity assess whether an impairment of a debt security is other-than-temporary and, as part of that assessment, determine its intent and ability to hold the security. If the entity intends to sell the debt security, an other-than-temporary impairment shall be considered to have occurred. In addition, an other-than-temporary impairment shall be considered to have occurred if it is more likely than not that it will be required to sell the security before recovery of its amortized cost.

We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment considers the duration and severity of the impairment, our intent and ability to hold the securities and our assessments of the reason for the decline in value and the likelihood of a near-term recovery. The unrealized losses on securities in our portfolio were due primarily to changes in market interest rates subsequent to purchase. In addition, we only purchase securities issued by GSEs. As a result, the unrealized losses on our securities were not considered to be other-than-temporary and, accordingly, no impairment loss was recognized during 2009.

Management of Market Risk

General

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 our interest-earning assets and interest-bearing liabilities, other than those that possess a short term to maturity. Due to the nature of our operations, we are not subject to foreign currency exchange or commodity price risk. 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 2009 and did not have any such hedging transactions in place at December 31, 2009. Our mortgage loan and mortgage-backed security portfolios, which comprise 87.1% of our balance sheet, are subject to risks associated with the economy in the New York metropolitan area, the general economy of the United States and the recent pressure on housing prices. We continually analyze our asset quality and believe our allowance for loan losses is adequate to cover known or potential losses.

The difference between rates on the yield curve, or the shape of the yield curve, impacts our net interest income. The Federal Open Market Committee of the Board of Governors of the Federal Reserve System (the “FOMC”) noted that economic activity has continued to improve during the fourth quarter of 2009. The FOMC also noted that the housing sector has shown signs of improvement. However, the national unemployment rate continued to rise to 10.0% in December 2009 as compared to 9.8% in September 2009 and 7.4% in December 2008. The S&P/Case-Shiller Home Price Index for the New York metropolitan area, where most of our lending activity occurs, declined by approximately 7.1% in 2009 and by 9.2% in 2008. The S&P/Case-Shiller U.S. National Home Price Index decreased by 5.3% in 2009 and by 18.2% in 2008. Lower household wealth and tight credit conditions in addition to the increase in the national unemployment rate has resulted in the FOMC maintaining the overnight lending rate at zero to 0.25% during the fourth quarter of 2009, with plans to maintain this level for an “extended period.”

As a result, short-term market interest rates have remained at low levels during the fourth quarter of 2009. This allowed us to continue to re-price our short-term deposits thereby reducing our cost of funds. While longer-term market interest rates increased during the fourth quarter of 2009, thus steepening the slope of the market yield curve, rates on mortgage-related assets declined slightly, although to a lesser extent than the decline in our cost of funds. Due to our investment and financing decisions, the more positive the slope of the yield curve the more favorable the environment is for our ability to generate net interest income. Our interest-bearing liabilities

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generally reflect movements in short- and intermediate-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 intermediate- and long-term interest rates. A positive slope of the yield curve allows us to invest in interest-earning assets at a wider spread to the cost of interest-bearing liabilities. Due to these changes in market rates, our net interest rate spread and net interest margin increased for the fourth quarter and full year of 2009 from the three and twelve-month periods ended December 31, 2008.

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 recognition of items on our balance sheet. The timing of the recognition of interest-earning assets on our balance sheet generally lags the current market rates by 60 to 90 days due to the normal time period between commitment and settlement dates. In contrast, the recognition of interest-bearing liabilities on our balance sheet generally reflects current market interest rates as we generally fund purchases at the time of settlement. During a period of decreasing short-term interest rates, as was experienced during these past 12 months, this timing difference had a positive impact on our net interest income as our interest-bearing liabilities reset to the current lower interest rates. If short-term interest rates were to increase, the cost of our interest-bearing liabilities would also increase and have an adverse impact on our net interest income.

Also impacting our net interest income and net interest rate spread is the level of prepayment activity on our interest-sensitive 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, availability of credit, seasonal factors and demographic variables. 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 lower 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. Prepayment rates on our mortgage-related assets have increased during 2009, due to the current low market interest rate environment. We believe the higher level of prepayment activity may continue as market interest rates are expected to remain at the current low levels through at least the first half of 2010.

Calls of investment securities and borrowed funds are also impacted by the level of market interest rates. The level of calls of investment securities are generally inversely related to the prevailing market interest rate, meaning as rates decrease the likelihood of a security being called would increase. The level of call activity generally affects the yield earned on these assets, as the payment received on the security would be reinvested at the prevailing lower market interest rate. During 2009 we saw an increase in call activity on our investment securities as market interest rates remained at these historic lows. We anticipate continued calls of investment securities due to the anticipated continuation of the low current market interest rate environment. However, the level of calls may not be as great as in 2009 as we experienced significant turnover of the portfolio in 2009 and the interest rates for the new securities are already close to current market.

Our borrowings have traditionally consisted of structured callable borrowings with ten year final maturities and initial non-call periods of one to five years. We have used this type of borrowing primarily to fund our loan growth because they have a longer duration than shorter-term non-callable borrowings and have a slightly lower cost than a non-callable borrowing with a maturity date similar to the initial call date of the callable borrowing. Our new borrowings in 2009 consisted of non-callable borrowings of

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$400.0 million with maturities of one to three months and $350.0 million of non-callable borrowings with maturities of two to three years.

During 2009, we were able to fund our asset growth primarily with deposit inflows. In order to effectively manage our interest rate risk and liquidity risk resulting from our current callable borrowing position, we are pursuing a variety of strategies to reduce callable borrowings while continuing to pursue our growth plans. We intend to continue focusing on funding our growth primarily with customer deposits, using borrowed funds as a supplemental funding source if deposit growth decreases which will allow us to achieve a greater balance between deposits and borrowings. If necessary to fund our growth and provide for liquidity, we may borrow a combination of short- term borrowings with maturities of three to six months and longer-term fixed-maturity borrowings with terms of two to five years. We also intend to modify certain borrowings to extend their call dates, which we began to do during 2009. During 2009, we modified approximately $1.73 billion of callable borrowings to extend the call dates of the borrowings by between three and four years as part of this strategy. In addition, we are considering prepayment of certain borrowings; however, at this time, we have no immediate plans to make any such prepayments, and we anticipate that any prepayment of borrowings will be limited.

The likelihood of a borrowing being called is directly related to the current market interest rates, meaning the higher that interest rates move, the more likely the borrowing would be called. The level of call activity generally affects the cost of our borrowed funds, as the call of a borrowing would generally necessitate the re-borrowing of the funds at the higher current market interest rate. During 2009 we experienced no call activity on our borrowed funds due to the continued low levels of market interest rates. At December 31, 2009, we had $22.25 billion of borrowed funds, with a weighted-average rate of 4.14%, with call dates within one year. We anticipate that none of these borrowings will be called assuming current market interest rates remain stable or increase modestly. We believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be called will not increase substantially unless interest rates were to increase by at least 300 basis points. However, in the event borrowings are called, we anticipate that we will have sufficient resources to meet this funding commitment by borrowing new funds at the prevailing market interest rate, using funds generated by deposit growth or by using proceeds from securities sales.

Management of Interest Rate Risk

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, while purchasing variable-rate or hybrid mortgage-backed securities to offset our predominantly fixed-rate loan portfolio. The current prevailing interest rate environment and the desires of our customers have resulted in a demand for long-term hybrid and fixed-rate mortgage loans. In the past several years, we have attempted to originate and purchase a larger percentage of variable-rate mortgage-related assets in order to better manage our interest rate risk. Variable-rate mortgage-related assets include those 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 loans that we have traditionally held in our portfolio. This 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, this strategy to originate a higher percentage of variable-rate instruments may have an initial adverse impact on our net interest

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income and net interest margin in the short-term, as variable-rate interest-earning assets generally have initial interest rates lower than alternative fixed-rate investments.

Variable-rate products constituted 47.4% of loan originations, 60.6% of loan purchases and 36.5% of mortgage-backed security purchases made during 2009. In aggregate, 45.0% of our mortgage-related asset originations and purchases had variable rates. Of the growth in our total mortgage-related assets, 30.5% was due to growth in our variable-rate products. In 2010, we intend to originate and purchase similar percentages to 2009 of variable-rate mortgage loans, but increase the percent of variable-rate mortgage-backed security purchases as we believe more variable-rate product will be available. Our percentage of fixed-rate interest-earning assets to total interest-earning assets was 49.6% at December 31, 2009, slightly increased from 48.2% at December 31, 2008. 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.

Our primary sources of funds have traditionally 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 have been 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. If we experience a significant rising interest rate environment where interest rates increase above the interest rate for the borrowings, these borrowings will likely be called at their next call date and our cost to replace these borrowings would likely increase. Of our borrowings outstanding at December 31, 2009, $29.33 billion were structured callable borrowings. Of these, $22.25 billion with a weighted-average rate of 4.14% have the contractual right to be called within the next twelve months. Given the current market rate environment, we believe none of these borrowings will be called during the next twelve months. As of December 31, 2009, we had $300.0 million of borrowings with terms to maturity of less than one year.

Cash Flow Determination. In preparing the following analyses, we were required to estimate the future cash flows of our interest-earning assets and interest-bearing liabilities. These items are generally reported at their maturity date, subject to assumptions regarding prepayment rates, non-maturity deposit decay rates, and the call of certain of our investment securities and borrowed funds. These assumptions can have a significant impact on the simulation model. While we believe our assumptions are reasonable, there can be no assurance that assumed prepayment rates, assumed calls of securities and borrowed funds, and deposit decay rates will approximate actual future cash flows. Increases in market interest rates may tend to reduce prepayment speeds on our mortgage-related assets, as fewer borrowers refinance their loans, and reduce the anticipated calls of our investment securities. At the same time, deposit decay rates and calls of our borrowed funds may tend to increase. 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 following tables is based on the following assumptions:

• we assumed an annual prepayment rate for our first mortgage loans using market prepayment speeds appropriate for the loan type;

• 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: 7.5% in less than six months, 7.5% in six months to one year, 10.0% in one year to two years, 10.0% in two years to three years, 25.0% in three years to five years, and 40.0% in more than five years;

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• 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 : 7.5% in less than six months, 7.5% in six months to one year, 10.0% in one to two years, 10.0% in two to three years, 25.0% in three years to five years, and 40.0% in more than five years;

• for money market accounts that had no stated maturity, we used decay rates of: 10.0% in less than six months, 10.0% in six months to one year, 20.0% in one to two years, 20.0% in two to three years, 35.0% in three years to five years, and 5.0% in more than five years;

• for the net interest income simulation model and GAP analysis, callable investment securities are shown at the earlier of their probable call date, maturity date or the next rate adjustment date (step-up securities); the model assumed calls of investment securities of $250.0 million over the next year in the current (zero basis point) change scenario; we currently hold $4.15 billion of step-up bonds, none of which were reported at their next call date; and

• for the net interest income simulation model and GAP analysis, 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 there were no calls of borrowed funds over the next year in the current (zero basis point) change scenario.

Simulation Model. We use simulation models as our primary means to calculate and monitor the interest rate risk inherent in our portfolio. These models report changes to 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. We have not reported the minus 200 basis point or minus 100 basis point interest rate shock scenarios in either of our simulation model analyses, as we believe, given the current interest rate environment and historical interest rate levels, the resulting information would not be meaningful.

Net Interest Income. 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.

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The following table reports the changes to our net interest income over the next 12 months ending December 31, 2010 assuming incremental and permanent changes in interest rates for the given rate shock scenarios. The incremental interest rate changes occur over a 12 month period.

Change in			Percent Change in
Interest Rates			Net Interest Income
(Basis points)
	200			(1.66	)%
	100			(0.90	)
	50			(0.47	)
	(50	)		0.01

The preceding table indicates that at December 31, 2009, in the event of a 200 basis point increase in interest rates over the next 12 months, we would expect to experience a 1.66% decrease in net interest income from the base case (no interest rate changes) analysis. If market rates were to increase 200 basis points instantaneously, we would expect to experience a 6.02% decrease in net interest income from the base case analysis. The negative change to net interest income in the increasing interest rate scenarios in both these analyses was primarily due to the increased expense of our short-term time deposits. Our internal policy sets a maximum change of 20.0% given an instantaneous 200 basis point increase or decrease shock in interest rates.

The preceding table also indicates that at December 31, 2009, in the event of a 50 basis point decrease in interest rates over the next 12 months, we would expect to experience a 0.01% increase in net interest income from the base case analysis. In this analysis, where the rates change over the 12 month period, the decrease in deposit expense offsets the decrease in interest income on assets, which will decrease due to accelerated prepayments on these instruments. If market rates were to decrease 50 basis points instantaneously, we would expect to experience a 4.83% decrease in net interest income from the base case. This decrease is primarily due to the acceleration of prepayment speeds on our mortgage-related assets and calls of our investment securities in the lower shocked environment, and the subsequent replacement of these instruments at the lower prevailing market rate.

Present Value of Equity. 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, 2009. 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 6.00% and a minimum present value ratio of 4.00% in the plus 200 basis point interest rate shock

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scenario. Additionally, our current policy sets a maximum basis point change in the plus 200 basis point change scenario of 400 basis points.

Present Value of Equity
As Percent of Present
Value of Assets
Change in			Present			Basis Point
Interest Rates			Value Ratio			Change
(Basis points)
	200			4.81	%		(258	)
	100			6.73			(66	)
	50			7.25			(14	)
	0			7.39
	(50	)		7.07			(32	)

In the 200 basis point increase scenario, the present value ratio was 4.81% at December 31, 2009 as compared to 3.84% at December 31, 2008. The change in the present value ratio was negative 258 basis points at December 31, 2009 as compared to positive 8 basis points at December 31, 2008. The decreases in the present value ratio and the sensitivity measure in the current period positive 200 basis point shock scenario reflect the decrease in the value of our primarily fixed-rate assets below par while the value of our borrowing portfolio remains above par due to call options. The increase in the present value ratio in the base case and the 200 basis point shock scenario from December 31, 2008 reflects the higher long-term market interest rates and steeper market yield curve as short-term rates did not change as much as long-term rates during the year. The increase in the present value ratio is also due to the growth of our deposit portfolio during 2009 as deposits price closer to par in the base case analysis. The decrease in the present value ratio in the negative basis point change was primarily due to higher pricing of our borrowed funds as the structures will increase in duration.

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,

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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.

The following table presents the amounts of our interest-earning assets and interest-bearing liabilities outstanding at December 31, 2009, which we anticipate to reprice or mature in each of the future time periods shown. Except for prepayment or call 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. Assumptions used for decay rates are the same as those used in the preparation of our December 31, 2008 model. Prepayment speeds on our mortgage-related assets have increased from our December 31, 2008 analysis to reflect actual prepayment speeds for these items. Callable investment securities and borrowed funds are reported at the anticipated call date, for those that are callable within one year, or at their contractual maturity date. Investment securities with step-up features, totaling $4.15 billion, are reported at the earlier of their next step-up date or anticipated call date. We reported $250.0 million of investment securities at their anticipated call date. We have reported no borrowings at their anticipated call date due to the low interest rate environment. We have excluded non-accrual mortgage loans of $589.8 million and non-accrual other loans of $1.9 million from the table.

	At December 31, 2009
										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	$	2,796,213		$	2,923,905		$	4,034,420		$	3,495,763		$	5,438,851		$	12,151,578		$	30,840,730
Consumer and other loans		125,942			3,413			19,222			3,293			11,305			184,276			347,451
Federal funds sold		362,449			—			—			—			—			—			362,449
Mortgage-backed securities		2,663,458			2,380,191			4,621,713			4,020,140			5,296,600			2,097,983			21,080,085
FHLB stock		874,768			—			—			—			—			—			874,768
Investment securities		257,080			300,100			1,000,000			1,750,000			1,000,000			975,764			5,282,944
Total interest-earning assets		7,079,910			5,607,609			9,675,355			9,269,196			11,746,756			15,409,601			58,788,427
Interest-bearing liabilities:
Savings accounts		58,992			58,992			78,656			78,656			196,640			314,623			786,559
Interest-bearing demand accounts		202,270			202,270			300,781			300,781			518,794			550,279			2,075,175
Money market accounts		505,884			505,884			1,011,768			1,011,768			1,770,595			252,943			5,058,842
Time deposits		10,636,606			2,445,111			2,146,191			497,046			346,477			—			16,071,431
Borrowed funds		—			300,000			450,000			250,000			600,000			28,375,000			29,975,000
Total interest-bearing liabilities		11,403,753			3,512,256			3,987,396			2,138,250			3,432,507			29,492,845			53,967,007
Interest rate sensitivity gap	$	(4,323,843	)	$	2,095,353		$	5,687,959		$	7,130,946		$	8,314,249		$	(14,083,244	)	$	4,821,420
Cumulative interest rate sensitivity gap	$	(4,323,843	)	$	(2,228,490	)	$	3,459,469		$	10,590,415		$	18,904,664		$	4,821,420
Cumulative interest rate sensitivity gap as a percent of total assets		(7.17	)%		(3.70	)%		5.74	%		17.57	%		31.37	%		8.00	%
Cumulative interest-earning assets as a percent of interest-bearing liabilities		62.08	%		85.06	%		118.30	%		150.33	%		177.24	%		108.93	%

The cumulative one-year gap as a percent of total assets was negative 3.70% at December 31, 2009 compared with negative 7.09% at December 31, 2008. The lower negative cumulative one-year gap primarily reflects the increase in longer-term (over one year to maturity) time deposits and money market deposit accounts placed on

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our balance sheet during 2009. The decrease also reflects the amount of mortgage-related assets in the lower repricing categories due to the current prepayment levels.

The methods used in the gap table are also 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.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
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, 2009 and 2008, 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, 2009. 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, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, 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 Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

New York, New York
February 26, 2010

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Report of Independent Registered Public Accounting Firm

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

We have audited the internal control over financial reporting of Hudson City Bancorp, Inc. and subsidiary (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included 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, Hudson City Bancorp, Inc. and subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, 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 the Company as of December 31, 2009 and 2008, 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, 2009, and our report dated February 26, 2010 expressed an unqualified opinion on those consolidated financial statements.

New York, New York
February 26, 2010

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

	December 31,			December 31,
	2009			2008
	(In thousands, except share and per share amounts)
Assets:
Cash and due from banks	$	198,752		$	184,915
Federal funds sold		362,449			76,896
Total cash and cash equivalents		561,201			261,811
Securities available for sale:
Mortgage-backed securities		11,116,531			9,915,554
Investment securities		1,095,240			3,413,633
Securities held to maturity:
Mortgage-backed securities (fair value of $10,324,831 and $9,695,445 at December 31, 2009 and 2008, respectively)		9,963,554			9,572,257
Investment securities (fair value of $4,071,005 and $50,512 at December 31, 2009 and 2008, respectively)		4,187,704			50,086
Total securities		26,363,029			22,951,530
Loans		31,779,921			29,418,888
Deferred loan costs		81,307			71,670
Allowance for loan losses		(140,074	)		(49,797	)
Net loans		31,721,154			29,440,761
Federal Home Loan Bank of New York stock		874,768			865,570
Foreclosed real estate, net		16,736			15,532
Accrued interest receivable		304,091			299,045
Banking premises and equipment, net		70,116			73,502
Goodwill		152,109			152,109
Other assets		204,556			85,468
Total Assets	$	60,267,760		$	54,145,328
Liabilities and Stockholders’ Equity:
Deposits:
Interest-bearing	$	23,992,007		$	17,949,846
Noninterest-bearing		586,041			514,196
Total deposits		24,578,048			18,464,042
Repurchase agreements		15,100,000			15,100,000
Federal Home Loan Bank of New York advances		14,875,000			15,125,000
Total borrowed funds		29,975,000			30,225,000
Due to brokers for securities purchases		100,000			239,100
Accrued expenses and other liabilities		275,560			278,390
Total liabilities		54,928,608			49,206,532
Commitments and Contingencies (Notes 1, 7, 9 and 14)
Common stock, $0.01 par value, 3,200,000,000 shares authorized; 741,466,555 shares issued; 526,493,676 and 523,770,617 shares outstanding at December 31, 2009 and 2008, respectively		7,415			7,415
Additional paid-in capital		4,683,414			4,641,571
Retained earnings		2,401,606			2,196,235
Treasury stock, at cost; 214,972,879 and 217,695,938 shares at December 31, 2009 and 2008, respectively		(1,727,579	)		(1,737,838	)
Unallocated common stock held by the employee stock ownership plan		(210,237	)		(216,244	)
Accumulated other comprehensive income, net of tax		184,533			47,657
Total stockholders’ equity		5,339,152			4,938,796
Total Liabilities and Stockholders’ Equity	$	60,267,760		$	54,145,328

See accompanying notes to consolidated financial statements.

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

	Year Ended December 31,
	2009		2008		2007
	(In thousands, except per share data)
Interest and Dividend Income:
First mortgage loans	$	1,678,789	$	1,523,521	$	1,205,461
Consumer and other loans		21,676		26,184		28,247
Mortgage-backed securities held to maturity		493,549		497,912		457,720
Mortgage-backed securities available for sale		490,109		377,096		130,185
Investment securities held to maturity		86,581		13,390		74,198
Investment securities available for sale		126,793		162,818		179,909
Dividends on Federal Home Loan Bank of New York stock		43,103		48,009		39,492
Federal funds sold		1,186		4,295		12,293
Total interest and dividend income		2,941,786		2,653,225		2,127,505
Interest Expense:
Deposits		483,468		581,357		606,936
Borrowed funds		1,214,840		1,129,891		873,386
Total interest expense		1,698,308		1,711,248		1,480,322
Net interest income		1,243,478		941,977		647,183
Provision for Loan Losses		137,500		19,500		4,800
Net interest income after provision for loan losses		1,105,978		922,477		642,383
Non-Interest Income:
Service charges and other income		9,399		8,485		7,267
Gains on securities transactions		24,185		—		6
Total non-interest income		33,584		8,485		7,273
Non-Interest Expense:
Compensation and employee benefits		137,071		127,198		106,630
Net occupancy expense		32,270		30,457		29,589
Federal deposit insurance assessment		35,094		4,320		1,701
FDIC special assessment		21,098		—		—
Other expense		40,063		36,101		29,993
Total non-interest expense		265,596		198,076		167,913
Income before income tax expense		873,966		732,886		481,743
Income Tax Expense		346,722		287,328		185,885
Net income	$	527,244	$	445,558	$	295,858
Basic Earnings Per Share	$	1.08	$	0.92	$	0.59
Diluted Earnings Per Share	$	1.07	$	0.90	$	0.58

See accompanying notes to consolidated financial statements.

Page 42

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

	Year Ended December 31,
	2009			2008			2007
	(In thousands , except share amounts)
Common Stock	$	7,415		$	7,415		$	7,415
Additional paid-in capital:
Balance at beginning of year		4,641,571			4,578,578			4,553,614
Stock option plan expense		12,869			15,043			12,242
Tax benefit from stock plans		24,834			36,119			3,761
Allocation of ESOP stock		6,319			10,471			7,313
RRP stock granted		(6,771	)		—			—
Vesting of RRP stock		4,592			1,360			1,648
Balance at end of year		4,683,414			4,641,571			4,578,578
Retained Earnings:
Balance at beginning of year		2,196,235			2,002,049			1,877,840
Net income		527,244			445,558			295,858
Dividends paid on common stock ($0.59, $0.45, and $0.33 per share, respectively)		(288,408	)		(217,995	)		(165,376	)
Exercise of stock options		(33,465	)		(33,377	)		(6,273	)
Balance at end of year		2,401,606			2,196,235			2,002,049
Treasury Stock:
Balance at beginning of year		(1,737,838	)		(1,771,106	)		(1,230,793	)
Purchase of common stock		(43,477	)		(17,045	)		(550,215	)
Exercise of stock options		46,965			50,313			9,902
RRP stock granted		6,771			—			—
Balance at end of year		(1,727,579	)		(1,737,838	)		(1,771,106	)
Unallocated common stock held by the ESOP:
Balance at beginning of year		(216,244	)		(222,251	)		(228,257	)
Allocation of ESOP stock		6,007			6,007			6,006
Balance at end of year		(210,237	)		(216,244	)		(222,251	)
Accumulated other comprehensive income (loss):
Balance at beginning of year		47,657			16,622			(49,563	)
Net change in unrealized gains on securities available for sale arising during the year, net of tax expense of $100,466 for 2009, $37,961 for 2008 and $47,073 for 2007		145,473			54,967			68,173
Reclassification adjustment for gains included in net income, net of tax of $9,880 for 2009, $0 for 2008 and $2 for 2007		(14,305	)		—			(4	)
Pension and other postretirement benefits adjustment, net of tax benefit (expense) of ($3,792) for 2009, $16,528 for 2008 and $1,366 for 2007		5,708			(23,932	)		(1,984	)
Other comprehensive income, net of tax		136,876			31,035			66,185
Balance at end of year		184,533			47,657			16,622
Total Stockholders’ Equity	$	5,339,152		$	4,938,796		$	4,611,307
Summary of comprehensive income
Net income	$	527,244		$	445,558		$	295,858
Other comprehensive income, net of tax		136,876			31,035			66,185
Total comprehensive income	$	664,120		$	476,593		$	362,043

See accompanying notes to consolidated financial statements.

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

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Cash Flows from Operating Activities:
Net income	$	527,244		$	445,558		$	295,858
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, accretion and amortization expense		65,984			26,329			22,484
Provision for loan losses		137,500			19,500			4,800
Gains on securities transactions, net		(24,185	)		—			(6	)
Share-based compensation, including committed ESOP shares		29,787			32,881			27,209
Deferred tax benefit		(46,700	)		(12,868	)		(9,430	)
Increase in accrued interest receivable		(5,046	)		(53,932	)		(50,884	)
(Increase) decrease in other assets		(164,846	)		(21,053	)		11,871
Increase in accrued expenses and other liabilities		2,878			18,029			45,901
Net Cash Provided by Operating Activities		522,616			454,444			347,803
Cash Flows from Investing Activities:
Originations of loans		(6,063,870	)		(5,040,221	)		(3,352,511	)
Purchases of loans		(3,161,401	)		(3,061,859	)		(3,971,273	)
Payments on loans		6,768,470			2,820,381			2,189,018
Principal collection of mortgage-backed securities held to maturity		2,609,338			1,348,304			1,215,867
Purchases of mortgage-backed securities held to maturity		(3,017,730	)		(1,360,861	)		(3,861,633	)
Principal collection of mortgage-backed securities available for sale		2,123,330			956,710			696,560
Proceeds from sales of mortgage-backed securities available for sale		785,594			—			—
Purchases of mortgage-backed securities available for sale		(4,088,367	)		(5,820,531	)		(2,966,473	)
Proceeds from maturities and calls of investment securities held to maturity		400,000			1,358,485			125,480
Purchases of investment securities held to maturity		(4,440,329	)		—			—
Proceeds from maturities and calls of investment securities available for sale		3,622,225			1,449,906			3,825,060
Proceeds from sales of investment securities available for sale		316			—			—
Purchases of investment securities available for sale		(1,331,300	)		(2,100,000	)		(2,148,705	)
Purchases of Federal Home Loan Bank of New York stock		(78,273	)		(193,277	)		(259,660	)
Redemption of Federal Home Loan Bank of New York stock		69,075			23,058			9,315
Purchases of premises and equipment, net		(6,316	)		(8,565	)		(11,694	)
Net proceeds from sale of foreclosed real estate		15,557			5,618			550
Net Cash Used in Investing Activities		(5,793,681	)		(9,622,852	)		(8,510,099	)
Cash Flows from Financing Activities:
Net increase in deposits		6,114,006			3,310,660			1,737,795
Proceeds from borrowed funds		750,000			6,650,000			10,725,000
Principal payments on borrowed funds		(1,000,000	)		(566,000	)		(3,557,000	)
Dividends paid		(288,408	)		(217,995	)		(165,376	)
Purchases of treasury stock		(43,477	)		(17,045	)		(550,215	)
Exercise of stock options		13,500			16,936			3,629
Tax benefit from stock plans		24,834			36,119			3,761
Net Cash Provided by Financing Activities		5,570,455			9,212,675			8,197,594
Net Increase in Cash and Cash Equivalents		299,390			44,267			35,298
Cash and Cash Equivalents at Beginning of Year		261,811			217,544			182,246
Cash and Cash Equivalents at End of Year	$	561,201		$	261,811		$	217,544
Supplemental Disclosures:
Interest paid	$	1,696,279		$	1,689,934		$	1,413,140
Loans transferred to foreclosed real estate	$	26,581		$	18,892		$	1,752
Income taxes paid	$	350,712		$	282,009		$	161,983

See accompanying notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

1. Organization

Hudson City Bancorp, Inc. (“Hudson City Bancorp” or the “Company”) 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. 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”).

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. or Hudson City Bancorp, Inc. and its consolidated subsidiary, depending on the context. In preparing the consolidated financial statements, management 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 revenues and expenses for the period. Actual results could differ from these estimates. The allowance for loan losses is a material estimate that is particularly susceptible to near-term change. The current economic environment has increased the degree of uncertainty inherent in this material estimate.

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 of New York based on deposits. The amount of the required reserves for the years ended December 31, 2009 and 2008 was $24.5 million and $21.8 million, respectively.

Mortgage-Backed Securities

Mortgage-backed securities include U.S. Government-sponsored enterprise (“GSEs”) and U.S. Government agency 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 (“REMIC’s”), 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”).

Mortgage-backed securities are classified as either held to maturity or available for sale. For the years ended December 31, 2009, 2008 and 2007, we did not maintain a trading portfolio. 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, adjusted for estimated prepayments, 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

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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. Amortization and accretion of premiums and discounts are reflected as an adjustment to interest income over the life of the security, adjusted for estimated prepayments, using the effective interest method. Realized gains and losses are recognized when securities are sold using the specific identification method. The estimated fair value of substantially all of these securities is determined by the use of market prices obtained from independent third-party pricing services. We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment considers the duration and severity of the impairment, our intent and ability to hold the securities and our assessments of the reason for the decline in value and the likelihood of a near-term recovery. If such a decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to income as a component of non-interest expense. See “Critical Accounting Policies – Securities Impairment”.

Investment Securities

Investment securities are classified as either held to maturity or available for sale. For the years ended December 31, 2009, 2008 and 2007, we did not maintain a trading portfolio. 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. Amortization and accretion of premiums and discounts are reflected as an adjustment to interest income over the life of the security using the effective interest method. Realized gains and losses are recognized when securities are sold or called using the specific identification method. The estimated fair value of substantially all of these securities is determined by the use of quoted market prices obtained from independent third-party pricing services. We conduct a periodic review and evaluation of the securities portfolio to determine if a decline in the fair value of any security below its cost basis is other-than-temporary. Our evaluation of other-than-temporary impairment considers the duration and severity of the impairment, our intent and ability to hold the securities and our assessments of the reason for the decline in value and the likelihood of a near-term recovery. If such a decline is deemed other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to income as a component of non-interest expense. See “Critical Accounting Policies – Securities Impairment”.

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. Amortization and accretion of premiums and discounts is reflected as an adjustment to interest income over the life of the purchased loan using the effective interest method.

Existing customers in good credit standing 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 have determined that the modification of the terms of the loan (i.e. the change in rate and period to maturity), represents a more than 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.

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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 U.S. Government 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 to income is reversed. Interest income on non-accrual loans and impaired loans is recognized in the period collected unless the ultimate collection of principal is considered doubtful. 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 31, 2009. 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 that is 73.8% of our total loans. 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, rising unemployment levels 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. Our Asset Quality Committee considers these trends in market conditions, as well as other factors, in estimating the allowance for loan losses.

Due to the nature of our loan portfolio, our evaluation of the adequacy of our ALL is performed primarily on a “pooled” basis. 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, commercial, construction, 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, delinquency trends, portfolio growth and the status of the regional economy and housing market, in order to ascertain that the loss factors cover probable and estimable losses inherent in the portfolio. Based on our recent loss experience on non-performing loans, we increased the loss factors used in our quantitative analysis of the ALL for certain loan types during 2009.

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 based on our systematic process which reflects various asset quality trends and recent charge-off experience. We apply this process and methodology in a consistent manner and we reassess and modify the estimation methods and assumptions used in response to changing conditions.

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Federal Home Loan Bank of New York Stock

As a member of the Federal Home Loan Bank of New York (“FHLB”), we are required to acquire and hold shares of FHLB Class B stock. Our holding requirement varies based on our activities, primarily our outstanding borrowings, with the FHLB. Our investment in FHLB stock is carried at cost. We conduct a periodic review and evaluation of our FHLB stock to determine if any impairment exists.

Foreclosed Real Estate

Foreclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure. Write-downs to fair value (net of estimated cost to sell) at the time of acquisition are charged to the allowance for loan losses. After acquisition, foreclosed properties are held for sale and carried at the lower of fair value less estimated selling costs. Fair value is estimated through current appraisals, where practical, or an inspection and a comparison of the property securing the loan with similar properties in the area by either a licensed appraiser or real estate broker. Subsequent provisions for losses, which may result from the ongoing periodic valuations of these properties, are charged to income in the period in which they are identified. 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 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

FASB guidance 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. Other intangible assets include the core deposit intangible recorded as a result of Hudson City Bancorp’s acquisition of Sound Federal Bancorp, Inc. in 2006. These other intangible assets are amortizing intangible assets and as such are evaluated for impairment in accordance with FASB guidance. We did not recognize any impairment of goodwill or other intangible assets for the years ended December 31, 2009, 2008 and 2007.

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. Certain tax benefits attributable to stock options and restricted stock are credited to additional paid-in capital. In July 2006, the FASB issued guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position

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taken, or expected to be taken, in a tax return. We adopted this guidance on January 1, 2007. Accruals of interest and penalties related to unrecognized tax benefits are recognized in income tax expense.

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.

The accounting guidance related to retirement benefits 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 accounting guidance requires that plan assets and benefit obligations be measured as of the date of the employer’s fiscal year-end statement of financial condition. This requirement became effective for the Company as of December 31, 2008. We have historically used our fiscal year-end as the measurement date for plan assets and benefit obligations and therefore the measurement date provisions of the FASB guidance did not affect us.

The employee stock ownership plan (“ESOP”) is accounted for in accordance with FASB guidance related to 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 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 market price of our stock during each quarter.

Stock-Based Compensation

Effective January 1, 2006, Hudson City Bancorp adopted FASB guidance 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.

Bank-Owned Life Insurance

Bank-owned life insurance (“BOLI”) is accounted for in accordance with FASB guidance related to Split-Dollar Life Insurance Agreements. The cash surrender value of BOLI is recorded on our consolidated statement 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 statement of financial condition for postretirement death benefits provided by the split-dollar endorsement policy. A corresponding expense is recorded in non-interest expense for the accrual of benefits over the period during which employees provide services to earn the benefits.

Borrowed Funds

Hudson City enters into sales of securities under agreements to repurchase with selected brokers and the 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

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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.

Comprehensive Income

Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes items such as changes in unrealized gains and losses on securities available for sale, net of tax and changes in the unrecognized 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

FASB guidance 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 decisions 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 recognition and retention plans (“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 or have not vested are excluded from the computation of basic and diluted earnings per share.

Subsequent Events

The Company has evaluated all events subsequent to the balance sheet date of December 31, 2009, through February 26, 2010, which is the date these consolidation financial statements were issued, and have determined that there are no subsequent events that require disclosure under FASB guidance.

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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, 2009, 2008 and 2007 we purchased 3,970,605, 1,124,262 and 40,578,954 shares of our common stock at an aggregate cost of $43.5 million, $17.0 million and 550.2 million, respectively. As of December 31, 2009, there remained 50,123,550 shares to be purchased under the existing stock repurchase programs.

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)
2009
Held to Maturity:
GNMA pass-through certificates	$	112,019	$	2,769	$	(1	)	$	114,787
FNMA pass-through certificates		2,510,095		106,509		—			2,616,604
FHLMC pass-through certificates		4,764,429		231,356		(3	)		4,995,782
FHLMC and FNMA — REMICs		2,577,011		37,119		(16,472	)		2,597,658
Total held to maturity	$	9,963,554	$	377,753	$	(16,476	)	$	10,324,831
Available for Sale:
GNMA pass-through certificates	$	1,257,590	$	13,365	$	(881	)	$	1,270,074
FNMA pass-through certificates		3,782,198		128,429		(3,259	)		3,907,368
FHLMC pass-through certificates		4,655,629		232,697		—			4,888,326
FHLMC and FNMA — REMICs		1,057,007		5,938		(12,182	)		1,050,763
Total available for sale	$	10,752,424	$	380,429	$	(16,322	)	$	11,116,531
2008
Held to Maturity:
GNMA pass-through certificates	$	128,906	$	108	$	(1,705	)	$	127,309
FNMA pass-through certificates		3,203,799		44,905		(857	)		3,247,847
FHLMC pass-through certificates		5,859,297		85,885		(2,027	)		5,943,155
FHLMC and FNMA — REMICs		380,255		363		(3,484	)		377,134
Total held to maturity	$	9,572,257	$	131,261	$	(8,073	)	$	9,695,445
Available for Sale:
GNMA pass-through certificates	$	938,393	$	2,425	$	(24,823	)	$	915,995
FNMA pass-through certificates		3,253,463		47,425		—			3,300,888
FHLMC pass-through certificates		5,607,066		91,657		(52	)		5,698,671
Total available for sale	$	9,798,922	$	141,507	$	(24,875	)	$	9,915,554

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The following tables summarize the fair values and unrealized losses of mortgage-backed securities with an unrealized loss at December 31, 2009 and 2008, segregated between securities that had been in a continuous unrealized loss position for less than twelve months or longer than twelve months at the respective dates.

	Less Than 12 Months					12 Months or Longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(In thousands)
2009
Held to Maturity:
GNMA pass-through certificates	$	—	$	—		$	582	$	(1	)	$	582	$	(1	)
FNMA pass-through certificates		—		—			—		—			—		—
FHLMC pass-through certificates		642		(2	)		52		(1	)		694		(3	)
FHLMC and FNMA — REMIC’s		617,463		(10,747	)		171,031		(5,725	)		788,494		(16,472	)
Total held to maturity		618,105		(10,749	)		171,665		(5,727	)		789,770		(16,476	)
Available for Sale:
GNMA pass-through certificates		156,668		(878	)		19,690		(3	)		176,358		(881	)
FNMA pass-through certificates		694,543		(3,259	)		—		—			694,543		(3,259	)
FHLMC pass-through certificates		—		—			—		—			—		—
FHLMC and FNMA — REMIC’s		476,797		(12,182	)		—		—			476,797		(12,182	)
Total available for sale		1,328,008		(16,319	)		19,690		(3	)		1,347,698		(16,322	)
Total	$	1,946,113	$	(27,068	)	$	191,355	$	(5,730	)	$	2,137,468	$	(32,798	)
2008
Held to Maturity:
GNMA pass-through certificates	$	99,059	$	(1,333	)	$	12,753	$	(372	)	$	111,812	$	(1,705	)
FNMA pass-through certificates		53,796		(230	)		154,150		(627	)		207,946		(857	)
FHLMC pass-through certificates		88,814		(310	)		186,866		(1,717	)		275,680		(2,027	)
FHLMC and FNMA — REMIC’s		—		—			274,434		(3,484	)		274,434		(3,484	)
Total held to maturity		241,669		(1,873	)		628,203		(6,200	)		869,872		(8,073	)
Available for Sale:
GNMA pass-through certificates		312,112		(6,714	)		467,660		(18,109	)		779,772		(24,823	)
FNMA pass-through certificates		—		—			—		—			—		—
FHLMC pass-through certificates		95,928		(52	)		—		—			95,928		(52	)
Total available for sale		408,040		(6,766	)		467,660		(18,109	)		875,700		(24,875	)
Total	$	649,709	$	(8,639	)	$	1,095,863	$	(24,309	)	$	1,745,572	$	(32,948	)

The unrealized losses are primarily due to the changes in market interest rates subsequent to purchase. At December 31, 2009, a total of 54 securities were in an unrealized loss position (417 at December 31, 2008). We only purchase securities issued by GSEs and do not own any unrated or private label securities or other high-risk securities such as those backed by sub-prime loans. Accordingly, it is expected that the securities would not be settled at a price less than the Company’s amortized cost basis. We do not consider these investments to be other-than-temporarily impaired at December 31, 2009 and December 31, 2008 since the decline in market value is attributable to changes in interest rates and not credit quality and the Company has the intent and ability to hold these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result no impairment loss has been recognized during the years ended December 31, 2009, 2008 and 2007, respectively.

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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, 2009, by contractual maturity, are shown below. The table does not include the effect of prepayments or scheduled principal amortization.

			Estimated
	Amortized		Fair Market
	Cost		Value
	(In thousands)
Held to Maturity:
Due in one year or less	$	73	$	75
Due after one year through five years		527		558
Due after five years through ten years		13,704		14,676
Due after ten years		9,949,250		10,309,522
Total held to maturity	$	9,963,554	$	10,324,831
Available for Sale:
Due after ten years	$	10,752,424	$	11,116,531
Total available for sale	$	10,752,424	$	11,116,531

Sales of mortgage-backed securities available-for-sale amounted to $761.6 million during 2009. There were no sales of mortgage-backed securities available-for-sale or held-to-maturity during 2008 and 2007. Realized gains on the sales of mortgage-backed securities amounted to $24.0 million during 2009.

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)
2009
Held to Maturity:
United States government-sponsored enterprises debt	$	4,187,599	$	915	$	(117,614	)	$	4,070,900
Municipal bonds		105		—		—			105
Total held to maturity	$	4,187,704	$	915	$	(117,614	)	$	4,071,005
Available for Sale:
United States government-sponsored enterprises debt	$	1,104,699	$	1,890	$	(18,424	)	$	1,088,165
Equity securities		6,770		305		—			7,075
Total available for sale	$	1,111,469	$	2,195	$	(18,424	)	$	1,095,240
2008
Held to Maturity:
United States government-sponsored enterprises debt	$	49,981	$	425	$	—		$	50,406
Municipal bonds		105		1		—			106
Total held to maturity	$	50,086	$	426	$	—		$	50,512
Available for Sale:
United States government-sponsored enterprises debt	$	3,397,204	$	14,137	$	(5,093	)	$	3,406,248
Equity securities		6,935		450		—			7,385
Total available for sale	$	3,404,139	$	14,587	$	(5,093	)	$	3,413,633

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The following tables summarize the fair values and unrealized losses of investment securities with an unrealized loss at December 31, 2009 and 2008, and if the unrealized loss position was for a continuous period of less than twelve months or longer than twelve months at the respective dates.

	Less Than 12 Months					12 Months or Longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(In thousands)
2009
Held to Maturity:
United States government - -sponsored enterprises debt	$	3,930,974	$	(117,614	)	$	—	$	—		$	3,930,974	$	(117,614	)
Total held to maturity		3,930,974		(117,614	)		—		—			3,930,974		(117,614	)
Available for Sale:
United States government - -sponsored enterprises debt		472,545		(7,263	)		263,730		(11,161	)		736,275		(18,424	)
Total available for sale		472,545		(7,263	)		263,730		(11,161	)		736,275		(18,424	)
Total	$	4,403,519	$	(124,877	)	$	263,730	$	(11,161	)	$	4,667,249	$	(136,038	)
2008
Available for Sale:
United States government - -sponsored enterprises debt	$	594,907	$	(5,093	)	$	—	$	—		$	594,907	$	(5,093	)
Total	$	594,907	$	(5,093	)	$	—	$	—		$	594,907	$	(5,093	)

The unrealized losses are primarily due to changes in market interest rates subsequent to purchase. At December 31, 2009, a total of 47 securities were in an unrealized loss position (6 at December 31, 2008). We only purchase securities issued by GSEs and do not own any unrated or private label securities or other high-risk securities such as those backed by sub-prime loans. Accordingly, it is expected that the securities would not be settled at a price less than the Company’s amortized cost basis. We do not consider these investments to be other-than-temporarily impaired at December 31, 2009 and December 31, 2008 since the decline in market value is attributable to changes in interest rates and not credit quality and the Company has the intent and ability to hold these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result no impairment loss has been recognized during the years ended December 31, 2009, 2008 and 2007, respectively.

The amortized cost and estimated fair market value of investment securities held to maturity and available for sale at December 31, 2009, 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.

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			Estimated
	Amortized		Fair Market
	Cost		Value
	(In thousands)
Held to Maturity:
Due after one year through five years	$	105	$	105
Due after five years through ten years		1,299,130		1,275,505
Due after ten years		2,888,469		2,795,395
Total held to maturity	$	4,187,704	$	4,071,005
Available for Sale:
Due after five years through ten years	$	399,905	$	396,941
Due after ten years		704,794		691,224
Total available for sale	$	1,104,699	$	1,088,165

There were sales of $168,000 of investment securities available-for-sale during 2009. There were no sales of investment securities available-for-sale or held-to-maturity during the years ended December 31, 2008 and 2007. Gross realized gains on sales and calls of investment securities available for sale were$148,000 during 2009 and $6,000 during 2007 (none during 2008). The carrying value of securities pledged as required security for deposits and for other purposes required by law amounted to $20.1 million and $20.0 million at December 31, 2009 and 2008, respectively.

6. Loans and Allowance for Loan Losses

Loans at December 31 are summarized as follows:

	2009		2008
	(In thousands)
First mortgage loans:
One- to four-family	$	31,076,829	$	28,931,237
FHA/VA		285,003		20,197
Multi-family and commercial		54,694		57,829
Construction		13,030		24,830
Total first mortgage loans		31,429,556		29,034,093
Consumer and other loans:
Fixed–rate second mortgages		201,375		262,538
Home equity credit lines		127,987		101,751
Other		21,003		20,506
Total consumer and other loans		350,365		384,795
Total loans	$	31,779,921	$	29,418,888

Originating loans secured by residential real estate is our 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 a result of our lending practices, we have a concentration of loans secured by real property located primarily in New Jersey, New York and Connecticut. At December 31, 2009, approximately 73.8% of our total loans are in the New York metropolitan area.

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Included in our loan portfolio at December 31, 2009 and 2008 are $4.59 billion and $3.47 billion, respectively, of interest-only loans. These loans are originated as adjustable-rate mortgage (“ARM”) loans with initial terms of five, seven or ten years 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, the loan 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. We had $82.2 million and $16.6 million of non-performing interest-only loans at December 31, 2009 and 2008, respectively.

In addition to our full documentation loan program, we process loans to certain eligible borrowers as limited documentation loans. We have originated these types of loans for over 15 years. Loans eligible for limited documentation processing are ARM loans, interest-only first mortgage 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 70% of the lower of the appraised value or purchase price of the property. Generally the maximum loan amount for limited documentation loans is $750,000 and these loans are subject to higher interest rates than our full documentation loan products. We also allow certain borrowers to obtain mortgage loans without verification of income. However, in these cases, we do verify the borrowers’ assets. These loans are subject to somewhat higher interest rates than our regular products, and are generally limited to a maximum loan-to-value ratio of 60%. Limited documentation and no income verification loans have an inherently higher level of risk compared to loans with full documentation. We had $68.0 million and $7.6 million of non-performing reduced-documentation loans at December 31, 2009 and 2008, respectively.

The following table presents the geographic distribution of our loan portfolio as a percentage of total loans and of our non-performing loans as a percentage of total non-performing loans.

	At December 31, 2009						At December 31, 2008
	Total loans			Non-performing loans			Total loans			Non-performing loans
New Jersey		43.0	%		41.6	%		44.8	%		40.4	%
New York		18.2			18.0			15.6			22.6
Connecticut		12.6			4.2			9.3			2.3
Total New York metropolitan area		73.8			63.8			69.7			65.3
Virginia		4.6			6.2			5.5			4.2
Illinois		3.9			5.6			4.3			3.5
Maryland		3.5			5.1			4.2			5.4
Massachusetts		2.7			2.3			3.0			2.7
Pennsylvania		2.0			1.9			1.5			1.5
Minnesota		1.4			1.8			1.8			3.8
Michigan		1.3			4.2			1.7			3.7
All others		6.8			9.1			8.3			9.9
Total Outside New York metropolitan area		26.2			36.2			30.3			34.7
		100.0	%		100.0	%		100.0	%		100.0	%

The ultimate ability to collect the loan portfolio is subject to changes in the real estate market and future economic conditions. During 2009 and 2008, there was a decline in the housing and real estate markets, both nationally and locally. Housing market conditions in the Northeast quadrant of the United States, where most of our lending activity occurs, weakened during 2009 and 2008 as evidenced by reduced levels of sales, increasing inventories of houses on the market, declining house prices, an increase in the length of time houses remain on the market and rising unemployment levels.

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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. While we continue to adhere to prudent underwriting standards, we are geographically concentrated in the New York metropolitan area of the United States and, therefore, are not immune to negative consequences arising from overall economic weakness and, in particular, a sharp downturn in the housing industry. Continued decreases in real estate values could adversely affect the value of property used as collateral for our loans. No assurance can be given in any particular case that our loan-to-value ratios will provide full protection in the event of borrower default. Adverse changes in the economy and increasing unemployment rates may have a negative effect on the ability of our borrowers to make timely loan payments, which would have an adverse impact on our earnings. A further increase in loan delinquencies would decrease our net interest income and may adversely impact our loss experience on non-performing loans which may result in an increase in the loss factors used in our quantitative analysis of the ALL, causing increases in our provision and allowance for loan losses. 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.

There were no loans held for sale at December 31, 2009 and 2008.

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:

	2009		2008
	(In thousands)
Non-accrual loans:
One-to four-family	$	581,786	$	200,642
Multi-family and commercial mortgages		1,414		1,854
Construction loans		6,624		7,610
Consumer loans		1,916		626
Total non-accrual loans		591,740		210,732
Accruing loans delinquent 90 days or more		35,955		6,842
Total non-performing loans	$	627,695	$	217,574

At December 31, 2009, approximately $402.8 million of our non-performing loans were in the New York metropolitan area and $175.2 million were in other states in the Northeast quadrant of the United States.

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.

At December 31, 2009 and 2008, loans evaluated for impairment in accordance with FASB guidance amounted to $11.2 million and $9.5 million, respectively. Based on this evaluation, the allowance for loan losses related to loans classified as impaired at December 31, 2009 and 2008 amounted to $2.1 million and $818,000, respectively. Interest income received during the year on loans classified as impaired was immaterial.

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

	2009			2008			2007
	(In thousands)
Balance at beginning of year	$	49,797		$	34,741		$	30,625
Charge-offs		(48,133	)		(4,522	)		(763	)
Recoveries		910			78			79
Net charge-offs		(47,223	)		(4,444	)		(684	)
Provision for loan losses		137,500			19,500			4,800
Balance at end of year	$	140,074		$	49,797		$	34,741

7. Banking Premises and Equipment, net

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

	2009			2008
	(In thousands)
Land	$	5,806		$	5,806
Buildings		55,100			54,757
Leasehold improvements		43,550			41,279
Furniture, fixtures and equipment		78,998			75,756
Total acquisition cost		183,454			177,598
Accumulated depreciation and amortization		(113,338	)		(104,096	)
Total banking premises and equipment, net	$	70,116		$	73,502

Amounts charged to net occupancy expense for depreciation and amortization of banking premises and equipment amounted to $9.7 million, $10.2 million and $10.1 million in 2009, 2008 and 2007, 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:

Year	Amount
	(in thousands)
2010	$	8,974
2011		9,196
2012		9,106
2013		8,940
2014		8,755
Thereafter		106,482
Total	$	151,453

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Net occupancy expense included gross rental expense for bank premises of $10.4 million, $9.4 million, and $8.5 million in 2009, 2008, and 2007, respectively, and rental income of $356,000, $324,000, and $384,000 for the respective years.

8. Deposits

Deposits at December 31 are summarized as follows:

	2009								2008
						Weighted								Weighted
	Balance		Percent			Average Rate			Balance		Percent			Average Rate
	(Dollars in thousands)
Savings	$	786,559		3.20	%		0.74	%	$	712,420		3.86	%		0.76	%
Noninterest-bearing demand		586,041		2.38			—			514,196		2.78			—
Interest-bearing demand		2,075,175		8.44			1.36			1,573,771		8.52			2.47
Money market		5,058,842		20.59			1.38			2,716,429		14.72			2.87
Time deposits		16,071,431		65.39			2.01			12,947,226		70.12			3.69
Total deposits	$	24,578,048		100.00	%		1.74	%	$	18,464,042		100.00	%		3.25	%

Time deposits of $100,000 or more amounted to $5.94 billion and $4.60 billion at December 31, 2009 and 2008, respectively. Interest expense on time deposits of $100,000 or more for the years ended December 31, 2009, 2008 and 2007 was $112.1 million, $119.9 million, and $131.5 million, respectively. Included in noninterest-bearing demand accounts are mortgage escrow deposits of $102.8 million and $98.7 million at December 31, 2009 and 2008, respectively.

Scheduled maturities of time deposits at December 31, 2009 are as follows:

Year	Amount
	(In thousands)
2010	$	13,081,717
2011		2,146,191
2012		497,046
2013		85,380
2014		261,097
Total	$	16,071,431

Page 59

9. Borrowed Funds

Borrowed funds at December 31 are summarized as follows:

	2009					2008
			Weighted					Weighted
			Average					Average
	Principal		Rate			Principal		Rate
	(Dollars in thousands)
Securities sold under agreements to repurchase:
FHLB	$	2,400,000		4.44	%	$	2,400,000		4.44	%
Other brokers		12,700,000		3.93			12,700,000		3.91
Total securities sold under agreements to repurchase		15,100,000		4.01			15,100,000		3.99
Advances from the FHLB		14,875,000		3.99			15,125,000		3.94
Total borrowed funds	$	29,975,000		4.00	%	$	30,225,000		3.97	%
Accrued interest payable	$	141,828				$	138,351

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,
	2009			2008			2007
	(Dollars in thousands)
Repurchase Agreements:
Average balance outstanding during the year	$	15,100,221		$	13,465,540		$	10,305,216
Maximum balance outstanding at any month-end during the year	$	15,100,000		$	15,100,000		$	12,016,000
Weighted average rate during the period		4.05	%		4.17	%		4.20	%
FHLB Advances:
Average balance outstanding during the year	$	15,035,798		$	13,737,057		$	10,286,869
Maximum balance outstanding at any month-end during the year	$	15,575,000		$	15,125,000		$	12,125,000
Weighted average rate during the period		4.01	%		4.14	%		4.28	%

Page 60

Substantially all of our borrowed funds are callable at the discretion of the issuer after an initial no-call period. At December 31, 2009, borrowed funds had scheduled maturities and potential call dates as follows:

	Borrowings by Scheduled					Borrowings by Earlier of Scheduled
	Maturity Date					Maturity or Next Potential Call Date
			Weighted					Weighted
			Average					Average
Year	Principal		Rate			Principal		Rate
	(Dollars in thousands)
2010	$	300,000		5.68	%	$	22,250,000		4.14	%
2011		450,000		3.71			5,350,000		3.20
2012		250,000		3.55			1,050,000		4.15
2013		250,000		5.30			1,325,000		4.69
2014		350,000		3.37			—		—
2015		3,725,000		3.85			—		—
2016		7,100,000		4.31			—		—
2017		9,975,000		4.20			—		—
2018		5,850,000		3.13			—		—
2019		1,725,000		4.63			—		—
Total	$	29,975,000		4.00	%	$	29,975,000		4.00	%

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 Year Ended December 31,
	2009		2008		2007
	(Dollars in thousands)
Amortized cost of collateral:
United States government-sponsored enterprise securities	$	2,429,640	$	2,150,000	$	3,620,083
Mortgage-backed securities		14,482,533		15,572,838		9,308,551
Total amortized cost of collateral	$	16,912,173	$	17,722,838	$	12,928,634
Fair value of collateral:
United States government-sponsored enterprise securities	$	2,363,328	$	2,159,471	$	3,626,572
Mortgage-backed securities		15,115,964		15,759,490		9,294,264
Total fair value of collateral	$	17,479,292	$	17,918,961	$	12,920,836

We have two collateralized borrowings in the form of repurchase agreements totaling $100.0 million with Lehman Brothers, Inc. that mature in the first quarter of 2013. Lehman Brothers, Inc. is currently in liquidation under the Securities Industry Protection Act. Mortgage-backed securities with an amortized cost of approximately $114.5 million are pledged as collateral for these borrowings. We intend to pursue full recovery of the pledged collateral in accordance with the contractual terms of the repurchase agreements. There can be no assurances that the final settlement of this transaction will result in the full recovery of the collateral or the full amount of the claim. We have not recognized a loss in our financial statements related to these repurchase agreements.

At December 31, 2009, we had unused lines of credit available from the FHLB, other than repurchase agreements, of up to $200.0 million. These lines of credit are renewed on an annual basis by the FHLB.

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Our advances from the FHLB are secured by our investment in FHLB stock and by a blanket security agreement. This agreement requires us to maintain as collateral certain qualifying assets (such as one- to-four family residential mortgage loans) with a fair value, as defined, at least equal to 110% of any outstanding advances.

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 postretirement benefits, other than pensions, was changed to restrict participation to those employees hired on or before July 31, 2005, and 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 $17.1 million at December 31, 2009 and $12.4 million at December 31, 2008. 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 10 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.

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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
	2009			2008			2009			2008
	(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year	$	132,134		$	114,491		$	37,820		$	37,245
Service cost		4,001			3,285			583			1,122
Interest cost		7,776			6,675			1,884			2,272
Participant contributions		—			—			46			40
Actuarial loss (gain)		2,403			11,921			(4,197	)		(1,116	)
Benefits paid		(4,486	)		(4,238	)		(1,915	)		(1,851	)
Medicare subsidy		—			—			—			108
Benefit obligation at end of year		141,828			132,134			34,221			37,820
Change in Plan Assets:
Fair value of plan assets at beginning of year		96,327			104,063			—			—
Actual return on plan assets		16,595			(22,030	)		—			—
Employer contributions		35,332			18,532			1,869			1,811
Participant contributions		—			—			46			40
Benefits paid		(4,486	)		(4,238	)		(1,915	)		(1,851	)
Fair value of plan assets at end of year		143,768			96,327			—			—
Funded status	$	1,940		$	(35,807	)	$	(34,221	)	$	(37,820	)

Funded status amounts recognized in the consolidated statements of financial condition at December 31 consist of:

	Retirement Plans					Other Benefits
	2009		2008			2009			2008
	(In thousands)
Other assets	$	1,940	$	—		$	—		$	—
Accrued expenses and other liabilities		—		(35,807	)		(34,221	)		(37,820	)

Pre-tax amounts recognized as components of total accumulated other comprehensive income at December 31 consist of:

	Retirement Plans				Other Benefits
	2009		2008		2009			2008
			(In thousands)
Net actuarial loss	$	47,981	$	55,748	$	8,301		$	11,261
Prior service cost (credit)		2,239		2,577		(22,470	)		(24,035	)
Total	$	50,220	$	58,325	$	(14,169	)	$	(12,774	)

The accumulated benefit obligation for all defined benefit retirement plans was $120.9 million and $113.7 million at December 31, 2009 and 2008, respectively.

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

	Retirement Plans									Other Benefits
	2009			2008			2007			2009			2008			2007
	(In thousands)
Net periodic benefit cost:
Service cost	$	4,001		$	3,285		$	3,358		$	583		$	1,122		$	945
Interest cost		7,776			6,675			6,392			1,884			2,272			2,058
Expected return on assets		(8,575	)		(8,530	)		(8,269	)		—			—			—
Amortization of:
Net actuarial loss		3,686			252			284			301			687			575
Prior service cost (credit)		338			325			300			(1,565	)		(1,565	)		(1,565	)
Net periodic benefit cost		7,226			2,007			2,065			1,203			2,516			2,013
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net actuarial (gain) loss		(4,081	)		41,275			3,878			(2,659	)		(1,116	)		(74	)
Prior service cost (credit)		—			—			677			—			—			(1,537	)
Amortization of net actuarial loss		(3,686	)		(252	)		(284	)		(301	)		(687	)		(575	)
Amortization of prior service cost		(338	)		(325	)		(300	)		1,565			1,565			1,565
Total recognized in other comprehensive income		(8,105	)		40,698			3,971			(1,395	)		(238	)		(621	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(879	)	$	42,705		$	6,036		$	(192	)	$	2,278		$	1,392

The estimated net actuarial loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2010 are $2.7 million and $339,000, respectively. The estimated net actuarial loss and prior service credit for other defined benefit post-retirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2010 are $264,000 and ($1.6) million, 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
	2009			2008			2007			2009			2008			2007
Discount rate		5.75	%		6.00	%		6.00	%		5.75	%		6.00	%		6.00	%
Expected return on assets		8.25			8.25			8.25			—			—			—
Rate of compensation increase		4.25			4.25			4.25			—			—			—

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

	Retirement Plans						Other Benefits
	2009			2008			2009			2008
Discount rate		6.00	%		5.75	%		5.75	%		5.75	%
Rate of compensation increase		4.00			4.00			—			—

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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.

The assumed health care cost trend rate used to measure the expected cost of other benefits for 2009 was 8.5%. The rate was assumed to decrease gradually to 4.75% for 2016 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	$	35	$	(81	)
Effect on other benefit obligations		476		(51	)

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. The plan trustee, in its 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 $9.6 million (6.7% of total plan assets) as of December 31, 2009, and $11.2 million (11.6% of total plan assets) as of December 31, 2008. This stock was purchased at an aggregate cost of $6.0 million using a cash contribution made by Hudson City Savings in July 2003. Our plan may not purchase our common stock if, after the purchase, 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 of our common stock held by the plan exceeds 20% of the fair value of the total plan assets.

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The following table presents the fair value of the retirement plan’s assets at December 31, 2009 by asset class:

			Fair Value Measurements at December 31, 2009
			Quoted Prices in Active		Significant Other		Significant
	Carrying		Markets for Identical		Observable Inputs		Unobservable
Asset Class	Value		Assets (Level 1)		(Level 2)		Inputs (Level 3)
	(In thousands)
Cash		8,732		8,732		—		—
Guaranteed deposit fund (a)		12,059		—		—		12,059
Equity Securities (b)		78,475		78,475		—		—
Fixed income securities (c)		44,502		44,502		—		—
	$	143,768	$	131,709	$	—	$	12,059

(a)	The Guaranteed Deposit Fund (the “Fund”) is an investment in the general account of the Prudential Retirement Insurance and Annuity Company and represents an insurance claim supported by all general account assets.
	The Fund’s assets are intermediate-term, high-grade fixed income securities consisting of commercial mortgages, private placement bonds, publicly-traded debt securities and asset-backed securities.
(b)	This class includes mutual funds that invest primarily in companies listed in the Russell 1000 Growth Index and Russell 1000 Value Index. The objectives of the mutual funds are to outperform these indices. The mutual funds also invest in other equity securities, derivative instruments and cash-equivalent securities or funds. This class also includes $9.6 million of Hudson City Bancorp, Inc. common stock.
(c)	This class includes a mutual fund that invests in international, emerging markets and high-yield fixed income markets.

The following table presents a reconciliation of Level 3 assets measured at fair value for the period of January 1, 2009 to December 31, 2009:

	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3)
	(In thousands)
	Guaranteed
	Deposit Fund
Beginning balance at December 31, 2008	$	12,273
Purchases, sales, issuances and settlements (net)		(214	)
Transfer into level 3		—
Ending balance at December 31, 2009	$	12,059

We contributed $35.0 million to the qualified retirement plan’s assets in 2009. We expect to contribute $10.0 million during 2010.

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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
Year	Plans		Benefits
	(In thousands)
2010	$	5,431	$	2,307
2011		5,737		2,440
2012		6,113		2,581
2013		7,375		2,710
2014		7,927		2,819
2015 through 2019		50,083		14,926

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. Employees are generally eligible to participate in the ESOP after one year of service providing they worked at least 1,000 hours during the plan year and attained age 21. Participants who do not have at least 1,000 hours of service during the plan year or are not employed on the last working day of a plan year are generally not eligible for an allocation of stock for such year. 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, 2009 was $231.9 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 962,185 shares per year over a forty-year period. The annual allocation of shares is based on the ratio of a participant’s eligible compensation, as defined in the ESOP document, as a percentage of total eligible compensation of all participants in the ESOP. Dividends on allocated and unallocated shares, to the extent that they exceed the scheduled principal and interest payments on the ESOP loan, are paid to participants in cash.

Through December 31, 2008, a total of 9,922,144 shares have been allocated to participants. For the plan year ended December 31, 2009, there are 962,185 shares that are committed to be released and will be allocated to participants. Unallocated ESOP shares held in suspense totaled 33,676,464 at December 31, 2009 and had a fair market value of $462.4 million. ESOP compensation expense for the years ended December 31, 2009, 2008 and 2007 was $20.8 million, $23.0 million, and $17.3 million, 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. We accrue for these benefits over the period during which employees provide services to earn these benefits. At December 31, 2009 and 2008, we had accrued $33.3 million and $30.0 million, respectively for the ESOP restoration plan. During 2007, two former executives received benefit payments from the ESOP restoration plan and no longer participate in the plan. Compensation expense related to this plan amounted to $3.7 million, $6.5 million and $5.8 million in 2009, 2008, and 2007, respectively.

c) Recognition and Retention Plans

Hudson City Bancorp granted stock awards pursuant to the Recognition and Retention Plan (the “RRP) established in January 2000 and the Stock Incentive Plan (the “SIP Plan”) established in January 2006. The

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purpose of both plans 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 plans have invested primarily in shares of Hudson City common stock that were used to make restricted stock awards. Expense for both plans in the amount of the fair value of the common stock at the date of grant is recognized ratably over the vesting period.

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. Generally, 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, 2009, common stock that had not been awarded totaled 13,625 shares.

During 2009, the Compensation Committee authorized performance-based stock awards (the “2009 stock awards”) pursuant to the SIP Plan for 847,750 shares of our common stock. These shares were issued from treasury stock and will vest in annual installments over a three-year period if certain performance measures are met and employment continues through the vesting date. None of these shares may be sold or transferred before the January 2012 vesting date. We have determined that it is probable these performance measures will be met and have therefore recorded compensation expense for the 2009 stock awards. Expense for the 2009 stock awards is recognized over the vesting period and is based on the fair value of the shares on the grant date which was $12.03. Expense attributable to both plans amounted to $4.6 million, $1.4 million and $1.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

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

	Restricted Stock Awards
	2009					2008					2007
				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		224,417		$	11.73		350,576		$	11.74		540,851		$	11.57
Granted		847,750			12.03		—			—		—			—
Vested		(112,211	)		11.73		(126,159	)		11.75		(190,275	)		11.27
Outstanding at end of period		959,956		$	12.00		224,417		$	11.73		350,576		$	11.74

The per share weighted-average vesting date fair value of the shares vested during 2009, 2008, and 2007 was $12.56, $18.47, and $13.46, respectively.

d) Stock Option Plans

In accordance with FASB guidance on stock compensation, 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 accordance with the transition FASB guidance.

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

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Hudson City Bancorp, Inc. common stock have been reserved for issuance. Directors and employees have been granted 36,503,507 stock options, including 240,819 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 (the “Committee”), 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. Grants were made in 2006, 2007 and 2008 pursuant to the SIP Plan for 7,960,000, 3,527,500 and 4,025,000 options, respectively, at an exercise price equal to the fair value of our common stock on the grant date, based on quoted market prices. Of these options, 5,035,000 have vesting periods ranging from one to five years and an expiration period of ten years (“Retention Options”). The remaining 10,477,500 shares have vesting periods ranging from two to three years if certain financial performance measures are met (“Performance Options”). Subject to review and verification by the Committee, we believe we attained these performance measures and have therefore recorded compensation expense for the 2006, 2007 and 2008 grants.

During 2009, the Committee authorized stock option grants (the “2009 grants”) pursuant to the SIP Plan for 3,375,000 options at an exercise price equal to the fair value of our common stock on the grant date, based on quoted market prices. Of these options, 2,875,000 will vest in January 2012 if certain financial performance measures are met and employment continues through the vesting date (“2009 Performance Options”). The remaining 500,000 options will vest between January 2010 and April 2010 (“2009 Retention Options”). The 2009 grants have an expiration period of ten years. We have determined that it is probable these performance measures will be met and have therefore recorded compensation expense for the 2009 grants.

The dividend yield assumption for the 2009, 2008 and 2007 grants were based on our current declared dividend as a percentage of the stock price on the grant date. The expected volatility assumption for 2009, 2008 and 2007 were calculated based on the weighting of our historical and rolling volatility for the expected term of the option grants. The risk-free interest rate was determined for 2009, 2008, and 2007 by reference to the continuously compounded yield on Treasury obligations for the expected term. The expected option life was based on historic optionee behavior for prior option grant awards.

The fair values of the 2009, 2008 and 2007 grants were estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions.

	2009						2008						2007
	2009 Retention Options			2009 Performance Options			Retention Options			Performance Options			Retention Options			Performance Options
Expected dividend yield		4.80	%		4.80	%		2.30	%		2.30	%		2.32	%		2.32	%
Expected volatility		33.43			29.08			19.59			20.75			16.72			19.50
Risk-free interest rate		1.29			1.75			2.41			2.88			4.90			4.87
Expected option life		3.5 years			5.5 years			3.5 years			5.5 years			3.5 years			5.5 years
Fair value of options granted	$	2.05		$	1.92		$	2.14		$	2.85		$	2.10		$	2.88

Compensation expense related to our outstanding stock options amounted to $12.9 million, $15.0 million and $12.2 million for the years ended December 31, 2009, 2008 and 2007, respectively.

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

	2009					2008					2007
				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		26,728,119		$	10.35		29,080,114		$	7.91		26,979,989		$	6.89
Granted		3,375,000			12.11		4,025,000			15.96		3,527,500			13.74
Exercised		(5,840,427	)		2.30		(6,325,277	)		2.69		(1,360,635	)		2.67
Forfeited		—			—		(51,718	)		13.10		(66,740	)		10.03
Outstanding at end of year		24,262,692		$	12.51		26,728,119		$	10.35		29,080,114		$	7.91

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 2009, 2008 and 2007 was $63.0 million, $92.4 million, and $15.0 million, respectively.

The following table summarizes information about our stock options outstanding at December 31, 2009:

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
	46,000	1 month	$	2.16		46,000	$	2.16
	121,383	1 year		3.09		121,383		3.09
	820,736	1 year		3.59		820,736		3.59
	63,801	2 years		4.20		63,801		4.20
	614,440	2 years		5.53		614,440		5.53
	131,395	3 years		5.96		131,395		5.96
	206,480	3 years		6.35		206,480		6.35
	448,840	4 years		10.33		448,840		10.33
	417,184	5 years		11.17		329,320		11.17
	305,592	4 years		11.91		297,201		11.91
	2,299,341	4 years		12.22		1,840,875		12.22
	8,055,000	6.5 years		12.76		6,895,000		12.76
	350,000	7.5 years		13.35		350,000		13.35
	3,182,500	7 years		13.78		157,500		13.78
	3,475,000	8 years		15.69		25,000		15.69
	350,000	8 years		18.84		350,000		18.84
	350,000	9 years		12.81		—		12.81
	3,025,000	9 years		12.03		25,000		12.03
	24,262,692		$	12.51		12,722,971	$	11.45

The total intrinsic value of the options outstanding and options exercisable were $29.6 million and $29.0 million, respectively, as of December 31, 2009. At December 31, 2009, unearned compensation costs related to all nonvested awards of options and restricted stock not yet recognized totaled $34.0 million, and will be recognized over a weighted-average period of approximately 2.3 years.

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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. Expense related to this plan was $3.0 million, $2.0 million, and $1.8 million in 2009, 2008 and 2007, 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 $7.3 million, $6.2 million, and $4.8 million in 2009, 2008 and 2007, respectively.

11. Income Taxes

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

	2009			2008			2007
	(In thousands)
Federal:
Current	$	323,152		$	255,511		$	170,374
Deferred		(36,368	)		(9,372	)		(7,896	)
Total federal		286,784			246,139			162,478
State:
Current		70,270			44,685			24,941
Deferred		(10,332	)		(3,496	)		(1,534	)
Total state		59,938			41,189			23,407
Total income tax expense	$	346,722		$	287,328		$	185,885

Not included in the above table are deferred income tax expense amounts of $94.4 million, $21.4 million and $45.7 million for 2009, 2008 and 2007, respectively, which represent the deferred income taxes relating to the changes in accumulated other comprehensive income (loss).

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:

	2009			2008			2007
	(Dollars in thousands)
Income before income tax expense	$	873,966		$	732,886		$	481,743
Statutory income tax rate		35	%		35	%		35	%
Computed expected income tax expense		305,888			256,510			168,610
State income taxes, net of federal income tax benefit		38,960			26,773			15,215
ESOP fair market value adjustment		2,212			3,665			2,559
Other, net		(338	)		380			(499	)
Income tax expense	$	346,722		$	287,328		$	185,885

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

	2009		2008
	(In thousands)
Deferred tax asset:
Postretirement benefits	$	41,873	$	43,462
Allowance for loan losses		56,621		19,701
Mortgage premium amortization		6,281		7,269
Non-qualified benefit plans		44,393		37,314
ESOP expense		8,700		7,245
Fair value adjustment on mortgages recorded in Acquisition		2,826		3,548
Interest on non-accrual loans		11,483		2,569
Other		7,359		4,766
		179,536		125,874
Deferred tax liabilities:
Postretirement benefits		30,340		17,874
Net unrealized gain on securities available for sale		142,109		51,522
Fair value adjustments related to the Acquisition:
Core deposit intangible		2,544		3,308
Buildings		1,648		1,827
Other		83		702
		176,724		75,233
Net deferred tax asset (included in other assets)	$	2,812	$	50,641

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, 2009 and 2008.

In July 2006, FASB issued guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This guidance 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. Accrued estimated penalties and interest on unrecognized tax benefits were approximately $645,000 and $915,000 at December 31, 2009 and 2008, respectively. Estimated penalties and interest of ($270,000), $470,000, and $445,000 are included in income tax expense at December 31, 2009, 2008, and 2007, respectively. The Company’s tax returns are subject to examination in the normal course by federal tax authorities for the years 2006 through 2009 and by state authorities for the years 2005 through 2009.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:

	2009			2008
	(in thousands)
Balance at January 1	$	3,212		$	2,189
Additions based on tax positions related to the current year		3,156			1,266
Additions for tax positions of prior years		—			—
Reductions for tax positions of prior years		(2,315	)		(243	)
Balance at December 31	$	4,053		$	3,212

Retained earnings at December 31, 2009 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 FASB guidance, this amount is treated as a permanent difference and deferred taxes are not recognized unless it appears that the amount 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 excess of Hudson City Savings’ current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation. The unrecognized deferred tax liability with respect to our base-year deduction amounted to $23.5 million at December 31, 2009 and 2008.

12. Fair Value Measurements and Disclosures

a) Fair Value Measurements

The Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 applies only to fair value measurements already required or permitted by other accounting standards and does not impose requirements for additional fair value measures. ASC Topic 820 was issued to increase consistency and comparability in reporting fair values.

We use fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. We did not have any liabilities that were measured at fair value at December 31, 2009. Our securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets or liabilities on a non-recurring basis, such as foreclosed real estate owned, certain impaired loans and goodwill. These non-recurring fair value adjustments generally involve the write-down of individual assets due to impairment losses.

In accordance with ASC Topic 820-10-35-01, we group our assets at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

• Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets.

• Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

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• Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of option pricing models, discounted cash flow models and similar techniques. The results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.

We base our fair values on the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. ASC Topic 820 requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets that we measure on a recurring basis are limited to our available-for-sale securities portfolio. 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 shareholders’ equity. Substantially all of our available-for-sale portfolio consists of mortgage-backed securities and investment securities issued by government-sponsored enterprises. The fair values for substantially all of these securities are obtained from an independent nationally recognized pricing service. Based on the nature of our securities, our independent pricing service provides us with prices which are categorized as Level 2 since quoted prices in active markets for identical assets are generally not available for the majority of securities in our portfolio. Various modeling techniques are used to determine pricing for our mortgage-backed securities, including option pricing and discounted cash flow models. The inputs to these models include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. We also own equity securities with a carrying value of $7.1 million and $7.4 million at December 31, 2009 and 2008, respectively for which fair values are obtained from quoted market prices in active markets and, as such, are classified as Level 1.

The following table provides the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a recurring basis at December 31, 2009 and 2008.

			Fair Value at December 31, 2009 using
			Quoted Prices in Active		Significant Other		Significant
	Carrying		Markets for Identical		Observable Inputs		Unobservable Inputs
Description	Value		Assets (Level 1)		(Level 2)		(Level 3)
			(In thousands)
Available for sale debt securities:
Mortgage-backed securities	$	11,116,531	$	—	$	11,116,531	$	—
U.S. government-sponsored enterprises debt		1,088,165		—		1,088,165		—
Total available for sale debt securities		12,204,696		—		12,204,696		—
Available for sale equity securities:
Financial services industry	$	7,075	$	7,075	$	—	$	—
Total available for sale equity securities		7,075		7,075		—		—
Total available for sale securities	$	12,211,771	$	7,075	$	12,204,696	$	—
			Fair Value Measurements at December 31, 2008
			Quoted Prices in Active		Significant Other		Significant
	Carrying		Markets for Identical		Observable Inputs		Unobservable Inputs
Description	Value		Assets (Level 1)		(Level 2)		(Level 3)
					(In thousands)
Available for sale:
Mortgage-backed securities	$	9,915,554	$	—	$	9,915,554	$	—
U.S. government-sponsored enterprises debt		3,406,248				3,406,248		—
Total available for sale debt securities	$	13,321,802	$	—	$	13,321,802	$	—
Available for sale equity securities:
Financial services industry	$	7,385	$	7,385	$	—	$	—
Total available for sale equity securities		7,385		7,385		—		—
Total available for sale securities	$	13,329,187	$	7,385	$	13,321,802	$	—

Assets that were measured at fair value on a non-recurring basis at December 31, 2009 and 2008 were limited to non-performing commercial and construction loans that are collateral dependent and foreclosed real estate. Commercial and construction loans evaluated for impairment in accordance with FASB guidance amounted to $11.2 million and $9.5 million at December 31, 2009 and 2008, respectively. Based on this evaluation, we established an allowance for loan losses of $2.1 million and $818,000 for such impaired loans for those same respective periods. The provision for loan losses related to these loans amounted to $1.3 million and $550,000 for 2009 and 2008. These impaired loans are individually assessed to determine that the loan’s carrying value is not in excess of the fair value of the collateral, less estimated selling costs. Since all of our impaired loans at December 31, 2009 are secured by real estate, fair value is estimated through current appraisals, where

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practical, or an inspection and a comparison of the property securing the loan with similar properties in the area by either a licensed appraiser or real estate broker and, as such, are classified as Level 3.

Foreclosed real estate represents real estate acquired as a result of foreclosure or by deed in lieu of foreclosure and is carried at the lower of cost or fair value less estimated selling costs. Fair value is estimated through current appraisals, where practical, or an inspection and a comparison of the property securing the loan with similar properties in the area by either a licensed appraiser or real estate broker and, as such, foreclosed real estate properties are classified as Level 3. Foreclosed real estate at December 31, 2009 and 2008 amounted to $16.7 million and $15.5 million, respectively. During 2009 and 2008, charge-offs to the allowance for loan losses related to loans that were transferred to foreclosed real estate amounted to $9.8 million and $1.8 million, respectively. Write downs and net loss on sale related to foreclosed real estate that were charged to non-interest expense amounted to $2.4 million and $1.3 million for those same respective periods.

The following table provides the level of valuation assumptions used to determine the carrying value of our assets measured at fair value on a non-recurring basis at December 31, 2009 and 2008.

	Fair Value Measurments at December 31, 2009 using
	Quoted Prices in Active		Significant Other		Significant		Total
	Markets for Identical		Observable Inputs		Unobservable Inputs		Gains
Description	Assets (Level 1)		(Level 2)		(Level 3)		(Losses)
			(In thousands)
Impaired loans	$	—	$	—	$	11,178	$	—
Foreclosed real estate		—		—		16,736		(2,365	)
	Fair Value Measurements at December 31, 2008
	Quoted Prices in Active		Significant Other		Significant		Total
	Markets for Identical		Observable Inputs		Unobservable Inputs		Gains
Description	Assets (Level 1)		(Level 2)		(Level 3)		(Losses)
			(In thousands)
Impaired loans	$	—	$	—	$	9,464	$	—
Foreclosed real estate		—		—		15,532		(1,343	)

b) Fair Value Disclosures

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.

Carrying amounts of cash, due from banks and federal funds sold are considered to approximate fair value. The carrying value of FHLB stock equals cost. The fair value of FHLB stock is based on redemption at par 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, assuming future prepayments and using market rates for new loans with comparable credit risk. The method of estimating fair value does not incorporate the exit-price concept of fair value prescribed by ASC 820-10.

For time deposits and fixed-maturity borrowed funds, the fair value is estimated by discounting estimated future cash flows using currently offered rates. Structured borrowed funds are valued using an option valuation model which uses assumptions for anticipated calls of borrowings based on market interest rates and weighted-average life. 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.

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

	2009				2008
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(In thousands)
Assets:
Cash and due from banks	$	198,752	$	198,752	$	184,915	$	184,915
Federal funds sold		362,449		362,449		76,896		76,896
Investment securities held to maturity		4,187,704		4,071,005		50,086		50,512
Investment securities available for sale		1,095,240		1,095,240		3,413,633		3,413,633
Federal Home Loan Bank of New York stock		874,768		874,768		865,570		865,570
Mortgage-backed securities held to maturity		9,963,554		10,324,831		9,572,257		9,695,445
Mortgage-backed securities available for sale		11,116,531		11,116,531		9,915,554		9,915,554
Loans		31,721,154		32,758,247		29,440,761		29,743,919
Liabilities:
Deposits		24,578,048		24,913,407		18,464,042		18,486,681
Borrowed funds		29,975,000		32,485,513		30,225,000		34,156,052

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 Deposit Insurance Fund (“DIF”) 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, 2009, 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 as of that date.

The following is a summary of Hudson City Savings’ actual capital amounts and ratios as of December 31, 2009 and 2008, 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, 2009
Tangible capital	$	4,539,630		7.59	%	$	897,374		1.50	%		n/a		n/a
Leverage (core) capital		4,539,630		7.59			2,392,955		4.00		$	2,991,245		5.00	%
Total-risk-based capital		4,679,843		21.02			1,781,277		8.00			2,226,597		10.00
December 31, 2008
Tangible capital	$	4,290,316		7.99	%	$	805,475		1.50	%		n/a		n/a
Leverage (core) capital		4,290,316		7.99			2,147,935		4.00		$	2,684,918		5.00	%
Total-risk-based capital		4,340,315		21.52			1,613,657		8.00			2,017,071		10.00

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The OTS may take certain supervisory actions under the prompt corrective action regulations of the Federal Deposit Insurance Corporation Improvement Act 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%. The OTS regulates all capital distributions by Hudson City Savings directly or indirectly to Hudson City Bancorp, including dividend payments. 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. As the subsidiary of a savings and loan holding company, Hudson City Savings currently must file a notice with the OTS 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 OTS for a proposed capital distribution.

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. 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 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. 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.

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At December 31, 2009, Hudson City Savings had variable- and fixed-rate first mortgage loan commitments to extend credit of approximately $288.8 million and $249.2 million, respectively; commitments to purchase variable- and fixed-rate first mortgage loans of $91.0 million and $66.5 million, respectively; commitments to purchase variable- and fixed-rate mortgage-backed securities of $1.24 billion and $7.5 million, respectively; and unused home equity, overdraft and commercial/construction lines of credit of approximately $179.7 million, $2.9 million, and $12.8 million, respectively. At December 31, 2008, Hudson City Savings had variable- and fixed-rate first mortgage loan commitments to extend credit of approximately $211.2 million and $126.4 million, respectively, commitments to purchase fixed-rate first mortgage loans of $219.1 million, commitments to purchase variable rate mortgage-backed securities of $516.0 million and unused home equity, overdraft and commercial/construction lines of credit of approximately $134.4 million, $3.0 million, and $15.2 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.

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, 2009		December 31, 2008
	(In thousands)
Assets:
Cash and due from subsidiary bank	$	224,601	$	205,765
Investment in subsidiary		4,882,609		4,498,248
ESOP loan receivable		231,856		234,300
Other assets		86		483
Total Assets	$	5,339,152	$	4,938,796
Stockholders’ Equity:
Total stockholders’ equity		5,339,152		4,938,796
Total Liabilities and Stockholders’ Equity	$	5,339,152	$	4,938,796

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Statements of Income

	Year Ended December 31,
	2009		2008		2007
	(In thousands)
Income:
Dividends received from subsidiary	$	338,500	$	288,442	$	278,176
Interest on ESOP loan receivable		11,715		11,831		11,942
Interest on deposit with subsidiary		2,646		3,017		2,820
Total income		352,861		303,290		292,938
Expenses		1,419		1,037		1,059
Income before income tax expense and equity in undistributed (overdistributed) earnings of subsidiary		351,442		302,253		291,879
Income tax expense		3,397		4,461		5,115
Income before equity in undistributed (overdistributed) earnings of subsidiary		348,045		297,792		286,764
Equity in undistributed (overdistributed) earnings of subsidiary		179,199		147,766		9,094
Net income	$	527,244	$	445,558	$	295,858

Statements of Cash Flows

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Cash Flows from Operating Activities:
Net income	$	527,244		$	445,558		$	295,858
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings		(179,199	)		(147,766	)		(9,094	)
Decrease (increase) in other assets		7,168			(483	)		—
Decrease in accrued expenses		—			(236	)		(729	)
Net Cash Provided by Operating Activities		355,213			297,073			286,035
Cash Flows from Investing Activities:
Principal collected on ESOP loan		2,444			2,329			2,217
Net Cash Provided by Investing Activities		2,444			2,329			2,217
Cash Flows from Financing Activities:
Purchases of treasury stock		(43,477	)		(17,045	)		(550,215	)
Exercise of stock options		13,500			16,936			3,629
Cash dividends paid on unallocated ESOP shares		(20,436	)		(16,019	)		(12,067	)
Cash dividends paid		(288,408	)		(217,995	)		(165,376	)
Net Cash Used in Financing Activities		(338,821	)		(234,123	)		(724,029	)
Net Increase (Decrease) in Cash Due from Bank		18,836			65,279			(435,777	)
Cash Due from Bank at Beginning of Year		205,765			140,486			576,263
Cash Due from Bank at End of Year	$	224,601		$	205,765		$	140,486

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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, 2009 and 2008.

	2009 Quarter Ended
	March 31		June 30		September 30		December 31
	(In thousands, except per share data)
Interest and dividend income	$	723,322	$	727,759	$	744,165	$	746,540
Interest expense		439,491		425,362		418,708		414,747
Net interest income		283,831		302,397		325,457		331,793
Provision for loan losses		20,000		32,500		40,000		45,000
Net interest income after provision for loan losses		263,831		269,897		285,457		286,793
Non-interest income		2,273		26,606		2,513		2,192
Non-interest expense		54,794		84,947		62,920		62,935
Income before income tax expense		211,310		211,556		225,050		226,050
Income tax expense		83,647		83,637		89,964		89,474
Net income	$	127,663	$	127,919	$	135,086	$	136,576
Basic earnings per share	$	0.26	$	0.26	$	0.28	$	0.28
Diluted earnings per share	$	0.26	$	0.26	$	0.27	$	0.28

	2008 Quarter Ended
	March 31		June 30		September 30		December 31
	(In thousands, except per share data)
Interest and dividend income	$	613,288	$	646,660	$	681,317	$	711,960
Interest expense		419,973		413,528		426,239		451,508
Net interest income		193,315		233,132		255,078		260,452
Provision for loan losses		2,500		3,000		5,000		9,000
Net interest income after provision for loan losses		190,815		230,132		250,078		251,452
Non-interest income		2,221		2,088		2,181		1,995
Non-interest expense		48,112		48,277		49,423		52,264
Income before income tax expense		144,924		183,943		202,836		201,183
Income tax expense		56,255		73,240		80,928		76,905
Net income	$	88,669	$	110,703	$	121,908	$	124,278
Basic earnings per share	$	0.18	$	0.23	$	0.25	$	0.25
Diluted earnings per share	$	0.18	$	0.22	$	0.25	$	0.25

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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,
	2009						2008						2007
					Per						Per						Per
					Share						Share						Share
	Income		Shares		Amount		Income		Shares		Amount		Income		Shares		Amount
	(In thousands, except per share data)
Net income	$	527,244					$	445,558					$	295,858
Basic earnings per share:
Income available to common stockholders	$	527,244		488,908	$	1.08	$	445,558		484,907	$	0.92	$	295,858		499,608	$	0.59
Effect of dilutive common stock equivalents		—		2,388				—		10,949				—		10,319
Diluted earnings per share:
Income available to common stockholders	$	527,244		491,296	$	1.07	$	445,558		495,856	$	0.90	$	295,858		509,927	$	0.58

18. Recent Accounting Pronouncements

In January 2010, the FASB issued an accounting standards update regarding disclosure requirements for fair value measurement. This update provides amendments to fair value measurement that require new disclosures related to transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. The update also provides amendments clarifying level of disaggregation and disclosures about inputs and valuation techniques along with conforming amendments to the guidance on employers’ disclosures about postretirement benefit plan assets. This update is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements which are effective for fiscal years beginning after December 15, 2010. We do not expect that this accounting standard update will have a material impact on our financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB Codification (the “Codification”) was issued. The Codification is the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification became non-authoritative. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The implementation of the Codification did not have an impact on our consolidated financial condition and results of operations.

In June 2009, the FASB issued an accounting standards update to the accounting and disclosure requirements for the consolidation of variable interest entities. The guidance affects the overall consolidation analysis and requires enhanced disclosure on involvement with variable interest entities. The guidance is effective for fiscal

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years beginning after November 15, 2009. We do not expect that the guidance will have a material impact on our financial condition, results of operations or financial statement disclosures.

In June 2009, the FASB issued an accounting standards update to the accounting and disclosure requirements for transfers of financial assets. The guidance defines the term “participating interest” to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. If the transfer does not meet those conditions, a transferor should account for the transfer as a sale only if it transfers an entire financial asset or a group of entire financial assets and surrenders control over the entire transferred asset(s). The guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We do not expect that the guidance will have a material impact on our financial condition, results of operations or financial statement disclosures.

Page 82

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   Name United States of America   Jurisdiction of Incorporation

The following is a list of the subsidiaries of Hudson City Savings Bank:

HudCiti Service Corporation Name	New Jersey State of Incorporation
HC Value Broker Services, Inc Name	New Jersey State of Incorporation

The following is a list of the subsidiaries of HudCiti Service Corporation:

Hudson City Preferred Funding Corp. Name	Delaware State of Incorporation
Sound REIT, Inc. Name	New York 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 statement (No. 333-163766) on Form S-3 and 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 26, 2010, with respect to the consolidated statements of financial condition of Hudson City Bancorp, Inc. as of December 31, 2009 and 2008, 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, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009 Annual Report on Form 10-K of Hudson City Bancorp, Inc.

New York, New York
February 26, 2010

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 registrant’s 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 26, 2010	By:	/s/ Ronald E. Hermance, Jr. Ronald E. Hermance, Jr.
		Chairman, President and Chief Executive Officer

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 registrant’s 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 26, 2010	By:	/s/ James C. Kranz James C. Kranz
		Executive Vice President and Chief Financial Officer

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, the Chief 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, 2009 (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 26, 2010	By:	/s/ Ronald E. Hermance, Jr. Ronald E. Hermance, Jr.
		Chairman, President and Chief Executive Officer
Date: February 26, 2010	By:	/s/ James C. Kranz James C. Kranz
		Executive Vice President and
		Chief Financial Officer