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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended: December 31, 2006
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-26001
 Hudson City Bancorp, Inc.
  Delaware
    
    22-3640393(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)West 80 Century RoadParamus, New Jersey
    
    07652(Address of Principal Executive Offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
   Common Stock, $0.01 par value
  þ o
  o þ
  þ o
 o
  þ o o
  o þ




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##### 



Hudson City Bancorp, Inc.
2006 Annual Report on Form 10-K
Table of Contents
 PageForward-Looking Statements and Associated Risk Factors
    
    
    1PART IItem 1
    
    Business
    
    
    5Item 1A
    
    Risk Factors
    
    
    46Item 1B
    
    Unresolved Staff Comments
    
    
    50Item 2
    
    Properties
    
    
    50Item 3
    
    Legal Proceedings
    
    
    50Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    50PART IIItem 5
    
    Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity
Securities
    
    
    51Item 6
    
    Selected Financial Data
    
    
    54Item 7
    
    Managements Discussion and Analysis of Financial Condition
and Results Of Operations
    
    
    55Item 7A
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    
    74Item 8
    
    Financial Statements and Supplementary Data
    
    
    81Item 9
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    123Item 9A
    
    Controls and Procedures
    
    
    123Item 9B
    
    Other Information
    
    
    124PART IIIItem 10
    
    Directors, Executive Officers and Corporate
Governance
    
    
    124Item 11
    
    Executive Compensation
    
    
    125Item 12
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    125Item 13
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    125Item 14
    
    Principal Accounting Fees and Services
    
    
    125PART IVItem 15
    
    Exhibits, Financial Statement Schedules
    
    
    126SIGNATURES
    
    
    129EX-10.28: FORM OF 2006 STOCK INCENTIVE PLAN PERFORMANCE STOCK OPTION AGREEMENTEX-10.29: FORM OF 2006 STOCK INCENTIVE PLAN RETENTION STOCK OPTION AGREEMENTEX-10.30: FORM OF 2006 STOCK INCENTIVE PLAN DIRECTOR STOCK OPTION AGREEMENTEX-10.31: BENEFIT MAINTENANCE PLANEX-10.32: SUMMARY OF MATERIAL TERMSEX-10.33: SUMMARY OF DIRECTOR COMPENSATIONEX-11.1: STATEMENT RE: COMPUTATION OF PER SHARE EARNINGSEX-21.1: SUBSIDIARIESEX-23.1: CONSENT OF KPMG LLPEX-31.1: CERTIFICATIONSEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION
  Page 2




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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
  
    
    the timing and occurrence or non-occurrence of events may be subject to circumstances
beyond our control;
    
    there may be increases in competitive pressure among the financial institutions or from
non-financial institutions;
    
    changes in the interest rate environment may reduce interest margins or affect the value
of our investments;
    
    changes in deposit flows, loan demand or real estate values may adversely affect our
business;
    
    changes in accounting principles, policies or guidelines may cause our financial
condition to be perceived differently;
    
    general economic conditions, either nationally or locally in some or all of the areas in
which we do business, or conditions in the securities markets or the banking industry may
be less favorable than we currently anticipate;
    
    legislative or regulatory changes may adversely affect our business;
    
    applicable technological changes may be more difficult or expensive than we anticipate;
    
    success or consummation of new business initiatives may be more difficult or expensive
than we anticipate;
    
    litigation or matters before regulatory agencies, whether currently existing or
commencing in the future, may delay the occurrence or non-occurrence of events longer than
we anticipate;
    
    the risks associated with continued diversification of assets and adverse changes to credit quality;
    
    difficulties associated with achieving expected future
financial results; and
    
    the risk of an economic slowdown that would adversely affect
credit quality and loan originations.
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Page 4




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PART I
 
 Item 1. Business.
       Page 5




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Available Information
 ,
 Market Area
   
   Page 6




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Competition
   Lending Activities
 Loan Portfolio Composition.
   Page 7




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At December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    PercentAmount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total(Dollars in thousands)First mortgage loans:One- to four-family
    
    $
    18,561,467
    
    
    
    97.27
    %
    
    $
    14,780,819
    
    
    
    98.13
    %
    
    $
    11,120,874
    
    
    
    97.87
    %
    
    $
    8,567,442
    
    
    
    97.32
    %
    
    $
    6,708,806
    
    
    
    96.25
    %FHA/VA
    
    
    29,573
    
    
    
    0.15
    
    
    
    43,672
    
    
    
    0.29
    
    
    
    81,915
    
    
    
    0.72
    
    
    
    98,502
    
    
    
    1.12
    
    
    
    131,209
    
    
    
    1.88Multi-family and commercial
    
    
    69,322
    
    
    
    0.36
    
    
    
    2,320
    
    
    
    0.02
    
    
    
    3,000
    
    
    
    0.03
    
    
    
    2,843
    
    
    
    0.03
    
    
    
    2,668
    
    
    
    0.04Construction
    
    
    41,150
    
    
    
    0.22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total first mortgage loans
    
    
    18,701,512
    
    
    
    98.00
    
    
    
    14,826,811
    
    
    
    98.44
    
    
    
    11,205,789
    
    
    
    98.62
    
    
    
    8,668,787
    
    
    
    98.47
    
    
    
    6,842,683
    
    
    
    98.17Consumer and other loans:Fixed-rate second mortgages
    
    
    274,028
    
    
    
    1.44
    
    
    
    205,826
    
    
    
    1.37
    
    
    
    127,737
    
    
    
    1.12
    
    
    
    105,361
    
    
    
    1.20
    
    
    
    93,691
    
    
    
    1.34Home equity credit lines
    
    
    97,644
    
    
    
    0.51
    
    
    
    29,150
    
    
    
    0.19
    
    
    
    28,929
    
    
    
    0.25
    
    
    
    28,217
    
    
    
    0.32
    
    
    
    33,543
    
    
    
    0.48Other
    
    
    10,433
    
    
    
    0.05
    
    
    
    662
    
    
    
    
    
    
    
    584
    
    
    
    0.01
    
    
    
    701
    
    
    
    0.01
    
    
    
    983
    
    
    
    0.01Total consumer and other loans
    
    
    382,105
    
    
    
    2.00
    
    
    
    235,638
    
    
    
    1.56
    
    
    
    157,250
    
    
    
    1.38
    
    
    
    134,279
    
    
    
    1.53
    
    
    
    128,217
    
    
    
    1.83Total loans
    
    
    19,083,617
    
    
    
    100.00
    %
    
    
    15,062,449
    
    
    
    100.00
    %
    
    
    11,363,039
    
    
    
    100.00
    %
    
    
    8,803,066
    
    
    
    100.00
    %
    
    
    6,970,900
    
    
    
    100.00
    %Deferred loan costs (fees)
    
    
    16,159
    
    
    
    
    
    
    
    1,653
    
    
    
    
    
    
    
    (8,073
    )
    
    
    
    
    
    
    (10,255
    )
    
    
    
    
    
    
    (13,508
    )Allowance for loan losses
    
    
    (30,625
    )
    
    
    
    
    
    
    (27,393
    )
    
    
    
    
    
    
    (27,319
    )
    
    
    
    
    
    
    (26,547
    )
    
    
    
    
    
    
    (25,501
    )Net Loans
    
    $
    19,069,151
    
    
    
    
    
    
    $
    15,036,709
    
    
    
    
    
    
    $
    11,327,647
    
    
    
    
    
    
    $
    8,766,264
    
    
    
    
    
    
    $
    6,931,891
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Loan Maturity .
 At December 31, 2006Multi-familyFirst Mortgage
    
    
    and Commercial
    
    
    
    
    
    
    Consumer andLoans
    
    
    Mortgages
    
    
    Construction
    
    
    Other Loans
    
    
    Total(In thousands)Amounts Due:One year or less
    
    $
    1,822
    
    
    $
    1,300
    
    
    $
    41,150
    
    
    $
    1,422
    
    
    $
    45,694After one year:One to three years
    
    
    184,147
    
    
    
    311
    
    
    
    
    
    
    
    12,486
    
    
    
    196,944Three to five years
    
    
    612,278
    
    
    
    1,232
    
    
    
    
    
    
    
    18,205
    
    
    
    631,715Five to ten years
    
    
    282,461
    
    
    
    2,984
    
    
    
    
    
    
    
    63,381
    
    
    
    348,826Ten to twenty years
    
    
    2,333,385
    
    
    
    30,619
    
    
    
    
    
    
    
    283,567
    
    
    
    2,647,571Over twenty years
    
    
    15,176,947
    
    
    
    32,876
    
    
    
    
    
    
    
    3,044
    
    
    
    15,212,867Total due after one year
    
    
    18,589,218
    
    
    
    68,022
    
    
    
    
    
    
    
    380,683
    
    
    
    19,037,923Total loans
    
    $
    18,591,040
    
    
    $
    69,322
    
    
    $
    41,150
    
    
    $
    382,105
    
    
    
    19,083,617Deferred loan costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,159Allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,625
    )Net loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,069,151
  Due After December 31, 2007Fixed
    
    
    Adjustable
    
    
    Total(In thousands)First mortgage loans
    
    $
    15,039,351
    
    
    $
    3,549,867
    
    
    $
    18,589,218Multi-family and commercial mortgages
    
    
    65,882
    
    
    
    2,140
    
    
    
    68,022Consumer and other loans
    
    
    276,700
    
    
    
    103,983
    
    
    
    380,683Total loans due after one year
    
    $
    15,381,933
    
    
    $
    3,655,990
    
    
    $
    19,037,923
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For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Total loans:Balance
outstanding at beginning of year
    
    $
    15,062,449
    
    
    $
    11,363,039
    
    
    $
    8,803,066Loans transferred in Acquisition
    
    
    774,908
    
    
    
    
    
    
    
    Originations:First mortgage loans
    
    
    2,155,997
    
    
    
    2,068,183
    
    
    
    1,378,709Consumer and other loans
    
    
    151,490
    
    
    
    126,591
    
    
    
    85,932Total originations
    
    
    2,307,487
    
    
    
    2,194,774
    
    
    
    1,464,641Purchases:One- to four-family first mortgage loans
    
    
    2,685,186
    
    
    
    3,676,260
    
    
    
    3,099,759FHA/VA first mortgage loans
    
    
    26,418
    
    
    
    
    
    
    
    22,334Other first mortgage loans
    
    
    544
    
    
    
    
    
    
    
    316Total purchases
    
    
    2,712,148
    
    
    
    3,676,260
    
    
    
    3,122,409Less:Principal payments:First mortgage loans
    
    
    (1,678,882
    )
    
    
    (2,103,100
    )
    
    
    (1,956,395
    )Consumer and other loans
    
    
    (73,997
    )
    
    
    (48,203
    )
    
    
    (62,960
    )Total principal payments
    
    
    (1,752,879
    )
    
    
    (2,151,303
    )
    
    
    (2,019,355
    )Premium amortization and discount accretion, net
    
    
    (1,440
    )
    
    
    (8,247
    )
    
    
    (5,374
    )Transfers to foreclosed real estate
    
    
    (3,642
    )
    
    
    (1,750
    )
    
    
    (2,348
    )Loan sales
    
    
    (15,414
    )
    
    
    (10,324
    )
    
    
    Balance
outstanding at end of year
    
    $
    19,083,617
    
    
    $
    15,062,449
    
    
    $
    11,363,039
 Residential Mortgage Lending .
  Page 10




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.
   Page 11




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Percent ofFirst MortgageAmount
    
    Loan Originations(In thousands)2006
    
    $
    83,693
    
    
    
    
    4.0
    %2005
    
    
    156,492
    
    
    
    
    7.62004
    
    
    143,959
    
    
    
    
    10.4
  Mortgage LoansModified(In thousands)2006
    
    $
    11,6562005
    
    
    39,2542004
    
    
    220,059
  Page 12




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Page 13




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.
 Multi-family and Commercial Mortgage Loans.
  Page 14




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Construction Lending .
   Consumer Loans .
 Page 15




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Loan Approval Procedures and Authority .
   Page 16




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Asset Quality
  Delinquent Loans and Foreclosed Assets .
    Page 17




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At December 31,2006
    
    2005
    
    200460-89 Days
    
    90 Days or More
    
    60-89 Days
    
    90 Days or More
    
    60-89 Days
    
    90 Days or MorePrincipal
    
    
    
    
    
    Principal
    
    
    
    
    
    Principal
    
    
    
    
    
    Principal
    
    
    
    
    
    Principal
    
    
    
    
    
    PrincipalNo. of
    
    Balance
    
    No. of
    
    Balance
    
    No. of
    
    Balance
    
    No. of
    
    Balance
    
    No. of
    
    Balance
    
    No. of
    
    BalanceLoans
    
    of Loans
    
    Loans
    
    of Loans
    
    Loans
    
    of Loans
    
    Loans
    
    of Loans
    
    Loans
    
    of Loans
    
    Loans
    
    of Loans(Dollars in thousands)One- to four-family first mortgages
    
    
    60
    
    
    $
    16,910
    
    
    
    82
    
    
    $
    22,026
    
    
    
    44
    
    
    $
    10,113
    
    
    
    67
    
    
    $
    15,273
    
    
    
    43
    
    
    $
    9,819
    
    
    
    64
    
    
    $
    15,232FHA/VA first mortgages
    
    
    8
    
    
    
    1,236
    
    
    
    23
    
    
    
    3,657
    
    
    
    10
    
    
    
    1,755
    
    
    
    24
    
    
    
    4,037
    
    
    
    8
    
    
    
    773
    
    
    
    53
    
    
    
    6,375Multi-family and
commercial mortgages
    
    
    1
    
    
    
    566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    76
    
    
    
    
    
    
    
    Construction loans
    
    
    4
    
    
    
    2,769
    
    
    
    2
    
    
    
    3,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer and other loans
    
    
    20
    
    
    
    1,125
    
    
    
    11
    
    
    
    1,217
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total delinquent loans (60 days and over)
    
    
    93
    
    
    $
    22,606
    
    
    
    118
    
    
    $
    29,998
    
    
    
    56
    
    
    $
    11,870
    
    
    
    93
    
    
    $
    19,312
    
    
    
    52
    
    
    $
    10,668
    
    
    
    117
    
    
    $
    21,607Delinquent loans (60 days and over)
to total loans
    
    
    
    
    
    
    0.12
    %
    
    
    
    
    
    
    0.16
    %
    
    
    
    
    
    
    0.08
    %
    
    
    
    
    
    
    0.13
    %
    
    
    
    
    
    
    0.09
    %
    
    
    
    
    
    
    0.19
    %
   Page 18




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At December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Non-accrual first mortgage loans
    
    $
    23,151
    
    
    $
    9,649
    
    
    $
    6,057
    
    
    $
    4,401
    
    
    $
    6,053Non-accrual consumer and other loans
    
    
    1,217
    
    
    
    2
    
    
    
    
    
    
    
    102
    
    
    
    19Accruing loans delinquent 90 days or more
    
    
    5,630
    
    
    
    9,661
    
    
    
    15,550
    
    
    
    15,748
    
    
    
    14,123Total non-performing loans
    
    
    29,998
    
    
    
    19,312
    
    
    
    21,607
    
    
    
    20,251
    
    
    
    20,195Foreclosed real estate, net
    
    
    3,161
    
    
    
    1,040
    
    
    
    878
    
    
    
    1,002
    
    
    
    1,276Total non-performing assets
    
    $
    33,159
    
    
    $
    20,352
    
    
    $
    22,485
    
    
    $
    21,253
    
    
    $
    21,471Non-performing loans to total loans
    
    
    0.16
    %
    
    
    0.13
    %
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.29
    %Non-performing assets to total assets
    
    
    0.09
    
    
    
    0.07
    
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.15
   Allowance for Loan Losses .
 At or for the Year December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Dollars in thousands)Balance at
beginning of year
    
    $
    27,393
    
    
    $
    27,319
    
    
    $
    26,547
    
    
    $
    25,501
    
    
    $
    24,010Provision for loan losses
    
    
    
    
    
    
    65
    
    
    
    790
    
    
    
    900
    
    
    
    1,500Allowance transferred in Acquisition
    
    
    3,308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Charge-offs:First mortgage loans
    
    
    (72
    )
    
    
    (2
    )
    
    
    (11
    )
    
    
    (92
    )
    
    
    (3
    )Consumer and other loans
    
    
    (7
    )
    
    
    (8
    )
    
    
    (9
    )
    
    
    (4
    )
    
    
    (10
    )Total charge-offs
    
    
    (79
    )
    
    
    (10
    )
    
    
    (20
    )
    
    
    (96
    )
    
    
    (13
    )Recoveries
    
    
    3
    
    
    
    19
    
    
    
    2
    
    
    
    242
    
    
    
    4Net (charge-offs) recoveries
    
    
    (76
    )
    
    
    9
    
    
    
    (18
    )
    
    
    146
    
    
    
    (9
    )Balance at
end of year
    
    $
    30,625
    
    
    $
    27,393
    
    
    $
    27,319
    
    
    $
    26,547
    
    
    $
    25,501Allowance for loan losses to total loans
    
    
    0.16
    %
    
    
    0.18
    %
    
    
    0.24
    %
    
    
    0.30
    %
    
    
    0.37
    %Allowance for loan losses to
non-performing loans
    
    
    102.09
    
    
    
    141.84
    
    
    
    126.44
    
    
    
    131.09
    
    
    
    126.27
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At December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentage
    
    
    
    
    
    
    Percentageof Loans in
    
    
    
    
    
    
    of Loans in
    
    
    
    
    
    
    of Loans in
    
    
    
    
    
    
    of Loans in
    
    
    
    
    
    
    of Loans inCategory
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Category
    
    
    
    
    
    
    Categoryto Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to Total
    
    
    
    
    
    
    to TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    Loans(Dollars in thousands)First mortgage loans:One- to four-family
    
    $
    24,578
    
    
    
    80.26
    %
    
    $
    25,474
    
    
    
    98.13
    %
    
    $
    25,524
    
    
    
    97.87
    %
    
    $
    24,690
    
    
    
    97.32
    %
    
    $
    23,040
    
    
    
    96.25
    %Other first mortgages
    
    
    999
    
    
    
    3.26
    
    
    
    23
    
    
    
    0.31
    
    
    
    35
    
    
    
    0.75
    
    
    
    28
    
    
    
    1.15
    
    
    
    26
    
    
    
    1.92Total first mortgage loans
    
    
    25,577
    
    
    
    83.52
    
    
    
    25,497
    
    
    
    98.44
    
    
    
    25,559
    
    
    
    98.62
    
    
    
    24,718
    
    
    
    98.47
    
    
    
    23,066
    
    
    
    98.17Consumer and other loans
    
    
    3,618
    
    
    
    11.81
    
    
    
    1,774
    
    
    
    1.56
    
    
    
    1,305
    
    
    
    1.38
    
    
    
    1,152
    
    
    
    1.53
    
    
    
    1,097
    
    
    
    1.83Unallocated
    
    
    1,430
    
    
    
    4.67
    
    
    
    122
    
    
    
    
    
    
    
    455
    
    
    
    
    
    
    
    677
    
    
    
    
    
    
    
    1,338
    
    
    
    Total allowance for loans losses
    
    $
    30,625
    
    
    
    100.00
    %
    
    $
    27,393
    
    
    
    100.00
    %
    
    $
    27,319
    
    
    
    100.00
    %
    
    $
    26,547
    
    
    
    100.00
    %
    
    $
    25,501
    
    
    
    100.00
    %
 Page 20




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##### Table of Contents



Investment Activities
     Investment Securities .
 Mortgage-backed Securities .
 Page 21




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##### Table of Contents



Page 22




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##### Table of Contents



For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Investment securities:Carrying value at beginning of year
    
    $
    5,496,727
    
    
    $
    2,928,888
    
    
    $
    2,245,178Transferred in Acquisition
    
    
    120,087
    
    
    
    
    
    
    
    Purchases:Held to maturity
    
    
    
    
    
    
    300,000
    
    
    
    1,769,643Available for sale
    
    
    1,250,010
    
    
    
    4,008,680
    
    
    
    337,306Calls:Held to maturity
    
    
    (256
    )
    
    
    (99,978
    )
    
    
    (436,670
    )Available for sale
    
    
    (350,004
    )
    
    
    (100,007
    )
    
    
    (986,343
    )Maturities:Held to maturity
    
    
    
    
    
    
    (65
    )
    
    
    (100
    )Available for sale
    
    
    (500,005
    )
    
    
    (1,500,000
    )
    
    
    Sales:Available for sale
    
    
    (97,549
    )
    
    
    
    
    
    
    Mutual fund shares
    
    
    (15,530
    )
    
    
    (10,000
    )
    
    
    Premium amortization and discount accretion, net
    
    
    (17
    )
    
    
    16,295
    
    
    
    32Change in unrealized gain or loss
    
    
    10,121
    
    
    
    (47,086
    )
    
    
    (158
    )Net increase in investment securities
    
    
    416,857
    
    
    
    2,567,839
    
    
    
    683,710Carrying value at end of year
    
    $
    5,913,584
    
    
    $
    5,496,727
    
    
    $
    2,928,888
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Mortgage-backed securities:Carrying value at beginning of year
    
    $
    6,910,497
    
    
    $
    5,376,629
    
    
    $
    5,422,701Transferred in Acquisition
    
    
    186,169
    
    
    
    
    
    
    
    Purchases:Held to maturity
    
    
    3,313,669
    
    
    
    1,604,473
    
    
    
    921,765Available for sale
    
    
    617,171
    
    
    
    1,675,428
    
    
    
    1,278,921Principal payments:Held to maturity
    
    
    (773,343
    )
    
    
    (960,630
    )
    
    
    (1,445,507
    )Available for sale
    
    
    (741,200
    )
    
    
    (499,387
    )
    
    
    (282,901
    )Sales:Held to maturity
    
    
    
    
    
    
    
    
    
    
    Available for sale
    
    
    (186,169
    )
    
    
    (227,894
    )
    
    
    (499,067
    )Premium amortization and discount accretion, net
    
    
    (10,709
    )
    
    
    (14,627
    )
    
    
    (14,138
    )Change in unrealized gain or loss
    
    
    13,546
    
    
    
    (43,495
    )
    
    
    (5,145
    )Net increase (decrease) in mortgage-backed securities
    
    
    2,419,134
    
    
    
    1,533,868
    
    
    
    (46,072
    )Carrying value at end of year
    
    $
    9,329,631
    
    
    $
    6,910,497
    
    
    $
    5,376,629
 Page 23




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##### Table of Contents



At December 31,2006
    
    
    2005
    
    
    2004Percent
    
    
    
    
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    
    
    
    
    PercentCarrying
    
    
    of
    
    
    Fair
    
    
    Carrying
    
    
    of
    
    
    Fair
    
    
    Carrying
    
    
    of
    
    
    FairValue
    
    
    Total (1)
    
    
    Value
    
    
    Value
    
    
    Total (1)
    
    
    Value
    
    
    Value
    
    
    Total (1)
    
    
    Value(Dollars in thousands)Money market investments:Federal funds sold
    
    $
    56,616
    
    
    
    100.00
    %
    
    $
    56,616
    
    
    $
    4,587
    
    
    
    100.00
    %
    
    $
    4,587
    
    
    $
    45,700
    
    
    
    100.00
    %
    
    $
    45,700Investment securities:Held to maturity:United States
government-sponsored
agencies
    
    $
    1,533,059
    
    
    
    25.92
    %
    
    $
    1,502,014
    
    
    $
    $1,533,050
    
    
    
    27.89
    %
    
    $
    1,506,865
    
    
    $
    1,333,018
    
    
    
    45.51
    %
    
    $
    1,325,054Municipal bonds
    
    
    910
    
    
    
    0.02
    
    
    
    920
    
    
    
    1,166
    
    
    
    0.02
    
    
    
    1,190
    
    
    
    1,231
    
    
    
    0.04
    
    
    
    1,282Total held to maturity
    
    
    1,533,969
    
    
    
    25.94
    
    
    
    1,502,934
    
    
    
    1,534,216
    
    
    
    27.91
    
    
    
    1,508,055
    
    
    
    1,334,249
    
    
    
    45.55
    
    
    
    1,326,336Available for sale:United States
government-sponsored
agencies
    
    
    4,372,295
    
    
    
    73.94
    
    
    
    4,372,295
    
    
    
    3,962,178
    
    
    
    72.09
    
    
    
    3,962,178
    
    
    
    1,584,384
    
    
    
    54.10
    
    
    
    1,584,384Corporate bonds
    
    
    57
    
    
    
    
    
    
    
    57
    
    
    
    67
    
    
    
    
    
    
    
    67
    
    
    
    74
    
    
    
    
    
    
    
    74Equity securities
    
    
    7,263
    
    
    
    0.12
    
    
    
    7,263
    
    
    
    266
    
    
    
    
    
    
    
    266
    
    
    
    10,181
    
    
    
    0.35
    
    
    
    10,181Total available for sale
    
    
    4,379,615
    
    
    
    74.06
    
    
    
    4,379,615
    
    
    
    3,962,511
    
    
    
    72.09
    
    
    
    3,962,511
    
    
    
    1,594,639
    
    
    
    54.45
    
    
    
    1,594,639Total investment securities
    
    $
    5,913,584
    
    
    
    100.00
    %
    
    $
    5,882,549
    
    
    $
    $5,496,727
    
    
    
    100.00
    %
    
    $
    5,470,566
    
    
    
    2,928,888
    
    
    
    100.00
    %
    
    $
    2,920,975Mortgage-backed securities:By issuer:Held to maturity:GNMA pass-through
certificates
    
    $
    215,161
    
    
    
    2.31
    %
    
    $
    216,504
    
    
    $
    $293,680
    
    
    
    4.25
    %
    
    $
    294,332
    
    
    $
    416,665
    
    
    
    7.75
    %
    
    $
    422,032FNMA pass-through
certificates
    
    
    3,233,852
    
    
    
    34.66
    
    
    
    3,191,324
    
    
    
    2,535,361
    
    
    
    36.69
    
    
    
    2,489,102
    
    
    
    2,017,165
    
    
    
    37.51
    
    
    
    2,017,791FHLMC pass-through
certificates
    
    
    3,069,884
    
    
    
    32.90
    
    
    
    3,019,995
    
    
    
    1,108,195
    
    
    
    16.04
    
    
    
    1,082,564
    
    
    
    561,095
    
    
    
    10.44
    
    
    
    554,341FHLMC and FNMA
REMICs
    
    
    406,313
    
    
    
    4.36
    
    
    
    376,775
    
    
    
    452,628
    
    
    
    6.55
    
    
    
    422,774
    
    
    
    760,996
    
    
    
    14.15
    
    
    
    726,865Total held to
maturity
    
    
    6,925,210
    
    
    
    74.23
    
    
    
    6,804,598
    
    
    
    4,389,864
    
    
    
    63.53
    
    
    
    4,288,772
    
    
    
    3,755,921
    
    
    
    69.85
    
    
    
    3,721,029Available for sale:GNMA pass-through
certificates
    
    
    1,696,715
    
    
    
    18.18
    
    
    
    1,696,715
    
    
    
    1,700,132
    
    
    
    24.60
    
    
    
    1,700,132
    
    
    
    503,839
    
    
    
    9.37
    
    
    
    503,839FNMA pass-through
certificates
    
    
    575,293
    
    
    
    6.17
    
    
    
    575,293
    
    
    
    666,485
    
    
    
    9.64
    
    
    
    666,485
    
    
    
    743,380
    
    
    
    13.83
    
    
    
    743,380FHLMC pass-through
certificates
    
    
    132,413
    
    
    
    1.42
    
    
    
    132,413
    
    
    
    154,016
    
    
    
    2.23
    
    
    
    154,016
    
    
    
    373,489
    
    
    
    6.95
    
    
    
    373,489Total available for sale
    
    
    2,404,421
    
    
    
    25.77
    
    
    
    2,404,421
    
    
    
    2,520,633
    
    
    
    36.47
    
    
    
    2,520,633
    
    
    
    1,620,708
    
    
    
    30.15
    
    
    
    1,620,708Total
mortgage-backed
securities
    
    $
    9,329,631
    
    
    
    100.00
    %
    
    $
    9,209,019
    
    
    $
    $6,910,497
    
    
    
    100.00
    %
    
    $
    6,809,405
    
    
    $
    5,376,629
    
    
    
    100.00
    %
    
    $
    5,341,737By coupon type:Adjustable-rate
    
    $
    6,495,769
    
    
    
    69.63
    %
    
    $
    6,457,465
    
    
    $
    $3,704,146
    
    
    
    53.60
    %
    
    $
    3,683,965
    
    
    $
    1,258,859
    
    
    
    23.41
    %
    
    $
    1,262,923Fixed-rate
    
    
    2,833,862
    
    
    
    30.37
    
    
    
    2,751,554
    
    
    
    3,206,351
    
    
    
    46.40
    
    
    
    3,125,440
    
    
    
    4,117,770
    
    
    
    76.59
    
    
    
    4,078,814Total
mortgage-backed
securities
    
    $
    9,329,631
    
    
    
    100.00
    %
    
    $
    9,209,019
    
    
    $
    $6,910,497
    
    
    
    100.00
    %
    
    $
    6,809,405
    
    
    $
    5,376,629
    
    
    
    100.00
    %
    
    $
    5,341,737Total investment portfolio
    
    $
    15,299,831
    
    
    
    
    
    
    $
    15,148,184
    
    
    $
    $12,411,811
    
    
    
    
    
    
    $
    12,284,558
    
    
    $
    8,351,217
    
    
    
    
    
    
    $
    8,308,412
 
 (1)
    
    Based on carrying value for each investment type. Page 24




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##### Table of Contents



Carrying Values, Rates and Maturities .
 At December 31, 2006More Than One Year
    
    
    More Than Five YearsOne Year or Less
    
    
    to Five Years
    
    
    to Ten Years
    
    
    More Than Ten Years
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    AverageValue
    
    
    Rate
    
    
    Value
    
    
    Rate
    
    
    Value
    
    
    Rate
    
    
    Value
    
    
    Rate
    
    
    Value
    
    
    Rate(Dollars in thousands)Money market investments:Federal funds sold
    
    $
    56,616
    
    
    
    5.25
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    56,616
    
    
    
    5.25
    %Investment securities:Held to maturity:United States government-sponsored agencies
    
    $
    
    
    
    
    
    
    
    $
    845,561
    
    
    
    4.72
    
    
    $
    65,968
    
    
    
    5.00
    
    
    $
    621,530
    
    
    
    5.02
    
    
    $
    1,533,059
    
    
    
    4.85Municipal bonds
    
    
    5
    
    
    
    5.25
    
    
    
    600
    
    
    
    6.50
    
    
    
    305
    
    
    
    6.30
    
    
    
    
    
    
    
    
    
    
    
    910
    
    
    
    6.43Total held to maturity
    
    
    5
    
    
    
    5.25
    
    
    
    846,161
    
    
    
    4.73
    
    
    
    66,273
    
    
    
    5.01
    
    
    
    621,530
    
    
    
    5.02
    
    
    
    1,533,969
    
    
    
    4.86Available for sale:United States government-sponsored agencies
    
    
    1,320,665
    
    
    
    4.31
    
    
    
    2,792,529
    
    
    
    4.60
    
    
    
    259,101
    
    
    
    4.57
    
    
    
    
    
    
    
    
    
    
    
    4,372,295
    
    
    
    4.51Corporate bonds
    
    
    50
    
    
    
    6.02
    
    
    
    7
    
    
    
    3.79
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    5.75Total available for sale
    
    
    1,320,715
    
    
    
    4.31
    
    
    
    2,792,536
    
    
    
    4.60
    
    
    
    259,101
    
    
    
    4.57
    
    
    
    
    
    
    
    
    
    
    
    4,372,352
    
    
    
    4.51Total investment securities
    
    $
    1,320,720
    
    
    
    4.31
    
    
    $
    3,638,697
    
    
    
    4.63
    
    
    $
    325,374
    
    
    
    4.66
    
    
    $
    621,530
    
    
    
    5.02
    
    
    $
    5,906,321
    
    
    
    4.60Mortgage-backed securities:By issuer:Held to maturity:GNMA pass-through certificates
    
    $
    121
    
    
    
    7.27
    
    
    $
    756
    
    
    
    8.98
    
    
    $
    89
    
    
    
    11.53
    
    
    $
    214,195
    
    
    
    5.41
    
    
    $
    215,161
    
    
    
    5.43FNMA pass-through certificates
    
    
    139
    
    
    
    6.58
    
    
    
    4,283
    
    
    
    6.28
    
    
    
    5,322
    
    
    
    7.08
    
    
    
    3,224,108
    
    
    
    5.17
    
    
    
    3,233,852
    
    
    
    5.17FHLMC pass-through certificates
    
    
    2
    
    
    
    7.58
    
    
    
    2,128
    
    
    
    7.26
    
    
    
    2,045
    
    
    
    6.74
    
    
    
    3,065,709
    
    
    
    5.24
    
    
    
    3,069,884
    
    
    
    5.24FHLMC and FNMA REMICs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    406,313
    
    
    
    4.56
    
    
    
    406,313
    
    
    
    4.56Total held to maturity
    
    
    262
    
    
    
    6.91
    
    
    
    7,167
    
    
    
    6.86
    
    
    
    7,456
    
    
    
    7.04
    
    
    
    6,910,325
    
    
    
    5.17
    
    
    
    6,925,210
    
    
    
    5.18Available for sale:GNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,696,715
    
    
    
    4.86
    
    
    
    1,696,715
    
    
    
    4.86FNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    575,293
    
    
    
    5.00
    
    
    
    575,293
    
    
    
    5.00FHLMC pass-through certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,413
    
    
    
    5.10
    
    
    
    132,413
    
    
    
    5.10Total available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,404,421
    
    
    
    4.91
    
    
    
    2,404,421
    
    
    
    4.91Total mortgage-backed securities
    
    $
    262
    
    
    
    6.91
    
    
    $
    7,167
    
    
    
    6.86
    
    
    $
    7,456
    
    
    
    7.04
    
    
    $
    9,314,746
    
    
    
    5.10
    
    
    $
    9,329,631
    
    
    
    5.11By coupon type:Adjustable-rate
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    884
    
    
    
    5.85
    
    
    $
    6,494,885
    
    
    
    5.18
    
    
    $
    6,495,769
    
    
    
    5.18Fixed-rate
    
    
    262
    
    
    
    6.91
    
    
    
    7,167
    
    
    
    6.86
    
    
    
    6,572
    
    
    
    7.20
    
    
    
    2,819,861
    
    
    
    4.93
    
    
    
    2,833,862
    
    
    
    4.94Total mortgage-backed securities
    
    $
    262
    
    
    
    6.91
    
    
    $
    7,167
    
    
    
    6.86
    
    
    $
    7,456
    
    
    
    7.04
    
    
    $
    9,314,746
    
    
    
    5.10
    
    
    $
    9,329,631
    
    
    
    5.11Total investment portfolio
    
    $
    1,377,598
    
    
    
    4.35
    
    
    $
    3,645,864
    
    
    
    4.64
    
    
    $
    332,830
    
    
    
    4.71
    
    
    $
    9,936,276
    
    
    
    5.09
    
    
    $
    15,292,568
    
    
    
    4.91
 Page 25




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##### Table of Contents



Sources of Funds
 General .
 Deposits .
    Page 26




---



##### Table of Contents



For the Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Total deposits at beginning of year
    
    $
    11,383,300
    
    
    $
    11,477,300
    
    
    $
    10,453,780Deposits assumed in Acquisition
    
    
    1,062,121
    
    
    
    
    
    
    
    Net increase (decrease) in deposits
    
    
    534,070
    
    
    
    (387,736
    )
    
    
    808,707Interest credited
    
    
    436,096
    
    
    
    293,736
    
    
    
    214,813Total deposits at end of year
    
    $
    13,415,587
    
    
    $
    11,383,300
    
    
    $
    11,477,300Net increase (decrease)
    
    $
    2,032,287
    
    
    $
    (94,000
    )
    
    $
    1,023,520Percent increase (decrease)
    
    
    17.85
    %
    
    
    (0.82
    )%
    
    
    9.79
    %
  Maturity Period
    
    Amount(In thousands)3 months or less
    
    $
    707,440Over 3 months through 6 months
    
    
    1,458,217Over 6 months through 12 months
    
    
    228,919Over 12 months
    
    
    170,444Total
    
    $
    2,565,020
 Page 27




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##### Table of Contents



At December 31,2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedPercent
    
    
    average
    
    
    
    
    
    
    Percent
    
    
    average
    
    
    
    
    
    
    Percent
    
    
    averageof total
    
    
    nominal
    
    
    
    
    
    
    of total
    
    
    nominal
    
    
    
    
    
    
    of total
    
    
    nominalAmount
    
    
    deposits
    
    
    rate
    
    
    Amount
    
    
    deposits
    
    
    rate
    
    
    Amount
    
    
    deposits
    
    
    rate(Dollars in thousands)Savings
    
    $
    805,278
    
    
    
    6.00
    %
    
    
    0.92
    %
    
    $
    808,325
    
    
    
    7.10
    %
    
    
    0.98
    %
    
    $
    931,783
    
    
    
    8.12
    %
    
    
    0.98
    %Interest-bearing transaction
    
    
    2,095,811
    
    
    
    15.62
    
    
    
    3.29
    
    
    
    3,616,644
    
    
    
    31.77
    
    
    
    3.19
    
    
    
    4,290,099
    
    
    
    37.38
    
    
    
    2.46Money market
    
    
    918,549
    
    
    
    6.85
    
    
    
    3.59
    
    
    
    342,021
    
    
    
    3.00
    
    
    
    1.14
    
    
    
    564,700
    
    
    
    4.92
    
    
    
    0.96Noninterest-bearing demand
    
    
    498,301
    
    
    
    3.71
    
    
    
    
    
    
    
    442,042
    
    
    
    3.88
    
    
    
    
    
    
    
    417,502
    
    
    
    3.64
    
    
    
    Total
    
    
    4,317,939
    
    
    
    32.18
    
    
    
    2.53
    
    
    
    5,209,032
    
    
    
    45.75
    
    
    
    2.44
    
    
    
    6,204,084
    
    
    
    54.06
    
    
    
    1.94Time deposits:Time deposits $100,000 and over
    
    
    2,565,020
    
    
    
    19.12
    
    
    
    5.03
    
    
    
    1,378,340
    
    
    
    12.11
    
    
    
    3.61
    
    
    
    886,079
    
    
    
    7.72
    
    
    
    2.45Time deposits less than
$100,000 with original
maturities of:Three months or less
    
    
    146,921
    
    
    
    1.10
    
    
    
    4.37
    
    
    
    199,280
    
    
    
    1.75
    
    
    
    3.17
    
    
    
    339,354
    
    
    
    2.96
    
    
    
    1.37Over three months to
twelve months
    
    
    4,302,331
    
    
    
    32.06
    
    
    
    5.23
    
    
    
    1,338,588
    
    
    
    11.76
    
    
    
    3.72
    
    
    
    864,250
    
    
    
    7.53
    
    
    
    1.64Over twelve months to
twenty-four months
    
    
    557,510
    
    
    
    4.16
    
    
    
    3.82
    
    
    
    1,541,166
    
    
    
    13.54
    
    
    
    3.36
    
    
    
    1,368,900
    
    
    
    11.93
    
    
    
    2.07Over twenty-four months
to thirty-six months
    
    
    202,276
    
    
    
    1.51
    
    
    
    3.67
    
    
    
    495,670
    
    
    
    4.35
    
    
    
    3.17
    
    
    
    650,289
    
    
    
    5.67
    
    
    
    2.81Over thirty-six months to
forty-eight months
    
    
    264,204
    
    
    
    1.97
    
    
    
    3.66
    
    
    
    294,538
    
    
    
    2.59
    
    
    
    3.47
    
    
    
    283,747
    
    
    
    2.47
    
    
    
    3.40Over forty-eight months
to sixty months
    
    
    43,243
    
    
    
    0.32
    
    
    
    3.72
    
    
    
    50,680
    
    
    
    0.45
    
    
    
    3.72
    
    
    
    48,692
    
    
    
    0.42
    
    
    
    3.76Over sixty months
    
    
    164,502
    
    
    
    1.23
    
    
    
    3.99
    
    
    
    149,724
    
    
    
    1.32
    
    
    
    3.93
    
    
    
    135,160
    
    
    
    1.18
    
    
    
    3.87Qualified retirement plans
    
    
    851,641
    
    
    
    6.35
    
    
    
    4.47
    
    
    
    726,282
    
    
    
    6.38
    
    
    
    3.49
    
    
    
    696,745
    
    
    
    6.06
    
    
    
    2.65Total time deposits
    
    
    9,097,648
    
    
    
    67.82
    
    
    
    4.89
    
    
    
    6,174,268
    
    
    
    54.25
    
    
    
    3.51
    
    
    
    5,273,216
    
    
    
    45.94
    
    
    
    2.32Total deposits
    
    $
    13,415,587
    
    
    
    100.00
    %
    
    
    4.13
    
    
    $
    11,383,300
    
    
    
    100.00
    %
    
    
    3.02
    
    
    $
    11,477,300
    
    
    
    100.00
    %
    
    
    2.11
 Page 28




---



##### Table of Contents



At December 31,2006
    
    
    2005
    
    
    2004(In thousands)Time deposit accounts:3.00% or less
    
    $
    38,158
    
    
    $
    816,838
    
    
    $
    4,174,6013.01% to 3.50%
    
    
    457,995
    
    
    
    2,246,361
    
    
    
    557,7063.51% to 4.00%
    
    
    979,918
    
    
    
    2,154,784
    
    
    
    370,0294.01% to 4.50%
    
    
    1,283,911
    
    
    
    952,228
    
    
    
    157,1424.51% to 5.00%
    
    
    482,847
    
    
    
    3,341
    
    
    
    11,4605.01% and over
    
    
    5,854,819
    
    
    
    716
    
    
    
    2,278Total
    
    $
    9,097,648
    
    
    $
    6,174,268
    
    
    $
    5,273,216
  Period to Maturity from December 31, 2006Within
    
    
    Over three
    
    
    Over six
    
    
    Over one
    
    
    Over two
    
    
    Overthree
    
    
    to six
    
    
    months to
    
    
    to two
    
    
    to three
    
    
    threemonths
    
    
    months
    
    
    one year
    
    
    years
    
    
    years
    
    
    years
    
    
    Total(In thousands)Time deposit accounts:3.00% or less
    
    $
    19,433
    
    
    $
    16,559
    
    
    $
    1,344
    
    
    $
    395
    
    
    $
    427
    
    
    $
    
    
    
    $
    38,1583.01% to 3.50%
    
    
    203,960
    
    
    
    120,082
    
    
    
    85,645
    
    
    
    48,295
    
    
    
    4
    
    
    
    9
    
    
    
    457,9953.51% to 4.00%
    
    
    146,070
    
    
    
    149,459
    
    
    
    390,431
    
    
    
    214,281
    
    
    
    79,614
    
    
    
    63
    
    
    
    979,9184.01% to 4.50%
    
    
    658,476
    
    
    
    301,199
    
    
    
    68,843
    
    
    
    62,243
    
    
    
    100,204
    
    
    
    92,946
    
    
    
    1,283,9114.51% to 5.00%
    
    
    66,659
    
    
    
    244,413
    
    
    
    6,616
    
    
    
    160,674
    
    
    
    3,061
    
    
    
    1,424
    
    
    
    482,8475.01% and over
    
    
    1,490,862
    
    
    
    3,929,037
    
    
    
    433,772
    
    
    
    7
    
    
    
    41
    
    
    
    1,100
    
    
    
    5,854,819Total
    
    $
    2,585,460
    
    
    $
    4,760,749
    
    
    $
    986,651
    
    
    $
    485,895
    
    
    $
    183,351
    
    
    $
    95,542
    
    
    $
    9,097,648
 Borrowings.
 .
 Page 29




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##### Table of Contents



2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AveragePrincipal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)Securities sold under agreements to repurchase:FHLB
    
    $
    823,000
    
    
    
    4.96
    %
    
    $
    850,000
    
    
    
    4.96
    %Other brokers
    
    
    8,100,000
    
    
    
    3.86
    
    
    
    7,050,000
    
    
    
    3.45Total securities sold under agreements to repurchase
    
    
    8,923,000
    
    
    
    3.96
    
    
    
    7,900,000
    
    
    
    3.61Advances from the FHLB
    
    
    8,050,000
    
    
    
    4.21
    
    
    
    3,450,000
    
    
    
    3.95Total borrowed funds
    
    $
    16,973,000
    
    
    
    4.08
    
    
    $
    11,350,000
    
    
    
    3.72
  At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Repurchase Agrements:Average balance outstanding during the year
    
    $
    8,313,321
    
    
    $
    6,447,560
    
    
    $
    4,182,197Maximum balance outstanding at any month-end
during the year
    
    $
    8,923,000
    
    
    $
    7,900,000
    
    
    $
    5,300,000Weighted average rate during the period
    
    
    3.81
    %
    
    
    3.52
    %
    
    
    3.41
    %FHLB Advances:Average balance outstanding during the year
    
    $
    5,977,115
    
    
    $
    2,469,529
    
    
    $
    1,916,085Maximum balance outstanding at any month-end
during the year
    
    $
    8,050,000
    
    
    $
    3,450,000
    
    
    $
    1,950,000Weighted average rate during the period
    
    
    4.17
    %
    
    
    3.89
    %
    
    
    3.79
    %
 Page 30




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##### Table of Contents



Borrowings by Scheduled
    
    
    Borrowings by Earlier of Maturity Date
or NextMaturity Date
    
    
    Potential Call DateWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageYear
    
    Principal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)2007
    
    $
    7,000
    
    
    
    2.65
    %
    
    $
    7,667,000
    
    
    
    4.04
    %2008
    
    
    16,000
    
    
    
    4.94
    
    
    
    6,156,000
    
    
    
    4.102009
    
    
    
    
    
    
    
    
    
    
    2,550,000
    
    
    
    4.092010
    
    
    300,000
    
    
    
    5.68
    
    
    
    350,000
    
    
    
    4.012011
    
    
    250,000
    
    
    
    4.90
    
    
    
    250,000
    
    
    
    4.902012
    
    
    900,000
    
    
    
    4.16
    
    
    
    
    
    
    
    2013
    
    
    350,000
    
    
    
    5.09
    
    
    
    
    
    
    
    2014
    
    
    1,850,000
    
    
    
    2.94
    
    
    
    
    
    
    
    2015
    
    
    4,175,000
    
    
    
    3.84
    
    
    
    
    
    
    
    2016
    
    
    9,125,000
    
    
    
    4.30
    
    
    
    
    
    
    
    Total
    
    $
    16,973,000
    
    
    
    4.08
    
    
    $
    16,973,000
    
    
    
    4.08
  At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Amortized cost of collateral:United States government-sponsored
agency securities
    
    $
    3,329,639
    
    
    $
    2,849,947
    
    
    $
    2,030,978Mortgage-backed securities
    
    
    5,937,758
    
    
    
    5,224,648
    
    
    
    3,198,768REMICs
    
    
    319,920
    
    
    
    356,579
    
    
    
    455,598Total amortized cost of collateral
    
    $
    9,587,317
    
    
    $
    8,431,174
    
    
    $
    5,685,344Fair value of collateral:United States government-sponsored
agency securities
    
    $
    3,195,765
    
    
    $
    2,778,462
    
    
    $
    2,008,710Mortgage-backed securities
    
    
    5,846,562
    
    
    
    5,119,225
    
    
    
    3,188,386REMICs
    
    
    296,661
    
    
    
    332,532
    
    
    
    434,249Total fair value of collateral
    
    $
    9,338,988
    
    
    $
    8,230,219
    
    
    $
    5,631,345
 Page 31




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##### Table of Contents



Subsidiaries
   Personnel
  REGULATION OF HUDSON CITY SAVINGS BANK AND HUDSON CITY BANCORP
 General
   Page 32




---



##### Table of Contents



Federally Chartered Savings Bank Regulation
 Activity Powers .
 
    
    real estate mortgages;
    
    consumer and commercial loans;
    
    certain types of debt securities; and
    
    certain other assets.
  Capital Requirements.
 OTS RequirementsMinimum Capital
    
    For Classification asBank Actual
    
    Adequacy
    
    Well-CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)December 31, 2006Tangible capital
    
    $
    4,000,577
    
    
    
    11.30
    %
    
    $
    530,878
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core) capital
    
    
    4,000,577
    
    
    
    11.30
    
    
    
    1,415,674
    
    
    
    4.00
    
    
    $
    1,769,592
    
    
    
    5.00
    %Total-risk-based capital
    
    
    4,031,202
    
    
    
    30.99
    
    
    
    1,040,513
    
    
    
    8.00
    
    
    
    1,300,642
    
    
    
    10.00December 31, 2005Tangible capital
    
    $
    4,129,937
    
    
    
    14.68
    %
    
    $
    422,069
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core) capital
    
    
    4,129,937
    
    
    
    14.68
    
    
    
    1,125,518
    
    
    
    4.00
    
    
    $
    1,406,897
    
    
    
    5.00
    %Total-risk-based capital
    
    
    4,157,330
    
    
    
    41.31
    
    
    
    805,040
    
    
    
    8.00
    
    
    
    1,006,300
    
    
    
    10.00
 Page 33




---



##### Table of Contents



Safety and Soundness Standards.
  Prompt Corrective Action.
 Page 34




---



##### Table of Contents



(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.
  Insurance Activities.
 Deposit Insurance.
 Page 35




---



##### Table of Contents



Page 36




---



##### Table of Contents



Transactions with Affiliates of Hudson City Savings.
   Privacy Standards.
   Page 37




---



##### Table of Contents



Community Reinvestment Act.
  
    
    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.
  Loans to One Borrower.
 Interagency Guidance on Nontraditional Mortgage Product Risks .
 Page 38




---



##### Table of Contents



OTS Guidance on Commercial Real Estate Lending
 Qualified Thrift Lender (QTL) Test.
  Limitation on Capital Distributions.
  Page 39




---



##### Table of Contents



Liquidity.
 Assessments.
 Branching.
 Anti-Money Laundering and Customer Identification
  Page 40




---



##### Table of Contents




    
    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
   Page 41




---



##### Table of Contents



Federal Reserve System
  Federal Holding Company Regulation
  Restrictions Applicable to New Savings and Loan Holding Companies.
 
    
    furnishing or performing management services for a savings institution subsidiary of
such holding company;
    
    conducting an insurance agency or escrow business;
    
    holding, managing, or liquidating assets owned or acquired from a savings institution
subsidiary of such company;
    
    holding or managing properties used or occupied by a savings institution subsidiary of
such company;
    
    acting as trustee under a deed of trust;
    
    any other activity (i) that the FRB, by regulation, has determined to be permissible for
bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956 (the BHC
 Page 42




---



##### Table of Contents



Act), unless the Director of the Office of Thrift Supervision, by regulation, prohibits or
limits any such activity for savings and loan holding companies, or (ii) which multiple
savings and loan holding companies were authorized by regulation to directly engage in on
December 5, 1987;
    
    purchasing, holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such holding company is approved by the Director
of the Office of Thrift Supervision; and
    
    any activity permissible for financial holding companies under section 4(k) of the BHC
Act.
  
    
    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.
  Restrictions Applicable to All Savings and Loan Holding Companies.
 
    
    control (as defined under HOLA) of another savings institution (or a holding company
parent) without prior Office of Thrift Supervision approval;
    
    through merger, consolidation, or purchase of assets, another savings institution or a
holding company thereof, or acquiring all or substantially all of the assets of such
institution (or a holding company) without prior Office of Thrift Supervision approval; or
    
    control of any depository institution not insured by the FDIC (except through a merger
with and into the holding companys savings institution subsidiary that is approved by the
Office of Thrift Supervision).
 Page 43




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##### Table of Contents




    
    in the case of certain emergency acquisitions approved by the FDIC;
    
    if such holding company controls a savings institution subsidiary that operated a home
or branch office in such additional state as of December 5, 1987; or
    
    if the laws of the state in which the savings institution to be acquired is located
specifically authorize a savings institution chartered by that state to be acquired by a
savings institution chartered by the state where the acquiring savings institution or
savings and loan holding company is located or by a holding company that controls such a
state chartered association.
   Federal Securities Law
  Delaware Corporation Law
  TAXATION
 Federal
 General.
 Page 44




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##### Table of Contents



Bad Debt Reserves.
 Distributions.
  Corporate Alternative Minimum Tax.
 Elimination of Dividends; Dividends Received Deduction.
 State
 New Jersey State Taxation.
 Page 45




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##### Table of Contents



Delaware State Taxation.
 New York State Taxation.
 Connecticut State Taxation.
 New York City Taxation.
 
 Item 1A. Risk Factors.
 Changes In Interest Rates Could Adversely Affect Our Results of Operations And Financial Condition.
 Page 46




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Our Plans To Increase The Level Of Our Adjustable-Rate Assets May Be Difficult To Implement And May
Decrease Our Profitability .
 Page 47




---



##### Table of Contents



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 May Not Be Able To Successfully Implement Our Plans For Growth.
 The Geographic Concentration Of Our Loan Portfolio And Lending Activities Makes Us Vulnerable To A
Downturn In The Local Economy.
 Page 48




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We operate in a highly regulated industry, which limits the manner and scope of our business
activities.
   Page 49




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##### Table of Contents



Our Stock Benefit Plans Will Increase Our Costs, Which Will Reduce Our Profitability And
Stockholders Equity.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
   
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
 .
 Page 50




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##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
  Sales Price
    
    Dividend InformationHigh
    
    Low
    

Amount Per Share
    
    Date of Payment2005First quarter
    
    $
    11.82
    
    
    $
    10.75
    
    
    $
    0.062
    
    
    March 1, 2005Second quarter
    
    
    11.69
    
    
    
    10.09
    
    
    
    0.066
    
    
    June 1, 2005Third quarter
    
    
    12.61
    
    
    
    11.36
    
    
    
    0.070
    
    
    September 1, 2005Fourth quarter
    
    
    12.25
    
    
    
    11.15
    
    
    
    0.070
    
    
    December 1, 20052006First quarter
    
    
    13.50
    
    
    
    11.90
    
    
    
    0.075
    
    
    March 1, 2006Second quarter
    
    
    14.07
    
    
    
    12.93
    
    
    
    0.075
    
    
    June 1, 2006Third quarter
    
    
    13.53
    
    
    
    12.64
    
    
    
    0.075
    
    
    September 1, 2006Fourth quarter
    
    
    14.09
    
    
    
    12.99
    
    
    
    0.075
    
    
    December 1, 2006
    Page 51




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##### Table of Contents



MaximumTotal Number of
    
    Number of SharesTotal
    
    
    
    
    
    Shares Purchased
    
    that May Yet BeNumber of
    
    Average
    
    as Part of Publicly
    
    Purchased UnderShares
    
    Price Paid
    
    Announced Plans
    
    the Plans orPeriod
    
    Purchased(2)
    
    per Share
    
    or Programs
    
    Programs (1)October 1-October 31, 2006
    
    
    1,200,000
    
    
    $
    13.62
    
    
    
    1,200,000
    
    
    
    51,429,000November 1-November 30, 2006
    
    
    4,015,000
    
    
    
    13.57
    
    
    
    4,015,000
    
    
    
    47,414,000December 1-December 31, 2006
    
    
    3,100,000
    
    
    
    13.62
    
    
    
    3,100,000
    
    
    
    44,314,000Total
    
    
    8,315,000
    
    
    
    13.60
    
    
    
    8,315,000
 
 (1)
    
    On June 20, 2006, Hudson City Bancorp announced the adoption of its seventh Stock Repurchase Program, which authorized the repurchase of up to
56,975,000 shares of common stock. This program has no expiration date and has 44,314,000 shares yet to be purchased as of December 31, 2006.(2)
    
    Amounts do not reflect purchases of common stock by the trustee of the recognition and retention plan. Performance
Graph
  Hudson
City Bancorp, Inc.  Total Return Performance
 
 
 *
    
    Source: SNL Financial LC and Bloomberg Financial Database There
can be no assurance that stock performance will continue in the
future with the same or similar trends as those depicted in the graph
above.
 Page 52




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Item 6. Selected Financial Data
  At December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Selected Financial Condition Data:Total assets
    
    $
    35,506,581
    
    
    $
    28,075,353
    
    
    $
    20,145,981
    
    
    $
    17,033,360
    
    
    $
    14,144,604Total loans
    
    
    19,083,617
    
    
    
    15,062,449
    
    
    
    11,363,039
    
    
    
    8,803,066
    
    
    
    6,970,900Federal Home Loan Bank of New York stock
    
    
    445,006
    
    
    
    226,962
    
    
    
    140,000
    
    
    
    164,850
    
    
    
    137,500Investment securities held to maturity
    
    
    1,533,969
    
    
    
    1,534,216
    
    
    
    1,334,249
    
    
    
    1,366
    
    
    
    1,406Investment securities available for sale
    
    
    4,379,615
    
    
    
    3,962,511
    
    
    
    1,594,639
    
    
    
    2,243,812
    
    
    
    560,932Mortgage-backed securities held to maturity
    
    
    6,925,210
    
    
    
    4,389,864
    
    
    
    3,755,921
    
    
    
    4,292,444
    
    
    
    4,734,266Mortgage-backed securities available for sale
    
    
    2,404,421
    
    
    
    2,520,633
    
    
    
    1,620,708
    
    
    
    1,130,257
    
    
    
    1,391,895Total cash and cash equivalents
    
    
    182,246
    
    
    
    102,259
    
    
    
    168,183
    
    
    
    254,584
    
    
    
    240,796Foreclosed real estate, net
    
    
    3,161
    
    
    
    1,040
    
    
    
    878
    
    
    
    1,002
    
    
    
    1,276Total deposits
    
    
    13,415,587
    
    
    
    11,383,300
    
    
    
    11,477,300
    
    
    
    10,453,780
    
    
    
    9,138,629Total borrowed funds
    
    
    16,973,000
    
    
    
    11,350,000
    
    
    
    7,150,000
    
    
    
    5,150,000
    
    
    
    3,600,000Total stockholders equity
    
    
    4,930,256
    
    
    
    5,201,476
    
    
    
    1,402,884
    
    
    
    1,329,366
    
    
    
    1,316,083
 For the Year Ended December 31,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands)Selected Operating Data:Total interest and dividend income
    
    $
    1,614,843
    
    
    $
    1,178,908
    
    
    $
    915,058
    
    
    $
    777,328
    
    
    $
    784,217Total interest expense
    
    
    1,001,610
    
    
    
    616,774
    
    
    
    430,066
    
    
    
    376,354
    
    
    
    395,774Net interest income
    
    
    613,233
    
    
    
    562,134
    
    
    
    484,992
    
    
    
    400,974
    
    
    
    388,443Provision for loan losses
    
    
    
    
    
    
    65
    
    
    
    790
    
    
    
    900
    
    
    
    1,500Net interest income after provision for loan losses
    
    
    613,233
    
    
    
    562,069
    
    
    
    484,202
    
    
    
    400,074
    
    
    
    386,943Non-interest income:Service charges and other income
    
    
    6,287
    
    
    
    5,267
    
    
    
    5,128
    
    
    
    5,338
    
    
    
    5,947Gains on securities transactions, net
    
    
    4
    
    
    
    2,740
    
    
    
    11,429
    
    
    
    24,326
    
    
    
    2,066Total non-interest income
    
    
    6,291
    
    
    
    8,007
    
    
    
    16,557
    
    
    
    29,664
    
    
    
    8,013Total non-interest expense
    
    
    158,955
    
    
    
    127,703
    
    
    
    118,348
    
    
    
    102,527
    
    
    
    93,541Income before income tax expense
    
    
    460,569
    
    
    
    442,373
    
    
    
    382,411
    
    
    
    327,211
    
    
    
    301,415Income tax expense
    
    
    171,990
    
    
    
    166,318
    
    
    
    143,145
    
    
    
    119,801
    
    
    
    109,382Net income
    
    $
    288,579
    
    
    $
    276,055
    
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033
 Page 53




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At or for the Year Ended December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002Selected Financial Ratios and Other Data:Performance Ratios:Return on average assets
    
    
    0.91
    %
    
    
    1.14
    %
    
    
    1.29
    %
    
    
    1.34
    %
    
    
    1.50
    %Return on average stockholders equity
    
    
    5.70
    
    
    
    7.52
    
    
    
    17.66
    
    
    
    15.38
    
    
    
    14.84Net interest rate spread (1)
    
    
    1.31
    
    
    
    1.84
    
    
    
    2.43
    
    
    
    2.37
    
    
    
    2.66Net interest margin (2)
    
    
    1.96
    
    
    
    2.35
    
    
    
    2.66
    
    
    
    2.65
    
    
    
    3.10Non-interest expense to average assets
    
    
    0.50
    
    
    
    0.53
    
    
    
    0.64
    
    
    
    0.66
    
    
    
    0.73Efficiency ratio (3)
    
    
    25.66
    
    
    
    22.40
    
    
    
    23.60
    
    
    
    23.81
    
    
    
    23.59Average interest-earning assets to
average interest-bearing liabilities
    
    
    1.20
    x
    
    
    1.20
    x
    
    
    1.09
    x
    
    
    1.11
    x
    
    
    1.14
    xShare and Per Share Data:Basic earnings per share
    
    $
    0.54
    
    
    $
    0.49
    
    
    $
    0.41
    
    
    $
    0.35
    
    
    $
    0.32Diluted earnings per share
    
    
    0.53
    
    
    
    0.48
    
    
    
    0.40
    
    
    
    0.34
    
    
    
    0.32Cash dividends paid per common share
    
    
    0.30
    
    
    
    0.27
    
    
    
    0.22
    
    
    
    0.16
    
    
    
    0.11Dividend pay-out ratio (4)
    
    
    55.56
    %
    
    
    54.69
    %
    
    
    53.17
    %
    
    
    46.29
    %
    
    
    33.75
    %Book value per share (5)
    
    $
    9.47
    
    
    $
    9.44
    
    
    $
    7.85
    
    
    $
    7.33
    
    
    $
    7.22Tangible book value per share (5)
    
    
    9.15
    
    
    
    9.44
    
    
    
    7.85
    
    
    
    7.33
    
    
    
    7.22Weighted average number of common
shares outstanding:Basic
    
    
    536,214,778
    
    
    
    567,789,397
    
    
    
    576,621,209
    
    
    
    585,316,009
    
    
    
    592,880,271Diluted
    
    
    546,790,604
    
    
    
    581,063,426
    
    
    
    593,000,573
    
    
    
    601,681,732
    
    
    
    609,157,242Capital Ratios:Average stockholders equity to average assets
    
    
    16.00
    %
    
    
    15.10
    %
    
    
    7.29
    %
    
    
    8.73
    %
    
    
    10.12
    %Stockholders equity to assets
    
    
    13.89
    
    
    
    18.53
    
    
    
    6.96
    
    
    
    7.80
    
    
    
    9.30Regulatory Capital Ratios of Bank:Leverage capital (6)
    
    
    11.30
    %
    
    
    14.68
    %
    
    
    6.36
    %
    
    
    7.52
    %
    
    
    8.85
    %Total risk-based capital (7)
    
    
    30.99
    
    
    
    41.31
    
    
    
    17.49
    
    
    
    20.89
    
    
    
    26.81Asset Quality Ratios:Non-performing loans to total loans
    
    
    0.16
    %
    
    
    0.13
    %
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.29
    %Non-performing assets to total assets
    
    
    0.09
    
    
    
    0.07
    
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.15Allowance for loan losses to non-performing loans
    
    
    102.09
    
    
    
    141.84
    
    
    
    126.44
    
    
    
    131.09
    
    
    
    126.27Allowance for loan losses to total loans
    
    
    0.16
    
    
    
    0.18
    
    
    
    0.24
    
    
    
    0.30
    
    
    
    0.37Branch and Deposit Data:Number of deposit accounts
    
    
    580,987
    
    
    
    484,956
    
    
    
    476,627
    
    
    
    491,293
    
    
    
    503,998Branches
    
    
    111
    
    
    
    90
    
    
    
    85
    
    
    
    81
    
    
    
    81Average deposits per branch (thousands)
    
    $
    120,861
    
    
    $
    126,481
    
    
    $
    135,027
    
    
    $
    129,059
    
    
    $
    112,823
 
 (1)
    
    Determined by subtracting the weighted average cost of average total interest-bearing liabilities from the weighted average yield
on average total interest-earning assets.(2)
    
    Determined by dividing net interest income by average total interest-earning assets.(3)
    
    Determined by dividing total non-interest expense by the sum of net interest income and total non-interest income.(4)
    
    The dividend pay-out ratio for 2004 and 2005 uses amount per share information that does not reflect the dividend waiver by Hudson City, MHC.(5)
    
    Computed based on total common shares issued, less treasury shares, unallocated ESOP shares and unvested stock award shares. Tangible book value excludes goodwill and other intangible assets.(6)
    
    Ratios determined pursuant to FDIC regulations for 2003 and prior years. Beginning January 1, 2004, Hudson City Savings became subject to the capital requirements under OTS regulations.(7)
    
    The calculation is the same under both OTS and FDIC regulations. Page 54




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 .
 Executive Summary
     Page 55




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Comparison of Financial Condition at December 31, 2006 and December 31, 2005
    Page 56




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Page 57




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Analysis of Net Interest Income
  Page 58




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Average Balance Sheet.
 For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/
    
    
    Average
    
    
    
    
    
    
    Yield/Balance
    
    
    Interest
    
    
    Cost
    
    
    Balance
    
    
    Interest
    
    
    Cost
    
    
    Balance
    
    
    Interest
    
    
    Cost(Dollars in thousands)Assets:Interest-earnings assets:First mortgage loans, net (1)
    
    $
    16,685,920
    
    
    $
    932,550
    
    
    
    5.59
    %
    
    $
    12,656,118
    
    
    $
    689,435
    
    
    
    5.45
    %
    
    $
    9,783,953
    
    
    $
    539,966
    
    
    
    5.52
    %Consumer and other loans
    
    
    316,844
    
    
    
    19,698
    
    
    
    6.22
    
    
    
    185,320
    
    
    
    10,786
    
    
    
    5.82
    
    
    
    144,621
    
    
    
    8,650
    
    
    
    5.98Federal funds sold
    
    
    165,380
    
    
    
    8,242
    
    
    
    4.98
    
    
    
    236,288
    
    
    
    5,013
    
    
    
    2.12
    
    
    
    124,755
    
    
    
    1,580
    
    
    
    1.27Mortgage-backed securities,
at amortized cost
    
    
    8,022,309
    
    
    
    381,995
    
    
    
    4.76
    
    
    
    6,218,312
    
    
    
    273,063
    
    
    
    4.39
    
    
    
    5,379,439
    
    
    
    242,335
    
    
    
    4.50Federal Home Loan Bank stock
    
    
    345,870
    
    
    
    16,507
    
    
    
    4.77
    
    
    
    169,781
    
    
    
    9,394
    
    
    
    5.53
    
    
    
    150,104
    
    
    
    3,213
    
    
    
    2.14Investment
securities, at amortized cost
    
    
    5,697,565
    
    
    
    255,851
    
    
    
    4.49
    
    
    
    4,503,416
    
    
    
    191,217
    
    
    
    4.25
    
    
    
    2,671,263
    
    
    
    119,314
    
    
    
    4.47Total interest-earning assets
    
    
    31,233,888
    
    
    
    1,614,843
    
    
    
    5.17
    
    
    
    23,969,235
    
    
    
    1,178,908
    
    
    
    4.92
    
    
    
    18,254,135
    
    
    
    915,058
    
    
    
    5.01Noninterest-earning assets
    
    
    414,084
    
    
    
    
    
    
    
    
    
    
    
    324,004
    
    
    
    
    
    
    
    
    
    
    
    334,712Total assets
    
    $
    31,647,972
    
    
    
    
    
    
    
    
    
    
    $
    24,293,239
    
    
    
    
    
    
    
    
    
    
    $
    18,588,847Liabilities and stockholders equity:Interest-bearing liabilities:Savings accounts
    
    $
    796,410
    
    
    
    7,851
    
    
    
    0.99
    
    
    $
    980,707
    
    
    
    9,709
    
    
    
    0.99
    
    
    $
    942,486
    
    
    
    9,359
    
    
    
    0.99Interest-bearing transaction accounts
    
    
    2,734,787
    
    
    
    90,936
    
    
    
    3.33
    
    
    
    4,124,359
    
    
    
    118,530
    
    
    
    2.87
    
    
    
    3,575,468
    
    
    
    79,750
    
    
    
    2.23Money market accounts
    
    
    688,311
    
    
    
    20,670
    
    
    
    3.00
    
    
    
    469,254
    
    
    
    5,172
    
    
    
    1.10
    
    
    
    593,426
    
    
    
    5,681
    
    
    
    0.96Time deposits
    
    
    7,417,812
    
    
    
    316,639
    
    
    
    4.27
    
    
    
    5,546,364
    
    
    
    160,325
    
    
    
    2.89
    
    
    
    5,482,554
    
    
    
    120,023
    
    
    
    2.19Total interest-bearing deposits
    
    
    11,637,320
    
    
    
    436,096
    
    
    
    3.75
    
    
    
    11,120,684
    
    
    
    293,736
    
    
    
    2.64
    
    
    
    10,593,934
    
    
    
    214,813
    
    
    
    2.03Repurchase agreements
    
    
    8,313,321
    
    
    
    316,444
    
    
    
    3.81
    
    
    
    6,447,560
    
    
    
    226,909
    
    
    
    3.52
    
    
    
    4,182,197
    
    
    
    142,648
    
    
    
    3.41Federal Home Loan Bank of New York
    
    
    5,977,115
    
    
    
    249,070
    
    
    
    4.17
    
    
    
    2,469,529
    
    
    
    96,129
    
    
    
    3.89
    
    
    
    1,916,085
    
    
    
    72,605
    
    
    
    3.79Total borrowed funds
    
    
    14,290,436
    
    
    
    565,514
    
    
    
    3.96
    
    
    
    8,917,089
    
    
    
    323,038
    
    
    
    3.62
    
    
    
    6,098,282
    
    
    
    215,253
    
    
    
    3.53Total interest-bearing liabilities
    
    
    25,927,756
    
    
    
    1,001,610
    
    
    
    3.86
    
    
    
    20,037,773
    
    
    
    616,774
    
    
    
    3.08
    
    
    
    16,692,216
    
    
    
    430,066
    
    
    
    2.58Noninterest-bearing liabilities:Noninterest-bearing deposits
    
    
    462,022
    
    
    
    
    
    
    
    
    
    
    
    437,790
    
    
    
    
    
    
    
    
    
    
    
    415,905Other noninterest-bearing liabilities
    
    
    195,845
    
    
    
    
    
    
    
    
    
    
    
    148,523
    
    
    
    
    
    
    
    
    
    
    
    125,929Total noninterest-bearing liabilities
    
    
    657,867
    
    
    
    
    
    
    
    
    
    
    
    586,313
    
    
    
    
    
    
    
    
    
    
    
    541,834Total liabilities
    
    
    26,585,623
    
    
    
    
    
    
    
    
    
    
    
    20,624,086
    
    
    
    
    
    
    
    
    
    
    
    17,234,050Stockholders equity
    
    
    5,062,349
    
    
    
    
    
    
    
    
    
    
    
    3,669,153
    
    
    
    
    
    
    
    
    
    
    
    1,354,797Total liabilities and
stockholders equity
    
    $
    31,647,972
    
    
    
    
    
    
    
    
    
    
    $
    24,293,239
    
    
    
    
    
    
    
    
    
    
    $
    18,588,847Net interest income
    
    
    
    
    
    $
    613,233
    
    
    
    
    
    
    
    
    
    
    $
    562,134
    
    
    
    
    
    
    
    
    
    
    $
    484,992Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    1.31
    %
    
    
    
    
    
    
    
    
    
    
    1.84
    %
    
    
    
    
    
    
    
    
    
    
    2.43
    %Net interest-earning assets
    
    $
    5,306,132
    
    
    
    
    
    
    
    
    
    
    $
    3,931,462
    
    
    
    
    
    
    
    
    
    
    $
    1,561,919Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    1.96
    %
    
    
    
    
    
    
    
    
    
    
    2.35
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    1.20
    x
    
    
    
    
    
    
    
    
    
    
    1.20
    x
    
    
    
    
    
    
    
    
    
    
    1.09
    x
 
 (1)
    
    Amount is net of deferred loan costs and allowance for loan losses and includes non-performing loans.(2)
    
    Determined by subtracting the weighted average cost of average total interest-bearing liabilities from the weighted average yield on average total interest-earning assets.(3)
    
    Determined by dividing net interest income by average total interest-earning assets.(4)
    
    At December 31, 2006, the weighted-average rate on our outstanding interest-earning assets,
other than our FHLB stock, was as follows: first mortgage loans, 5.78%, consumer and other loans, 6.55%, federal funds sold, 5.25%,
mortgage-backed securities,
5.21%, investment securities, 4.72%. At December 31, 2006, the weighted-average rate on our outstanding interest-bearing
liabilities was as follows: savings accounts, 0.94%, interest-bearing transaction accounts, 3.29%, money market accounts, 3.59%, time
deposits, 4.89%, borrowed funds, 4.08%. Page 59




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Rate/Volume Analysis.
 
    
    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.
  For the Year Ended December 31,2006 vs. 2005
    
    

2005 vs. 2004Increase (Decrease) Due To
    
    
    Increase (Decrease) Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In thousands)Interest-earning assets:First mortgage loans, net
    
    $
    224,965
    
    
    $
    18,150
    
    
    $
    243,115
    
    
    $
    156,410
    
    
    $
    (6,941
    )
    
    $
    149,469Consumer and other loans
    
    
    8,125
    
    
    
    787
    
    
    
    8,912
    
    
    
    2,373
    
    
    
    (237
    )
    
    
    2,136Federal funds sold
    
    
    (1,872
    )
    
    
    5,101
    
    
    
    3,229
    
    
    
    1,963
    
    
    
    1,470
    
    
    
    3,433Mortgage-backed securities
    
    
    84,409
    
    
    
    24,523
    
    
    
    108,932
    
    
    
    36,795
    
    
    
    (6,067
    )
    
    
    30,728Federal Home Loan Bank stock
    
    
    8,559
    
    
    
    (1,446
    )
    
    
    7,113
    
    
    
    472
    
    
    
    5,709
    
    
    
    6,181Investment securities
    
    
    53,286
    
    
    
    11,348
    
    
    
    64,634
    
    
    
    78,056
    
    
    
    (6,153
    )
    
    
    71,903Total
    
    
    377,472
    
    
    
    58,463
    
    
    
    435,935
    
    
    
    276,069
    
    
    
    (12,219
    )
    
    
    263,850Interest-bearing liabilities:Savings accounts
    
    
    (1,858
    )
    
    
    
    
    
    
    (1,858
    )
    
    
    350
    
    
    
    
    
    
    
    350Interest-bearing transaction accounts
    
    
    (44,411
    )
    
    
    16,817
    
    
    
    (27,594
    )
    
    
    13,514
    
    
    
    25,266
    
    
    
    38,780Money market accounts
    
    
    3,298
    
    
    
    12,200
    
    
    
    15,498
    
    
    
    (1,279
    )
    
    
    770
    
    
    
    (509
    )Time deposits
    
    
    64,721
    
    
    
    91,593
    
    
    
    156,314
    
    
    
    1,416
    
    
    
    38,886
    
    
    
    40,302Repurchase agreements
    
    
    69,693
    
    
    
    19,842
    
    
    
    89,535
    
    
    
    79,525
    
    
    
    4,736
    
    
    
    84,261FHLB Advances
    
    
    145,564
    
    
    
    7,377
    
    
    
    152,941
    
    
    
    21,555
    
    
    
    1,969
    
    
    
    23,524Total
    
    
    237,007
    
    
    
    147,829
    
    
    
    384,836
    
    
    
    115,081
    
    
    
    71,627
    
    
    
    186,708Net change in net interest income
    
    $
    140,465
    
    
    $
    (89,366
    )
    
    $
    51,099
    
    
    $
    160,988
    
    
    $
    (83,846
    )
    
    $
    77,142
 Page 60




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Comparison of Operating Results for the Years Ended December 31, 2006 and 2005
 General.
 Interest and Dividend Income.
    Interest Expense.
 Page 61




---



##### Table of Contents



Net Interest Income.
  Provision for Loan Losses.
 Page 62




---



##### Table of Contents



Non-Interest Income.
 Non-Interest Expense.
 Income Taxes.
 Comparison of Operating Results for the Years Ended December 31, 2005 and 2004
 General. Page 63
    Table of Contents    Interest and Dividend Income.
    Interest Expense.
 Page 64




---



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Net Interest Income.
  Page 65




---



##### Table of Contents



Provision for Loan Losses.
    Non-Interest Income.
 Non-Interest Expense.
 Income Taxes.
 Page 66




---



##### Table of Contents



Liquidity and Capital Resources
      Page 67




---



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Page 68




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Off-Balance Sheet Arrangements and Contractual Obligations
   Payments Due By PeriodLess Than
    
    
    One Year to
    
    
    Three Years to
    
    
    More ThanContractual Obligation
    
    Total
    
    
    One Year
    
    
    Three Years
    
    
    Five Years
    
    
    Five Years(In thousands)Mortgage loan originations
    
    $
    176,655
    
    
    $
    176,655
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage loan purchases
    
    
    951,000
    
    
    
    951,000
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed security purchases
    
    
    846,900
    
    
    
    846,900
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    122,243
    
    
    
    7,317
    
    
    
    15,111
    
    
    
    13,825
    
    
    
    85,990Total
    
    $
    2,096,798
    
    
    $
    1,981,872
    
    
    $
    15,111
    
    
    $
    13,825
    
    
    $
    85,990
 Page 69




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Recent Accounting Pronouncements
  ,
  Page 70




---



##### Table of Contents



Impact of Inflation and Changing Prices
  Critical Accounting Policies
  Allowance for Loan Losses.
  Page 71




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Asset Impairment Judgments.
  Page 72




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Stock-Based Compensation
    Goodwill
   Pension and Other Postretirement Benefit Assumptions.
 Page 73




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Management of Interest Rate Risk
   Page 74




---



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
    
    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.
    Page 75




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Simulation Model.
   Page 76




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##### Table of Contents




    
    we assumed an annual prepayment rate for fixed-rate first mortgage loans of 125% of the
FHLMC fixed-rate index of moderately seasoned loans and an annual prepayment rate for
variable-rate first mortgage loans of 125% of the FHLMC 5 year balloon index of new loans;
    
    we assumed an annual prepayment rate for our mortgage-backed securities using the
prepayment rate associated with the security type;
    
    for savings accounts that had no stated maturity, we used decay rates (the assumed rate
at which the balance of existing accounts would decline) of: 5.0% in less than six months,
5.0% in six months to one year, 5.0% in one year to two years, 5.0% in two years to three
years, 10.0% in three years to five years, and 70.0% in more than
five years;
    
    for our High Value Checking product, which is included in interest-bearing transaction
accounts, we used decay rates of : 10.0% in less than six months, 10.0% in six months to
one year, 15% in one to two years, 15% in two to three years, 25% in three to five years,
and 25% in more than five years;
    
    for other interest-bearing transaction accounts that had no stated maturity, we used
decay rates of : 2.5% in less than six months, 2.5% in six months to one year, 10.0% in
one to two years, 10.0% in two to three years, 20.0% in three years to five years, and
55.0% in more than five years;
    
    for money market accounts that had no stated maturity, we used decay rates of: 2.5% in
less than six months, 2.5% in six months to one year, 10.0% in one to two years, 10.0% in
two to three years, 20.0% in three years to five years, and 55.0% in
more than five years; and
    
    callable investment securities and borrowed funds are shown at the earlier of their
probable call date or maturity date given the rate of the instrument in relation to the
current market rate environment and the call option frequency, the model assumed no calls
of investment securities and $3.56 billion of calls of borrowed funds over the next year
in the current (zero basis point) change scenario.
  Change in

    
    Percent Change inInterest Rates

    
    Net Interest Income(Basis points)200
    
    
    
    (11.76
    )%100
    
    
    
    (5.12
    )50
    
    
    
    (1.91
    )
    
    
    
    (50
    )
    
    
    1.19(100
    )
   
    
    (1.45
    )(200
    )
    
    
    (10.09
    )
 Page 77




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Present Value of EquityAs Percent of PresentPresent Value of Equity
    
    
    
    
    
    Value of AssetsChange in

    
    Dollar
    
    Dollar
    
    Percent
    
    Present
    
    Basis PointInterest Rates

    
    Amount
    
    Change
    
    Change
    
    Value Ratio
    
    Change(Basis points)

    
    
    
    
    
    (Dollars in thousands)200
    
    
    $
    3,893,098
    
    
    $
    (1,588,208
    )
    
    
    (28.97
    )%
    
    
    11.79
    %
    
    
    (364
    )100
    
    
    
    4,776,023
    
    
    
    (705,283
    )
    
    
    (12.87
    )
    
    
    13.92
    
    
    
    (151
    )50
    
    
    
    5,204,666
    
    
    
    (276,640
    )
    
    
    (5.05
    )
    
    
    14.89
    
    
    
    (54
    )
    
    
    
    5,481,306
    
    
    
    
    
    
    
    
    
    
    
    15.43
    
    
    
    (50
    )
    
    
    5,366,967
    
    
    
    (114,339
    )
    
    
    (2.09
    )
    
    
    14.92
    
    
    
    (51
    )(100
    )
    
    
    4,795,263
    
    
    
    (686,043
    )
    
    
    (12.52
    )
    
    
    13.29
    
    
    
    (214
    )(200
       )
    
    
    3,217,799
    
    
    
    (2,263,507
    )
    
    
    (41.30
    )
    
    
    8.93
    
    
    
    (650
    )
  Page 78




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Gap Analysis.
  Page 79




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




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Item 8. Financial Statements and Supplementary Data.
 Report of Independent Registered Public Accounting Firm
 
    Internal
ControlIntegrated Framework
 
 
 Page 81




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal
ControlIntegrated Framework .
  
 
 Page 82




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##### Table of Contents



Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
 December 31,
    
    
    December 31,2006
    
    
    2005(In thousands, except share and per share amounts)Assets:Cash and due from banks
    
    $
    125,630
    
    
    $
    97,672Federal funds sold
    
    
    56,616
    
    
    
    4,587Total cash and cash equivalents
    
    
    182,246
    
    
    
    102,259Securities available for sale:Mortgage-backed securities
    
    
    2,404,421
    
    
    
    2,520,633Investment securities
    
    
    4,379,615
    
    
    
    3,962,511Securities held to maturity:Mortgage-backed securities (fair value of $6,804,598 and $4,288,772 at
December 31, 2006 and 2005, respectively)
    
    
    6,925,210
    
    
    
    4,389,864Investment securities (fair value of $1,502,934 and $1,508,055 at
December 31, 2006 and 2005, respectively)
    
    
    1,533,969
    
    
    
    1,534,216Total securities
    
    
    15,243,215
    
    
    
    12,407,224Loans
    
    
    19,083,617
    
    
    
    15,062,449Deferred loan costs
    
    
    16,159
    
    
    
    1,653Allowance for loan losses
    
    
    (30,625
    )
    
    
    (27,393
    )Net loans
    
    
    19,069,151
    
    
    
    15,036,709Federal Home Loan Bank of New York stock
    
    
    445,006
    
    
    
    226,962Foreclosed real estate, net
    
    
    3,161
    
    
    
    1,040Accrued interest receivable
    
    
    194,229
    
    
    
    140,723Banking premises and equipment, net
    
    
    73,929
    
    
    
    49,132Goodwill
    
    
    150,831
    
    
    
    Other
intangible assets, net
    
    
    13,407
    
    
    
    Other assets
    
    
    131,406
    
    
    
    111,304Total Assets
    
    $
    35,506,581
    
    
    $
    28,075,353Liabilities and Stockholders Equity:Deposits:Interest-bearing
    
    $
    12,917,286
    
    
    $
    10,941,258Noninterest-bearing
    
    
    498,301
    
    
    
    442,042Total deposits
    
    
    13,415,587
    
    
    
    11,383,300Repurchase agreements
    
    
    8,923,000
    
    
    
    7,900,000Federal Home Loan Bank of New York advances
    
    
    8,050,000
    
    
    
    3,450,000Total borrowed funds
    
    
    16,973,000
    
    
    
    11,350,000Accrued expenses and other liabilities
    
    
    187,738
    
    
    
    140,577Total liabilities
    
    
    30,576,325
    
    
    
    22,873,877Commitments and Contingencies (Note 14)Common stock, $0.01 par value, 3,200,000,000 shares authorized;
741,466,555 shares issued; 557,787,921 and 588,905,543
shares outstanding at December 31, 2006 and 2005, respectively
    
    
    7,415
    
    
    
    7,415Additional paid-in capital
    
    
    4,553,614
    
    
    
    4,533,329Retained earnings
    
    
    1,877,840
    
    
    
    1,759,492Treasury stock, at cost; 183,678,634 and 152,561,012 shares
at December 31, 2006 and 2005, respectively
    
    
    (1,230,793
    )
    
    
    (798,232
    )Unallocated common stock held by the employee stock ownership plan
    
    
    (228,257
    )
    
    
    (234,264
    )Unearned common stock held by the recognition and retention plan
    
    
    
    
    
    
    (2,815
    )Accumulated other comprehensive loss, net of tax
    
    
    (49,563
    )
    
    
    (63,449
    )Total stockholders equity
    
    
    4,930,256
    
    
    
    5,201,476Total Liabilities and Stockholders Equity
    
    $
    35,506,581
    
    
    $
    28,075,353
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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands, except per share data)Interest and Dividend Income:Interest and fees on first mortgage loans
    
    $
    932,550
    
    
    $
    689,435
    
    
    $
    539,966Interest and fees on consumer and other loans
    
    
    19,698
    
    
    
    10,786
    
    
    
    8,650Interest on mortgage-backed securities held to maturity
    
    
    262,417
    
    
    
    182,309
    
    
    
    174,596Interest on mortgage-backed securities available for sale
    
    
    119,578
    
    
    
    90,754
    
    
    
    67,739Interest on investment securities held to maturity
    
    
    74,592
    
    
    
    72,582
    
    
    
    41,435Interest and dividends on investment securities available for sale
    
    
    181,259
    
    
    
    118,635
    
    
    
    77,879Dividends on Federal Home Loan Bank of New York stock
    
    
    16,507
    
    
    
    9,394
    
    
    
    3,213Interest on federal funds sold
    
    
    8,242
    
    
    
    5,013
    
    
    
    1,580Total interest and dividend income
    
    
    1,614,843
    
    
    
    1,178,908
    
    
    
    915,058Interest Expense:Interest on deposits
    
    
    436,096
    
    
    
    293,736
    
    
    
    214,813Interest on borrowed funds
    
    
    565,514
    
    
    
    323,038
    
    
    
    215,253Total interest expense
    
    
    1,001,610
    
    
    
    616,774
    
    
    
    430,066Net interest income
    
    
    613,233
    
    
    
    562,134
    
    
    
    484,992Provision for Loan Losses
    
    
    
    
    
    
    65
    
    
    
    790Net interest income after provision for loan losses
    
    
    613,233
    
    
    
    562,069
    
    
    
    484,202Non-Interest Income:Service charges and other income
    
    
    6,287
    
    
    
    5,267
    
    
    
    5,128Gains on securities transactions, net
    
    
    4
    
    
    
    2,740
    
    
    
    11,429Total non-interest income
    
    
    6,291
    
    
    
    8,007
    
    
    
    16,557Non-Interest Expense:Compensation and employee benefits
    
    
    103,443
    
    
    
    83,211
    
    
    
    79,195Net occupancy expense
    
    
    25,015
    
    
    
    20,211
    
    
    
    16,035Federal deposit insurance assessment
    
    
    1,695
    
    
    
    1,656
    
    
    
    1,644Computer and related services
    
    
    2,812
    
    
    
    2,498
    
    
    
    2,041Other expense
    
    
    25,990
    
    
    
    20,127
    
    
    
    19,433Total non-interest expense
    
    
    158,955
    
    
    
    127,703
    
    
    
    118,348Income before income tax expense
    
    
    460,569
    
    
    
    442,373
    
    
    
    382,411Income Tax Expense
    
    
    171,990
    
    
    
    166,318
    
    
    
    143,145Net income
    
    $
    288,579
    
    
    $
    276,055
    
    
    $
    239,266Basic Earnings Per Share
    
    $
    0.54
    
    
    $
    0.49
    
    
    $
    0.41Diluted Earnings Per Share
    
    $
    0.53
    
    
    $
    0.48
    
    
    $
    0.40
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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders Equity
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands , except share amounts)Common Stock
    
    $
    7,415
    
    
    $
    7,415
    
    
    $
    7,415Additional paid-in capital:Balance at beginning of year
    
    
    4,533,329
    
    
    
    565,403
    
    
    
    538,487Common stock offering
    
    
    
    
    
    
    3,953,001
    
    
    
    Unvested RRP awards reclassified as additonal paid-in-capital
    
    
    (2,815
    )
    
    
    
    
    
    
    Stock option plan expense
    
    
    5,526
    
    
    
    
    
    
    
    Tax benefit from stock plans
    
    
    8,633
    
    
    
    9,431
    
    
    
    20,880Allocation of ESOP stock
    
    
    6,700
    
    
    
    5,632
    
    
    
    8,544Vesting of RRP stock
    
    
    2,241
    
    
    
    (138
    )
    
    
    (2,508
    )Balance at end of year
    
    
    4,553,614
    
    
    
    4,533,329
    
    
    
    565,403Retained Earnings:Balance at beginning of year
    
    
    1,759,492
    
    
    
    1,588,792
    
    
    
    1,396,257Net Income
    
    
    288,579
    
    
    
    276,055
    
    
    
    239,266Dividends paid on common stock ($0.30, $0.268, and
$0.218 per share, respectively)
    
    
    (161,374
    )
    
    
    (102,103
    )
    
    
    (40,482
    )Exercise of stock options
    
    
    (8,857
    )
    
    
    (3,252
    )
    
    
    (6,249
    )Balance at end of year
    
    
    1,877,840
    
    
    
    1,759,492
    
    
    
    1,588,792Treasury Stock:Balance at beginning of year
    
    
    (798,232
    )
    
    
    (696,812
    )
    
    
    (547,859
    )Purchase of common stock
    
    
    (448,237
    )
    
    
    (107,499
    )
    
    
    (161,662
    )Exercise of stock options
    
    
    15,676
    
    
    
    6,079
    
    
    
    12,709Balance at end of year
    
    
    (1,230,793
    )
    
    
    (798,232
    )
    
    
    (696,812
    )Unallocated common stock held by the ESOP:Balance at beginning of year
    
    
    (234,264
    )
    
    
    (47,552
    )
    
    
    (49,513
    )Purchase of ESOP stock
    
    
    
    
    
    
    (189,348
    )
    
    
    Allocation of ESOP stock
    
    
    6,007
    
    
    
    2,636
    
    
    
    1,961Balance at end of year
    
    
    (228,257
    )
    
    
    (234,264
    )
    
    
    (47,552
    )Unallocated common stock held by the RRP:Balance at beginning of year
    
    
    (2,815
    )
    
    
    (5,267
    )
    
    
    (9,463
    )Unvested RRP awards reclassified as additonal paid-in-capital
    
    
    2,815
    
    
    
    
    
    
    
    Purchase of RRP stock
    
    
    
    
    
    
    (1,290
    )
    
    
    (7,299
    )Vesting of RRP stock
    
    
    
    
    
    
    3,742
    
    
    
    11,495Balance at end of year
    
    
    
    
    
    
    (2,815
    )
    
    
    (5,267
    )Accumulated other comprehensive loss:Balance at beginning of year
    
    
    (63,449
    )
    
    
    (9,095
    )
    
    
    (5,958
    )Unrealized holding gains(losses) arising during period, net
of tax(benefit) of $9,765 for 2006, ($35,884) for 2005 and
$2,503 for 2004
    
    
    14,143
    
    
    
    (51,958
    )
    
    
    3,623Reclassification adjustment for gains in net income, net
of tax of ($2) for 2006, ($1,119) for 2005 and
($4,669) for 2004
    
    
    (2
    )
    
    
    (1,621
    )
    
    
    (6,760
    )Funded status of defined benefit postretirement plans upon adoption of SFAS
    
    
    (1,030
    )
    
    
    
    
    
    
    No. 158, net of taxMinimum pension liability adjustment
    
    
    775
    
    
    
    (775
    )
    
    
    Balance at end of year
    
    
    (49,563
    )
    
    
    (63,449
    )
    
    
    (9,095
    )Total Stockholders Equity
    
    $
    4,930,256
    
    
    $
    5,201,476
    
    
    $
    1,402,884Summary of comprehensive incomeNet income
    
    $
    288,579
    
    
    $
    276,055
    
    
    $
    239,266Other comprehensive income(loss), net of tax
    
    
    13,886
    
    
    
    (54,354
    )
    
    
    (3,137
    )Total comprehensive income
    
    $
    302,465
    
    
    $
    221,701
    
    
    $
    236,129
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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
 Year Ended December 31,2006
    
    

2005
    
    
    2004(In thousands)Cash Flows from Operating Activities:Net income
    
    $
    288,579
    
    
    $
    276,055
    
    
    $
    239,266Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation, accretion and amortization expense
    
    
    21,952
    
    
    
    10,197
    
    
    
    24,129Provision for loan losses
    
    
    
    
    
    
    65
    
    
    
    790Gains on securities transactions, net
    
    
    (4
    )
    
    
    (2,740
    )
    
    
    (11,429
    )Share-based compensation, including committed ESOP shares
    
    
    20,474
    
    
    
    11,872
    
    
    
    19,492Deferred tax benefit
    
    
    (3,659
    )
    
    
    (6,505
    )
    
    
    (6,912
    )Increase in accrued interest receivable
    
    
    (48,580
    )
    
    
    (43,233
    )
    
    
    (17,270
    )(Increase) decrease in other assets
    
    
    (4,166
    )
    
    
    2,070
    
    
    
    6,418Increase in accrued expenses and other liabilities
    
    
    46,571
    
    
    
    24,005
    
    
    
    15,583Tax benefit from stock plans
    
    
    
    
    
    
    9,431
    
    
    
    20,880Net Cash Provided by Operating Activities
    
    
    321,167
    
    
    
    281,217
    
    
    
    290,947Cash Flows from Investing Activities:Originations of loans
    
    
    (2,307,487
    )
    
    
    (2,194,774
    )
    
    
    (1,464,641
    )Purchases of loans
    
    
    (2,712,148
    )
    
    
    (3,676,260
    )
    
    
    (3,122,409
    )Payments on loans
    
    
    1,754,157
    
    
    
    2,154,125
    
    
    
    2,016,447Principal collection of mortgage-backed securities held to maturity
    
    
    773,343
    
    
    
    960,630
    
    
    
    1,445,507Purchases of mortgage-backed securities held to maturity
    
    
    (3,313,668
    )
    
    
    (1,604,473
    )
    
    
    (921,765
    )Principal collection of mortgage-backed securities available for sale
    
    
    741,200
    
    
    
    499,387
    
    
    
    282,901Proceeds from sales of mortgage-backed securities available for sale
    
    
    186,169
    
    
    
    230,632
    
    
    
    510,496Purchases of mortgage-backed securities available for sale
    
    
    (617,172
    )
    
    
    (1,675,428
    )
    
    
    (1,278,921
    )Proceeds from maturities and calls of investment securities held to maturity
    
    
    256
    
    
    
    100,043
    
    
    
    436,770Purchases of investment securities held to maturity
    
    
    
    
    
    
    (300,000
    )
    
    
    (1,769,643
    )Proceeds from maturities and calls of investment securities available for sale
    
    
    850,013
    
    
    
    1,600,029
    
    
    
    986,343Proceeds from sales of investment securities available for sale
    
    
    112,157
    
    
    
    9,980
    
    
    
    Purchases of investment securities available for sale
    
    
    (1,250,010
    )
    
    
    (4,008,680
    )
    
    
    (337,306
    )Purchases of Federal Home Loan Bank of New York stock
    
    
    (233,236
    )
    
    
    (104,162
    )
    
    
    Redemption of Federal Home Loan Bank of New York stock
    
    
    18,000
    
    
    
    17,200
    
    
    
    24,850Cash paid in purchase acquistion, net of cash acquired
    
    
    (197,653
    )
    
    
    
    
    
    
    Purchases of premises and equipment, net
    
    
    (22,557
    )
    
    
    (18,566
    )
    
    
    (9,023
    )Net proceeds from sale of foreclosed real estate
    
    
    1,449
    
    
    
    1,588
    
    
    
    2,509Net Cash Used in Investment Activities
    
    
    (6,217,187
    )
    
    
    (8,008,729
    )
    
    
    (3,197,885
    )Cash Flows from Financing Activities:Net increase (decrease) in deposits
    
    
    970,166
    
    
    
    (94,000
    )
    
    
    1,023,520Proceeds from borrowed funds
    
    
    9,125,000
    
    
    
    5,125,000
    
    
    
    3,750,000Principal payments on borrowed funds
    
    
    (3,525,000
    )
    
    
    (925,000
    )
    
    
    (1,750,000
    )Cash proceeds from the common stock offering  net
    
    
    
    
    
    
    3,806,627
    
    
    
    Consolidation of Hudson City, MHC
    
    
    
    
    
    
    146,374
    
    
    
    Dividends paid
    
    
    (161,374
    )
    
    
    (102,103
    )
    
    
    (40,482
    )Purchases of stock by the employee stock ownership plan
    
    
    
    
    
    
    (189,348
    )
    
    
    Purchases of stock by the recognition and retention plan
    
    
    
    
    
    
    (1,290
    )
    
    
    (7,299
    )Purchases of treasury stock
    
    
    (448,237
    )
    
    
    (107,499
    )
    
    
    (161,662
    )Exercise of stock options
    
    
    6,819
    
    
    
    2,827
    
    
    
    6,460Tax benefit from stock plans
    
    
    8,633
    
    
    
    
    
    
    
    Net Cash Provided by Financing Activities
    
    
    5,976,007
    
    
    
    7,661,588
    
    
    
    2,820,537Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    79,987
    
    
    
    (65,924
    )
    
    
    (86,401
    )Cash and Cash Equivalents at Beginning of Year
    
    
    102,259
    
    
    
    168,183
    
    
    
    254,584Cash and Cash Equivalents at End of Year
    
    $
    182,246
    
    
    $
    102,259
    
    
    $
    168,183Supplemental Disclosures:Interest paid
    
    $
    969,606
    
    
    $
    599,037
    
    
    $
    422,862Loans transferred to foreclosed real estate
    
    $
    3,642
    
    
    $
    1,750
    
    
    $
    2,348Income taxes paid
    
    $
    172,382
    
    
    $
    167,200
    
    
    $
    133,800
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1.
    
    OrganizationHudson City Bancorp, Inc. (Hudson City Bancorp) is a Delaware corporation organized in March
1999 by Hudson City Savings Bank (Hudson City Savings) in connection with the conversion and
reorganization of Hudson City Savings from a New Jersey mutual savings bank into a two-tiered
mutual savings bank holding company structure. Prior to June 7, 2005, a majority of Hudson City
Bancorps common stock was owned by Hudson City, MHC, a mutual holding companyPlan of Conversion and ReorganizationOn June 7, 2005, Hudson City Bancorp, Hudson City Savings and Hudson City, MHC reorganized from
a two-tier mutual holding company structure to a stock holding company structure, and Hudson
City Bancorp completed a stock offering, all in accordance with a Plan of Conversion and
Reorganization (the Plan). Under the terms of the Plan, Hudson City, MHC, which owned 65.77%
of the outstanding common stock of Hudson City Bancorp immediately prior to the conversion,
merged into Hudson City Bancorp and the shares of Hudson City Bancorp common stock owned by
Hudson City, MHC were cancelled. Hudson City Bancorp sold 392,980,580 shares of common stock at
a price of $10.00 per share raising approximately $3.93 billion. After incremental costs of
$125.0 million directly attributable to the stock offering, net proceeds from the stock offering
amounted to $3.80 billion. The amount reported in the Statements of Changes in Stockholders
Equity reflects the $145.8 million consolidation of the deposit of Hudson City, MHC. In
accordance with the Plan, we also effected a stock split pursuant to which each share of common
stock outstanding or held as treasury stock before completion of the offering was split into
3.206 shares. Hudson City Bancorp contributed $3.00 billion of the net proceeds from the
offering to Hudson City Savings Bank.Acquisition of Sound FederalOn July 14, 2006, we completed the acquisition of Sound Federal Bancorp (the Acquisition), for
$20.75 per share in cash, representing an aggregate transaction value of approximately $265
million. As a result of the Acquisition, we added $1.21 billion in assets, fair value of
approximately $1.18 billion, and $1.06 billion in deposits, fair value of approximately $1.05
billion. The Acquisition was accounted for using the purchase method of accounting and,
accordingly, the assets acquired and liabilities assumed were recorded at their fair values at
the consummation date. Related operating results are included in our consolidated financial
statements for periods after the consummation date. The excess of the total acquisition cost
over the fair value of the net assets acquired, or goodwill, totaled $150.8 million and was
recognized as an intangible asset at the consummation date. Also as a result of the Acquisition
we recorded a core deposit intangible of $13.7 million.2.
    
    Summary of Significant Accounting PoliciesBasis of PresentationThe following are the significant accounting and reporting policies applied by Hudson City
Bancorp and its wholly-owned subsidiary, Hudson City Savings, in the preparation of the
accompanying consolidated financial statements. The consolidated financial statements have been
prepared in conformity with U.S. generally accepted accounting principles. All significant
intercompany transactions and balances have been eliminated in consolidation. As used in these
consolidated financial statements, Hudson City refers to Hudson City Bancorp, Inc. and its
consolidated subsidiary, depending on the context. In preparing the consolidated financial
statements, management
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is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the statements of financial condition and income for the period.
Actual results could differ from these estimates.Cash and Cash EquivalentsFor purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts
due from banks and federal funds sold. Generally, federal funds are sold for one-day periods.
Cash reserves are required to be maintained on deposit with the Federal Reserve Bank based on
deposits. The average amount of the reserves on deposit for the years ended December 31, 2006
and 2005 was approximately $7,211,000 and $9,540,000, respectively.Mortgage-Backed SecuritiesMortgage-backed securities include pass-through certificates, which represent participating
interests in pools of long-term first mortgage loans originated and serviced by third-party
issuers of the securities, and real estate mortgage investment conduits (REMICs), which are
debt securities that are secured by mortgage loans or other mortgage-backed securities.Mortgage-backed securities are classified as either held to maturity or available for sale.
Mortgage-backed securities classified as held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Amortization and accretion is reflected as
an adjustment to interest income over the life of the security using the effective interest
method. Hudson City has both the ability and the positive intent to hold these investment
securities to maturity. Mortgage-backed securities available for sale are carried at fair
value, with unrealized gains and losses, net of tax, reported as a component of other
comprehensive income or loss, which is included in stockholders equity. Realized gains and
losses are recognized when securities are sold using the specific identification method. The
estimated fair market value of these securities is determined by use of quoted market prices.Investment SecuritiesInvestment securities are classified as either held to maturity or available for sale.
Investment securities classified as held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Amortization and accretion is reflected as
an adjustment to interest income over the life of the security using
the effective interest method.
Hudson City has both the ability and the positive intent to hold these investment securities to
maturity. Securities available for sale are carried at fair value, with unrealized gains and
losses, net of tax, reported as a component of accumulated other comprehensive income or loss,
which is included in stockholders equity. Realized gains and losses are recognized when
securities are sold or called using the specific identification method. The estimated fair
market value of all investment securities is determined by use of quoted market prices.Security ImpairmentWe periodically perform analyses to test for impairment of various assets. We conduct periodic
reviews and evaluations of our securities portfolio to determine if the value of any security
has declined below its carrying value and whether such decline is other than temporary. If such
decline is deemed other than temporary, we adjust the carrying amount of the security by writing
it down to fair market value through a charge to current period operations.
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LoansLoans are stated at their principal amounts outstanding. Interest income on loans is accrued
and credited to income as earned. Net loan origination fees and broker costs are deferred and
amortized to interest income over the life of the loan using the effective interest method.
Purchased loans are stated at their principal amounts outstanding, adjusted for amortization of
premiums and accretion of discounts. Such amortization and accretion is reflected as an
adjustment to interest income over the life of the purchased loan using the effective interest
method.Existing customers are permitted to modify the terms of their mortgage loan, for a fee, to the
terms of the currently offered fixed-rate product with a similar or reduced period to maturity
than the current remaining period of their existing loan. The modified terms of these loans are
at least as favorable to us as the terms of mortgage loans we offer to new customers. The fee
assessed for modifying the mortgage loan is deferred and accreted over the life of the modified
loan using the effective interest method. Such accretion is reflected as an adjustment to
interest income. We deem the specific facts and circumstances surrounding the modification of
the terms of the loan (i.e. the change in rate and period to maturity), to be more than a minor
change to the loan. Accordingly, pre-modification deferred fees or costs associated with the
mortgage loan are recognized in interest income at the time of the modification.A loan is considered delinquent when we have not received a payment within 30 days of its
contractual due date. The accrual of income on loans that do not carry private mortgage
insurance or are not guaranteed by a federal agency is generally discontinued when interest or
principal payments are 90 days in arrears or when the timely collection of such income is
doubtful. Loans on which the accrual of income has been discontinued are designated as
non-accrual loans and outstanding interest previously credited is reversed. It is recognized
subsequently in the period collected or when the ultimate collection of principal is no longer
in doubt. A non-accrual loan is returned to accrual status when factors indicating doubtful
collection no longer exist.Hudson City defines the population of potential impaired loans to be all non-accrual commercial
real estate and multi-family loans. Impaired loans are individually assessed to determine that
the loans carrying value is not in excess of the fair value of the collateral or the present
value of the loans expected future cash flows. Smaller balance homogeneous loans that are
collectively evaluated for impairment, such as residential mortgage loans and consumer loans,
are specifically excluded from the impaired loan portfolio.Allowance for Loan LossesThe allowance for loan losses has been determined in accordance with U.S. generally accepted
accounting principles, under which we are required to maintain adequate allowances for loan
losses. We are responsible for the timely and periodic determination of the amount of the
allowance required. We believe that our allowance for loan losses is adequate to cover
specifically identifiable loan losses, as well as estimated losses inherent in our portfolio for
which certain losses are probable but not specifically identifiable.Our primary lending emphasis is the origination and purchase of one- to four-family first
mortgage loans on residential properties and, to a lesser extent, second mortgage loans on one-
to four-family residential properties resulting in a loan concentration in residential first
mortgage loans at December
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31, 2006. As a result of our lending practices, we also have a concentration of loans secured by
real property located in New Jersey, New York and Connecticut. Based on the composition of our
loan portfolio and the growth in our loan portfolio, we believe the primary risks inherent in
our portfolio are increases in interest rates, a decline in the economy, generally, and a
decline in real estate market values. Any one or a combination of these events may adversely
affect our loan portfolio resulting in increased delinquencies, charge-offs and future levels of
loan loss provisions. We consider it important to maintain the ratio of our allowance for loan
losses to total loans at an acceptable level given current economic conditions, interest rates
and the composition of our portfolio.Due to the nature of our loan portfolio, our evaluation of the adequacy of our allowance for
loan losses is performed on a pooled basis. We evaluated the multi-family and commercial
mortgage, construction and unsecured commercial loans transferred in the Acquisition in a
similar manner as our previously existing portfolio. Each month we prepare an analysis which
categorizes the entire loan portfolio by certain risk characteristics such as loan type (one- to
four-family, multi-family, etc.), loan source (originated or purchased) and payment status
(i.e., current or number of days delinquent). Loans with known potential losses are categorized
separately. We assign potential loss factors to the payment status categories on the basis of
our assessment of the potential risk inherent in each loan type. These factors are periodically
reviewed for appropriateness giving consideration to charge-off history and delinquency trends.
We use this analysis, as a tool, together with principal balances and delinquency reports, to
evaluate the adequacy of the allowance for loan losses. Other key factors we consider in this
process are current real estate market conditions in geographic areas where our loans are
located, changes in the trend of non-performing loans, the current state of the local and
national economy and loan portfolio growth.We maintain the allowance for loan losses through provisions for loan losses that we charge to
income. We charge losses on loans against the allowance for loan losses when we believe the
collection of loan principal is unlikely. We establish the provision for loan losses after
considering the results of our review of delinquency and charge-off trends, the allowance for
loan loss analysis, the amount of the allowance for loan losses in relation to the total loan
balance, loan portfolio growth, U.S. generally accepted accounting principles and regulatory
guidance. We have applied this process consistently and have not made significant changes in the
estimation methods and assumptions that we have used.Foreclosed Real EstateForeclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure.
After foreclosure, foreclosed properties held for sale are carried at the lower of fair value
minus estimated cost to sell, or at cost. Fair market value is generally based on recent
appraisals. Subsequent provisions, which may result from the ongoing periodic valuations of
these properties, are charged to income in the period in which they are identified and credited
to a valuation allowance account. Foreclosed real estate is reported net of the valuation
allowance. Carrying costs, such as maintenance and taxes, are charged to operating expenses as
incurred.Banking Premises and EquipmentLand is carried at cost. Buildings, leasehold improvements and furniture, fixtures and
equipment are carried at cost, less accumulated depreciation and leasehold amortization.
Buildings are depreciated over their estimated useful lives using the straight-line method.
Furniture, fixtures and equipment are depreciated over their estimated useful lives using the
double-declining balance method. Leasehold
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improvements are amortized over the shorter of their estimated useful lives or the term of the
respective leases. The costs for major improvements and renovations are capitalized, while
maintenance, repairs and minor improvements are charged to operating expenses as incurred.
Gains and losses on dispositions are reflected currently as other non-interest income or
expense.Goodwill and Other Intangible AssetsStatement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets, requires that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually using a fair-value based
approach. We did not recognize any impairment of goodwill for the year ended December 31, 2006.
Other intangible assets include the core deposit intangible recorded as a result of the
Acquisition. These intangible assets are amortizing intangible assets and as such are accounted
evaluated for impairment in accordance with SFAS No. 144, Accounting for the Impairment of Disposal or Long-Lived
Assets.Income TaxesWe utilize the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.Employee Benefit PlansHudson City maintains certain noncontributory retirement and postretirement benefit plans, which
cover employees hired prior to August 1, 2005 who have met the eligibility requirements of the
plans. Certain health care and life insurance benefits are provided for retired employees. The
expected cost of benefits provided for retired employees is actuarially determined and accrued
ratably from the date of hire to the date the employee is fully eligible to receive the
benefits.We adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans  An Amendment of FASB Statements No. 87, 88, 106, and 132R as of
December 31, 2006. This statement requires an employer to: (a) recognize in its statement of
financial position an asset for a plans overfunded status or a liability for a plans
underfunded status; (b) measure a plans assets and its obligations that determine its funded
status as of the end of the employers fiscal year; and (c) recognize, in comprehensive income,
changes in the funded status of a defined benefit postretirement plan in the year in which the
changes occur. The requirement to measure plan assets and benefit obligations as of the date of
the employers fiscal year-end statement of financial condition is effective for the Company as
of December 31, 2008.The employee stock ownership plan (ESOP) is accounted for in accordance with the provisions of
Statement of Position 93-6, Employers Accounting for Employee Stock Ownership Plans. The
funds borrowed by the ESOP from Hudson City Bancorp to purchase Hudson City Bancorp common stock
are being repaid from Hudson City Savings contributions and dividends paid on unallocated
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ESOP shares over a period of up to 40 years. Hudson City common stock not allocated to
participants is recorded as a reduction of stockholders equity at cost. Compensation expense
for the ESOP is based on the average price of our stock during each quarter.Stock Based CompensationEffective January 1, 2006, Hudson City Bancorp adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 123(R), Share-Based Payment, using the modified prospective
method. Stock-based compensation expense is recognized for new stock-based awards granted, modified,
repurchased or cancelled after January 1, 2006, and the remaining portion of the requisite
service under previously granted unvested awards outstanding as of January 1, 2006 based upon
the grant-date fair value of those awards. There was no impact of the adoption on previously
reported periods, in accordance with the transition guidance in SFAS No. 123(R). Prior to
January 1, 2006, Hudson City accounted for employee stock options and restricted stock grants
using the intrinsic value method of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Under this method,
Hudson City did not recognize any stock-based compensation expense for employee stock options,
as all options granted had an exercise price equal to the market value of the underlying common
stock on the date of grant.Bank-Owned Life InsuranceBank-owned life insurance (BOLI) is accounted for in accordance with FASB Technical Bulletin
No. 85-4, Accounting for Purchases of Life Insurance and EITF No. 06-04, Accounting for
Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Agreements. The cash surrender value of BOLI is
recorded on our consolidated statements of financial condition as an asset and the change in the cash surrender value is recorded as non-interest income.
The amount by which any death benefits received exceeds a policys cash surrender value is
recorded in non-interest income at the time of receipt. A liability is also recorded on our
consolidated balance sheet for post-retirement death benefits provided by the split-dollar
endorsement policy. A corresponding expense is recorded in non-interest expense.Borrowed FundsHudson City enters into sales of securities under agreements to repurchase with selected brokers
and the Federal Home Loan Bank (FHLB). These agreements are recorded as financing
transactions as Hudson City maintains effective control over the transferred securities. The
dollar amount of the securities underlying the agreements continues to be carried in Hudson
Citys securities portfolio. The obligations to repurchase the securities are reported as a
liability in the consolidated statements of financial condition. The securities underlying the
agreements are delivered to the party with whom each transaction is executed. They agree to
resell to Hudson City the same securities at the maturity or call of the agreement. Hudson City
retains the right of substitution of the underlying securities throughout the terms of the
agreements.Hudson City has also obtained advances from the FHLB, which are generally secured by a blanket
lien against our mortgage portfolio. Total borrowings with the FHLB are generally limited to
approximately twenty times the amount of FHLB stock owned or the fair value of our mortgage
portfolio, whichever is greater.
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Comprehensive IncomeComprehensive income is comprised of net income and other comprehensive income. Other
comprehensive income includes items such as unrealized gains and losses on securities available
for sale, net of tax and the changes in the unrealized gains or
losses and prior service costs or credits of defined benefit pension
and other postretirement plans, net of tax.
Comprehensive income is presented in the consolidated statements of changes in stockholders
equity.Segment InformationSFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires
public companies to report certain financial information about significant revenue-producing
segments of the business for which such information is available and utilized by the chief
operating decision maker. As a community-oriented financial institution, substantially all of
our operations involve the delivery of loan and deposit products to customers. Management makes
operating decision and assesses performance based on an ongoing review of these community
banking operations, which constitute our only operating segment for financial reporting
purposes.Earnings Per ShareBasic earnings per share is computed by dividing income available to common stockholders by the
weighted average number of shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other contracts to issue
common stock (such as stock options) were exercised or resulted in the issuance of common stock.
These potentially dilutive shares would then be included in the weighted average number of
shares outstanding for the period using the treasury stock method. Shares issued and shares
reacquired during any period are weighted for the portion of the period that they were
outstanding.In computing both basic and diluted earnings per share, the weighted average number of common
shares outstanding includes the ESOP shares previously allocated to participants and shares
committed to be released for allocation to participants and the RRP shares which have vested or
have been allocated to participants. ESOP and RRP shares that have been purchased but have not
been committed to be released have not been considered in computing basic and diluted earnings
per share.3.
    
    Stock Repurchase ProgramsWe have previously announced several stock repurchase programs. Under our stock repurchase
programs, shares of Hudson City Bancorp common stock may be purchased in the open market or through
other privately negotiated transactions, depending on market conditions. The repurchased shares
are held as treasury stock for general corporate use. During the years ended December 31, 2006 and
2005, we purchased 33,747,243 and 9,119,768 shares of our common stock at an aggregate cost of
$448.2 million and $107.5 million, respectively. At December 31, 2006, there were 44,314,000
shares remaining to be repurchased under our existing stock repurchase program.
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4.
    
    Mortgage-Backed SecuritiesThe amortized cost and estimated fair market value of mortgage-backed securities at December 31 are
as follows:
 Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)2006Held to Maturity:GNMA pass-through certificates
    
    $
    215,161
    
    
    $
    1,491
    
    
    $
    (148
    )
    
    $
    216,504FNMA pass-through certificates
    
    
    3,233,852
    
    
    
    6,796
    
    
    
    (49,324
    )
    
    
    3,191,324FHLMC pass-through certificates
    
    
    3,069,884
    
    
    
    9,197
    
    
    
    (59,086
    )
    
    
    3,019,995FHLMC and FNMA  REMICs
    
    
    406,313
    
    
    
    4
    
    
    
    (29,542
    )
    
    
    376,775Total held to maturity
    
    $
    6,925,210
    
    
    $
    17,488
    
    
    $
    (138,100
    )
    
    $
    6,804,598Available for Sale:GNMA pass-through certificates
    
    $
    1,708,855
    
    
    $
    638
    
    
    $
    (12,778
    )
    
    $
    1,696,715FNMA pass-through certificates
    
    
    592,514
    
    
    
    
    
    
    
    (17,221
    )
    
    
    575,293FHLMC pass-through certificates
    
    
    135,424
    
    
    
    
    
    
    
    (3,011
    )
    
    
    132,413Total available for sale
    
    $
    2,436,793
    
    
    $
    638
    
    
    $
    (33,010
    )
    
    $
    2,404,4212005Held to Maturity:GNMA pass-through certificates
    
    $
    293,680
    
    
    $
    1,089
    
    
    $
    (437
    )
    
    $
    294,332FNMA pass-through certificates
    
    
    2,535,361
    
    
    
    2,685
    
    
    
    (48,944
    )
    
    
    2,489,102FHLMC pass-through certificates
    
    
    1,108,195
    
    
    
    758
    
    
    
    (26,389
    )
    
    
    1,082,564FHLMC and FNMA  REMICs
    
    
    452,628
    
    
    
    13
    
    
    
    (29,867
    )
    
    
    422,774Total held to maturity
    
    $
    4,389,864
    
    
    $
    4,545
    
    
    $
    (105,637
    )
    
    $
    4,288,772Available for Sale:GNMA pass-through certificates
    
    $
    1,726,111
    
    
    $
    72
    
    
    $
    (26,051
    )
    
    $
    1,700,132FNMA pass-through certificates
    
    
    683,604
    
    
    
    
    
    
    
    (17,119
    )
    
    
    666,485FHLMC pass-through certificates
    
    
    156,835
    
    
    
    
    
    
    
    (2,819
    )
    
    
    154,016Total available for sale
    
    $
    2,566,550
    
    
    $
    72
    
    
    $
    (45,989
    )
    
    $
    2,520,633
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Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In thousands)2006Held to Maturity:GNMA pass-through certificates
    
    $
    156
    
    
    $
    (1
    )
    
    $
    27,078
    
    
    $
    (147
    )
    
    $
    27,234
    
    
    $
    (148
    )FNMA pass-through certificates
    
    
    130,800
    
    
    
    (357
    )
    
    
    2,008,981
    
    
    
    (48,967
    )
    
    
    2,139,781
    
    
    
    (49,324
    )FHLMC pass-through certificates
    
    
    138,348
    
    
    
    (214
    )
    
    
    858,612
    
    
    
    (58,872
    )
    
    
    996,960
    
    
    
    (59,086
    )FHLMC and FNMA  REMICs
    
    
    
    
    
    
    
    
    
    
    376,245
    
    
    
    (29,542
    )
    
    
    376,245
    
    
    
    (29,542
    )Total held to maturity
    
    
    269,304
    
    
    
    (572
    )
    
    
    3,270,916
    
    
    
    (137,528
    )
    
    
    3,540,220
    
    
    
    (138,100
    )Available for Sale:GNMA pass-through certificates
    
    $
    311,551
    
    
    $
    (1,044
    )
    
    $
    1,196,044
    
    
    $
    (11,734
    )
    
    $
    1,507,595
    
    
    $
    (12,778
    )FNMA pass-through certificates
    
    
    
    
    
    
    
    
    
    
    575,293
    
    
    
    (17,221
    )
    
    
    575,293
    
    
    
    (17,221
    )FHLMC pass-through certificates
    
    
    
    
    
    
    
    
    
    
    132,413
    
    
    
    (3,011
    )
    
    
    132,413
    
    
    
    (3,011
    )Total available for sale
    
    
    311,551
    
    
    
    (1,044
    )
    
    
    1,903,750
    
    
    
    (31,966
    )
    
    
    2,215,301
    
    
    
    (33,010
    )Total
    
    $
    580,855
    
    
    $
    (1,616
    )
    
    $
    5,174,666
    
    
    $
    (169,494
    )
    
    $
    5,755,521
    
    
    $
    (171,110
    )2005Held to Maturity:GNMA pass-through certificates
    
    $
    67,545
    
    
    $
    (249
    )
    
    $
    11,732
    
    
    $
    (188
    )
    
    $
    79,277
    
    
    $
    (437
    )FNMA pass-through certificates
    
    
    2,214,642
    
    
    
    (48,760
    )
    
    
    6,056
    
    
    
    (184
    )
    
    
    2,220,698
    
    
    
    (48,944
    )FHLMC pass-through certificates
    
    
    953,410
    
    
    
    (25,267
    )
    
    
    42,889
    
    
    
    (1,122
    )
    
    
    996,299
    
    
    
    (26,389
    )FHLMC and FNMA  REMICs
    
    
    401,538
    
    
    
    (29,361
    )
    
    
    20,192
    
    
    
    (506
    )
    
    
    421,730
    
    
    
    (29,867
    )Total held to maturity
    
    
    3,637,135
    
    
    
    (103,637
    )
    
    
    80,869
    
    
    
    (2,000
    )
    
    
    3,718,004
    
    
    
    (105,637
    )Available for Sale:GNMA pass-through certificates
    
    $
    1,625,731
    
    
    $
    (25,391
    )
    
    $
    40,082
    
    
    $
    (660
    )
    
    $
    1,665,813
    
    
    $
    (26,051
    )FNMA pass-through certificates
    
    
    622,989
    
    
    
    (15,546
    )
    
    
    43,496
    
    
    
    (1,573
    )
    
    
    666,485
    
    
    
    (17,119
    )FHLMC pass-through certificates
    
    
    154,016
    
    
    
    (2,819
    )
    
    
    
    
    
    
    
    
    
    
    154,016
    
    
    
    (2,819
    )Total available for sale
    
    
    2,402,736
    
    
    
    (43,756
    )
    
    
    83,578
    
    
    
    (2,233
    )
    
    
    2,486,314
    
    
    
    (45,989
    )Total
    
    $
    6,039,871
    
    
    $
    (147,393
    )
    
    $
    164,447
    
    
    $
    (4,233
    )
    
    $
    6,204,318
    
    
    $
    (151,626
    )
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EstimatedAmortized
    
    
    Fair MarketCost
    
    
    Value(In thousands)Held to Maturity:Due in one year or less
    
    $
    262
    
    
    $
    263Due after one year through five years
    
    
    7,167
    
    
    
    7,279Due after five years through ten years
    
    
    7,456
    
    
    
    7,708Due after ten years
    
    
    6,910,325
    
    
    
    6,789,348Total held to maturity
    
    $
    6,925,210
    
    
    $
    6,804,598Available for Sale:Due after ten years
    
    $
    2,436,793
    
    
    $
    2,404,421Total available for sale
    
    $
    2,436,793
    
    
    $
    2,404,421
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5. Investment Securities
  Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)2006Held to Maturity:United States government-sponsored agencies
    
    $
    1,533,059
    
    
    $
    
    
    
    $
    (31,045
    )
    
    $
    1,502,014Municipal bonds
    
    
    910
    
    
    
    10
    
    
    
    
    
    
    
    920Total held to maturity
    
    $
    1,533,969
    
    
    $
    10
    
    
    $
    (31,045
    )
    
    $
    1,502,934Available for Sale:United States government-sponsored agencies
    
    $
    4,422,300
    
    
    $
    94
    
    
    $
    (50,099
    )
    
    $
    4,372,295Corporate bonds
    
    
    58
    
    
    
    
    
    
    
    (1
    )
    
    
    57Equity securities
    
    
    6,935
    
    
    
    328
    
    
    
    
    
    
    
    7,263Total available for sale
    
    $
    4,429,293
    
    
    $
    422
    
    
    $
    (50,100
    )
    
    $
    4,379,6152005Held to Maturity:United States government-sponsored agencies
    
    $
    1,533,050
    
    
    $
    
    
    
    $
    (26,185
    )
    
    $
    1,506,865Municipal bonds
    
    
    1,166
    
    
    
    24
    
    
    
    
    
    
    
    1,190Total held to maturity
    
    $
    1,534,216
    
    
    $
    24
    
    
    $
    (26,185
    )
    
    $
    1,508,055Available for Sale:United States government-sponsored agencies
    
    $
    4,022,316
    
    
    $
    
    
    
    $
    (60,138
    )
    
    $
    3,962,178Corporate bonds
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    67Equity securities
    
    
    168
    
    
    
    98
    
    
    
    
    
    
    
    266Total available for sale
    
    $
    4,022,551
    
    
    $
    98
    
    
    $
    (60,138
    )
    
    $
    3,962,511
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Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In thousands)2006Held to Maturity:United States government
-sponsored agencies
    
    $
    
    
    
    $
    
    
    
    $
    1,502,014
    
    
    $
    (31,045
    )
    
    $
    1,502,014
    
    
    $
    (31,045
    )Total held to maturity securities
    
    
    
    
    
    
    
    
    
    
    1,502,014
    
    
    
    (31,045
    )
    
    
    1,502,014
    
    
    
    (31,045
    )Available for Sale:United States government
-sponsored agencies
    
    $
    453,267
    
    
    $
    (1,421
    )
    
    $
    3,668,934
    
    
    $
    (48,678
    )
    
    $
    4,122,201
    
    
    $
    (50,099
    )Corporate bonds
    
    
    57
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    (1
    )Total
available for sale securities
    
    
    453,324
    
    
    
    (1,422
    )
    
    
    3,668,934
    
    
    
    (48,678
    )
    
    
    4,122,258
    
    
    
    (50,100
    )Total
    
    $
    453,324
    
    
    $
    (1,422
    )
    
    $
    5,170,948
    
    
    $
    (79,723
    )
    
    $
    5,624,272
    
    
    $
    (81,145
    )2005Held to Maturity:United States government
-sponsored agencies
    
    $
    1,213,548
    
    
    $
    (19,501
    )
    
    $
    293,317
    
    
    $
    (6,684
    )
    
    $
    1,506,865
    
    
    $
    (26,185
    )Total held to maturity securities
    
    
    1,213,548
    
    
    
    (19,501
    )
    
    
    293,317
    
    
    
    (6,684
    )
    
    
    1,506,865
    
    
    
    (26,185
    )Available for Sale:United States government
-sponsored agencies
    
    $
    2,961,446
    
    
    $
    (24,332
    )
    
    $
    1,000,732
    
    
    $
    (35,806
    )
    
    $
    3,962,178
    
    
    $
    (60,138
    )Total available for sale securities
    
    
    2,961,446
    
    
    
    (24,332
    )
    
    
    1,000,732
    
    
    
    (35,806
    )
    
    
    3,962,178
    
    
    
    (60,138
    )Total
    
    $
    4,174,994
    
    
    $
    (43,833
    )
    
    $
    1,294,049
    
    
    $
    (42,490
    )
    
    $
    5,469,043
    
    
    $
    (86,323
    )
  Page 98




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##### Table of Contents



EstimatedAmortized
    
    
    Fair MarketCost
    
    
    Value(In thousands)Held to Maturity:Due in one year or less
    
    $
    5
    
    
    $
    5Due after one year through five years
    
    
    846,161
    
    
    
    831,402Due after five years through ten years
    
    
    66,273
    
    
    
    65,181Due after ten years
    
    
    621,530
    
    
    
    606,346Total held to maturity
    
    $
    1,533,969
    
    
    $
    1,502,934Available for Sale:Due in one year or less
    
    $
    1,325,047
    
    
    $
    1,320,715Due after one year through five years
    
    
    2,828,150
    
    
    
    2,792,536Due after five years through ten years
    
    
    269,161
    
    
    
    259,101Total available for sale
    
    $
    4,422,358
    
    
    $
    4,372,352
  6. Loans and Allowance for Loan Losses
  2006
    
    
    2005(In thousands)First mortgage loans:One- to four-family
    
    $
    18,561,467
    
    
    $
    14,780,819FHA/VA
    
    
    29,573
    
    
    
    43,672Multi-family and commercial
    
    
    69,322
    
    
    
    2,320Construction
    
    
    41,150
    
    
    
    Total first mortgage loans
    
    
    18,701,512
    
    
    
    14,826,811Consumer and other loans:Fixedrate second mortgages
    
    
    274,028
    
    
    
    205,826Home equity credit lines
    
    
    97,644
    
    
    
    29,150Other
    
    
    10,433
    
    
    
    662Total consumer and other loans
    
    
    382,105
    
    
    
    235,638Total loans
    
    $
    19,083,617
    
    
    $
    15,062,449
 Page 99




---



##### Table of Contents



2006
    
    
    2005(In thousands)Non-accrual loans
    
    $
    24,368
    
    
    $
    9,651Accruing loans delinquent 90 days or more
    
    
    5,630
    
    
    
    9,661Total non-performing loans
    
    $
    29,998
    
    
    $
    19,312
   2006
    
    
    2005
    
    
    2004(In thousands)Balance at beginning of year
    
    $
    27,393
    
    
    $
    27,319
    
    
    $
    26,547Charge-offs
    
    
    (79
    )
    
    
    (10
    )
    
    
    (20
    )Recoveries
    
    
    3
    
    
    
    19
    
    
    
    2Net (charge-offs) recoveries
    
    
    (76
    )
    
    
    9
    
    
    
    (18
    )Provision for loan losses
    
    
    
    
    
    
    65
    
    
    
    790Allowance transferred in Acquisition
    
    
    3,308
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    30,625
    
    
    $
    27,393
    
    
    $
    27,319
 Page 100




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##### Table of Contents



7. Banking Premises and Equipment, net
  2006
    
    
    2005(In thousands)Land
    
    $
    5,806
    
    
    $
    5,215Buildings
    
    
    50,889
    
    
    
    34,199Leasehold improvements
    
    
    33,921
    
    
    
    23,435Furniture, fixtures and equipment
    
    
    67,601
    
    
    
    53,722Total acquisition cost
    
    
    158,217
    
    
    
    116,571Accumulated depreciation and amortization
    
    
    (84,288
    )
    
    
    (67,439
    )Total banking premises and equipment, net
    
    $
    73,929
    
    
    $
    49,132
    AmountYear
    
    
    (In thousands)2007
    
    
    $
    7,3172008
    
    
    
    7,5882009
    
    
    
    7,5232010
    
    
    
    7,0682011
    
    
    
    6,757Thereafter
    
    
    
    85,990Total
    
    
    $
    122,243
  Page 101




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##### Table of Contents



8. Deposits
  2006
    
    
    2005Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in thousands)Savings
    
    $
    805,278
    
    
    
    6.00
    %
    
    $
    808,325
    
    
    
    7.10
    %Noninterest-bearing demand
    
    
    498,301
    
    
    
    3.71
    
    
    
    442,042
    
    
    
    3.88Interest-bearing transaction
    
    
    2,095,811
    
    
    
    15.62
    
    
    
    3,616,644
    
    
    
    31.77Money market
    
    
    918,549
    
    
    
    6.85
    
    
    
    342,021
    
    
    
    3.00Time deposits
    
    
    9,097,648
    
    
    
    67.82
    
    
    
    6,174,268
    
    
    
    54.25Total deposits
    
    $
    13,415,587
    
    
    
    100.00
    %
    
    $
    11,383,300
    
    
    
    100.00
    %
   Year
    
    
    Amount(In thousands)2007
    
    
    $
    8,332,8602008
    
    
    
    485,8952009
    
    
    
    183,3512010
    
    
    
    84,4762011
    
    
    
    11,066Total
    
    
    $
    9,097,648
 Page 102




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##### Table of Contents



9. Borrowed Funds
  2006
    
    
    2005Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AveragePrincipal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)Securities sold under agreements to repurchase:FHLB
    
    $
    823,000
    
    
    
    4.96
    %
    
    $
    850,000
    
    
    
    4.96
    %Other brokers
    
    
    8,100,000
    
    
    
    3.86
    
    
    
    7,050,000
    
    
    
    3.45Total securities sold under
agreements to repurchase
    
    
    8,923,000
    
    
    
    3.96
    
    
    
    7,900,000
    
    
    
    3.61Advances from the FHLB
    
    
    8,050,000
    
    
    
    4.21
    
    
    
    3,450,000
    
    
    
    3.95Total borrowed funds
    
    $
    16,973,000
    
    
    
    4.08
    
    
    $
    11,350,000
    
    
    
    3.72
  At or for the Year Ended December 31,2006
    
    
    2005
    
    
    2004(Dollars in thousands)Repurchase Agrements:Average balance outstanding during the year
    
    $
    8,313,321
    
    
    $
    6,447,560
    
    
    $
    4,182,197Maximum balance outstanding at any month-end
during the year
    
    $
    8,923,000
    
    
    $
    7,900,000
    
    
    $
    5,300,000Weighted average rate during the period
    
    
    3.81
    %
    
    
    3.52
    %
    
    
    3.41
    %FHLB Advances:Average balance outstanding during the year
    
    $
    5,977,115
    
    
    $
    2,469,529
    
    
    $
    1,916,085Maximum balance outstanding at any month-end
during the year
    
    $
    8,050,000
    
    
    $
    3,450,000
    
    
    $
    1,950,000Weighted average rate during the period
    
    
    4.17
    %
    
    
    3.89
    %
    
    
    3.79
    %
 Page 103




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##### Table of Contents



Borrowings by EarlierBorrowings by Scheduled
    
    
    of Maturity or NextMaturity Date
    
    
    Potential Call DateWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageYear
    
    Principal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)2007
    
    $
    7,000
    
    
    
    2.65
    %
    
    $
    7,667,000
    
    
    
    4.04
    %2008
    
    
    16,000
    
    
    
    4.94
    
    
    
    6,156,000
    
    
    
    4.102009
    
    
    
    
    
    
    
    
    
    
    2,550,000
    
    
    
    4.092010
    
    
    300,000
    
    
    
    5.68
    
    
    
    350,000
    
    
    
    4.012011
    
    
    250,000
    
    
    
    4.90
    
    
    
    250,000
    
    
    
    4.902012
    
    
    900,000
    
    
    
    4.16
    
    
    
    
    
    
    
    2013
    
    
    350,000
    
    
    
    5.09
    
    
    
    
    
    
    
    2014
    
    
    1,850,000
    
    
    
    2.94
    
    
    
    
    
    
    
    2015
    
    
    4,175,000
    
    
    
    3.84
    
    
    
    
    
    
    
    2016
    
    
    9,125,000
    
    
    
    4.30
    
    
    
    
    
    
    
    Total
    
    $
    16,973,000
    
    
    
    4.08
    
    
    $
    16,973,000
    
    
    
    4.08
  At or for the Years Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Amortized cost of collateral:United States government-sponsored
agency securities
    
    $
    3,329,639
    
    
    $
    2,849,947
    
    
    $
    2,030,978Mortgage-backed securities
    
    
    5,937,758
    
    
    
    5,224,648
    
    
    
    3,198,768REMICs
    
    
    319,920
    
    
    
    356,579
    
    
    
    455,598Total amortized cost of collateral
    
    $
    9,587,317
    
    
    $
    8,431,174
    
    
    $
    5,685,344Fair value of collateral:United States government-sponsored
agency securities
    
    $
    3,195,765
    
    
    $
    2,778,462
    
    
    $
    2,008,710Mortgage-backed securities
    
    
    5,846,562
    
    
    
    5,119,225
    
    
    
    3,188,386REMICs
    
    
    296,661
    
    
    
    332,532
    
    
    
    434,249Total fair value of collateral
    
    $
    9,338,988
    
    
    $
    8,230,219
    
    
    $
    5,631,345
 10. Employee Benefit Plans
 a)
    
    Retirement and Other Postretirement Benefits
  Page 104




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Before
    
    
    
    
    
    
    AfterApplication of
    
    
    
    
    
    
    Application ofSFAS No. 158
    
    
    Adjustments
    
    
    SFAS No. 158(In thousands)Accrued expenses and other liabilities
    
    $
    186,708
    
    
    $
    1,030
    
    
    $
    187,738Total liabilities
    
    
    30,575,205
    
    
    
    1,030
    
    
    
    30,576,325Accumulated other comprehensive income
    
    
    (48,533
    )
    
    
    (1,030
    )
    
    
    (49,563
    )Total stockholders equity
    
    
    4,931,286
    
    
    
    (1,030
    )
    
    
    4,930,256
 Page 105




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##### Table of Contents



Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year
    
    $
    90,093
    
    
    $
    83,268
    
    
    $
    36,254
    
    
    $
    46,396Benefit obligation assumed in Acquisition
    
    
    13,515
    
    
    
    
    
    
    
    
    
    
    
    Service cost
    
    
    3,404
    
    
    
    3,048
    
    
    
    1,076
    
    
    
    1,921Interest cost
    
    
    5,766
    
    
    
    4,784
    
    
    
    1,996
    
    
    
    2,492Plan amendments
    
    
    (2,007
    )
    
    
    1,884
    
    
    
    
    
    
    
    (28,171
    )Participant contributions
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    40Actuarial (gain) loss
    
    
    (1,008
    )
    
    
    (176
    )
    
    
    (1,257
    )
    
    
    15,003Benefits paid
    
    
    (3,694
    )
    
    
    (2,715
    )
    
    
    (2,258
    )
    
    
    (1,427
    )Benefit obligation at end of year
    
    
    106,069
    
    
    
    90,093
    
    
    
    35,850
    
    
    
    36,254Change in Plan Assets:Fair value of plan assets at beginning of year
    
    
    80,091
    
    
    
    78,901
    
    
    
    
    
    
    
    Assets received in Acquisition
    
    
    12,503
    
    
    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    9,725
    
    
    
    3,411
    
    
    
    
    
    
    
    Employer contribution
    
    
    943
    
    
    
    493
    
    
    
    2,219
    
    
    
    1,387Participant contributions
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    40Benefits paid
    
    
    (3,694
    )
    
    
    (2,715
    )
    
    
    (2,258
    )
    
    
    (1,427
    )Fair value of plan assets at end of year
    
    
    99,568
    
    
    
    80,090
    
    
    
    
    
    
    
    Funded Status
    
    
    (6,501
    )
    
    
    (10,003
    )
    
    
    (35,850
    )
    
    
    (36,254
    )Unrecognized prior service cost
    
    
    
    
    
    
    1,874
    
    
    
    
    
    
    
    (27,193
    )Unrecognized net actuarial loss
    
    
    
    
    
    
    15,851
    
    
    
    
    
    
    
    15,615Prepaid (accrued) benefit cost
    
    
    (6,501
    )
    
    
    7,722
    
    
    
    (35,850
    )
    
    
    (47,832
    )
  Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Assets
    
    $
    401
    
    
    $
    13,090
    
    
    $
    
    
    
    $
    Liabilities
    
    
    (6,902
    )
    
    
    (5,368
    )
    
    
    (35,850
    )
    
    
    (47,832
    )
  Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Net loss(gain)
    
    $
    11,131
    
    
    $
    
    
    
    $
    13,713
    
    
    $
    Prior service cost(credit)
    
    
    2,525
    
    
    
    
    
    
    
    (25,628
    )
    
    
    
 Page 106




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##### Table of Contents



Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004(In thousands)Net periodic benefit cost:Service cost
    
    $
    3,863
    
    
    $
    3,048
    
    
    $
    2,945
    
    
    $
    1,076
    
    
    $
    1,921
    
    
    $
    2,120Interest cost
    
    
    6,452
    
    
    
    4,784
    
    
    
    4,527
    
    
    
    1,996
    
    
    
    2,492
    
    
    
    2,318Expected return on assets
    
    
    (8,447
    )
    
    
    (6,774
    )
    
    
    (6,532
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of:Net loss (gain)
    
    
    943
    
    
    
    435
    
    
    
    59
    
    
    
    645
    
    
    
    621
    
    
    
    (40
    )Unrecognized prior service cost
    
    
    168
    
    
    
    25
    
    
    
    (16
    )
    
    
    (1,565
    )
    
    
    (978
    )
    
    
    Net periodic benefit cost
    
    $
    2,979
    
    
    $
    1,518
    
    
    $
    983
    
    
    $
    2,152
    
    
    $
    4,056
    
    
    $
    4,398
   Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2004
    
    
    2006
    
    
    2005
    
    
    2004Discount rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    6.25Expected return on assets
    
    
    8.75
    
    
    
    8.75
    
    
    
    8.75
    
    
    
    
    
    
    
    
    
    
    
    Rate of compensation increase.
    
    
    4.25
    
    
    
    4.25
    
    
    
    4.75
    
    
    
    
    
    
    
    
    
    
    
    
  Retirement Plans
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Discount rate
    
    
    6.00
    %
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Rate of compensation increase
    
    
    4.25
    
    
    
    4.25
    
    
    
    
    
    
    
    
  Page 107




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##### Table of Contents



1% Increase
    
    1% Decrease(In thousands)Effect on total service cost and
interest cost
    
    $
    73
    
    
    $
    (66
    )Effect on other benefit obligations
    
    
    1,547
    
    
    
    (1,375
    )
  Asset Category
    
    2006
    
    2005Equity securities
    
    
    60.9
    %
    
    
    60.2
    %Fixed Income
    
    
    28.5
    
    
    
    25.2Cash
    
    
    10.6
    
    
    
    14.6Total
    
    
    100.0
    
    
    
    100.0
    Page 108




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##### Table of Contents



Retirement
    
    OtherPlans
    
    Benefits(In thousands)2007
    
    $
    3,763
    
    
    $
    2,2422008
    
    
    3,829
    
    
    
    2,3782009
    
    
    4,103
    
    
    
    2,5952010
    
    
    4,265
    
    
    
    2,7472011
    
    
    4,633
    
    
    
    2,9552012 through 2016
    
    
    31,491
    
    
    
    17,249
 b) Employee Stock Ownership Plan
     Page 109




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##### Table of Contents



c) Recognition and Retention Plans
      Resticted Stock Awards2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Grant Date
    
    
    Number of
    
    
    Grant Date
    
    
    Number of
    
    
    Grant DateShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueOutstanding at beginning of period
    
    
    951,761
    
    
    $
    9.69
    
    
    
    2,973,759
    
    
    $
    4.66
    
    
    
    5,601,236
    
    
    $
    2.47Granted
    
    
    
    
    
    
    
    
    
    
    150,682
    
    
    
    11.18
    
    
    
    762,868
    
    
    
    11.40Vested
    
    
    (410,910
    )
    
    
    7.22
    
    
    
    (2,172,680
    )
    
    
    2.91
    
    
    
    (3,390,345
    )
    
    
    2.56Outstanding at end of period
    
    
    540,851
    
    
    
    11.57
    
    
    
    951,761
    
    
    
    9.69
    
    
    
    2,973,759
    
    
    
    4.66
  d) Stock Option Plans
  Page 110




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##### Table of Contents



2005
    
    2004(In thousands, except per share data)Net income, as reported
    
    $
    276,055
    
    
    $
    239,266Add: expense recognized for the recognition and
retention plans, net of related tax effect
    
    
    2,249
    
    
    
    5,623Less: total stock option and recognition and
retention plans expense, determined under the
fair value method, net of related tax effect
    
    
    (3,738
    )
    
    
    (8,939
    )Pro forma net income
    
    $
    274,566
    
    
    $
    235,950Basic            As reported
    
    $
    0.49
    
    
    $
    0.41Pro forma
    
    
    0.48
    
    
    
    0.41Diluted:       As reported
    
    $
    0.48
    
    
    $
    0.40Pro forma
    
    
    0.47
    
    
    
    0.40
  2005
    
    2004Expected dividend yield
    
    
    2.23
    %
    
    
    1.69
    %Expected volatility
    
    
    21.57
    
    
    
    19.66Risk-free interest rate
    
    
    3.64
    
    
    
    3.05Expected option life
    
    5 years
    
    5 yearsFair value
of options granted
    
    $
    2.20
    
    
    $
    2.23
   Page 111




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##### Table of Contents



2006Expected dividend yield
    
    
    2.35
    %Expected volatility
    
    
    19.96
    %Risk-free interest rate
    
    
    4.98
    %Expected option life
    
    5.4 years
   2006
    
    
    2005
    
    
    2004Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    Average
    
    
    Number of
    
    
    AverageStock
    
    
    Exercise
    
    
    Stock
    
    
    Exercise
    
    
    Stock
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning
of year
    
    
    21,659,869
    
    
    $
    4.21
    
    
    
    22,425,161
    
    
    $
    3.95
    
    
    
    22,009,657
    
    
    $
    2.53Granted
    
    
    7,960,000
    
    
    
    12.76
    
    
    
    496,930
    
    
    
    11.17
    
    
    
    3,305,393
    
    
    
    11.93Exercised
    
    
    (2,629,621
    )
    
    
    2.60
    
    
    
    (1,247,475
    )
    
    
    2.26
    
    
    
    (2,886,042
    )
    
    
    2.24Forfeited
    
    
    (10,259
    )
    
    
    4.21
    
    
    
    (14,747
    )
    
    
    8.13
    
    
    
    (3,847
    )
    
    
    3.10Outstanding at end of year
    
    
    26,979,989
    
    
    
    6.89
    
    
    
    21,659,869
    
    
    
    4.21
    
    
    
    22,425,161
    
    
    
    3.95
  Page 112




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageOf Options
    
    
    Contractual
    
    
    Exercise
    
    
    Of Options
    
    
    ExerciseOutstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price12,347,659
    
    
    3  years
    
    $
    2.16
    
    
    
    12,347,659
    
    
    $
    2.16235,283
    
    
    4  years
    
    
    3.09
    
    
    
    235,283
    
    
    
    3.09411,801
    
    
    4  years
    
    
    3.40
    
    
    
    411,801
    
    
    
    3.40820,736
    
    
    4  years
    
    
    3.59
    
    
    
    820,736
    
    
    
    3.59283,051
    
    
    5  years
    
    
    4.20
    
    
    
    195,208
    
    
    
    4.20689,440
    
    
    5  years
    
    
    5.53
    
    
    
    689,440
    
    
    
    5.53242,964
    
    
    6  years
    
    
    5.96
    
    
    
    128,828
    
    
    
    5.96206,480
    
    
    6  years
    
    
    6.35
    
    
    
    206,480
    
    
    
    6.35448,840
    
    
    7  years
    
    
    10.33
    
    
    
    179,536
    
    
    
    10.33485,389
    
    
    8  years
    
    
    11.17
    
    
    
    95,543
    
    
    
    11.17371,890
    
    
    7  years
    
    
    11.91
    
    
    
    148,745
    
    
    
    11.912,476,456
    
    
    7  years
    
    
    12.22
    
    
    
    591,344
    
    
    
    12.227,960,000
    
    
    9.5 years
    
    
    12.76
    
    
    
    
    
    
    
    26,979,989
    
    
    
    
    
    
    
    6.89
    
    
    
    16,050,603
    
    
    
    3.14
  e) Incentive Plans
   Page 113




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11. Income Taxes
  2006
    
    
    2005
    
    
    2004(In thousands)Federal:Current
    
    $
    161,558
    
    
    $
    160,263
    
    
    $
    139,839Deferred
    
    
    (2,443
    )
    
    
    (5,573
    )
    
    
    (4,838
    )Total federal
    
    
    159,115
    
    
    
    154,690
    
    
    
    135,001State:Current
    
    
    14,091
    
    
    
    12,560
    
    
    
    10,218Deferred
    
    
    (1,216
    )
    
    
    (932
    )
    
    
    (2,074
    )Total state
    
    
    12,875
    
    
    
    11,628
    
    
    
    8,144Total income tax expense
    
    $
    171,990
    
    
    $
    166,318
    
    
    $
    143,145
   2006
    
    
    2005
    
    
    2004(Dollars in thousands)Income before income tax expense
    
    $
    460,569
    
    
    $
    442,373
    
    
    $
    382,411Statutory income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35Computed expected income tax expense
    
    
    161,199
    
    
    
    154,831
    
    
    
    133,844State income taxes, net of federal
income tax benefit
    
    
    8,369
    
    
    
    7,558
    
    
    
    5,294Tax-exempt interest
    
    
    (51
    )
    
    
    (67
    )
    
    
    (71
    )Incentive stock option expense
    
    
    244
    
    
    
    
    
    
    
    Dividends on allocated ESOP shares
    
    
    (426
    )
    
    
    (308
    )
    
    
    (110
    )ESOP fair market value adjustment
    
    
    2,345
    
    
    
    1,971
    
    
    
    2,990Other, net
    
    
    310
    
    
    
    2,333
    
    
    
    1,198Income tax expense
    
    $
    171,990
    
    
    $
    166,318
    
    
    $
    143,145
 Page 114




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##### Table of Contents



2006
    
    
    2005(In thousands)Deferred tax asset:Deferred loan origination fees
    
    $
    1,329
    
    
    $
    1,985Postretirement benefits
    
    
    20,502
    
    
    
    20,028Allowance for loan loss reserve
    
    
    11,888
    
    
    
    10,146Mortgage premium amortization
    
    
    6,787
    
    
    
    5,417Non-accrual interest income
    
    
    254
    
    
    
    156Non-qualified benefit plans
    
    
    21,807
    
    
    
    15,999Net unrealized loss on securities available for sale
    
    
    33,517
    
    
    
    43,283Funded status of pension plan
    
    
    6,633
    
    
    
    ESOP expense
    
    
    7,931
    
    
    
    5,488Fair value adjustment on mortgages recorded in Acquisition
    
    
    4,719
    
    
    
    Other
    
    
    3,835
    
    
    
    2,464119,202
    
    
    
    104,966Deferred tax liabilities:Discount accretion
    
    
    124
    
    
    
    257Retirement plan
    
    
    5,268
    
    
    
    5,282Principal payments on ESOP loans
    
    
    3,736
    
    
    
    1,105Fair value adjustments related to the Acquisition:Core deposit intangible
    
    
    5,395
    
    
    
    Deposits
    
    
    408
    
    
    
    Buildings
    
    
    2,232
    
    
    
    Other
    
    
    694
    
    
    
    2,05517,857
    
    
    
    8,699Net deferred tax asset
    
    $
    101,345
    
    
    $
    96,267
   12. Fair Value of Financial Instruments
  Page 115




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2006
    

2005Carrying
    
    Estimated
    
    Carrying
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair Value(In thousands)Assets:Cash and due from banks
    
    $
    125,630
    
    
    $
    125,630
    
    
    $
    97,672
    
    
    $
    97,672Federal funds sold
    
    
    56,616
    
    
    
    56,616
    
    
    
    4,587
    
    
    
    4,587Investment securities held to maturity
    
    
    1,533,969
    
    
    
    1,502,934
    
    
    
    1,534,216
    
    
    
    1,508,055Investment securities available for sale
    
    
    4,379,615
    
    
    
    4,379,615
    
    
    
    3,962,511
    
    
    
    3,962,511Federal Home Loan Bank of New York stock
    
    
    445,006
    
    
    
    445,006
    
    
    
    226,962
    
    
    
    226,962Mortgage-backed securities held to maturity
    
    
    6,925,210
    
    
    
    6,804,598
    
    
    
    4,389,864
    
    
    
    4,288,772Mortgage-backed securities available for sale
    
    
    2,404,421
    
    
    
    2,404,421
    
    
    
    2,520,633
    
    
    
    2,520,633Loans
    
    
    19,083,617
    
    
    
    19,235,250
    
    
    
    15,036,709
    
    
    
    15,183,250Liabilities:Deposits
    
    
    13,415,587
    
    
    
    13,424,527
    
    
    
    11,383,300
    
    
    
    11,376,587Borrowed funds
    
    
    16,973,000
    
    
    
    17,069,882
    
    
    
    11,350,000
    
    
    
    11,237,494
 13. Regulatory Matters
   Page 116




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OTS RequirementsMinimum Capital
    
    For Classification asBank Actual
    
    Adequacy
    
    Well-CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)December 31, 2006Tangible capital
    
    $
    4,000,577
    
    
    
    11.30
    %
    
    $
    530,878
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core) capital
    
    
    4,000,577
    
    
    
    11.30
    
    
    
    1,415,674
    
    
    
    4.00
    
    
    $
    1,769,592
    
    
    
    5.00
    %Total-risk-based capital
    
    
    4,031,202
    
    
    
    30.99
    
    
    
    1,040,513
    
    
    
    8.00
    
    
    
    1,300,642
    
    
    
    10.00December 31, 2005Tangible capital
    
    $
    4,129,937
    
    
    
    14.68
    %
    
    $
    422,069
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core) capital
    
    
    4,129,937
    
    
    
    14.68
    
    
    
    1,125,518
    
    
    
    4.00
    
    
    $
    1,406,897
    
    
    
    5.00
    %Total-risk-based capital
    
    
    4,157,330
    
    
    
    41.31
    
    
    
    805,040
    
    
    
    8.00
    
    
    
    1,006,300
    
    
    
    10.00
     Page 117




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14. Commitments and Contingencies
     Page 118




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15. Parent Company Only Financial Statements
  Statements of Financial Condition
 December 31, 2006
    
    
    December 31, 2005(In thousands)Assets:Cash and due from subsidiary bank
    
    $
    576,263
    
    
    $
    894,128Investment in subsidiary
    
    
    4,116,112
    
    
    
    4,067,146ESOP loan receivable
    
    
    238,846
    
    
    
    240,958Other assets
    
    
    
    
    
    
    83Total Assets
    
    $
    4,931,221
    
    
    $
    5,202,315Liabilities and Stockholders Equity:Accrued expenses
    
    $
    965
    
    
    $
    839Total stockholders equity
    
    
    4,930,256
    
    
    
    5,201,476Total Liabilities and Stockholders Equity
    
    $
    4,931,221
    
    
    $
    5,202,315
 Statements of Income
 Year Ended December 31,2006
    
    
    2005
    
    
    2004(In thousands)Income:Dividends received from subsidiary
    
    $
    282,929
    
    
    $
    259,329
    
    
    $
    226,592Interest on ESOP loan receivable
    
    
    12,048
    
    
    
    6,954
    
    
    
    4,128Interest on deposit with subsidiary
    
    
    6,674
    
    
    
    5,964
    
    
    
    423Total income
    
    
    301,651
    
    
    
    272,247
    
    
    
    231,143Expenses
    
    
    1,273
    
    
    
    1,733
    
    
    
    673Income before income tax expense
and equity in undistributed earnings of subsidiary
    
    
    300,378
    
    
    
    270,514
    
    
    
    230,470Income tax expense
    
    
    6,515
    
    
    
    4,205
    
    
    
    1,464Income before equity in undistributed
earnings of subsidiary
    
    
    293,863
    
    
    
    266,309
    
    
    
    229,006Equity in (overdistributed)undistributed earnings
of subsidiary
    
    
    (5,284
    )
    
    
    9,746
    
    
    
    10,260Net Income
    
    $
    288,579
    
    
    $
    276,055
    
    
    $
    239,266
 Page 119




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##### Table of Contents



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




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16. Selected Quarterly Financial Data (Unaudited)
  2006 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands except per share data)Interest and dividend income
    
    $
    359,688
    
    
    $
    384,140
    
    
    $
    422,045
    
    
    $
    448,970Interest expense
    
    
    202,009
    
    
    
    230,551
    
    
    
    268,917
    
    
    
    300,133Net interest income
    
    
    157,679
    
    
    
    153,589
    
    
    
    153,128
    
    
    
    148,837Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net interest income after
provision for loan losses
    
    
    157,679
    
    
    
    153,589
    
    
    
    153,128
    
    
    
    148,837Non-interest income
    
    
    1,264
    
    
    
    1,455
    
    
    
    1,669
    
    
    
    1,903Non-interest expense
    
    
    38,285
    
    
    
    38,515
    
    
    
    40,588
    
    
    
    41,567Income before income tax expense
    
    
    120,658
    
    
    
    116,529
    
    
    
    114,209
    
    
    
    109,173Income tax expense
    
    
    45,430
    
    
    
    43,361
    
    
    
    43,238
    
    
    
    39,961Net income
    
    $
    75,228
    
    
    $
    73,168
    
    
    $
    70,971
    
    
    $
    69,212Basic earnings per share
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.13
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.13
    
    
    $
    0.13
    
    
    $
    0.13
    
    
    $
    0.13
 2005 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31Interest and dividend income
    
    $
    253,619
    
    
    $
    279,204
    
    
    $
    313,787
    
    
    $
    332,298Interest expense
    
    
    127,733
    
    
    
    147,517
    
    
    
    161,611
    
    
    
    179,913Net interest income
    
    
    125,886
    
    
    
    131,687
    
    
    
    152,176
    
    
    
    152,385Provision for loan losses
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    Net interest income after
provision for loan losses
    
    
    125,821
    
    
    
    131,687
    
    
    
    152,176
    
    
    
    152,385Non-interest income
    
    
    3,873
    
    
    
    1,245
    
    
    
    1,413
    
    
    
    1,476Non-interest expense
    
    
    30,765
    
    
    
    30,256
    
    
    
    32,923
    
    
    
    33,759Income before income tax expense
    
    
    98,929
    
    
    
    102,676
    
    
    
    120,666
    
    
    
    120,102Income tax expense
    
    
    37,000
    
    
    
    38,385
    
    
    
    45,635
    
    
    
    45,298Net income
    
    $
    61,929
    
    
    $
    64,291
    
    
    $
    75,031
    
    
    $
    74,804Basic earnings per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.11
    
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.13
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17. Earnings Per Share
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Per
    
    
    
    
    
    
    
    
    
    
    Per
    
    
    
    
    
    
    
    
    
    
    PerShare
    
    
    
    
    
    
    
    
    
    
    Share
    
    
    
    
    
    
    
    
    
    
    ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount(In thousands, except per share data)Net income
    
    $
    288,579
    
    
    
    
    
    
    
    
    
    
    $
    276,055
    
    
    
    
    
    
    
    
    
    
    $
    239,266Basic earnings per share:Income available to
common stockholders
    
    $
    288,579
    
    
    
    536,215
    
    
    $
    0.54
    
    
    $
    276,055
    
    
    
    567,789
    
    
    $
    0.49
    
    
    $
    239,266
    
    
    
    576,621
    
    
    $
    0.41Effect of dilutive common
stock equivalents
    
    
    
    
    
    
    10,576
    
    
    
    
    
    
    
    
    
    
    
    13,274
    
    
    
    
    
    
    
    
    
    
    
    16,380Diluted earnings per share:Income available to
common stockholders
    
    $
    288,579
    
    
    
    546,791
    
    
    $
    0.53
    
    
    $
    276,055
    
    
    
    581,063
    
    
    $
    0.48
    
    
    $
    239,266
    
    
    
    593,001
    
    
    $
    0.40
 18. Recent Accounting Pronouncements
  ,
  Page 122




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 Management Report on Internal Control Over Financial Reporting
 Page 123




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##### Table of Contents



Internal
Control-Integrated Framework
  Item 9B. Other Information.
  PART III
 Item 10. Directors, Executive Officers and Corporate Governance.
  Audit
Committee Financial Expert
  Page 124




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##### Table of Contents



Code of Ethics
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services.
  Page 125




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    List of Documents Filed as Part of this Annual Report on Form 10-K
 (1)
    
    The following consolidated financial statements are in Item 8 of
this annual report:
    
    Reports of Independent Registered Public Accounting Firm
    
    Consolidated Statements of Financial Condition as of December 31,
2006 and 2005
    
    Consolidated Statements of Income for the years ended December 31,
2006, 2005 and 2004
    
    Consolidated Statements of Changes in Stockholders Equity for the
years ended December 31, 2006, 2005 and 2004
    
    Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004
    
    Notes to Consolidated Financial Statements(2)
    
    Financial Statement Schedules have been omitted because they are
not applicable or the required information is shown in the Consolidated
Financial Statements or Notes thereto in Item 8 of this annual report.
 (b)
    
    Exhibits Required by Item 601 of Regulation S-K
 Page 126




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##### Table of Contents



EXHIBIT
    
    DESCRIPTION2.1
    
    Amended and Restated Plan of Conversion and Reorganization of Hudson City, MHC, Hudson City
Bancorp, Inc. and Hudson City Savings Bank (1)2.2
    
    Agreement and Plan of Merger by and between Hudson City Bancorp, Inc. and Sound Federal
Bancorp, Inc. (2)3.1
    
    Certificate of Incorporation of Hudson City Bancorp, Inc. (1)3.2
    
    Amended and Restated Bylaws of Hudson City Bancorp, Inc. (4)4.1
    
    Certificate of Incorporation of Hudson City Bancorp, Inc. (See Exhibit 3.1)4.2
    
    Amended and Restated Bylaws of Hudson City Bancorp, Inc. (See Exhibit 3.2)4.3
    
    Form of Stock Certificate of Hudson City Bancorp, Inc. (3)10.1
    
    Employee Stock Ownership Plan of Hudson City Savings Bank (Incorporating amendments No.
1,2,3,4,and 5) (5)10.2
    
    Profit Incentive Bonus Plan of Hudson City Savings Bank (5)10.3
    
    Form of One-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson
City Bancorp, Inc. and certain officers (3)10.4
    
    Form of Two-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson
City Bancorp, Inc. and certain officers (5)10.5
    
    Severance Pay Plan of Hudson City Savings Bank (3)10.6
    
    Hudson City Savings Bank Outside Directors Consultation Plan (3)10.7
    
    Hudson City Bancorp, Inc. 2000 Stock Option Plan (6)10.8
    
    Hudson City Bancorp, Inc. 2000 Recognition and Retention Plan (6)10.9
    
    Hudson City Bancorp, Inc. Denis J. Salamone Stock Option Plan (7)10.10
    
    Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Ronald E. Butkovich
(8)10.11
    
    Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Christopher Nettleton
(8)10.12
    
    Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Ronald E.
Hermance, Jr. (9)10.13
    
    Amended and Restated Employment Agreement between Hudson City Savings Bank and Ronald E.
Hermance, Jr. (9)10.14
    
    Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and John M.
Tassillo (9)10.15
    
    Amended and Restated Employment Agreement between Hudson City Savings Bank and John M.
Tassillo (9)10.16
    
    Amended and Restated Employment Agreement between Hudson City Bancorp, Inc. and Denis J.
Salamone (9)10.17
    
    Amended and Restated Employment Agreement between Hudson City Savings Bank and Denis J.
Salamone (9)10.18
    
    Executive Officer Annual Incentive
Plan of Hudson City Savings Bank (9)10.19
    
    Amended and Restated Loan Agreement by and between Employee Stock Ownership Plan Trust of
Hudson City Savings Bank and Hudson City Bancorp, Inc. (9)
 Page 127




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##### Table of Contents



EXHIBIT
    
    DESCRIPTION10.20


10.21
    
    Amended and Restated Promissory Note between Employee Stock Ownership Plan Trust and Hudson
City Bancorp, Inc. (9)


Amended and Restated Pledge Agreement by and between Employee Stock
Ownership Plan Trust of Hudson City Savings Bank and Hudson City
Bancorp, Inc. (9)10.22
    
    Form of Amended and Restated Assignment between Employee Stock Ownership Plan Trust and
Hudson City Bancorp, Inc. (9)10.23
    
    Loan Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings Bank
and Hudson City Bancorp, Inc. (9)10.24
    
    Promissory Note between Employee
Stock Ownership Plan Trust and Hudson City Bancorp, Inc. (9)10.25
    
    Pledge Agreement by and between Employee Stock Ownership Plan Trust of Hudson City Savings
Bank and Hudson City Bancorp, Inc. (9)10.26
    
    Form of Assignment between Employee Stock Ownership Plan Trust and Hudson City Bancorp, Inc.
(9)10.27
    
    Hudson City Bancorp, Inc. 2006
Stock Incentive Plan (10)10.28
    
    Form of Hudson Bancorp, Inc. 2006
Stock Incentive Plan Performance Stock Option Agreement (11)10.29
    
    Form of Hudson Bancorp, Inc. 2006
Stock Incentive Plan Retention Stock Option Agreement (11)10.30
    
    Form of Hudson Bancorp, Inc. 2006
Stock Incentive Plan Director Stock Option Agreement (11)10.31
    
    Benefit Maintenance Plan of Hudson
City Savings Bank (11)10.32
    
    Summary of Material Terms of
Directed Charitable Contribution Program (11)10.33
    
    Summary of Director Compensation (11)11.1
    
    Statement Re: Computation of Per Share Earnings*21.1
    
    Subsidiaries of Hudson City Bancorp, Inc.*23.1
    
    Consent of KPMG LLP (11)31.1
    
    Certification of Disclosure of Ronald E. Hermance, Jr.*31.2
    
    Certification of Disclosure of James C. Kranz*32.1
    
    Statement Furnished Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350*
 
 (1)
    
    Incorporated herein by reference to the Exhibits to the Registrants Registration Statement No. 333-122989 on Form S-3
filed with the Securities and Exchange Commission on February 25, 2005, as amended.(2)
    
    Incorporated herein by reference to the Exhibits to the Registrants Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 10, 2006.(3)
    
    Incorporated herein by reference to the Exhibits to the Registrants Registration Statement No. 333-74383 on Form S-1,
filed with the Securities and Exchange Commission on March 15, 1999, as amended.(4)
    
    Incorporated herein by reference to the Exhibits to the Registrants Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 27, 2003.(5)
    
    Incorporated herein by reference to the Exhibits to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 2005 filed with the Securities and Exchange Commission on February 25, 2005.(6)
    
    Incorporated herein by reference to the Exhibits to the Registrants Registration Statement No. 333-95193 on Form S-8,
filed with the Securities and Exchange Commission on January 21, 2000.(7)
    
    Incorporated herein by reference to the Exhibits to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 filed with the Securities and Exchange Commission on March 28, 2002.(8)
    
    Incorporated herein by reference to the Exhibits to the Registrants Registration Statement No. 333-114536 on Form S-8,
filed with the Securities and Exchange Commission on April 16, 2004.(9)
    
    Incorporated herein by reference to the Exhibits to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 2005 filed with the Securities and Exchange Commission on March 14, 2006.(10)
    
    Incorporated herein by reference to the Proxy Statement No. 000-26001 filed with the Securities and Exchange Commission
on April 28, 2006(11)
    
    Filed herewith (Submitted only with filing in electronic
format).(*)
    
    Filed herewith. Page 128




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##### Table of Contents



SIGNATURES
  Hudson City Bancorp, Inc.
 By:
    
    /s/ Ronald E. Hermance, Jr.
    
    
    
    /s/ James C. KranzRonald E. Hermance, Jr.
    
    
    
    James C. KranzChairman, President and
Chief Executive Officer
    
    
    
    Senior Vice President and
Chief Financial Officer(Principal Executive Officer)
    
    
    
    (Principal Financial Officer)
  NAME
    
    TITLE
    
    DATE/s/ Ronald E. Hermance, Jr.
    
    Director, Chairman, President and
    
    February 28, 2007Ronald E. Hermance, Jr.
    
    Chief
Executive Officer
(principal executive officer)/s/ Denis J. Salamone

Denis J. Salamone
    
    Director, Senior Executive Vice President and Chief
Operating Officer
    
    February 28, 2007/s/ Michael W. Azzara
    
    Director
    
    February 28, 2007Michael W. Azzara/s/ William G. Bardel
    
    Director
    
    February 28, 2007William G. Bardel/s/ Scott A. Belair
    
    Director
    
    February 28, 2007Scott A. Belair/s/ Victoria H. Bruni
    
    Director
    
    February 28, 2007Victoria H. Bruni/s/ William J. Cosgrove
    
    Director
    
    February 28, 2007William J. Cosgrove/s/ Donald O. Quest
    
    Director
    
    February 28, 2007Donald O. Quest/s/ Joseph G. Sponholz
    
    Director
    
    February 28, 2007Joseph G. Sponholz
 Page 129