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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K (Mark One) þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 December 31, 2004
 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  Commission File Number: 0-26001 Hudson City Bancorp, Inc.   Delaware
    
    22-3640393(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)West 80 Century RoadParamus, New Jersey
    
    07652(Address of Principal Executive Offices)
    
    (Zip Code)
 (201) 967-1900   Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value   Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. þ o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. þ
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). þ o
 As of February 4, 2005, the registrant had 231,276,600 shares of common stock, $0.01 par
value, issued and 186,391,293 shares outstanding. Of such shares outstanding, 122,576,600 shares
were held by Hudson City, MHC, the registrants mutual holding company, and 63,814,693 shares were
held by the public and directors, officers and employees of the registrant. The aggregate market
value of voting stock held by non-affiliates of the registrant as of June 30, 2004 was
$1,655,253,000. This figure was based on the closing price by the NASDAQ National Market for a
share of the registrants common stock, which was $33.44 as reported in the Wall Street Journal on
July 1, 2004. Documents Incorporated by Reference: Portions of the definitive Proxy Statement dated
February 25, 2005 in connection with the Annual Meeting of Stockholders to be held on May 27, 2005
and any adjournment thereof and which is expected to be filed with the Securities and Exchange
Commission no later than April 30, 2005, are incorporated by reference into Part III.




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Hudson City Bancorp, Inc.
2004 Annual Report on Form 10-K
Table of Contents PagePART IItem 1 Business
    
    4Item 2 Properties
    
    48Item 3 Legal Proceedings
    
    48Item 4 Submission of Matters to a Vote of Security Holders
    
    48PART IIItem 5 Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    49Item 6 Selected Financial Data
    
    51Item 7 Managements Discussion and Analysis of Financial Condition
and Results Of Operations
    
    53Item 7a Quantitative and Qualitative Disclosures About Market Risk
    
    83Item 8 Financial Statements and Supplementary Data
    
    84Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
    
    124Item 9a Controls and Procedures
    
    124Item 9b Other Information
    
    125PART IIIItem 10 Directors and Executive Officers of the Registrant
    
    126Item 11 Executive Compensation
    
    126Item 12 Security Ownership of Certain Beneficial Owners and Management
    
    126Item 13 Certain Relationships and Related Transactions
    
    126Item 14 Principal Accounting Fees and Services
    
    127PART IVItem 15 Exhibits, Financial Statement Schedules
    
    128SIGNATURES
    
    130EMPLOYEE STOCK OWNERSHIP PLANPROFIT INCENTIVE BONUS PLANEMPLOYMENT AGREEMENTEMPLOYMENT AGREEMENTFORM OF TWO-YEAR CHANGE IN CONTROL AGREEMENTESOP RESTORATION PLANPOST RETIRE DEATH BENEFIT FOR SENIOR OFFICERSPOST RETIRE DEATH BENEFIT FOR SENIOR OFFICERSPOST RETIRE DEATH BENEFIT FOR SENIOR OFFICERSPOST RETIRE DEATH BENEFIT FOR SENIOR OFFICERSPOST RETIRE DEATH BENEFIT FOR SENIOR OFFICERSSTATEMENT RE: COMPUTATION OF PER SHARE EARINGSSUBSIDIARIESCONSENT OF KPMG LLPCERTIFICATIONCERTIFICATIONCERTIFICATIONS
  Page 2




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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT This Annual Report on Form 10-K contains certain forward looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 which may be identified by the use of such
words as may, believe, expect, anticipate, should, plan, estimate, predict,
continue, and potential or the negative of these terms or other comparable terminology.
Examples of forward-looking statements include, but are not limited to, estimates with respect to
our financial condition, results of operations and business that are subject to various factors
which could cause actual results to differ materially from these estimates. These factors include,
but are not limited to:  
    the timing and occurrence or non-occurrence of events may be subject to circumstances
beyond our control;
    there may be increases in competitive pressure among the financial institutions or from
non-financial institutions;
    changes in the interest rate environment may reduce interest margins or affect the value
of our investments;
    changes in deposit flows, loan demand or real estate values may adversely affect our
business;
    changes in accounting principles, policies or guidelines may cause our financial
condition to be perceived differently;
    general economic conditions, either nationally or locally in some or all of the areas in
which we do business, or conditions in the securities markets or the banking industry may
be less favorable than we currently anticipate;
    legislative or regulatory changes may adversely affect our business;
    applicable technological changes may be more difficult or expensive than when anticipate;
    success or consummation of new business initiatives may be more difficult or expensive
than we anticipate; or
    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. Any or all of our forward-looking statements in this prospectus and in any other public statements
we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or
by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be
guaranteed. We do not intend to update any of the forward-looking statements after the date of
this prospectus or to conform these statements to actual events. As used in this Form 10-K, unless we specify otherwise, Hudson City Bancorp, our company, we,
us, and our refer to Hudson City Bancorp, Inc., a Delaware corporation. Hudson City Savings
refers to Hudson City Savings Bank, a federal stock savings bank and the wholly-owned subsidiary of
Hudson City Bancorp. Hudson City, MHC refers to Hudson City, MHC, a New Jersey mutual holding
company and majority-owner of Hudson City Bancorp. Page 3




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PART I 
 Item 1. Business. Hudson City Bancorp is a Delaware corporation organized in 1999 and serves as the holding company
of its only subsidiary, Hudson City Savings Bank. A majority of the outstanding shares of Hudson
City Bancorps common stock are owned by Hudson City, MHC. Hudson City Bancorps executive offices
are located at West 80 Century Road, Paramus, New Jersey 07652 and our telephone number is (201)
967-1900. In 1999, Hudson City Savings converted and reorganized from a New Jersey chartered mutual savings
bank into a two-tiered mutual savings bank holding company structure and became a wholly owned
subsidiary of Hudson City Bancorp. Hudson City Bancorp sold 47% of the then outstanding shares of
its common stock to the public at $10.00 per share and received net proceeds of $527.6 million.
Hudson City Bancorp contributed 50% of the net proceeds from the initial public offering to Hudson
City Savings. Hudson City Bancorp issued 53% of the then outstanding shares of its common stock to
Hudson City, MHC. At December 31, 2004, as a result of stock repurchases, Hudson City, MHC owned
65.85% of Hudson City Bancorp. As part of our reorganization in structure, Hudson City Savings organized Hudson City, MHC as a
bank holding company whose principal assets are the shares of common stock of Hudson City Bancorp
it received in the reorganization and the cash dividends it received on the shares of Hudson City
Bancorp common stock it owns. Hudson City, MHC does not engage in any business activity other than
its investment in a majority of the common stock of Hudson City Bancorp and the management of any
cash dividends received from Hudson City Bancorp. Federal and state law and regulations require
that as long as Hudson City, MHC is in existence it must own a majority of Hudson City Bancorps
common stock. Hudson City Savings is a federally chartered stock savings bank subject to supervision and
examination by the Office of Thrift Supervision (OTS). Hudson City Bancorp and Hudson City, MHC,
as savings and loan holding companies, are also subject to supervision and examination by the OTS.
Our deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Hudson City Savings
Bank has served the customers of New Jersey since 1868 and now, through de novo branching, serves
the customers of Suffolk County, New York. We have further expansion plans in Suffolk County and
plans to expand into Richmond County (Staten Island), New York. We are a community- and
customer-oriented retail savings bank offering traditional deposit products, residential real
estate mortgage loans and consumer loans. In addition, we purchase mortgages, mortgage-backed securities, securities issued by the U.S.
government and government-sponsored agencies and other investments permitted by applicable laws and
regulations. Except for community-related investments, we have not recently originated or invested
in commercial real estate loans, loans secured by multi-family residences or commercial/industrial
business loans, although we have the legal authority to make such loans. We retain in our portfolio
substantially all of the loans we originate. Our revenues are derived principally from interest on our mortgage loans and mortgage-backed
securities and interest and dividends on our investment securities. Our primary sources of funds
are customer deposits, borrowings, scheduled amortization and prepayments of mortgage loan
principal and mortgage-backed securities, maturities and calls of investment securities and funds
provided by operations. We are the largest savings bank by asset size headquartered in New Jersey. Page 4




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Available Information Our periodic and current reports, proxy and information statements, and other information that
Hudson City Bancorp files with the Securities and Exchange Commission, or SEC, are made available
free of charge through our website, www.hcbk.com,as soon as reasonably practicable after such
reports are electronically filed with, or furnished to, the SEC. Except for these reports, the
information on our website is not part of this annual report. Such reports are also available on
the SECs website at www.sec.gov, or at the SECs Public Reference Room at 450 Fifth Street, NW,
Washington, DC, 20549. Information may be obtained on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Market Area We conduct our operations out of our corporate offices in Paramus, Bergen County, New Jersey, and
84 branches located in 15 counties throughout the State of New Jersey and one branch office located
in Suffolk County, New York. We operate in three primary markets: northern New Jersey (Bergen,
Essex, Hudson, Mercer, Middlesex, Morris, Passaic, Union and Warren Counties), the New Jersey shore
(Atlantic, Monmouth and Ocean Counties), and southwestern New Jersey (Burlington, Camden and
Gloucester Counties) in the suburbs of Philadelphia. New Jersey is one of the most attractive banking markets in the United States with a total
population of nearly 8.7 million and a median 2004 household income of $61,779, ranking first among
the states and well above the U.S. median 2004 household income of $46,475. Over 70% of the
population of New Jersey resides in the counties in which we operate. We believe that New Jerseys
highly diversified economy reduces our potential exposure to a downturn in one or a handful of
economic sectors. We had a 5.56% deposit market share in the State of New Jersey as of June 30,
2004, ranking fifth in total deposits as of that date as reported by SNL Financial LC. Our deposit
growth rate from 2001 to 2004 in all but one of the counties we serve has exceeded the overall
deposit growth rate in those counties over that period. We have received regulatory approval to open three additional branch offices in New Jersey. We have
begun to increase our market area by opening new branch offices outside of New Jersey. In 2004, we
opened our first branch in Suffolk County, New York and received regulatory approval to open an
additional four branch offices in that county. We also have received regulatory approval to open
two new branch offices to be located in Richmond County (Staten Island), New York. We plan to open
all of these offices in 2005 while continually evaluating new locations in areas that present the
greatest opportunity to promote our deposit and mortgage products. Our market areas provide distinct differences in demographics and economic characteristics. The
northern New Jersey market represents the greatest concentration of population, deposits and income
in New Jersey. The combination of these counties represents more than half of the entire New Jersey
population and more than half of New Jersey households. The northern New Jersey market also
represents the greatest concentration of Hudson City Savings retail operations  both lending and
deposit gathering  and based on its high level of economic activity, we believe that the northern
New Jersey market provides significant opportunities for future growth. The New Jersey shore market
represents a strong concentration of population and income, and is an increasingly popular resort
and retirement economy  providing healthy opportunities for deposit growth and residential
lending. Page 5




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The southwestern New Jersey market consists of communities adjacent to the Philadelphia
metropolitan area and represents the smallest concentration of deposits for Hudson City Savings.
We believe the Suffolk County and Staten Island market areas have similar demographic and economic
characteristics to the northern New Jersey market area. Our future growth opportunities will be influenced by the growth and stability of the statewide and
regional economies, other demographic population trends and the competitive environment within and
around the State of New Jersey and the New York metropolitan area. We expect to continue to grow
through internal expansion primarily through the origination and purchase of mortgage loans, while
purchasing mortgage-backed securities and investment securities as a supplement to our mortgage
loans. We believe that we have developed lending products and marketing strategies to address the
diverse credit-related needs of the residents in our market area. We intend the primary funding
for our growth to be customer deposits, using borrowed funds to supplement our deposit initiatives
as a funding source. We intend to grow customer deposits by continuing to offer desirable products
at competitive rates and by opening new branch offices. Our business model and product offerings allow us to serve a broad range of customers with varying
demographic characteristics. Our traditional thrift products such as conforming one- to
four-family residential mortgages, certificates of deposit, and passbook savings accounts appeal to
a broad customer base. Additionally, our jumbo mortgage lending proficiency and our High Value
Checking product allow us to target higher-income customers successfully. Competition We face intense competition both in making loans and attracting deposits in the market areas we
serve. New Jersey and the New York metropolitan area have a high concentration of financial
institutions, many of which are branches of large money center and regional banks, which have
resulted from the consolidation of the banking industry in New Jersey, New York and surrounding
states. Some of these competitors have greater resources than we do and may offer services that we
do not provide such as trust services or investment services. Customers who seek one stop
shopping may be drawn to these institutions. In the fourth quarter of 2004 we opened our first of several planned branch locations in New York
providing further resources for our retail operations and allowing for additional geographic
diversification. We believe we will compete favorably in these new markets for the same reasons we
have been successful in New Jersey. Areas being considered for expansion have similar demographic
and economic characteristics as those in which we already have proven our ability to garner
significant market share. Our competition for loans comes principally from commercial banks, savings institutions, mortgage
banking firms, credit unions, finance companies, mutual funds, insurance companies and brokerage
and investment banking firms. Our most direct competition for deposits has historically come from
commercial banks, savings banks, savings and loan associations and credit unions. We face
additional competition for deposits from short-term money market funds and other corporate and
government securities funds and from brokerage firms and insurance companies. Lending Activities Loan Portfolio Composition.Our loan portfolio primarily consists of one- to four-family
residential first mortgage loans. To a lesser degree, the loan portfolio includes consumer and
other loans, which primarily consist of fixed-rate second mortgage loans and home equity credit
lines. We do not originate commercial real estate loans, loans secured by multi-family residences,
construction loans or commercial/industrial business loans although we have the legal authority to
make such loans. Page 6




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From time to time we purchase participation interests in multi-family and commercial first mortgage
loans and commercial loans through community-based organizations. These loans amounted to $3.1
million at December 31, 2004. At December 31, 2004, we had total loans of $11.36 billion, of which $11.21 billion, or 98.6%, were
first mortgage loans. Of residential mortgage loans outstanding at that date, 92.5% were fixed-rate
mortgage loans and 7.5% were adjustable-rate, or ARM, loans. At December 31, 2004, consumer and
other loans, primarily fixed-rate second mortgage loans and home equity credit lines, amounted to
$157.3 million, or 1.4%, of total loans. We also offer guaranteed student loans through the Student
Loan Marketing Association, commonly known as SallieMae, Loan Referral Program. Our loans are subject to federal and state laws and regulations. The interest rates we charge on
loans are affected principally by the demand for loans, the supply of money available for lending
purposes and the interest rates offered by our competitors. These factors are, in turn, affected by
general and local economic conditions, monetary policies of the federal government, including the
Federal Reserve Board (FRB), legislative tax policies and governmental budgetary matters. Page 7




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The following table presents the composition of our loan portfolio in dollar amounts and in
percentages of the total portfolio at the dates indicated. At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Percent
    
    
    
    
    
    
    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
    
    $
    11,120,874
    
    
    
    97.87
    %
    
    $
    8,567,442
    
    
    
    97.32
    %
    
    $
    6,708,806
    
    
    
    96.25
    %
    
    $
    5,664,973
    
    
    
    94.93
    %
    
    $
    4,607,891
    
    
    
    94.56
    %FHA/VA
    
    
    81,915
    
    
    
    0.72
    
    
    
    98,502
    
    
    
    1.12
    
    
    
    131,209
    
    
    
    1.88
    
    
    
    151,203
    
    
    
    2.53
    
    
    
    112,937
    
    
    
    2.32Multi-family and
commercial
    
    
    3,000
    
    
    
    0.03
    
    
    
    2,843
    
    
    
    0.03
    
    
    
    2,668
    
    
    
    0.04
    
    
    
    2,548
    
    
    
    0.04
    
    
    
    2,380
    
    
    
    0.05Total first mortgage
loans
    
    
    11,205,789
    
    
    
    98.62
    
    
    
    8,668,787
    
    
    
    98.47
    
    
    
    6,842,683
    
    
    
    98.17
    
    
    
    5,818,724
    
    
    
    97.50
    
    
    
    4,723,208
    
    
    
    96.93Consumer and other loans:Fixed-rate second
mortgages
    
    
    127,737
    
    
    
    1.12
    
    
    
    105,361
    
    
    
    1.20
    
    
    
    93,691
    
    
    
    1.34
    
    
    
    115,244
    
    
    
    1.93
    
    
    
    118,319
    
    
    
    2.43Home equity credit
lines
    
    
    28,929
    
    
    
    0.25
    
    
    
    28,217
    
    
    
    0.32
    
    
    
    33,543
    
    
    
    0.48
    
    
    
    32,715
    
    
    
    0.55
    
    
    
    29,119
    
    
    
    0.60Other
    
    
    584
    
    
    
    0.01
    
    
    
    701
    
    
    
    0.01
    
    
    
    983
    
    
    
    0.01
    
    
    
    1,488
    
    
    
    0.02
    
    
    
    2,094
    
    
    
    0.04Total consumer and
other loans
    
    
    157,250
    
    
    
    1.38
    
    
    
    134,279
    
    
    
    1.53
    
    
    
    128,217
    
    
    
    1.83
    
    
    
    149,447
    
    
    
    2.50
    
    
    
    149,532
    
    
    
    3.07Total loans
    
    
    11,363,039
    
    
    
    100.00
    %
    
    
    8,803,066
    
    
    
    100.00
    %
    
    
    6,970,900
    
    
    
    100.00
    %
    
    
    5,968,171
    
    
    
    100.00
    %
    
    
    4,872,740
    
    
    
    100.00
    %Less:Deferred loan fees
    
    
    8,073
    
    
    
    
    
    
    
    10,255
    
    
    
    

    
    
    
    13,508
    
    
    
    
    
    
    
    12,060
    
    
    
    
    
    
    
    9,555Allowance for loan
losses
    
    
    27,319
    
    
    
    
    
    
    
    26,547
    
    
    
    
    
    
    
    25,501
    
    
    
    
    
    
    
    24,010
    
    
    
    
    
    
    
    22,144Net loans
    
    $
    11,327,647
    
    
    
    
    
    
    $
    8,766,264
    
    
    
    
    
    
    $
    6,931,891
    
    
    
    
    
    
    $
    5,932,101
    
    
    
    
    
    
    $
    4,841,041
 Page 8




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Loan Maturity.The following table presents the contractual maturity of our loans at
December 31, 2004. The table does not include the effect of prepayments or scheduled principal
amortization. Prepayments and scheduled principal amortization on first mortgage loans totaled
$1.96 billion for 2004, $3.53 billion for 2003 and $2.53 billion for 2002. At December 31, 2004First Mortgage
    
    
    Consumer andLoans
    
    
    Other Loans
    
    
    Total(In thousands)Amounts Due:One year or less
    
    $
    410
    
    
    $
    381
    
    
    $
    791After one year:One to three years
    
    
    12,077
    
    
    
    4,047
    
    
    
    16,124Three to five years
    
    
    54,591
    
    
    
    16,616
    
    
    
    71,207Five to ten years
    
    
    239,865
    
    
    
    36,801
    
    
    
    276,666Ten to twenty years
    
    
    2,078,546

    
    
    
    99,405
    
    
    
    2,177,951Over twenty years
    
    
    8,820,300
    
    
    
    
    
    
    
    8,820,300Total due after one
year
    
    
    11,205,379
    
    
    
    156,869
    
    
    
    11,362,248Total loans
    
    $
    11,205,789
    
    
    $
    157,250
    
    
    
    11,363,039Less:Deferred loan fees
    
    
    
    
    
    
    
    
    
    
    8,073Allowance for loan losses
    
    
    
    
    
    
    
    
    
    
    27,319Net loans
    
    
    
    
    
    
    
    
    
    $
    11,327,647
 The following table presents, as of December 31, 2004, the dollar amount of all loans due
after December 31, 2005, and whether these loans have fixed interest rates or adjustable interest
rates. Due After December 31, 2005Fixed
    
    
    Adjustable
    
    
    Total(In thousands)First mortgage loans
    
    $
    10,368,257
    
    
    $
    837,122
    
    
    $
    11,205,379Consumer and other loans
    
    
    127,517
    
    
    
    29,352
    
    
    
    156,869Total loans due
after one year
    
    $
    10,495,774
    
    
    $
    866,474
    
    
    $
    11,362,248
 Page 9




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The following table presents our loan originations, purchases, sales and principal payments
for the periods indicated. For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands)Total loans:Balance outstanding at beginning of period...
    
    $
    8,803,066
    
    
    $
    6,970,900
    
    
    $
    5,968,171Originations:First mortgage loans
    
    
    1,378,709
    
    
    
    2,168,148
    
    
    
    1,840,857Consumer and other loans
    
    
    85,932
    
    
    
    103,000
    
    
    
    66,441Total originations
    
    
    1,464,641
    
    
    
    2,271,148
    
    
    
    1,907,298Purchases:One- to four-family first mortgage loans
    
    
    3,099,759
    
    
    
    3,168,892
    
    
    
    1,684,368FHA/VA first mortgage loans
    
    
    22,334
    
    
    
    36,064
    
    
    
    32,819Other first mortgage loans
    
    
    316
    
    
    
    293
    
    
    
    219Total purchases
    
    
    3,122,409
    
    
    
    3,205,249
    
    
    
    1,717,406Less:Principal payments:First mortgage loans
    
    
    1,956,395
    
    
    
    3,530,205
    
    
    
    2,531,976Consumer and other loans
    
    
    62,960
    
    
    
    96,938
    
    
    
    87,671Total principal
payments
    
    
    2,019,355
    
    
    
    3,627,143
    
    
    
    2,619,647Premium amortization and
discount accretion, net
    
    
    5,374
    
    
    
    14,094
    
    
    
    1,071Transfers to foreclosed real estate
    
    
    2,348
    
    
    
    2,994
    
    
    
    1,257Balance outstanding at end of
period
    
    $
    11,363,039
    
    
    $
    8,803,066
    
    
    $
    6,970,900
 Residential Mortgage Lending.Our primary lending emphasis is the origination and purchase
of first mortgage loans secured by one- to four-family properties that serve as the primary or
secondary residence of the owner. We do not offer loans secured by cooperative apartment units or
interests therein. Since the early 1980s, we have originated and purchased substantially all of
our one- to four-family first mortgage loans for retention in our portfolio. We have developed a
core competency in residential mortgage loans with principal balances in excess of the Fannie Mae
single-family limit of $359,600 (non-conforming or jumbo loans). We are one of the largest
jumbo residential mortgage lenders in New Jersey and one of the largest buyers of jumbo mortgages
nationally. We believe that our retention and servicing of the residential mortgage loans that we
originate allows us to maintain higher levels of customer service and satisfaction than originators
who sell loans to third parties. Our wholesale loan purchase program is an important component of our strategy to grow our
residential loan portfolio, and complements our retail loan origination production by enabling us
to diversify assets outside our local market area, thus providing a safeguard against economic
trends that might affect one particular area of the nation. Page 10




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Through this program, we have obtained assets with a relatively low overhead cost and minimized
related servicing costs. We have developed written standard operating guidelines relating to the
purchase of these assets. These guidelines include the evaluation and approval process of the
various sellers, primarily large national mortgage loan seller/servicers, from whom we choose to
buy whole loans, the types of whole loans, acceptable property locations and maximum interest rate
variances. At December 31, 2004 $5.63 billion, or 50.2%, of our first mortgage loans were
purchased loans. The purchasing agreements, as established with each seller/servicer, contain parameters of the loan
characteristics that can be included in each package. These parameters, such as maximum loan size
and maximum loan-to-value ratio, generally conform to parameters utilized by us to originate
mortgage loans. All loans are reviewed for compliance with the agreed upon parameters. All
purchased loan packages are subject to internal due diligence procedures including review of a
sampling of individual loan files. It is our policy to perform full credit reviews of at least 10%
of all loans purchased. Our loan review includes review of the legal documents, including the note,
the mortgage and the title policy, review of the credit file, evaluating debt service ratios,
review of the appraisal and verifying loan-to-value ratios and evaluating the completeness of the
loan package. This review subjects the loan file to substantially the same underwriting standards
used in our own loan origination process. The loan purchase agreements recognize that the time frame to complete our due diligence reviews
may not be sufficient prior to the completion of the purchase and afford us a limited period of
time after closing to complete our review and return, or request substitution of, any loan for any
legitimate underwriting concern. After the review period, we are still provided recourse to the
seller for any breach of a representation or warranty with respect to the loans purchased. Among
these representations and warranties are attestations of the legality and enforceability of the
legal documentation, adequacy of insurance on the collateral real estate, compliance with
regulations and certifications that all loans are current as to principal and interest at the time
of purchase. At December 31, 2004, approximately 58% of the mortgage loan portfolio was secured by
real estate located in the State of New Jersey. Additionally, the states of Virginia, New York,
Illinois, Massachusetts and Maryland each account for approximately 4% to 7% of the total mortgage
loan portfolio. The remainder of the loan portfolio is secured by real estate in 32 other states. In general, the seller of a purchased loan continues to service the loan following our purchase of
it. The servicing of purchased loans is governed by the servicing agreement entered into with each
servicer. Oversight of the servicer is maintained by us through review of all reports, remittances
and non-performing loan ratios with appropriate further action, such as contacting the servicers by
phone or in writing to clarify or correct our concerns, taken as required. We also require that
all servicers provide end-of-year financial statements to confirm company soundness. These
servicers must also deliver industry certifications substantiating that they have in place all
appropriate controls to ensure their mode of administration is in accordance with standards set by
the Mortgage Bankers Association of America. These operating guidelines provide a means of
evaluating and monitoring the quality of mortgage loan purchases and the servicing abilities of the
loan servicers. We typically purchase loans from eight to ten of the largest nationwide mortgage
producers. We purchased first mortgage loans of $3.12 billion in 2004, $3.21 billion in 2003 and
$1.72 billion in 2002.The average size of our one-to-four family mortgage loans purchased during
2004 was approximately $476,000. Most of our retail loan originations are from existing or past customers, members of our local
communities or referrals from local real estate agents, attorneys and builders. We believe that our
extensive branch network is a significant source of new loan generation. We also employ a small
staff of representatives who call on real estate professionals to disseminate information regarding
our loan programs and take applications directly from their clients. Page 11




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These representatives are paid for each origination. In addition, we employ the services of
licensed mortgage bankers and brokers to supplement our mortgage loan production capabilities. We currently offer loans that conform to underwriting standards that are based on standards
specified by FannieMae (conforming loans), non-conforming loans, loans processed as limited
documentation loans and, to a limited extent, no income or asset verification loans, as described
below. These loans may be fixed-rate one- to four-family mortgage loans or adjustable-rate one- to
four-family mortgage loans with maturities of up to 40 years. The non-conforming loans generally
follow FannieMae guidelines, except for the loan amount. FannieMae guidelines limit the principal
amount of single-family loans to $359,600; our non-conforming loans generally exceed such limits.
The average size of our one- to four-family mortgage loans originated in 2004 was approximately
$320,000. The overall average size of our one- to four-family first mortgage loans was
approximately $290,000 at December 31, 2004. We are an approved seller/servicer for FannieMae and
an approved servicer for FreddieMac. We generally hold loans for our portfolio but have, from time
to time, sold loans in the secondary market. We did not sell any loans in 2004. Our originations of first mortgage loans amounted to $1.38 billion in 2004, $2.17 billion in 2003
and $1.84 billion in 2002. During 2003 and 2002, a significant number of our first mortgage loan
originations were the result of refinancing of existing loans due to declining interest rates. Total refinancing of our existing first mortgage loans were as follows: Percent ofFirst MortgageAmount
    
    
    Loan Originations(In thousands)2004
    
    $
    143,959
    
    
    
    10.4
    %2003
    
    
    530,408
    
    
    
    24.52002
    
    
    496,772
    
    
    
    27.0
 In 2001, we began to allow existing customers to modify their mortgage loans with the intent
of maintaining customer relationships in periods of extensive refinancing due to a low interest
rate environment. The modification allows adjustment of the existing interest rate to the
currently offered fixed interest rate product with a similar or reduced term, for a fee, after past
payment performance is reviewed. In general, all other terms and conditions of the existing
mortgage remain the same. Modifications of existing mortgage loans were as follows: Mortgage LoansModified(In thousands)2004
    
    $
    220,0592003
    
    
    1,458,8362002
    
    
    866,298
 Page 12




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We offer a variety of adjustable-rate and fixed-rate one- to four-family mortgage loans with
maximum loan-to-value ratios that depend on the type of property and the size of loan involved. The
loan-to-value ratio is the loan amount divided by the appraised value of the property. The
loan-to-value ratio is a measure commonly used by financial institutions to determine exposure to
risk. Except for loans to low- and moderate-income home mortgage applicants, described below, loans
on owner-occupied one- to four-family homes of up to $750,000 are subject to a maximum
loan-to-value ratio of 80%. However, we make loans in amounts up to $400,000 with a 95%
loan-to-value ratio and loans in excess of $400,000 and less than $500,000 with a 90% loan-to-value
ratio if the borrower obtains private mortgage insurance. Under certain circumstances, where the
Bank deems appropriate, we will originate a first and second mortgage, up to a combined loan amount
of $500,000, where the combined loan-to-value ratio is 90%. Under these circumstances, we will
waive the private mortgage insurance requirements and receive a higher interest rate on the second
mortgage loan than we would receive on a regular second mortgage loan. Loans in excess of $750,000
and up to $1.0 million are subject to a maximum 70% loan-to-value ratio. Loan-to-value ratios of
65% or less are required for one- to four-family loans in excess of $1.0 million and less than $1.5
million. Loans in excess of $1.5 million and less than $2.0 million are subject to a maximum
loan-to-value ratio of 60%. Loans in excess of $2.0 million and up to $2.5 million are subject to
a maximum loan-to-value ratio of 55%. Loans in excess of $2.5 million and up to $3.0 million are
subject to a maximum loan-to-value ratio of 50%. During 2004 we raised our internal lending limit
to $3.0 million from $1.5 million. At December 31, 2004, we had 267 originated mortgage loans with
principal balances in excess of $750,000 with an aggregate balance of $251.0 million. We currently offer fixed-rate mortgage loans in amounts generally up to $3.0 million with a maximum
term of 40 years secured by one- to four-family residences. We price our interest rates on
fixed-rate loans to be competitive in light of market conditions. We currently offer a variety of ARM loans secured by one- to four-family residential properties
that initially adjust after three years, five years or ten years, in amounts generally up to $3.0
million. After the initial adjustment period, ARM loans adjust on an annual basis. The ARM loans
that we currently originate have a maximum 40 year amortization period and are subject to the same
loan-to-value ratios applicable to fixed-rate mortgage loans described above. The interest rates on
ARM loans fluctuate based upon a fixed spread above the monthly average yield on United States
treasury securities, adjusted to a constant maturity of one year (constant treasury maturity
index) and generally are subject to a maximum increase of 2% per adjustment period and a
limitation on the aggregate adjustment of 5% over the life of the loan. In the current rate
environment, where the yield curve is relatively flat, the ARM loans we offer have initial interest
rates below the fully indexed rate. As of December 31, 2004, the initial offered rate on these
loans was 13 to 100 basis points below the current fully indexed rate. We originated $286.9 million
of one- to four-family ARM loans in 2004. At December 31, 2004, 7.5% of our one- to four-family
mortgage loans consisted of ARM loans. The origination and retention of ARM loans helps reduce exposure to increases in interest rates.
However, ARM loans can pose credit risks different from the risks inherent in fixed-rate loans,
primarily because as interest rates rise, the underlying payments of the borrower may rise, which
increases the potential for default. The marketability of the underlying property also may be
adversely affected. In order to minimize risks, we evaluate borrowers of ARM loans based on their
ability to repay the loans at the higher of the initial interest rate or the fully indexed rate. In
an effort to further reduce interest rate risk, we have not in the past, nor do we currently,
originate ARM loans that provide for negative amortization of principal. Page 13




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In addition to our full documentation loan program, we process some loans as limited documentation
loans. We have originated these types of loans for over 15 years. Loans eligible for limited
documentation processing are ARM loans and 10-, 15-, 20-, 30- and 40-year fixed-rate loans to
owner-occupied primary and second home applicants. These loans are available in amounts up to 75%
of the lower of the appraised value or purchase price of the property. The maximum loan amount for
limited documentation loans is $600,000. We do not charge borrowers additional fees for limited
documentation loans. We require applicants for limited documentation loans to complete a
FreddieMac/FannieMae loan application and request income, assets and credit history information
from the borrower. Additionally, we obtain credit reports from outside vendors on all borrowers. We
also look at other information to ascertain the credit history of the borrower. Applicants with
delinquent credit histories usually do not qualify for the limited documentation processing,
although relatively minor delinquencies that are adequately explained will not prohibit processing
as a limited documentation loan. We reserve the right to verify income, asset information and other
information where we believe circumstances warrant. We recently began to allow certain borrowers
to obtain mortgage loans without verification of income or assets. These loans are subject to
somewhat higher interest rates than our regular products, and are limited to a maximum
loan-to-value ratio of 65% on purchases and 60% on refinancing transactions. Limited documentation and no verification loans may involve higher risks compared to loans with
full documentation, as there is a greater opportunity for borrowers to falsify their income and
ability to service their debt. We believe these programs have not had a material adverse effect on
our asset quality. See  Asset Quality. Unseasoned limited documentation and no verification
loans are not as readily salable in the secondary market as whole loans. We do not believe that an
inability to sell such loans will have a material adverse impact on our liquidity needs, because
internally generated sources of liquidity are expected to be sufficient to meet our liquidity
needs. We recently introduced an interest-only mortgage product which has a maximum loan-to-value
ratio of 80%. See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources and  Sources of Funds. In addition to our standard mortgage and consumer credit products, since 1992, we have developed
mortgage programs designed to address the credit needs of low- and moderate-income home mortgage
applicants, first-time home buyers and low- and moderate-income home improvement loan applicants.
We define low- and moderate-income applicants as borrowers residing in low- and moderate-income
census tracts or households with income not greater than 80% of the median income of the
Metropolitan Statistical Area in the county where the subject property is located. Our low- and
moderate-income home improvement loans are discussed under  Consumer Loans. Among the features
of the low- and moderate-income home mortgage and first-time home buyers programs are reduced
rates, lower down payments, reduced fees and closing costs, and generally less restrictive
requirements for qualification compared with our traditional one- to four-family mortgage loans.
For instance, certain of these programs currently provide for loans with up to 95% loan-to-value
ratios and rates which are 25 to 50 basis points lower than our traditional mortgage loans. In
2004, we provided $31.1 million in mortgage loans to home buyers under these programs. Consumer Loans.At December 31, 2004, $157.3 million, or 1.4%, of our total loans consisted of
consumer and other loans, primarily fixed-rate second mortgage loans and home equity credit lines.
Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in
interest rates. Consumer loans generally carry higher rates of interest than do one- to
four-family residential mortgage loans. In addition, we believe that offering consumer loan
products helps to expand and create stronger ties to our existing customer base by increasing the
number of customer relationships and providing cross-marketing opportunities. Page 14




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We offer fixed-rate second mortgage loans in amounts up to $200,000 secured by owner-occupied one-
to four-family residences located in the State of New Jersey, and the portions of New York State
served by our first mortgage loan products, for terms of up to 20 years. At December 31, 2004 these
loans totaled $127.7 million, or 1.1% of total loans. Interest rates on fixed-rate second mortgage
loans are periodically set by our Consumer Loan Department based on market conditions. The
underwriting standards applicable to these loans generally are the same as one- to four-family
first mortgage loans, except that the combined loan-to-value ratio, including the balance of the
first mortgage, cannot exceed 80% of the appraised value of the property. We also offer discounted fixed-rate second mortgage loans to low- and moderate-income borrowers in
amounts up to $20,000. The borrower must use a portion of the loan proceeds for home improvements
or the satisfaction of an existing obligation. The underwriting standards under this program are
similar to those for standard second mortgage loans, except that the combined maximum loan-to-value
ratio is 90%. Our home equity credit line loans, which totaled $28.9 million, or 0.3% of total loans at December
31, 2004, are adjustable-rate loans secured by a second mortgage on owner-occupied one- to
four-family residences located in the State of New Jersey and the portions of New York State served
by our first mortgage loan products. Current interest rates on home equity credit lines are based
on the prime rate as published in the Money Rates section of The Wall Street Journal (the
Index) subject to certain interest rate limitations. Interest rates on home equity credit lines
are adjusted monthly based upon changes in the Index. Minimum monthly principal payments on
currently offered home equity lines of credit are based on 1/240th of the outstanding principal
balance or $100 whichever is greater. The maximum credit line available is $200,000. The
underwriting terms and procedures applicable to these loans are substantially the same as for our
fixed-rate second mortgage loans. Other loans totaled $584,000 at December 31, 2004 and consisted of collateralized passbook loans,
overdraft protection loans, automobile loans, unsecured personal loans and commercial loans made to

community-based organizations. We no longer originate student loans, but offer guaranteed student
loans through the SallieMae Loan Referral Program. Loan Approval Procedures and Authority.Our lending policies provide that loans up to $600,000
can be approved by two officers of the Mortgage Origination Department, one of whom must have the
title of at least Vice President. Loans in excess of $600,000 require the approval of two
officers, one of whom must have the title of at least Vice President, as well as either our Senior
Vice President-Lending, Chief Executive Officer or Chief Operating Officer. Home equity credit
lines and fixed-rate second mortgage loans in principal amounts of $25,000 or less are approved by
one of our designated loan underwriters. Home equity loans in excess of $25,000, up to the $200,000
maximum, are approved by an underwriter and either our Consumer Loan Officer, Senior Vice
President-Lending, Chief Executive Officer or Chief Operating Officer. The following describes our current lending procedures. Upon receipt of a completed loan
application from a prospective borrower, we order a credit report and, except for loans originated
as limited documentation or no income/no asset verification loans, we verify certain other
information. If necessary, we obtain additional financial or credit-related information. We require
an appraisal for all mortgage loans, except for some loans made to refinance existing mortgage
loans. Appraisals may be performed by our in-house Appraisal Department or by licensed or certified
third-party appraisal firms. Currently most appraisals are performed by third-party appraisers and
are reviewed by our in-house Appraisal Department. We require title insurance on all mortgage
loans, except for home equity credit lines and fixed-rate second mortgage loans. Page 15




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For these loans, we require a property search detailing the current chain of title. We require
borrowers to obtain hazard insurance and we may require borrowers to obtain flood insurance prior
to closing. We require most borrowers to advance funds on a monthly basis together with each
payment of principal and interest to a mortgage escrow account from which we make disbursements for
items such as real estate taxes, flood insurance and private mortgage insurance premiums, if
required. In a limited number of instances, at the discretion of the Bank, we will waive the real
estate tax escrow for the borrower, subject to an interest rate somewhat higher than our regular
offered rate. Presently, we do not escrow for real estate taxes on properties located in the State
of New York. Asset Quality One of our key operating objectives has been, and continues to be, to maintain a high level of
asset quality. Through a variety of strategies, including, but not limited to, borrower workout
arrangements and aggressive marketing of owned properties, we have been proactive in addressing
problem and non-performing assets. These strategies, as well as our concentration on one- to
four-family mortgage lending, our maintenance of sound credit standards for new loan originations
and favorable real estate market conditions have resulted in relatively low delinquency ratios.
This, in turn, has helped strengthen our financial condition. Delinquent Loans and Foreclosed Assets.When a borrower fails to make required payments on a
loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan
to a current status. In the case of originated mortgage loans, our mortgage servicing department is
responsible for collection procedures from the 15th day up to the 90th day of delinquency. Specific
procedures include a late charge notice being sent at the time a payment is over 15 days past due.
Telephone contact is attempted on approximately the 20th day of the month to avoid a 30-day
delinquency. A second written notice is sent at the time the payment becomes 30 days past due. We send additional letters if no contact is established by approximately the 45th day of
delinquency. On the 60th day of delinquency, we send another letter followed by continued telephone
contact. Between the 30th and the 60th day of delinquency, if telephone contact has not been
established, an independent contractor makes a physical inspection of the property. When contact is
made with the borrower at any time prior to foreclosure, we attempt to obtain full payment or work
out a repayment schedule with the borrower in order to avoid foreclosure. It has been our
experience that most loan delinquencies are cured within 90 days and no legal action is taken. We send foreclosure notices when a loan is 90 days delinquent and we transfer the loan to the
foreclosure/bankruptcy section for referral to legal counsel. The accrual of income on loans that
do not carry private mortgage insurance or are not guaranteed by a federal agency is generally
discontinued when interest or principal payments are 90 days in arrears. We commence foreclosure
proceedings if the loan is not brought current between the 90th and 120th day of delinquency unless
specific limited circumstances warrant an exception. We hold property foreclosed upon as foreclosed
real estate. We carry foreclosed real estate at the lower of fair market value less estimated
selling costs, or at cost. If a foreclosure action is commenced and the loan is not brought
current, paid in full or refinanced before the foreclosure sale, we either sell the real property
securing the loan by a foreclosure sale, or sell the property as soon thereafter as practicable.
The collection procedures for Federal Housing Administration (FHA) and Veterans Administration
(VA) one- to four-family mortgage loans follow the collection guidelines outlined by those
agencies. Page 16




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We monitor delinquencies on our serviced loan portfolio, in aggregate, from reports sent to us by
the servicers. Once all past due reports are received, we examine the delinquencies and contact
appropriate servicer personnel to determine the collectability of the loans. We also use these
reports to prepare our own monthly reports for management review. These summaries breakdown, by
servicer, total principal and interest due, length of delinquency, as well as accounts in
foreclosure and bankruptcy. We control, on a case-by-case basis, all accounts in foreclosure and
bankruptcy to confirm that the servicer has taken all proper steps to foreclose promptly if there
is no other recourse. We also monitor that mortgagors who filed bankruptcy are meeting their
obligation to pay the mortgage debt in accordance with the terms of the bankruptcy petition. The collection procedures for consumer and other loans include our sending periodic late notices to
a borrower once a loan is past due. We attempt to make direct contact with a borrower once a loan
becomes 30 days past due. Supervisory personnel in our Consumer Loan Collection Department review
loans 60 days or more delinquent on a regular basis. If collection activity is unsuccessful after
90 days, we may refer the matter to our legal counsel for further collection effort or charge-off
the loan. Loans we deem to be uncollectible are proposed for charge-off by our Collection
Department. Charge-offs of consumer loans require the approval of our Consumer Loan Officer and
either the Senior Vice President-Lending, our Chief Executive Officer or Chief Operating Officer. Our policies require that management continuously monitor the status of the loan portfolio and
report to the Board of Directors on a monthly basis. These reports include information on
delinquent loans and foreclosed real estate. Page 17




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At December 31, 2004, 2003 and 2002, loans delinquent 60 days to 89 days and 90 days or more were
as follows: 2004
    
    
    2003
    
    
    200260-89 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
    
    
    43
    
    
    $
    9,819
    
    
    
    64
    
    
    $
    15,232
    
    
    
    52
    
    
    $
    8,974
    
    
    
    58
    
    
    $
    9,690
    
    
    
    46
    
    
    $
    6,701
    
    
    
    62
    
    
    $
    10,670FHA/VA first mortgages
    
    
    8
    
    
    
    773
    
    
    
    53
    
    
    
    6,375
    
    
    
    15
    
    
    
    1,493
    
    
    
    85
    
    
    
    10,459
    
    
    
    27
    
    
    
    2,591
    
    
    
    77
    
    
    
    9,506Multi-family and Commercial
mortgages
    
    
    1
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer and other loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    4
    
    
    
    3
    
    
    
    102
    
    
    
    3
    
    
    
    10
    
    
    
    2
    
    
    
    19Total delinquent loans
(60 days and
over)
    
    
    52
    
    
    $
    10,668
    
    
    
    117
    
    
    $
    21,607
    
    
    
    68
    
    
    $
    10,471
    
    
    
    146
    
    
    $
    20,251
    
    
    
    76
    
    
    $
    9,302
    
    
    
    141
    
    
    $
    20,195Delinquent loans (60 days
and over) to total
loans
    
    
    
    
    
    
    0.09
    %
    
    
    
    
    
    
    0.19
    %
    
    
    
    
    
    
    0.12
    %
    
    
    
    
    
    
    0.23
    %
    
    
    
    
    
    
    0.13
    %
    
    
    
    
    
    
    0.29
    %
 Page 18




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Non-performing assets, which include foreclosed real estate, net, non-accrual loans and
accruing loans delinquent 90 days or more, were $22.5 million at December 31, 2004 compared with
$21.3 million at December 31, 2003. Our $21.6 million in loans delinquent 90 days or more at
December 31, 2004 were comprised primarily of 117 one- to four-family first mortgage loans
(including FHA/VA first mortgage loans). At December 31, 2004, our largest loan delinquent 90 days
or more had a balance of $759,000. With the exception of first mortgage loans insured or guaranteed by a federal agency, for which the
borrower has obtained private mortgage insurance, or loans serviced by others, we stop accruing
income on loans when interest or principal payments are 90 days in arrears or earlier when the
timely collectibility of such interest or principal is doubtful. We designate loans on which we
stop accruing income as non-accrual loans and we reverse outstanding interest that we previously
credited to income. We recognize income in the period that we collect it or when the ultimate
collectibility of principal is no longer in doubt. We return a non-accrual loan to accrual status
when factors indicating doubtful collection no longer exist. The accrual of income on FHA/VA loans
is generally not discontinued as they are guaranteed by a federal agency. Serviced loans
delinquent 90 days or more continue to accrue interest through settlement. Foreclosed real estate consists of property we acquired through foreclosure or deed in lieu of
foreclosure. After foreclosure, foreclosed properties held for sale are carried at the lower of
fair value minus estimated cost to sell, or at cost. A valuation allowance account is established
through provisions charged to income, which results from the ongoing periodic valuations of
foreclosed real estate properties. Fair market value is generally based on recent appraisals. The following table presents information regarding non-accrual mortgage and consumer and other
loans, accruing loans delinquent 90 days or more, and foreclosed real estate as of the dates
indicated. At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(Dollars in thousands)Non-accrual first mortgage
loans
    
    $
    6,057
    
    
    $
    4,401
    
    
    $
    6,053
    
    
    $
    8,177
    
    
    $
    10,422Non-accrual consumer and other
loans
    
    
    
    
    
    
    102
    
    
    
    19
    
    
    
    85
    
    
    
    30Accruing loans delinquent 90 days
or more
    
    
    15,550
    
    
    
    15,748
    
    
    
    14,123
    
    
    
    7,386
    
    
    
    2,523Total
non-performing
loans
    
    
    21,607
    
    
    
    20,251
    
    
    
    20,195
    
    
    
    15,648
    
    
    
    12,975Foreclosed real estate, net
    
    
    878
    
    
    
    1,002
    
    
    
    1,276
    
    
    
    250
    
    
    
    438Total
non-performing
assets
    
    $
    22,485
    
    
    $
    21,253
    
    
    $
    21,471
    
    
    $
    15,898
    
    
    $
    13,413Non-performing loans to total
loans
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.29
    %
    
    
    0.26
    %
    
    
    0.27
    %Non-performing assets to total
assets
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.15
    
    
    
    0.14
    
    
    
    0.14
 The total amount of interest income received during the year on non-accrual loans outstanding
and additional interest income on non-accrual loans that would have been recognized if interest
on all such loans had been recorded based upon original contract terms is immaterial. We are not
committed to lend additional funds to borrowers on non-accrual status. We define the population of impaired loans to be all non-accrual commercial real estate and
multi-family loans. Impaired loans are individually assessed to determine whether a loans carrying
value is not in excess of the fair value of the collateral or the present value of the loans cash
flows. Page 19




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##### Table of Contents



Smaller balance homogeneous loans that are collectively evaluated for impairment, such as
residential mortgage loans and consumer loans, are specifically excluded from the impaired loan
portfolio. We had no loans classified as impaired at December 31, 2004 and 2003. In addition, at
December 31, 2004 and 2003, we had no loans classified as troubled debt restructurings, as defined
in SFAS No. 15. Allowance for Loan Losses.The following table presents the activity in our allowance for loan
losses at or for the periods indicated. At or for the Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(Dollars in thousands)Balance at beginning of period
    
    $
    26,547
    
    
    $
    25,501
    
    
    $
    24,010
    
    
    $
    22,144
    
    
    $
    20,010Provision for loan losses
    
    
    790
    
    
    
    900
    
    
    
    1,500
    
    
    
    1,875
    
    
    
    2,130Charge-offs:First mortgage loans
    
    
    (11
    )
    
    
    (92
    )
    
    
    (3
    )
    
    
    (6
    )
    
    
    (18
    )Consumer and other loans
    
    
    (9

    )
    
    
    (4
    )
    
    
    (10
    )
    
    
    (14
    )
    
    
    Total
charge-offs
    
    
    (20
    )
    
    
    (96
    )
    
    
    (13
    )
    
    
    (20
    )
    
    
    (18
    )Recoveries
    
    
    2
    
    
    
    242
    
    
    
    4
    
    
    
    11
    
    
    
    22Net (charge-offs) recoveries
    
    
    (18
    )
    
    
    146
    
    
    
    (9
    )
    
    
    (9
    )
    
    
    4Balance at end of period
    
    $
    27,319
    
    
    $
    26,547
    
    
    $
    25,501
    
    
    $
    24,010
    
    
    $
    22,144Allowance for loan losses to
total loans
    
    
    0.24
%

    
    
    0.30
%
    
    
    0.37
%
    
    
    0.40
%
    
    
    0.45
%Allowance for loan losses to
non-performing loans
    
    
    126.44
    
    
    
    131.09
    
    
    
    126.27
    
    
    
    153.44
    
    
    
    170.67
 The allowance for loan losses has been determined in accordance with accounting principles
generally accepted in the United States of America, under which we are required to maintain
adequate allowances for loan losses. We are responsible for the timely and periodic determination
of the amount of the allowance required. We believe that our allowance for loan losses is adequate
to cover specifically identifiable loan losses, as well as estimated losses inherent in our
portfolio for which certain losses are probable but not specifically identifiable. Our primary lending emphasis is the origination and purchase of one- to four-family first mortgage
loans on residential properties and, to a lesser extent, second mortgage loans on one- to
four-family residential properties resulting in a loan concentration in residential first mortgage
loans at December 31, 2004. As a result of our lending practices, we also have a concentration of
loans secured by real property located in New Jersey. Based on the composition of our loan
portfolio and the growth in our loan portfolio, we believe the primary risks inherent in our
portfolio are increases in interest rates, a decline in the economy, generally, and a decline in
real estate market values. Any one or a combination of these events may adversely affect our loan
portfolio resulting in increased delinquencies, loan losses and future levels of provisions. We
consider it important to maintain the ratio of our allowance for loan losses to total loans at an
acceptable level given current economic conditions, interest rates and the composition of our
portfolio. Page 20




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##### Table of Contents



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. Each month we prepare a worksheet 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
worksheet, 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 worksheet, the amount of the allowance for loan losses in relation to the total loan balance,
loan portfolio growth, accounting principles generally accepted in the United States of America and
regulatory guidance. We have applied this process consistently and we have made minimal changes in
the estimation methods and assumptions that we have used. During 2004, we lowered the loss factors used in our worksheet on our purchased mortgage loans to
reflect the seasoning of the portfolio, and the charge-off and delinquency experience.
Notwithstanding such decrease, we have maintained a minimal provision for loan losses during 2004
to reflect expected losses resulting from the actual growth in our loan portfolio. At December 31,
2004, the allowance for loan losses as a percentage of total loans was 0.24%, which, given the
primary emphasis of our lending practices and the current market conditions, we consider to be at
an acceptable level. Furthermore, the increase in the allowance for loan losses during 2004
reflected the growth in the loan portfolio, the low levels of loan charge-offs, the stability in
the real estate market and the resulting stability in our overall loan quality. Although we believe that we have established and maintained the allowance for loan losses at
adequate levels, additions may be necessary if future economic and other conditions differ
substantially from the current operating environment. Although management uses the best
information available, the level of the allowance for loan losses remains an estimate that is
subject to significant judgment and short-term change. See Managements Discussion and Analysis of Financial Condition and Results of Operations 
Comparison of Operating Results for the Years Ended December 31, 2004 and 2003 Provision for Loan
Losses. Page 21




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##### Table of Contents



The following table presents our allocation of the allowance for loan losses by loan category and
the percentage of loans in each category to total loans at December 31, 2004, 2003, 2002, 2001, and
2000. At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000Percentage
    
    
    
    
    
    
    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
conventional
    
    $
    25,524
    
    
    
    97.87
    %
    
    $
    24,690
    
    
    
    97.32
    %
    
    $
    23,040
    
    
    
    96.25
    %
    
    $
    18,114
    
    
    
    94.93
    %
    
    $
    13,628
    
    
    
    94.56
    %Other first mortgages
    
    
    35
    
    
    
    0.75
    
    
    
    28
    
    
    
    1.15
    
    
    
    26
    
    
    
    1.92
    
    
    
    28
    
    
    
    2.57
    
    
    
    24
    
    
    
    2.37Total first mortgage
loans
    
    
    25,559
    
    
    
    98.62
    
    
    
    24,718
    
    
    
    98.47
    
    
    
    23,066
    
    
    
    98.17
    
    
    
    18,142
    
    
    
    97.50
    
    
    
    13,652
    
    
    
    96.93Consumer and other loans
    
    
    1,305
    
    
    
    1.38
    
    
    
    1,152
    
    
    
    1.53
    
    
    
    1,097
    
    
    
    1.83
    
    
    
    1,247
    
    
    
    2.50
    
    
    
    1,233
    
    
    
    3.07Unallocated
    
    
    455
    
    
    
    
    
    
    
    677
    
    
    
    
    
    
    
    1,338
    
    
    
    
    
    
    
    4,621
    
    
    
    
    
    
    
    7,259
    
    
    
    Total allowance for
loan losses
    
    $
    27,319
    
    
    
    100.00
    %
    
    $
    26,547
    
    
    
    100.00
    %
    
    $
    25,501
    
    
    
    100.00
    %
    
    $
    24,010
    
    
    
    100.00
    %
    
    $
    22,144
    
    
    
    100.00
    %
 Page 22




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##### Table of Contents



Investment Activities Investment Securities.The Board of Directors reviews and approves our investment policy on an
annual basis. The Chief Executive Officer, Chief Operating Officer and Investment Officer, as
authorized by the Board of Directors, implement this policy. The Board of Directors reviews our
investment activity on a monthly basis. Our investment policy is designed primarily to manage the interest rate sensitivity of our assets
and liabilities, to generate a favorable return without incurring undue interest rate and credit
risk, to complement our lending activities and to provide and maintain liquidity within established
guidelines. In establishing our investment strategies, we consider our interest rate sensitivity
position, the types of securities to be held, liquidity and other factors. We have authority to
invest in various types of assets, including U.S. Treasury obligations, securities of various
federal agencies, mortgage-backed securities, certain time deposits of insured banks and savings
institutions, certain bankers acceptances, repurchase agreements, loans of federal funds, and,
subject to certain limits, corporate debt and equity securities, commercial paper and mutual funds. During 2004 we purchased $2.11 billion of investment securities compared with $3.09 billion during
2003. Of these investment security purchases, $1.77 billion were classified as held to maturity.
Of these agency securities purchased and classified as held to maturity, $621.6 million have
step-up features where the interest rate is increased on scheduled future dates. These securities
have call options that are generally effective prior to the initial rate increase but after an
initial non-call period of three months to one year. The initial rate for the securities purchased
was higher than interest rates on similar agency securities offered at the time of purchase without
the step-up feature. The rate increases are at least one percent per adjustment and are fixed over
the life of the security. Our investment policy currently does not authorize participation in hedging programs, options or
futures transactions or interest rate swaps, and also prohibits the purchase of non-investment
grade bonds. In the future we may amend our policy to allow us to engage in hedging transactions.
Our investment policy also provides that we will not engage in any practice that the Federal
Financial Institutions Examination Council considers to be an unsuitable investment practice. In
addition, the policy provides that we shall maintain a primary liquidity ratio, which consists of
investments in cash, cash in banks, Federal funds sold, securities with remaining maturities of
less than five years and adjustable-rate mortgage-backed securities repricing within one year, in
an amount equal to at least 4% of total deposits and short-term borrowings. At December 31, 2004,
our primary liquidity ratio was 14.3%. For information regarding the carrying values, yields and
maturities of our investment securities and mortgage-backed securities, see  Carrying Values,
Rates and Maturities. We classify securities as held to maturity or available for sale at the date of purchase. Held to
maturity securities are reported at cost, adjusted for amortization of premium and accretion of
discount. We have both the ability and positive intent to hold these securities to maturity.
Available for sale securities are reported at fair market value. We currently have no securities
classified as trading. Mortgage-backed Securities.All of our mortgage-backed securities are directly or indirectly
insured or guaranteed by GNMA, FannieMae or FreddieMac. We classify mortgage-backed securities as
held to maturity or available for sale at the date of purchase based on our assessment of our
internal liquidity requirements. Held to maturity mortgage-backed securities are reported at cost,
adjusted for amortization of premium and accretion of discount. We have both the ability and
positive intent to hold these investments to maturity. Available for sale mortgage-backed
securities are reported at fair market value. We currently have no mortgage-backed securities
classified as trading. Page 23




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##### Table of Contents



At December 31, 2004, mortgage-backed securities classified as held to maturity totaled $3.76
billion, or 18.7% of total assets, while $1.62 billion, or 8.0% of total assets, were classified as
available for sale. At December 31, 2004, the mortgage-backed securities portfolio had a weighted
average rate of 4.82% and a market value of approximately $5.34 billion. Of the mortgage-backed
securities we held at December 31, 2004, $4.12 billion, or 76.6% of total mortgage-backed
securities, had fixed rates and $1.26 billion, or 23.4% of total mortgage-backed securities, had
adjustable rates. Our mortgage-backed securities portfolio includes real estate mortgage
investment conduits (REMICs), which are securities derived by reallocating cash flows from
mortgage pass-through securities or from pools of mortgage loans held by a trust. REMICs are a form
of, and are often referred to as, collateralized mortgage obligations (CMOs). At December 31,
2004, we held $761.0 million of REMICs, which constituted 14.2% of our mortgage-backed securities
portfolio. Mortgage-backed security purchases totaled $2.20 billion during 2004 compared with $4.53
billion during 2003. Purchases of mortgage-backed securities may decline in the future to offset
any significant increase in demand for one- to four-family mortgage loans. Mortgage-backed securities generally yield less than the loans that underlie such securities
because of the cost of payment guarantees or credit enhancements that reduce credit risk. However,
mortgage-backed securities are more liquid than individual mortgage loans and may be used to
collateralize certain borrowings. In general, mortgage-backed securities issued or guaranteed by
GNMA, FannieMae and FreddieMac are weighted at no more than 20% for risk-based capital purposes,
compared to the 50% risk-weighting assigned to most non-securitized residential mortgage loans. While mortgage-backed securities carry a reduced credit risk as compared to whole loans, they
remain subject to the risk of a fluctuating interest rate environment. Along with other factors,
such as the geographic distribution of the underlying mortgage loans, changes in interest rates may
alter the prepayment rate of those mortgage loans and affect both the prepayment rates and value of
mortgage-backed securities. At December 31, 2004, we did not own any interest-only,
principal-only, REMIC residuals or other higher risk securities. Page 24




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##### Table of Contents



The following table presents our investment securities activity for the periods indicated. For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands)Investment securities:Carrying value at beginning of
period
    
    $
    2,245,178
    
    
    $
    562,338
    
    
    $
    168,868Purchases:Held to
maturity
    
    
    1,769,643
    
    
    
    
    
    
    
    Available for
sale
    
    
    337,306
    
    
    
    3,089,474
    
    
    
    598,358Equity
securities
    
    
    
    
    
    
    
    
    
    
    189Calls:Held to
maturity
    
    
    (436,670
    )
    
    
    (40
    )
    
    
    (35
    )Available for
sale
    
    
    (986,343
    )
    
    
    (1,332,072
    )
    
    
    (202,687
    )Maturities:Held to
maturity
    
    
    (100
    )
    
    
    
    
    
    
    Available for
sale
    
    
    
    
    
    
    (150
    )
    
    
    (651
    )Sales:Available for
sale
    
    
    
    
    
    
    (50,000
    )
    
    
    (9,919
    )Equity
securities
    
    
    
    
    
    
    (20
    )
    
    
    Premium amortization and discount
accretion, net
    
    
    32
    
    
    
    (2,047
    )
    
    
    (346
    )Change in unrealized gain or
loss
    
    
    (158
    )
    
    
    (22,305
    )
    
    
    8,561Net increase in investment
securities
    
    
    683,710
    
    
    
    1,682,840
    
    
    
    393,470Carrying value at end of
period
    
    $
    2,928,888
    
    
    $
    2,245,178
    
    
    $
    562,338
 The following table presents our mortgage-backed securities activity for the periods
indicated. For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands)Mortgage-backed securities:Carrying value at beginning of
period
    
    $
    5,422,701
    
    
    $
    6,126,161
    
    
    $
    5,009,178Purchases:Held to
maturity
    
    
    921,765
    
    
    
    3,038,153
    
    
    
    2,400,445Available for
sale
    
    
    1,278,921
    
    
    
    1,489,154
    
    
    
    1,168,106Principal payments:Held to
maturity
    
    
    (1,445,507
    )
    
    
    (3,387,605
    )
    
    
    (2,133,902
    )Available for
sale
    
    
    (282,901
    )
    
    
    (410,316
    )
    
    
    (250,244
    )Sales:Held to
maturity
    
    
    
    
    
    
    (64,590
    )
    
    
    Available for
sale
    
    
    (499,067
    )
    
    
    (1,310,004
    )
    
    
    (76,683
    )Premium amortization and discount
accretion, net
    
    
    (14,138
    )
    
    
    (31,307
    )
    
    
    (13,542
    )Change in unrealized gain or
loss
    
    
    (5,145
    )
    
    
    (26,945
    )
    
    
    22,803Net (decrease)increase in
mortgage-backed
securities
    
    
    (46,072
    )
    
    
    (703,460
    )
    
    
    1,116,983Carrying value at end of period
    
    $
    5,376,629
    
    
    $
    5,422,701
    
    
    $
    6,126,161
 Page 25




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##### Table of Contents



The following table presents the composition of our money market investments, investment
securities and mortgage-backed securities portfolios in dollar amount and in percentage of each
investment type at the dates indicated. It also presents the coupon type for the mortgage-backed
securities portfolio. At December 31,2004
    
    
    2003
    
    
    2002Carrying
    
    
    Percent of
    
    
    Fair
    
    
    Carrying
    
    
    Percent of
    
    
    Fair
    
    
    Carrying
    
    
    Percent of
    
    
    FairValue
    
    
    Total (1)
    
    
    Value
    
    
    Value
    
    
    Total (1)
    
    
    Value
    
    
    Value
    
    
    Total (1)
    
    
    Value(Dollars in thousands)Money market investments:Federal funds sold
    
    $
    45,700
    
    
    
    100.00
    %
    
    $
    45,700
    
    
    $
    63,600
    
    
    
    100.00
    %
    
    $
    63,600
    
    
    $
    87,700
    
    
    
    100.00
    %
    
    $
    87,700Investment securities:Held to maturity:United States
government-sponsored
agencies
    
    $
    1,333,018
    
    
    
    45.51
    %
    
    $
    1,325,054
    
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    $
    
    
    
    
    
    %
    
    $
    Municipal bonds
    
    
    1,231
    
    
    
    0.04
    
    
    
    1,282
    
    
    
    1,366
    
    
    
    0.06
    
    
    
    1,443
    
    
    
    1,406
    
    
    
    0.25
    
    
    
    1,497Total held to
maturity
    
    
    1,334,249
    
    
    
    45.55
    
    
    
    1,326,336
    
    
    
    1,366
    
    
    
    0.06
    
    
    
    1,443
    
    
    
    1,406
    
    
    
    0.25
    
    
    
    1,497Available for sale:United States
government-sponsored
agencies
    
    
    1,584,384
    
    
    
    54.10
    
    
    
    1,584,384
    
    
    
    2,233,035
    
    
    
    99.46
    
    
    
    2,233,035
    
    
    
    549,505
    
    
    
    97.72
    
    
    
    549,505Corporate bonds
    
    
    74
    
    
    
    
    
    
    
    74
    
    
    
    81
    
    
    
    
    
    
    
    81
    
    
    
    334
    
    
    
    0.06
    
    
    
    334Equity
securities
    
    
    10,181
    
    
    
    0.35
    
    
    
    10,181
    
    
    
    10,696
    
    
    
    0.48
    
    
    
    10,696
    
    
    
    11,093
    
    
    
    1.97
    
    
    
    11,093Total available for
sale
    
    
    1,594,639
    
    
    
    54.45
    
    
    
    1,594,639
    
    
    
    2,243,812
    
    
    
    99.94
    
    
    
    2,243,812
    
    
    
    560,932
    
    
    
    99.75
    
    
    
    560,932Total investment
securities
    
    $
    2,928,888
    
    
    
    100.00
    %
    
    $
    2,920,975
    
    
    $
    2,245,178
    
    
    
    100.00
    %
    
    $
    2,245,255
    
    
    $
    562,338
    
    
    
    100.00
    %
    
    $
    562,429Mortgage-backed securities:By issuer:Held to maturity:GNMA pass-through
certificates
    
    $
    416,665
    
    
    
    7.75
    %
    
    $
    422,032
    
    
    $
    616,618
    
    
    
    11.37
    %
    
    $
    626,239
    
    
    $
    1,059,848
    
    
    
    17.30
    %
    
    $
    1,088,541FNMA pass-through
certificates
    
    
    2,017,165
    
    
    
    37.51
    
    
    
    2,017,791
    
    
    
    1,650,544
    
    
    
    30.44
    
    
    
    1,652,854
    
    
    
    1,186,247
    
    
    
    19.36
    
    
    
    1,221,835FHLMC pass-through
certificates
    
    
    561,095
    
    
    
    10.44
    
    
    
    554,341
    
    
    
    439,793
    
    
    
    8.11
    
    
    
    433,097
    
    
    
    213,686
    
    
    
    3.49
    
    
    
    219,564FHLMC and FNMA REMICs
    
    
    760,996
    
    
    
    14.15
    
    
    
    726,865
    
    
    
    1,585,489
    
    
    
    29.24
    
    
    
    1,538,498
    
    
    
    2,274,485
    
    
    
    37.13
    
    
    
    2,298,999Total held to
maturity
    
    
    3,755,921
    
    
    
    69.85
    
    
    
    3,721,029
    
    
    
    4,292,444
    
    
    
    79.16
    
    
    
    4,250,688
    
    
    
    4,734,266
    
    
    
    77.28
    
    
    
    4,828,939Available for sale:GNMA pass-through
certificates
    
    
    503,839
    
    
    
    9.37
    
    
    
    503,839
    
    
    
    336,458
    
    
    
    6.20
    
    
    
    336,458
    
    
    
    1,391,895
    
    
    
    22.72
    
    
    
    1,391,895FNMA pass-through
certificates
    
    
    743,380
    
    
    
    13.83
    
    
    
    743,380
    
    
    
    493,383
    
    
    
    9.10
    
    
    
    493,383
    
    
    
    
    
    
    
    
    
    
    
    FHLMC pass-through
certificates
    
    
    373,489
    
    
    
    6.95
    
    
    
    373,489
    
    
    
    300,416
    
    
    
    5.54
    
    
    
    300,416
    
    
    
    
    
    
    
    
    
    
    
    Available for
sale
    
    
    1,620,708
    
    
    
    30.15
    
    
    
    1,620,708
    
    
    
    1,130,257
    
    
    
    20.84
    
    
    
    1,130,257
    
    
    
    1,391,895
    
    
    
    22.72
    
    
    
    1,391,895Total mortgage-backed
securities
    
    $
    5,376,629
    
    
    
    100.00
    %
    
    $
    5,341,737
    
    
    $
    5,422,701
    
    
    
    100.00
    %
    
    $
    5,380,945
    
    
    $
    6,126,161
    
    
    
    100.00
    %
    
    $
    6,220,834By coupon type:Adjustable-rate
    
    $
    1,258,859
    
    
    
    23.41
    %
    
    $
    1,262,923
    
    
    $
    959,445
    
    
    
    17.69
    
    
    $
    967,477
    
    
    $
    2,409,746
    
    
    
    39.34
    %
    
    $
    2,433,191Fixed-rate
    
    
    4,117,770
    
    
    
    76.59
    
    
    
    4,078,814
    
    
    
    4,463,256
    
    
    
    82.31
    
    
    
    4,413,468
    
    
    
    3,716,415
    
    
    
    60.66
    
    
    
    3,787,643Total mortgage-backed
securities
    
    $
    5,376,629
    
    
    
    100.00
    %
    
    $
    5,341,737
    
    
    $
    5,422,701
    
    
    
    100.00
    %
    
    $
    5,380,945
    
    
    $
    6,126,161
    
    
    
    100.00
    %
    
    $
    6,220,834Total investment portfolio
    
    $
    8,351,217
    
    
    
    
    
    
    $
    8,308,412
    
    
    $
    7,731,479
    
    
    
    
    
    
    $
    7,689,800
    
    
    $
    6,776,199
    
    
    
    
    
    
    $
    6,870,963
   (1)
    
    Based on carrying value for each investment type. Page 26




---



##### Table of Contents



Carrying Values, Rates and Maturities.The table below presents information regarding the
carrying values, weighted average rates and contractual maturities of our money market investments,
investment securities and mortgage-backed securities at December 31, 2004. Mortgage-backed
securities are presented by issuer and by coupon type. Equity securities have been excluded from
this table. At December 31, 2004More 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
    
    $
    45,700
    
    
    
    2.00
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    45,700
    
    
    
    2.00
    %Investment securities:Held to maturity:United States
government-sponsored
agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    711,504
    
    
    
    4.74
    
    
    
    621,514
    
    
    
    5.02
    
    
    
    1,333,018
    
    
    
    4.87Municipal
bonds
    
    $
    65
    
    
    
    6.70
    
    
    $
    10
    
    
    
    5.25
    
    
    $
    905
    
    
    
    6.43
    
    
    $
    251
    
    
    
    6.02
    
    
    $
    1,231
    
    
    
    6.35Total held to
maturity
    
    
    65
    
    
    
    6.70
    
    
    
    10
    
    
    
    5.25
    
    
    
    712,409
    
    
    
    4.74
    
    
    
    621,765
    
    
    
    5.02
    
    
    
    1,334,249
    
    
    
    4.87Available for sale:United States
government-sponsored
agencies
    
    
    
    
    
    
    
    
    
    
    662,392
    
    
    
    3.67
    
    
    
    921,992
    
    
    
    4.50
    
    
    
    
    
    
    
    
    
    
    
    1,584,384
    
    
    
    4.15Corporate
bonds
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    5.58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    5.58Total available for
sale
    
    
    
    
    
    
    
    
    
    
    662,466
    
    
    
    3.67
    
    
    
    921,992
    
    
    
    4.50
    
    
    
    
    
    
    
    
    
    
    
    1,584,458
    
    
    
    4.15Total investment
securities
    
    $
    65
    
    
    
    6.70
    
    
    $
    662,476
    
    
    
    3.67
    
    
    $
    1,634,401
    
    
    
    4.60
    
    
    $
    621,765
    
    
    
    5.02
    
    
    $
    2,918,707
    
    
    
    4.48Mortgage-backed securities:By issuer:Held to maturity:GNMA pass-through
certificates
    
    $
    18
    
    
    
    8.21
    
    
    $
    3,374
    
    
    
    8.51
    
    
    $
    342
    
    
    
    11.18
    
    
    $
    412,931
    
    
    
    3.63
    
    
    $
    416,665
    
    
    
    3.68FNMA pass-through
certificates
    
    
    13
    
    
    
    3.92
    
    
    
    15,183
    
    
    
    6.70
    
    
    
    51,136
    
    
    
    5.07
    
    
    
    1,950,833
    
    
    
    5.18
    
    
    
    2,017,165
    
    
    
    5.19FHLMC pass-through
certificates
    
    
    134
    
    
    
    9.48
    
    
    
    688
    
    
    
    9.05
    
    
    
    5,446
    
    
    
    6.94
    
    
    
    554,827
    
    
    
    4.75
    
    
    
    561,095
    
    
    
    4.78FHLMC, FNMA and REMICs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    760,996
    
    
    
    4.72
    
    
    
    760,996
    
    
    
    4.72Total held to
maturity
    
    
    165
    
    
    
    8.90
    
    
    
    19,245
    
    
    
    7.10
    
    
    
    56,924
    
    
    
    5.29
    
    
    
    3,679,587
    
    
    
    4.85
    
    
    
    3,755,921
    
    
    
    4.87Available for sale:GNMA pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503,839
    
    
    
    3.68
    
    
    
    503,839
    
    
    
    3.68FNMA pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    743,380
    
    
    
    5.06
    
    
    
    743,380
    
    
    
    5.06FHLMC pass-through
certificates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373,489
    
    
    
    5.39
    
    
    
    373,489
    
    
    
    5.39Total available for
sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,620,708
    
    
    
    4.71
    
    
    
    1,620,708
    
    
    
    4.71Total mortgage-backed
securities
    
    $
    165
    
    
    
    8.90
    
    
    $
    19,245
    
    
    
    7.10
    
    
    $
    56,924
    
    
    
    5.29
    
    
    $
    5,300,295
    
    
    
    4.81
    
    
    $
    5,376,629
    
    
    
    4.82By coupon type:Adjustable-rate
    
    $
    13
    
    
    
    3.92
    
    
    $
    
    
    
    
    
    
    
    $
    50,746
    
    
    
    5.02
    
    
    $
    1,208,100
    
    
    
    3.92
    
    
    $
    1,258,859
    
    
    
    3.96Fixed-rate
    
    
    152
    
    
    
    9.33
    
    
    
    19,245
    
    
    
    7.10
    
    
    
    6,178
    
    
    
    7.43
    
    
    
    4,092,195
    
    
    
    5.07
    
    
    
    4,117,770
    
    
    
    5.08Total mortgage-backed
securities
    
    $
    165
    
    
    
    8.90
    
    
    $
    19,245
    
    
    
    7.10
    
    
    $
    56,924
    
    
    
    5.29
    
    
    $
    5,300,295
    
    
    
    4.81
    
    
    $
    5,376,629
    
    
    
    4.82Total investment portfolio
    
    $
    45,930
    
    
    
    2.03
    
    
    $
    681,721
    
    
    
    3.77
    
    
    $
    1,691,325
    
    
    
    4.62
    
    
    $
    5,922,060
    
    
    
    4.83
    
    
    $
    8,341,036
    
    
    
    4.69
 Page 27




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##### Table of Contents



Sources of Funds General.Customer deposits, borrowings, scheduled amortization and prepayments of mortgage loan
principal and mortgage-backed securities, maturities and calls of investment securities and funds
provided by operations are our primary sources of funds for use in lending, investing and for other
general purposes. See Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources. Deposits.We offer a variety of deposit accounts having a range of interest rates and terms. We
currently offer passbook and statement savings accounts, NOW accounts, checking accounts, money
market accounts and time deposits. We also offer IRA accounts and qualified retirement plans. Retail deposits generated through our branch network and longer-term wholesale borrowings are our
primary means of funding growth. We have increased our share of total deposit funding provided by
core deposits (which excludes our time deposits) to over 50% at December 31, 2004 from
approximately 25% at December 31, 1999. A key driver of this growth is our High Value Checking
product, which was introduced in April, 2002. We view our interest-bearing High Value Checking
account as an attractive alternative to cash management accounts offered by brokerage firms. This
account offers unlimited check writing, no charge on-line banking, no-charge bill payment and debit
card availability as part of the product, and pays an interest rate generally above competitive
market rates. The balance in the High Value Checking account at December 31, 2004 was $4.19
billion compared with $2.71 billion at December 31, 2003 and $943.2 million at December 31, 2002.
We recently introduced a Business Money Market Account that offers similar features and benefits as
our High Value Checking account. This product, in conjunction with our regular business checking
account, should provide small business customers in our market area competitive returns and
operating flexibility. Deposit flows are influenced significantly by general and local economic conditions, changes in
prevailing interest rates, pricing of deposits and competition. Our deposits are primarily obtained
from market areas surrounding our offices. We rely primarily on paying competitive rates,
providing strong customer service and maintaining long-standing relationships with customers to
attract and retain these deposits. We do not use brokers to obtain deposits. We believe the
increase in the interest-bearing deposits in 2004 was due primarily to our consistent offering of
competitive rates on our deposit products and the continued success of our interest-bearing High
Value Checking account. In determining our deposit rates, we consider local competition, U.S. Treasury securities offerings
and the rates charged on other sources of funds. Core deposits (defined as non-time deposit
accounts) represented 54.1% of total deposits on December 31, 2004. At December 31, 2004, time
deposits with remaining terms to maturity of less than one year amounted to $3.71 billion. See
Managements Discussion and Analysis of Financial Condition and Results of Operations  Analysis
of Net Interest Income for information relating to the average balances and costs of our deposit
accounts for the years ended December 31, 2004, 2003 and 2002. Page 28




---



##### Table of Contents



The following table presents our deposit activity for the periods indicated: For the Year Ended December 31,2004
    
    
    2003
    
    
    2002(Dollars in thousands)Total deposits at
beginning of period
    
    $
    10,453,780
    
    
    $
    9,138,629
    
    
    $
    7,912,762Net increase in
deposits
    
    
    808,707
    
    
    
    1,105,812
    
    
    
    970,092Interest credited, net
penalties
    
    
    214,813
    
    
    
    209,339
    
    
    
    255,775Total deposits at end of
period
    
    $
    11,477,300
    
    
    $
    10,453,780
    
    
    $
    9,138,629Net increase
    
    $
    1,023,520
    
    
    $
    1,315,151
    
    
    $
    1,225,867Percent
increase
    
    
    9.79
    %
    
    
    14.39
    %
    
    
    15.49
    %
 At December 31, 2004, we had $886.1 million in time deposits with balances of $100,000 and
over maturing as follows: Maturity Period
    
    Amount(In thousands)Three months or less
    
    $
    231,035Over three months through six
months
    
    
    156,554Over six months through 12
months
    
    
    187,300Over 12 months
    
    
    311,190Total
    
    $
    886,079
 Page 29




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##### Table of Contents



The following table presents the distribution of our deposit accounts at the dates indicated
by dollar amount and percent of portfolio, and the weighted average nominal interest rate on each
category of deposits. At December 31,2004
    
    
    2003
    
    
    2002Weighted
    
    
    
    
    
    
    
    
    
    
    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
    
    $
    931,783
    
    
    
    8.12
    %
    
    
    0.98
    %
    
    $
    945,595
    
    
    
    9.05
    %
    
    
    0.98
    %
    
    $
    892,678
    
    
    
    9.77
    %
    
    
    1.61
    %Interest-bearing demand
    
    
    4,290,099
    
    
    
    37.38
    
    
    
    2.46
    
    
    
    2,808,901
    
    
    
    26.87
    
    
    
    2.09
    
    
    
    1,040,614
    
    
    
    11.39
    
    
    
    2.80Money market
    
    
    564,700
    
    
    
    4.92
    
    
    
    0.96
    
    
    
    623,811
    
    
    
    5.97
    
    
    
    0.96
    
    
    
    629,042
    
    
    
    6.88
    
    
    
    1.56Noninterest-bearing demand
    
    
    417,502
    
    
    
    3.64
    
    
    
    
    
    
    
    396,495
    
    
    
    3.79
    
    
    
    
    
    
    
    388,465
    
    
    
    4.25
    
    
    
    Total
    
    
    6,204,084
    
    
    
    54.06
    
    
    
    1.94
    
    
    
    4,774,802
    
    
    
    45.68
    
    
    
    1.55
    
    
    
    2,950,799
    
    
    
    32.29
    
    
    
    1.81Time deposits:Time deposits $100,000
and over
    
    
    886,079
    
    
    
    7.72
    
    
    
    2.45
    
    
    
    914,639
    
    
    
    8.75
    
    
    
    2.19
    
    
    
    967,983
    
    
    
    10.59
    
    
    
    2.83Time deposits less than
$100,000 with original
maturities of:Three months or less
    
    
    339,354
    
    
    
    2.96
    
    
    
    1.37
    
    
    
    483,460
    
    
    
    4.62
    
    
    
    1.37
    
    
    
    619,953
    
    
    
    6.78
    
    
    
    2.10Over three months to
twelve months
    
    
    864,250
    
    
    
    7.53
    
    
    
    1.64
    
    
    
    1,166,713
    
    
    
    11.16
    
    
    
    1.52
    
    
    
    1,668,926
    
    
    
    18.26
    
    
    
    2.54Over twelve months to
twenty-four months
    
    
    1,368,900
    
    
    
    11.93
    
    
    
    2.07
    
    
    
    1,634,702
    
    
    
    15.64
    
    
    
    2.18
    
    
    
    1,723,400
    
    
    
    18.86
    
    
    
    3.03Over twenty-four months
to thirty-six months
    
    
    650,289
    
    
    
    5.67
    
    
    
    2.81
    
    
    
    562,678
    
    
    
    5.38
    
    
    
    2.94
    
    
    
    456,832
    
    
    
    5.00
    
    
    
    3.79Over thirty-six months to
forty-eight months
    
    
    283,747
    
    
    
    2.47
    
    
    
    3.40
    
    
    
    149,801
    
    
    
    1.43
    
    
    
    3.48
    
    
    
    73,431
    
    
    
    0.80
    
    
    
    4.16Over forty-eight months
to sixty months
    
    
    48,692
    
    
    
    0.42
    
    
    
    3.76
    
    
    
    27,594
    
    
    
    0.26
    
    
    
    3.70
    
    
    
    15,419
    
    
    
    0.17
    
    
    
    4.19Over sixty months
    
    
    135,160
    
    
    
    1.18
    
    
    
    3.87
    
    
    
    70,850
    
    
    
    0.68
    
    
    
    3.79
    
    
    
    37,018
    
    
    
    0.41
    
    
    
    4.33Qualified retirement
plans
    
    
    696,745
    
    
    
    6.06
    
    
    
    2.65
    
    
    
    668,541
    
    
    
    6.40
    
    
    
    2.57
    
    
    
    624,868
    
    
    
    6.84
    
    
    
    3.28Total time deposits
    
    
    5,273,216
    
    
    
    45.94
    
    
    
    2.32
    
    
    
    5,678,978
    
    
    
    54.32
    
    
    
    2.16
    
    
    
    6,187,830
    
    
    
    67.71
    
    
    
    2.88Total deposits
    
    $
    11,477,300
    
    
    
    100.00
    %
    
    
    2.11
    
    
    $
    10,453,780
    
    
    
    100.00
    %
    
    
    1.88
    
    
    $
    9,138,629
    
    
    
    100.00
    %
    
    
    2.53
 Page 30




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##### Table of Contents



The following table presents, by rate category, the amount of our time deposit accounts
outstanding at December 31, 2004, 2003 and 2002. At December 31,2004
    
    
    2003
    
    
    2002(In thousands)Time deposit accounts:1.50% or less
    
    $
    942,685
    
    
    $
    1,917,721
    
    
    $
    1.51% to 2.00%
    
    
    1,375,593
    
    
    
    1,107,584
    
    
    
    205,8172.01% to 2.50%
    
    
    1,345,286
    
    
    
    968,757
    
    
    
    1,767,2002.51% to 3.00%
    
    
    511,037
    
    
    
    813,199
    
    
    
    2,185,8983.01% to 3.50%
    
    
    557,706
    
    
    
    501,926
    
    
    
    1,236,7823.51% and over
    
    
    540,909
    
    
    
    369,791
    
    
    
    792,133Total
    
    $
    5,273,216
    
    
    $
    5,678,978
    
    
    $
    6,187,830
 The following table presents, by rate category, the remaining period to maturity of time
deposit accounts outstanding as of December 31, 2004. Period to Maturity from December 31, 2004Within
    
    
    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:1.50% or less
    
    $
    829,542
    
    
    $
    86,340
    
    
    $
    26,803
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    942,6851.51% to 2.00%
    
    
    391,617
    
    
    
    554,641
    
    
    
    425,671
    
    
    
    3,637
    
    
    
    20
    
    
    
    7
    
    
    
    1,375,5932.01% to 2.50%
    
    
    140,201
    
    
    
    265,461
    
    
    
    685,349
    
    
    
    254,171
    
    
    
    18
    
    
    
    86
    
    
    
    1,345,2862.51% to 3.00%
    
    
    63,359
    
    
    
    81,041
    
    
    
    65,770
    
    
    
    278,600
    
    
    
    22,203
    
    
    
    64
    
    
    
    511,0373.01% to 3.50%
    
    
    22,575
    
    
    
    1,208
    
    
    
    25,937
    
    
    
    353,784
    
    
    
    88,962
    
    
    
    65,240
    
    
    
    557,7063.51% and over
    
    
    10,981
    
    
    
    9,129
    
    
    
    20,201
    
    
    
    22,887
    
    
    
    229,937
    
    
    
    247,774
    
    
    
    540,909Total
    
    $
    1,458,275
    
    
    $
    997,820
    
    
    $
    1,249,731
    
    
    $
    913,079
    
    
    $
    341,140
    
    
    $
    313,171
    
    
    $
    5,273,216
 Borrowings.Hudson City enters into sales of securities under agreements to repurchase
with selected brokers and the Federal Home Loan Bank of New York (FHLB). These agreements are
recorded as financing transactions as 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. Borrowings with the FHLB are generally limited to twenty times the
amount of FHLB stock owned. Page 31




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##### Table of Contents



Borrowed funds at December 31 are summarized as follows: 2004
    
    
    2003Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AveragePrincipal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)Securities sold under agreements to repurchase:FHLB
    
    $
    950,000
    
    
    
    4.73
    %
    
    $
    1,250,000
    
    
    
    4.00
    %Other brokers
    
    
    4,350,000
    
    
    
    3.11
    
    
    
    1,950,000
    
    
    
    3.14Total securities sold under
agreements to
repurchase
    
    
    5,300,000
    
    
    
    3.40
    
    
    
    3,200,000
    
    
    
    3.48Advances from the FHLB
    
    
    1,850,000
    
    
    
    3.81
    
    
    
    1,950,000
    
    
    
    3.69Total borrowed funds
    
    $
    7,150,000
    
    
    
    3.51
    
    
    $
    5,150,000
    
    
    
    3.56
 At December 31, 2004, borrowed funds had scheduled maturities and potential call dates as
indicated below. Substantially all of our borrowed funds are callable at the discretion of the
issuer. These call features are generally quarterly, after an initial non-call period of three
months to five years from the date of borrowing. Borrowings by Scheduled
    
    
    
    
    
    
    Borrowings by NextMaturity Date
    
    
    
    
    
    
    Potential Call DateWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageYear
    
    Principal
    
    
    Rate
    
    
    
    
    
    
    Principal
    
    
    Rate(Dollars in thousands)2005
    
    $
    
    
    
    
    
    
    
    
    %
    
    
    $
    2,025,000
    
    
    
    3.93
    %2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,275,000
    
    
    
    3.262007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    3.272008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    3.802009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    3.632010
    
    
    300,000
    
    
    
    5.68
    
    
    
    
    
    
    
    50,000
    
    
    
    5.272011
    
    
    950,000
    
    
    
    4.65
    
    
    
    
    
    
    
    150,000
    
    
    
    4.762012
    
    
    1,500,000
    
    
    
    4.06
    
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    1,550,000
    
    
    
    3.08
    
    
    
    
    
    
    
    
    
    
    
    2014
    
    
    2,850,000
    
    
    
    2.84
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    7,150,000
    
    
    
    3.51
    
    
    
    
    
    
    $
    7,150,000
    
    
    
    3.51
 Page 32




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The amortized cost and fair value of the underlying securities used as collateral for
securities sold under agreements to repurchase, the average balances and the maximum outstanding at
any month-end at or for the years ended December 31, 2004 and 2003 are as follows: At or for the year endedDecember 31,2004
    
    
    2003(In thousands)Amortized cost of collateral:United States
government-sponsored agency
securities
    
    $
    2,030,978
    
    
    $
    615,806Mortgage-backed
securities
    
    
    3,198,768
    
    
    
    2,369,058REMICs
    
    
    455,598
    
    
    
    495,074Total amortized cost of
collateral
    
    $
    5,685,344
    
    
    $
    3,479,938Fair value of collateral:United States
government-sponsored agency
securities
    
    $
    2,008,710
    
    
    $
    604,397Mortgage-backed
securities
    
    
    3,188,386
    
    
    
    2,387,457REMICs
    
    
    434,249
    
    
    
    478,192Total fair value of
collateral
    
    $
    5,631,345
    
    
    $
    3,470,046Average balance of outstanding repurchase
agreements during the
year
    
    $
    4,182,197
    
    
    $
    2,253,025Maximum balance of outstanding repurchase
agreements at any
month-end during the
year
    
    $
    5,300,000
    
    
    $
    3,200,000Average cost of securities sold under agreements
to repurchase
    
    
    3.41
    %
    
    
    4.26
    %
 The average balances of our advances from the FHLB during 2004 and 2003 were $1.92 billion and
$1.84 billion, respectively, and the maximum FHLB advances outstanding during 2004 and 2003 were
$1.95 billion and $2.05 billion, respectively. Subsidiaries Hudson City Savings has two wholly owned and consolidated subsidiaries: HudCiti Service Corporation
and HC Value Broker Services, Inc. HudCiti Service Corporation, which qualifies as a New Jersey
investment company, has one wholly owned and consolidated subsidiary: Hudson City Preferred
Funding Corporation. Hudson City Preferred Funding qualifies as a real estate investment trust,
pursuant to the Internal Revenue Code of 1986, as amended, and had $6.02 billion of residential
mortgage loans outstanding at December 31, 2004. HC Value Broker Services, Inc., whose primary operating activity is the referral of insurance
applications, formed a strategic alliance that jointly markets insurance products with Savings Bank
Life Insurance of Massachusetts. HC Value Broker Services offers customers access to a variety of
life insurance products. Personnel As of December 31, 2004, we had 1,000 full-time employees and 115 part-time employees. Employees
are not represented by a collective bargaining unit and we consider our relationship with our
employees to be good. Page 33




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REGULATION OF HUDSON CITY SAVINGS BANK AND HUDSON CITY BANCORP General Hudson City Savings has been a federally chartered savings bank since January 1, 2004 when it
converted from a New Jersey chartered savings bank. Its deposit accounts are insured up to
applicable limits by the Federal Deposit Insurance Corporation (FDIC) under the Bank Insurance
Fund (BIF). Under its charter, Hudson City Savings is subject to extensive regulation,
examination and supervision by the Office of Thrift Supervision as its chartering agency, and by
the FDIC as the deposit insurer. Hudson City, MHC and Hudson City Bancorp are unitary savings and
loan holding companies regulated, examined and supervised by the Office of Thrift Supervision.
Hudson City, MHC, as a New Jersey chartered mutual holding company, is also regulated by the New
Jersey Department of Banking and Insurance (the Department) and is subject to the provisions of
the New Jersey Banking Act of 1948 (the New Jersey Banking Act) and the regulations of the
Department under the New Jersey Banking Act applicable to mutual holding companies. Each of Hudson
City, MHC, Hudson City Bancorp and Hudson City Savings must file reports with the Office of Thrift
Supervision concerning its activities and financial condition, and must obtain regulatory approval
from the Office of Thrift Supervision prior to entering into certain transactions, such as mergers
with, or acquisitions of, other depository institutions. The Office of Thrift Supervision will
conduct periodic examinations to assess Hudson City, MHC, Hudson City Bancorp and Hudson City
Savings Banks compliance with various regulatory requirements. The Office of Thrift Supervision
has primary enforcement responsibility over federally chartered savings banks and has substantial
discretion to impose enforcement action on an institution that fails to comply with applicable
regulatory requirements, particularly with respect to its capital requirements. In addition, the
FDIC has the authority to recommend to the Director of the Office of Thrift Supervision that
enforcement action be taken with respect to a particular federally chartered savings bank and, if
action is not taken by the Director, the FDIC has authority to take such action under certain
circumstances. This regulation and supervision establishes a comprehensive framework of activities in which a
federal savings bank can engage and is intended primarily for the protection of the deposit
insurance fund and depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of assets and the
establishment of adequate loan loss reserves for regulatory purposes. Any change in such laws and
regulations, whether by the Office of Thrift Supervision, the FDIC or through legislation, could
have a material adverse impact on Hudson City, MHC, Hudson City Bancorp and Hudson City Savings and
their operations and stockholders. Federally Chartered Savings Bank Regulation Activity Powers.Hudson City Savings derives its lending, investment and other activity powers
primarily from the Home Owners Loan Act, as amended, commonly referred to as HOLA, and the
regulations of the Office of Thrift Supervision thereunder. Under these laws and regulations,
federal savings banks, including Hudson City Savings, generally may invest in:  
    real estate mortgages;  
    consumer and commercial loans;  
    certain types of debt securities; and  
    certain other assets. Page 34




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Hudson City Savings may also establish service corporations that may engage in activities not
otherwise permissible for Hudson City Savings, including certain real estate equity investments and
securities and insurance brokerage activities. These investment powers are subject to various
limitations, including (1) a prohibition against the acquisition of any corporate debt security
that is not rated in one of the four highest rating categories, (2) a limit of 400% of an
associations capital on the aggregate amount of loans secured by non-residential real estate
property, (3) a limit of 20% of an associations assets on commercial loans, with the amount of
commercial loans in excess of 10% of assets being limited to small business loans, (4) a limit of
35% of an associations assets on the aggregate amount of consumer loans and acquisitions of
certain debt securities, (5) a limit of 5% of assets on non-conforming loans (loans in excess of
the specific limitations of HOLA), and (6) a limit of the greater of 5% of assets or an
associations capital on certain construction loans made for the purpose of financing what is or is
expected to become residential property. Capital Requirements.The Office of Thrift Supervision capital regulations require federally
chartered savings banks to meet three minimum capital ratios: a 1.5% tangible capital ratio, a 4%
(3% if the savings bank received the highest rating on its most recent examination) leverage (core
capital) ratio and an 8% total risk-based capital ratio. In assessing an institutions capital
adequacy, the Office of Thrift Supervision takes into consideration not only these numeric factors
but also qualitative factors as well, and has the authority to establish higher capital
requirements for individual institutions where necessary. Hudson City Savings, as a matter of
prudent management, targets as its goal the maintenance of capital ratios which exceed these
minimum requirements and that are consistent with Hudson City Savings risk profile. At December
31, 2004, Hudson City Savings exceeded each of its capital requirements as shown in the following
table: Office of Thrift Supervision RequirementsMinimum Capital
    
    
    For Classification asBank Actual
    
    
    Adequacy
    
    
    Well-CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)December 31, 2004Tangible capital
    
    $
    1,282,665
    
    
    
    6.36
    %
    
    $
    302,325
    
    
    
    1.50
    %
    
    $
    n/a
    
    
    
    n/aLeverage (core)
capital
    
    
    1,282,665
    
    
    
    6.36
    
    
    
    806,200
    
    
    
    4.00
    
    
    
    1,007,750
    
    
    
    5.00
    %Total-risk-based
capital
    
    
    1,309,984
    
    
    
    17.49
    
    
    
    599,199
    
    
    
    8.00
    
    
    
    748,998
    
    
    
    10.00
 The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, requires that the Office
of Thrift Supervision and other federal banking agencies revise their risk-based capital standards,
with appropriate transition rules, to ensure that they take into account interest rate risk, or
IRR, concentration of risk and the risks of non-traditional activities. The Office of Thrift
Supervision adopted regulations, effective January 1, 1994, that set forth the methodology for
calculating an IRR component to be incorporated into the Office of Thrift Supervision risk-based
capital regulations. On May 10, 2002, the Office of Thrift Supervision adopted an amendment to its
capital regulations which eliminated the IRR component of the risk-based capital requirement. Pursuant to the amendment, the Office of Thrift Supervision will continue to monitor the IRR of
individual institutions through the Office of Thrift Supervision requirements for IRR management,
the ability of the Office of Thrift Supervision to impose individual minimum capital requirements
on institutions that exhibit a high degree of IRR, and the requirements of Thrift Bulletin 13a,
which provides guidance on the management of IRR and the responsibility of boards of directors in
that area. Page 35




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The Office of Thrift Supervision continues to monitor the IRR of individual institutions through
analysis of the change in net portfolio value, or NPV. NPV is defined as the net present value of
the expected future cash flows of an entitys assets and liabilities and, therefore, hypothetically
represents the value of an institutions net worth. The Office of Thrift Supervision has also used
this NPV analysis as part of its evaluation of certain applications or notices submitted by thrift
institutions. The Office of Thrift Supervision, through its general oversight of the safety and
soundness of savings associations, retains the right to impose minimum capital requirements on
individual institutions to the extent the institution is not in compliance with certain written
guidelines established by the Office of Thrift Supervision regarding NPV analysis. The Office of
Thrift Supervision has not imposed any such requirements on Hudson City Savings. Safety and Soundness Standards.Pursuant to the requirements of FDICIA, as amended by the
Riegle Community Development and Regulatory Improvement Act of 1994, each federal banking agency,
including the Office of Thrift Supervision, has adopted guidelines establishing general standards
relating to internal controls, information and internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees
and benefits. In general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director, or principal stockholder. In addition, the Office of Thrift Supervision adopted regulations to require a savings bank that is
given notice by the Office of Thrift Supervision that it is not satisfying any of such safety and
soundness standards to submit a compliance plan to the Office of Thrift Supervision. If, after
being so notified, a savings bank fails to submit an acceptable compliance plan or fails in any
material respect to implement an accepted compliance plan, the Office of Thrift Supervision may
issue an order directing corrective and other actions of the types to which a significantly
undercapitalized institution is subject under the prompt corrective action provisions of FDICIA.
If a savings bank fails to comply with such an order, the Office of Thrift Supervision may seek to
enforce such an order in judicial proceedings and to impose civil monetary penalties. Prompt Corrective Action.FDICIA also established a system of prompt corrective action to
resolve the problems of undercapitalized institutions. Under this system, the bank regulators are
required to take certain, and authorized to take other, supervisory actions against
undercapitalized institutions, based upon five categories of capitalization which FDICIA created:
well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized
and critically capitalized. The severity of the action authorized or required to be taken under
the prompt corrective action regulations increases as a banks capital decreases within the three
undercapitalized categories. All banks are prohibited from paying dividends or other capital
distributions or paying management fees to any controlling person if, following such distribution,
the bank would be undercapitalized. The Office of Thrift Supervision is required to monitor
closely the condition of an undercapitalized bank and to restrict the growth of its assets. Page 36




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An undercapitalized bank is required to file a capital restoration plan within 45 days of the date
the bank receives notices that it is within any of the three undercapitalized categories, and the
plan must be guaranteed by any parent holding company. The aggregate liability of a parent holding
company is limited to the lesser of: (1) an amount equal to five percent of the banks total assets at the time it became
undercapitalized; and (2) the amount that is necessary (or would have been necessary) to bring the bank into
compliance with all capital standards applicable with respect to such bank as of the time it
fails to comply with the plan. If a bank fails to submit an acceptable plan, it is treated as if it were significantly
undercapitalized. Banks that are significantly or critically undercapitalized are subject to a
wider range of regulatory requirements and restrictions. Under the Office of Thrift Supervision
regulations, generally, a federally chartered savings bank is treated as well capitalized if its
total risk-based capital ratio is 10% or greater, its Tier 1 risk-based capital ratio is 6% or
greater, and its leverage ratio is 5% or greater, and it is not subject to any order or directive
by the Office of Thrift Supervision to meet a specific capital level. As of December 31, 2004,
Hudson City Savings was considered well capitalized by the Office of Thrift Supervision. Insurance Activities.Hudson City Savings is generally permitted to engage in certain activities
through its subsidiaries. However, the federal banking agencies have adopted regulations
prohibiting depository institutions from conditioning the extension of credit to individuals upon
either the purchase of an insurance product or annuity or an agreement by the consumer not to
purchase an insurance product or annuity from an entity that is not affiliated with the depository
institution. The regulations also require prior disclosure of this prohibition to potential
insurance product or annuity customers. Deposit Insurance.Pursuant to FDICIA, the FDIC established a system for setting deposit
insurance premiums based upon the risks a particular bank or savings association posed to its
deposit insurance funds. Under the risk-based deposit insurance assessment system, the FDIC
assigns an institution to one of three capital categories based on the institutions financial
information as of its most recent quarterly financial report filed with the applicable bank
regulatory agency prior to the commencement of the assessment period. The three capital categories
are (1) well-capitalized, (2) adequately capitalized and (3) undercapitalized. The FDIC also
assigns an institution to one of three supervisory subcategories within each capital group. The
FDIC also assigns an institution to a supervisory subgroup based on a supervisory evaluation
provided to the FDIC by the institutions primary federal regulator and information that the FDIC
determines to be relevant to the institutions financial condition and the risk posed to the
deposit insurance funds. An institutions assessment rate depends on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, there are nine assessment risk
classifications (i.e., combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for deposit insurance currently range from 0 basis
points to 27 basis points. The capital and supervisory subgroup to which an institution is
assigned by the FDIC is confidential and may not be disclosed. The assessment rates for our BIF
assessable deposits are zero basis points. If the FDIC determines that assessment rates should be
increased, institutions in all risk categories could be affected. The FDIC has exercised this
authority several times in the past and could raise insurance assessment rates in the future. Page 37




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Under the Deposit Insurance Funds Act of 1996 (Funds Act), the assessment base for the payments
on the bonds (FICO bonds) issued in the late 1980s by the Financing Corporation to recapitalize
the now defunct Federal Savings and Loan Insurance Corporation was expanded to include, beginning
January 1, 1997, the deposits of BIF-insured institutions, such as Hudson City Savings. Our total
expense in 2004 for the assessment for deposit insurance and the FICO payments was $1.6 million. Under the FDIA, the FDIC may terminate the insurance of an institutions deposits upon a finding
that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC. The management of Hudson City Savings does not know of any
practice, condition or violation that might lead to termination of deposit insurance. Transactions with Affiliates of Hudson City Savings.Hudson City Savings is subject to the
affiliate and insider transaction rules set forth in Sections 23A, 23B, 22(g) and 22(h) of the
Federal Reserve Act (FRA), Regulation W issued by the Federal Reserve Board (FRB), as well as
additional limitations as adopted by the Director of the Office of Thrift Supervision. Office of
Thrift Supervision regulations regarding transactions with affiliates conform to Regulation W.
These provisions, among other things, prohibit or limit a savings bank from extending credit to, or
entering into certain transactions with, its affiliates (which for Hudson City Savings would
include Hudson City Bancorp and Hudson City, MHC) and principal stockholders, directors and
executive officers of Hudson City Savings. In addition, the Office of Thrift Supervision regulations include additional restrictions on
savings banks under Section 11 of HOLA, including provisions prohibiting a savings bank from making
a loan to an affiliate that is engaged in non-bank holding company activities and provisions
prohibiting a savings association from purchasing or investing in securities issued by an affiliate
that is not a subsidiary. Office of Thrift Supervision regulations also include certain specific
exemptions from these prohibitions. The FRB and the Office of Thrift Supervision require each
depository institution that is subject to Sections 23A and 23B to implement policies and procedures
to ensure compliance with Regulation W and the Office of Thrift Supervision regulations regarding
transactions with affiliates. Section 402 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) prohibits the extension of
personal loans to directors and executive officers of issuers (as defined in Sarbanes-Oxley). The
prohibition, however, does not apply to mortgages advanced by an insured depository institution,
such as Hudson City Savings, that are subject to the insider lending restrictions of Section 22(h)
of the FRA. Privacy Standards.Hudson City Savings is subject to Office of Thrift Supervision regulations
implementing the privacy protection provisions of the Gramm-Leach-Bliley Act. These regulations
require Hudson City Savings to disclose its privacy policy, including identifying with whom it
shares non-public personal information, to customers at the time of establishing the customer
relationship and annually thereafter. The regulations also require Hudson City Savings to provide its customers with initial and annual
notices that accurately reflect its privacy policies and practices. In addition, Hudson City
Savings is required to provide its customers with the ability to opt-out of having Hudson City
Savings share their non-public personal information with unaffiliated third parties before they can
disclose such information, subject to certain exceptions. The implementation of these regulations
did not have a material adverse effect on Hudson City Savings. Page 38




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Hudson City Savings is subject to regulatory guidelines establishing standards for safeguarding
customer information. These regulations implement certain provisions of Gramm-Leach. The
guidelines describe the agencies expectations for the creation, implementation and maintenance of
an information security program, which would include administrative, technical and physical
safeguards appropriate to the size and complexity of the institution and the nature and scope of
its activities. The standards set forth in the guidelines are intended to ensure the security and
confidentiality of customer records and information, protect against any anticipated threats or
hazards to the security or integrity of such records and protect against unauthorized access to or
use of such records or information that could result in substantial harm or inconvenience to any
customer. Community Reinvestment Act.Under the Community Reinvestment Act (CRA), as implemented by the
Office of Thrift Supervision regulations, any federally chartered savings bank, including Hudson
City Savings, has a continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institutions discretion to develop the types of products and
services that it believes are best suited to its particular community. The CRA requires the Office
of Thrift Supervision, in connection with its examination of a federally chartered savings bank, to
assess the depository institutions record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such institution. Current CRA regulations rate an institution based on its actual performance in meeting community
needs. In particular, the evaluation system focuses on three tests:  
    a lending test, to evaluate the institutions record of making loans in its service
areas;  
    an investment test, to evaluate the institutions record of investing in community
development projects, affordable housing, and programs benefiting low or moderate income
individuals and businesses; and  
    a service test, to evaluate the institutions delivery of services through its branches,
ATMs and other offices. The CRA also requires all institutions to make public disclosure of their CRA ratings. Hudson City
Savings has received a satisfactory rating in its most recent CRA examination. The federal
banking agencies adopted regulations implementing the requirements under Gramm-Leach that insured
depository institutions publicly disclose certain agreements that are in fulfillment of the CRA.
Hudson City Savings has no such agreements in place at this time. Loans to One Borrower.Under the HOLA, savings banks are generally subject to the national bank
limits on loans to one borrower. Generally, savings banks may not make a loan or extend credit to
a single or related group of borrowers in excess of 15% of the institutions unimpaired capital and
unimpaired surplus. Additional amounts may be loaned, not in excess of 10% of unimpaired capital
and unimpaired surplus, if such loans or extensions of credit are secured by readily-marketable
collateral. Hudson City Savings is in compliance with applicable loans to one borrower
limitations. At December 31, 2004, Hudson City Savings largest aggregate amount of loans to one
borrower totaled $2.9 million. All of the loans for the largest borrower were performing in
accordance with their terms and the borrower had no affiliation with Hudson City Savings. Page 39




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Qualified Thrift Lender (QTL) Test.The HOLA requires federal savings banks to meet a QTL
test. Under the QTL test, a savings bank is required to maintain at least 65% of its portfolio
assets (total assets less (1) specified liquid assets up to 20% of total assets, (2) intangibles,
including goodwill, and (3) the value of property used to conduct business) in certain qualified
thrift investments (primarily residential mortgages and related investments, including certain
mortgage-backed securities, credit card loans, student loans, and small business loans) on a
monthly basis during at least 9 out of every 12 months. As of December 31, 2004, Hudson City
Savings held 84.7% of its portfolio assets in qualified thrift investments and had more than 80% of
its portfolio assets in qualified thrift investments for each of the 12 months ending December 31,
2004. Therefore, Hudson City Savings qualified under the QTL test. A savings bank that fails the QTL test and does not convert to a bank charter generally will be
prohibited from: (1) engaging in any new activity not permissible for a national bank, (2) paying
dividends not permissible under national bank regulations, and (3) establishing any new branch
office in a location not permissible for a national bank in the institutions home state. In
addition, if the institution does not requalify under the QTL test within three years after failing
the test, the institution would be prohibited from engaging in any activity not permissible for a
national bank and would have to repay any outstanding advances from the FHLB as promptly as
possible. Limitation on Capital Distributions.The Office of Thrift Supervision regulations impose
limitations upon certain capital distributions by federal savings banks, such as certain cash
dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of
another institution in a cash out merger and other distributions charged against capital. The Office of Thrift Supervision regulates all capital distributions by Hudson City Savings
directly or indirectly to Hudson City Bancorp, including dividend payments. As the subsidiary of a
savings and loan holding company, Hudson City Savings currently must file a notice with the Office
of Thrift Supervision at least 30 days prior to each capital distribution. However, if the total
amount of all capital distributions (including each proposed capital distribution) for the
applicable calendar year exceeds net income for that year to date plus the retained net income for
the preceding two years, then Hudson City Savings must file an application to receive the approval
of the Office of Thrift Supervision for a proposed capital distribution. Hudson City Savings may not pay dividends to Hudson City Bancorp if, after paying those dividends,
it would fail to meet the required minimum levels under risk-based capital guidelines and the
minimum leverage and tangible capital ratio requirements or the Office of Thrift Supervision
notified Hudson City Savings Bank that it was in need of more than normal supervision. Under the
Federal Deposit Insurance Act, or FDIA, an insured depository institution such as Hudson City
Savings is prohibited from making capital distributions, including the payment of dividends, if,
after making such distribution, the institution would become undercapitalized (as such term is
used in the FDIA). Payment of dividends by Hudson City Savings also may be restricted at any time
at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and
unsound banking practice. In addition, Hudson City Savings may not declare or pay cash dividends on or repurchase any of its
shares of common stock if the effect thereof would cause stockholders equity to be reduced below
the amounts required for the liquidation account which was established as a result of Hudson City
Savings conversion to mutual holding company form. Page 40




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Liquidity.Hudson City Savings maintains sufficient liquidity to ensure its safe and sound
operation, in accordance with Office of Thrift Supervision regulations. Assessments.The Office of Thrift Supervision charges assessments to recover the cost of
examining federal savings banks and their affiliates. These assessments are based on three
components: the size of the institution, on which the basic assessment is based; the institutions
supervisory condition, which results in an additional assessment based on a percentage of the basic
assessment for any savings institution with a composite rating of 3, 4 or 5 in its most recent
safety and soundness examination; and the complexity of the institutions operations, which results
in an additional assessment based on a percentage of the basic assessment for any savings
institution that managed over $1.00 billion in trust assets, serviced for others loans aggregating
more than $1.00 billion, or had certain off-balance sheet assets aggregating more than $1.00
billion. Effective July 1, 2004, the Office of Thrift Supervision adopted a final rule replacing
examination fees for savings and loan holding companies with semi-annual assessments. The Office
of Thrift Supervision is phasing in the assessments at a rate of 25% of the first semiannual
assessment on July 1, 2004, 50% of the second semiannual assessment on January 1, 2005 and 100% of
the third semiannual assessment on July 1, 2005. Hudson City Savings paid an assessment of $2.3
million in 2004. Branching.The Office of Thrift Supervision regulations authorize federally chartered savings
banks to branch nationwide to the extent allowed by federal statute. This permits federal savings
and loan associations with interstate networks to more easily diversify their loan portfolios and
lines of business geographically. Office of Thrift Supervision authority preempts any state law
purporting to regulate branching by federal savings associations. Anti-Money Laundering and Customer Identification Hudson City Savings is subject to Office of Thrift Supervision regulations implementing the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, or the USA PATRIOT Act. The USA PATRIOT Act gives the federal government
powers to address terrorist threats through enhanced domestic security measures, expanded
surveillance powers, increased information sharing, and broadened anti-money laundering
requirements. By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT takes
measures intended to encourage information sharing among bank regulatory agencies and law
enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a
broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions,
money transfer agents and parties registered under the Commodity Exchange Act. Title III of the USA PATRIOT Act and the related Office of Thrift Supervision regulations impose
the following requirements with respect to financial institutions:  
    Establishment of anti-money laundering programs.
    Establishment of a program specifying procedures for obtaining identifying information
from customers seeking to open new accounts, including verifying the identity of customers
within a reasonable period of time.
    Establishment of enhanced due diligence policies, procedures and controls designed to
detect and report money-laundering.
    Prohibitions on correspondent accounts for foreign shell banks and compliance with
record keeping obligations with respect to correspondent accounts of foreign banks. Page 41




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
    Bank regulators are directed to consider a holding companys effectiveness in combating
money laundering when ruling on Federal Reserve Act and Bank Merger Act applications.   Federal Home Loan Bank System Hudson City Savings is a member of the FHLB system, which consists of twelve regional FHLBs, each
subject to supervision and regulation by the Federal Housing Finance Board, or FHFB. The FHLB
provides a central credit facility primarily for member thrift institutions as well as other
entities involved in home mortgage lending. It is funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLBs. It makes loans to members (i.e., advances) in
accordance with policies and procedures, including collateral requirements, established by the
respective boards of directors of the FHLBs. These policies and procedures are subject to the
regulation and oversight of the FHFB. All long-term advances are required to provide funds for
residential home financing. The FHFB has also established standards of community or investment
service that members must meet to maintain access to such long-term advances. Hudson City Savings,
as a member of the FHLB of New York, is currently required to purchase and hold shares of capital
stock in the FHLB of New York in an amount at least equal to the greater of (i) 1% of the aggregate
principal amount of its unpaid mortgage loans, home purchase contracts and similar obligations at
the beginning of each year; or (ii) 5% (or such greater fraction as established by the FHLB) of its
outstanding advances from the FHLB. Hudson City Savings is in compliance with these requirements. Federal Reserve System FRB regulations require federally chartered savings banks to maintain non-interest-earning cash
reserves against their transaction accounts (primarily NOW and demand deposit accounts). A reserve
of 3% is to be maintained against aggregate transaction accounts between $7 million and $47.6
million (subject to adjustment by the FRB) plus a reserve of 10% (subject to adjustment by the FRB
between 8% and 14%) against that portion of total transaction accounts in excess of $47.6 million.
The first $7 million of otherwise reservable balances (subject to adjustment by the FRB) is exempt
from the reserve requirements. Hudson City Savings is in compliance with the foregoing
requirements. Because required reserves must be maintained in the form of either vault cash, a
non-interest-bearing account at a Federal Reserve Bank or a pass-through account as defined by the
FRB, the effect of this reserve requirement is to reduce Hudson City Savings interest-earning
assets. FHLB system members are also authorized to borrow from the Federal Reserve discount
window, but FRB regulations require institutions to exhaust all FHLB sources before borrowing from
a Federal Reserve Bank. Federal Holding Company Regulation Hudson City, MHC and Hudson City Bancorp are unitary savings and loan holding companies within the
meaning of the HOLA. As such, Hudson City, MHC and Hudson City Bancorp are registered with the
Office of Thrift Supervision and are subject to the Office of Thrift Supervision regulation,
examination, supervision and reporting requirements. In addition, the Office of Thrift Supervision
has enforcement authority over Hudson City, MHC, Hudson City Bancorp and their savings bank
subsidiary. Among other things, this authority permits the Office of Thrift Supervision to
restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings
bank. Page 42




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Restrictions Applicable to New Savings and Loan Holding Companies.Gramm-Leach also restricts the
powers of new unitary savings and loan holding companies. Under Gramm-Leach, all unitary savings
and loan holding companies formed after May 4, 1999, such as Hudson City, MHC and Hudson City
Bancorp, are limited to financially related activities permissible for bank holding companies, as
defined under Gramm-Leach. Accordingly, Hudson City Bancorps activities are restricted to:  
    furnishing or performing management services for a savings institution subsidiary of
such holding company;
    conducting an insurance agency or escrow business;
    holding, managing, or liquidating assets owned or acquired from a savings institution
subsidiary of such company;
    holding or managing properties used or occupied by a savings institution subsidiary of
such company;
    acting as trustee under a deed of trust;
    any other activity (i) that the FRB, by regulation, has determined to be permissible for
bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956 (the BHC
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) in which multiple
savings and loan holding companies were authorized by regulation to directly engage in on
March 5, 1987;
    purchasing, holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such holding company is approved by the Director
of the Office of Thrift Supervision; and
    any activity permissible for financial holding companies under section 4(k) of the BHC
Act. Permissible activities which are deemed to be financial in nature or incidental thereto under
section 4(k) of the BHC Act include:  
    lending, exchanging, transferring, investing for others, or safeguarding money or securities;
    insurance activities or providing and issuing annuities, and acting as principal, agent, or broker;
    financial, investment, or economic advisory services;
    issuing or selling instruments representing interests in pools of assets that a bank is
permitted to hold directly;
    underwriting, dealing in, or making a market in securities;
    activities previously determined by the FRB to be closely related to banking;
    activities that bank holding companies are permitted to engage in outside of the U.S.; and
    portfolio investments made by an insurance company. Page 43




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In addition, Hudson City
Bancorp cannot be acquired or acquire a company unless the acquirer
or target, as applicable, is
engaged solely in financial activities. Restrictions Applicable to All Savings and Loan Holding Companies.Federal law prohibits a savings
and loan holding company, including Hudson City Bancorp and Hudson City, MHC, directly or
indirectly, from acquiring:  
    control (as defined under HOLA) of another savings institution (or a holding company
parent) without prior Office of Thrift Supervision approval;
    through merger, consolidation, or purchase of assets, another savings institution or a
holding company thereof, or acquiring all or substantially all of the assets of such
institution (or a holding company) without prior Office of Thrift Supervision approval; or
    control of any depository institution not insured by the FDIC (except through a merger
with and into the holding companys savings institution subsidiary that is approved by the
Office of Thrift Supervision). A savings and loan holding company may not acquire as a separate subsidiary an insured institution
that has a principal office outside of the state where the principal office of its subsidiary
institution is located, except:  
    in the case of certain emergency acquisitions approved by the FDIC;
    if such holding company controls a savings institution subsidiary that operated a home
or branch office in such additional state as of March 5, 1987; or
    if the laws of the state in which the savings institution to be acquired is located
specifically authorize a savings institution chartered by that state to be acquired by a
savings institution chartered by the state where the acquiring savings institution or
savings and loan holding company is located or by a holding company that controls such a
state chartered association. If the savings institution subsidiary of a federal mutual holding company fails to meet the QTL
test set forth in Section 10(m) of the HOLA and regulations of the Office of Thrift Supervision,
the holding company must register with the FRB as a bank holding company under the BHC Act within
one year of the savings institutions failure to so qualify. The HOLA prohibits a savings and loan holding company (directly or indirectly, or through one or
more subsidiaries) from acquiring another savings association or holding company thereof without
prior written approval of the Office of Thrift Supervision; acquiring or retaining, with certain
exceptions, more than 5% of a non-subsidiary savings association, a non-subsidiary holding company,
or a non-subsidiary company engaged in activities other than those permitted by the HOLA; or
acquiring or retaining control of a depository institution that is not federally insured. In
evaluating applications by holding companies to acquire savings associations, the Office of Thrift
Supervision must consider the financial and managerial resources and future prospects of the
company and institution involved, the effect of the acquisition on the risk to the insurance funds,
the convenience and needs of the community and competitive factors. Page 44




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New Jersey Holding Company Regulation General.Under the New Jersey Banking Act, Hudson City, MHC is regulated as a mutual savings
bank holding company. Mutual savings bank holding companies that are not also bank holding
companies, such as Hudson City, MHC, are not subject to the reporting and examination requirements
of the New Jersey Banking Act and the regulations of the Department promulgated thereunder.
However, Hudson City, MHC is subject to the provisions of the New Jersey Banking Act and the
regulations thereunder that apply specifically to mutual savings bank holding companies. These
provisions include the requirement for mutual savings bank holding companies to obtain the approval
of the Department to merge with or into another holding company, to incorporate a new subsidiary
savings bank, to convert itself into a capital stock savings bank holding company, or to acquire or
be acquired by another bank or holding company. In addition, Hudson City, MHC is subject to the
corporate governance provisions of the New Jersey Banking Act. Federal Securities Law Hudson City Bancorps securities are registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended. As such, Hudson City Bancorp is subject to the
information, proxy solicitation, insider trading, and other requirements and restrictions of the
Securities Exchange Act of 1934. Delaware Corporation Law Hudson City Bancorp is incorporated under the laws of the State of Delaware, and is therefore
subject to regulation by the State of Delaware. In addition, the rights of Hudson City Bancorps
shareholders are governed by the Delaware General Corporation Law. Page 45




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TAXATION Federal General.The following discussion is intended only as a summary and does not purport to be a
comprehensive description of the tax rules applicable to Hudson City Savings, Hudson City, MHC or
Hudson City Bancorp. For federal income tax purposes, Hudson City Savings reports its income on
the basis of a taxable year ending December 31, using the accrual method of accounting, and is
generally subject to federal income taxation in the same manner as other corporations. Because
Hudson City Savings and Hudson City Bancorp constitute an affiliated group of corporations, they
are eligible to report their income on a consolidated basis. However, because Hudson City, MHC
owns less than 80% of the common stock of Hudson City Bancorp, it will not be a member of such
affiliated group and will report its income on a separate return. Hudson City Savings is not
currently under audit by the Internal Revenue Service and has not been audited by the IRS during
the past five years. Bad Debt Reserves.Pursuant to the Small Business Job Protection Act of 1996, Hudson City
Savings is no longer permitted to use the reserve method of accounting for bad debts, and has
recaptured (taking into income) over a multi-year period a portion of the balance of its tax bad
debt reserve as of December 31, 1995. Since Hudson City Savings has already provided a deferred
tax liability equal to the amount of such recapture, the recapture will not adversely impact Hudson
City Savings financial condition or results of operations. Distributions.To the extent that Hudson City Savings makes non-dividend distributions to
stockholders, such distributions will be considered to result in distributions from Hudson City
Savings unrecaptured tax bad debt reserve base year reserve, i.e., its reserve as of December
31, 1987, to the extent thereof and then from its supplemental reserve for losses on loans, and an
amount based on the amount distributed will be included in Hudson City Savings taxable income.
Non-dividend distributions include distributions in excess of Hudson City Savings current and
accumulated earnings and profits, distributions in redemption of stock and distributions in partial
or complete liquidation. However, dividends paid out of Hudson City Savings current or
accumulated earnings and profits, as calculated for federal income tax purposes, will not
constitute non-dividend distributions and, therefore, will not be included in Hudson City Savings
income. The amount of additional taxable income created from a non-dividend distribution is equal to the
lesser of Hudson City Savings base year reserve and supplemental reserve for losses on loans or an
amount that, when reduced by the tax attributable to the income, is equal to the amount of the
distribution. Thus, in certain situations, approximately one and one-half times the non-dividend
distribution would be included in gross income for federal income tax purposes, assuming a 35%
federal corporate income tax rate. Hudson City Savings does not intend to pay dividends that would
result in the recapture of any portion of its bad debt reserve. Corporate Alternative Minimum Tax.In addition to the regular corporate income tax,
corporations generally are subject to an alternative minimum tax, or AMT, in an amount equal to 20%
of alternative minimum taxable income, to the extent the AMT exceeds the corporations regular
income tax. The AMT is available as a credit against future regular income tax. We do not expect to
be subject to the AMT. Page 46




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Elimination of Dividends; Dividends Received Deduction.Hudson City Bancorp may exclude from
its income 100% of dividends received from Hudson City Savings because Hudson City Savings is a
member of the affiliated group of corporations of which Hudson City Bancorp is the parent. Because
Hudson City, MHC is not a member of such affiliated group, it will not qualify for such 100%
dividends exclusion, but it will be entitled to deduct 80% of the dividends it receives from Hudson
City Bancorp so long as it owns more than 20% of the common stock of Hudson City Bancorp. State New Jersey State Taxation.Hudson City Savings files New Jersey Corporate Business income tax
returns. Generally, the income of savings institutions in New Jersey, which is calculated based on
federal taxable income, subject to certain adjustments, is subject to New Jersey tax. In July of
2002, the State of New Jersey enacted legislation retroactive to January 1, 2002, which impacted
Hudson City Savings as the tax rate was increased from 3% to 9%. The State also introduced a new
tax, the Alternative Minimum Assessment (AMA), which for Hudson City Savings is based on New
Jersey gross receipts. Hudson City Savings, under the new legislation, must calculate its
corporate business tax and the AMA, then pay the higher amount. In future years, if the corporate
business tax is greater than the AMA paid in prior years, Hudson City Savings may apply the prepaid
AMA against its corporate business taxes (up to 50% of the corporate business tax, subject to
certain limitations). Hudson City Savings is not currently under audit with respect to its New
Jersey income tax returns and Hudson City Savings state tax returns have not been audited for the
past five years. Hudson City Bancorp is required to file a New Jersey income tax return and will generally be
subject to a state income tax at a 9% rate. However, if Hudson City Bancorp meets certain
requirements, it may be eligible to elect to be taxed as a New Jersey Investment Company, which
would allow it to be taxed at a rate of 3.6%. The new tax legislation increased the income tax
rate for qualifying New Jersey investment companies from 2.25% to 3.6%. Further, investment
companies are not subject to the AMA. If Hudson City Bancorp does not qualify as an investment
company, it would be subject to taxation at the higher of the 9% corporate business rate on taxable
income or the AMA. Delaware State Taxation.As a Delaware holding company not earning income in Delaware, Hudson
City Bancorp is exempt from Delaware corporate income tax but is required to file annual returns
and pay annual fees and a franchise tax to the State of Delaware. Page 47




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Item 2. Properties. During 2004, we conducted our business through our executive office, located in Paramus, NJ, our
operations center, located in Glen Rock, NJ, and 85 branch offices. At December 31, 2004, we owned
29 of our locations and leased the remaining 58. Our lease arrangements are typically long-term
arrangements with third-parties that generally contain several options to renew at the expiration
date of the lease. For additional information regarding our lease obligations, see Note 7 of Notes to Consolidated
Financial Statements in Item 8 Financial Statements and Supplementary Data. 
 Item 3. Legal Proceedings. We are not involved in any pending legal proceedings other than routine legal proceedings occurring
in the ordinary course of business. We believe that these routine legal proceedings, in the
aggregate, are immaterial to our financial condition and results of operation. 
 Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted during the quarter ended December 31, 2004 to a vote of security holders of
Hudson City Bancorp through the solicitation of proxies or otherwise. Page 48




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PART II 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities. On July 13, 1999, Hudson City Bancorp, Inc. common stock commenced trading on the Nasdaq National
Market under the symbol HCBK. The table below shows the reported high and low sales prices of
the common stock during the periods indicated. Certain share, per share and dividend information
reflects the 100% stock dividend that was effective June 17, 2002. Sales Price
    
    
    Dividend InformationAmountHigh
    
    
    Low
    
    
    Per Share
    
    
    Date of Payment2003First quarter
    
    $
    20.45
    
    
    $
    18.55
    
    
    $
    0.11
    
    
    March 3, 2003Second quarter
    
    
    26.45
    
    
    
    20.05
    
    
    
    0.12
    
    
    June 2, 2003Third quarter
    
    
    30.96
    
    
    
    25.36
    
    
    
    0.14
    
    
    September 2, 2003Fourth quarter
    
    
    38.48
    
    
    
    30.68
    
    
    
    0.15
    
    
    December 1, 20032004First quarter
    
    
    40.38
    
    
    
    35.81
    
    
    
    0.16
    
    
    March 1, 2004Second quarter
    
    
    38.38
    
    
    
    31.39
    
    
    
    0.17
    
    
    June 1, 2004Third quarter
    
    
    35.90
    
    
    
    32.25
    
    
    
    0.18
    
    
    September 1, 2004Fourth quarter
    
    
    41.00
    
    
    
    34.79
    
    
    
    0.19
    
    
    December 1, 2004
 On January 18, 2005, the Board of Directors of Hudson City Bancorp declared a quarterly cash
dividend of twenty cents ($0.20) per common share outstanding that will be paid on March 1, 2005 to
stockholders of record as of the close of business on February 4, 2005. The Board of Directors
intends to review the payment of dividends quarterly and plans to continue to maintain a regular
quarterly dividend in the future, dependent upon our earnings, financial condition and other
relevant factors. Hudson City Bancorp is subject to the requirements of Delaware law that generally limits dividends
to an amount equal to the difference between the amount by which total assets exceed total
liabilities and the amount equal to the aggregate par value of the outstanding shares of capital
stock. If there is no difference between these amounts, dividends are limited to net income for
the current and/or immediately preceding year. As the principal asset of Hudson City Bancorp, Hudson City Savings provides the principal source of
funds for the payment of dividends by Hudson City Bancorp. Hudson City Savings is subject to
certain restrictions that may limit its ability to pay us dividends. Hudson City Savings may not
pay dividends to Hudson City Bancorp if paying such dividends would cause it to fail to meet
capital requirements or cause its stockholders equity to be reduced below the amounts required for
its liquidation account. See Note 2 of Notes to Consolidated Financial Statements in Item 8 of
this report for a further discussion of the liquidation account. For more information regarding
the limitations on dividends paid by Hudson City Savings, see Regulation of Hudson City Savings
Bank and Hudson City Bancorp  Federally Chartered Savings Bank Regulation  Limitation on Capital
Distributions. As of February 4, 2005, there were approximately 16,301 holders of record of Hudson City Bancorp
common stock. Page 49




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The following table reports information regarding repurchases of our common stock during the fourth
quarter of 2004 and the stock repurchase plans approved by our Board of Directors. Total Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    as Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    or Programs
    
    
    Programs (1) (2)(3)October 1 thru October 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,101,221November 1 thru November 30, 2004
    
    
    25,000
    
    
    
    37.32
    
    
    
    25,000
    
    
    
    3,076,221December 1 thru December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,076,221Total
    
    
    25,000
    
    
    
    37.32
    
    
    
    25,000
   (1)
    
    On March 20, 2003, Hudson City Bancorp announced the adoption of its fifth Stock Repurchase Program, which authorized the
purchase of up to
9,525,000 shares of common stock. This program has no expiration date.(2)
    
    No repurchase plan or program has expired or been terminated during the quarter.(3)
    
    Shares indicated are determined as of the close of business on the last day of the period presented. Page 50




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Item 6. Selected Financial Data The summary information presented below under Selected Financial Condition Data, Selected
Operating Data and Selected Financial Ratios and Other Data at or for each of the years
presented is derived in part from the audited consolidated financial statements of Hudson City
Bancorp. The following information is only a summary and you should read it in conjunction with
our audited consolidated financial statements in Item 8 of this document. Certain share, per share
and dividend information reflects the 100% stock dividend that was effective June 17, 2002. At December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands)Selected Financial Condition Data:Total
assets
    
    $
    20,145,981
    
    
    $
    17,033,360
    
    
    $
    14,144,604
    
    
    $
    11,426,768
    
    
    $
    9,380,373Loans
    
    
    11,363,039
    
    
    
    8,803,066
    
    
    
    6,970,900
    
    
    
    5,968,171
    
    
    
    4,872,740Federal Home Loan
Bank of New York
stock
    
    
    140,000
    
    
    
    164,850
    
    
    
    137,500
    
    
    
    81,149
    
    
    
    73,629Investment
securities held to
maturity
    
    
    1,334,249
    
    
    
    1,366
    
    
    
    1,406
    
    
    
    1,441
    
    
    
    1,481Investment
securities
available for
sale
    
    
    1,594,639
    
    
    
    2,243,812
    
    
    
    560,932
    
    
    
    167,427
    
    
    
    876,667Mortgage-backed
securities held to
maturity
    
    
    3,755,921
    
    
    
    4,292,444
    
    
    
    4,734,266
    
    
    
    4,478,488
    
    
    
    3,262,035Mortgage-backed
securities
available for
sale
    
    
    1,620,708
    
    
    
    1,130,257
    
    
    
    1,391,895
    
    
    
    530,690
    
    
    
    Total cash and cash
equivalents
    
    
    168,183
    
    
    
    254,584
    
    
    
    240,796
    
    
    
    101,814
    
    
    
    187,111Foreclosed real
estate,
net
    
    
    878
    
    
    
    1,002
    
    
    
    1,276
    
    
    
    250
    
    
    
    438Total
deposits
    
    
    11,477,300
    
    
    
    10,453,780
    
    
    
    9,138,629
    
    
    
    7,912,762
    
    
    
    6,604,121Total borrowed
funds
    
    
    7,150,000
    
    
    
    5,150,000
    
    
    
    3,600,000
    
    
    
    2,150,000
    
    
    
    1,250,000Total stockholders
equity
    
    
    1,402,884
    
    
    
    1,329,366
    
    
    
    1,316,083
    
    
    
    1,288,736
    
    
    
    1,464,569
 For the Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands)Selected Operating Data:Total interest and dividend income
    
    $
    915,058
    
    
    $
    777,328
    
    
    $
    784,217
    
    
    $
    690,498
    
    
    $
    614,041Total interest expense
    
    
    430,066
    
    
    
    376,354
    
    
    
    395,774
    
    
    
    403,427
    
    
    
    360,039Net interest income
    
    
    484,992
    
    
    
    400,974
    
    
    
    388,443
    
    
    
    287,071
    
    
    
    254,002Provision for loan losses
    
    
    790
    
    
    
    900
    
    
    
    1,500
    
    
    
    1,875
    
    
    
    2,130Net interest income after provision
for loan losses
    
    
    484,202
    
    
    
    400,074
    
    
    
    386,943
    
    
    
    285,196
    
    
    
    251,872Non-interest income:Service charges and other income
    
    
    5,128
    
    
    
    5,338
    
    
    
    5,947
    
    
    
    4,694
    
    
    
    4,541Gains on securities transactions, net
    
    
    11,429
    
    
    
    24,326
    
    
    
    2,066
    
    
    
    
    
    
    
    Total
non-interest income
    
    
    16,557
    
    
    
    29,664
    
    
    
    8,013
    
    
    
    4,694
    
    
    
    4,541Total
non-interest expense
    
    
    118,348
    
    
    
    102,527
    
    
    
    93,541
    
    
    
    81,824
    
    
    
    78,997Income before income tax expense
    
    
    382,411
    
    
    
    327,211
    
    
    
    301,415
    
    
    
    208,066
    
    
    
    177,416Income tax expense
    
    
    143,145
    
    
    
    119,801
    
    
    
    109,382
    
    
    
    73,517
    
    
    
    62,590Net income
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033
    
    
    $
    134,549
    
    
    $
    114,826
 Page 51




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##### Table of Contents



At
or for the Year Ended December 31,2004
    
    

2003
    
    

2002
    
    

2001
    
    

2000Selected Financial Ratios and
Other Data:Performance Ratios:Return on average
assets
    
    
    1.29
    %
    
    
    1.34
    %
    
    
    1.50
    %
    
    
    1.32
    %
    
    
    1.29
    %Return on average
stockholders equity
    
    
    17.66
    
    
    
    15.38
    
    
    
    14.84
    
    
    
    10.09
    
    
    
    7.87Net interest rate spread
(1)
    
    
    2.43
    
    
    
    2.37
    
    
    
    2.66
    
    
    
    2.12
    
    
    
    1.91Net interest margin
(2)
    
    
    2.66
    
    
    
    2.65
    
    
    
    3.10
    
    
    
    2.87
    
    
    
    2.90Non-interest expense to
average assets
    
    
    0.64
    
    
    
    0.66
    
    
    
    0.73
    
    
    
    0.80
    
    
    
    0.89Efficiency ratio
(3)
    
    
    23.60
    
    
    
    23.81
    
    
    
    23.59
    
    
    
    28.04
    
    
    
    30.55Average interest-earning
assets to
average interest-bearing
liabilities
    
    
    1.09
    x
    
    
    1.11
    x
    
    
    1.14
    x
    
    
    1.19
    x
    
    
    1.24
    xShare and Per Share Data:Basic earnings per
share
    
    $
    1.33
    
    
    $
    1.14
    
    
    $
    1.04
    
    
    $
    0.69
    
    
    $
    0.52Diluted earnings per
share
    
    
    1.29
    
    
    
    1.11
    
    
    
    1.01
    
    
    
    0.68
    
    
    
    0.52Cash dividends paid per
common share
    
    
    0.70
    
    
    
    0.52
    
    
    
    0.345
    
    
    
    0.235
    
    
    
    0.145Dividend pay-out ratio
(4)
    
    
    52.63
    %
    
    
    45.61
    %
    
    
    33.17
    %
    
    
    34.06
    %
    
    
    27.88
    %Stockholders equity per
common share
    
    $
    7.85
    
    
    $
    7.33
    
    
    $
    7.22
    
    
    $
    6.87
    
    
    $
    6.89Weighted average number of
common shares outstanding:basic
    
    
    179,856,896
    
    
    
    182,568,936
    
    
    
    184,928,344
    
    
    
    195,862,296
    
    
    
    219,014,380diluted
    
    
    184,965,868
    
    
    
    187,673,653
    
    
    
    190,005,378
    
    
    
    198,987,520
    
    
    
    219,937,552Capital Ratios:Average stockholders equity
to average assets
    
    
    7.29
    %
    
    
    8.73
    %
    
    
    10.12
    %
    
    
    13.05
    %
    
    
    16.35
    %Stockholders equity to
assets (6)
    
    
    6.96
    
    
    
    7.80
    
    
    
    9.30
    
    
    
    11.28
    
    
    
    15.61Regulatory Capital Ratios of
Bank:Leverage capital
(5)
    
    
    6.36
    %
    
    
    7.52
    %
    
    
    8.85
    %
    
    
    10.64
    %
    
    
    14.16
    %Total risk-based capital
(7)
    
    
    17.49
    
    
    
    20.89
    
    
    
    26.81
    
    
    
    31.96
    
    
    
    43.06Asset Quality Ratios:Non-performing loans to total
loans
    
    
    0.19
    %
    
    
    0.23
    %
    
    
    0.29
    %
    
    
    0.26
    %
    
    
    0.27
    %Non-performing assets to
total assets
    
    
    0.11
    
    
    
    0.12
    
    
    
    0.15
    
    
    
    0.14
    
    
    
    0.14Allowance for loan losses to
non-performing loans
    
    
    126.44
    
    
    
    131.09
    
    
    
    126.27
    
    
    
    153.44
    
    
    
    170.67Allowance for loan losses to
total loans
    
    
    0.24
    
    
    
    0.30
    
    
    
    0.37
    
    
    
    0.40
    
    
    
    0.45Net charge-offs (recoveries)
to average loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Branch and Deposit Data:Number of deposit
accounts
    
    
    476,627
    
    
    
    491,293
    
    
    
    503,998
    
    
    
    495,871
    
    
    
    463,369Branches
    
    
    85
    
    
    
    81
    
    
    
    81
    
    
    
    80
    
    
    
    79Average deposits per branch
(thousands)
    
    $
    135,027
    
    
    $
    129,059
    
    
    $
    112,823
    
    
    $
    98,910
    
    
    $
    83,596
   (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 uses amount per share information that does not reflect the dividend waiver by Hudson City, MHC.(5)
    
    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.(6)
    
    We had no goodwill at any of the dates presented. Accordingly, our tangible stockholders equity to assets is the same at each date as our stockholders equity to assets.(7)
    
    The calculation is the same under both OTS
and FDIC regulations. Page 52




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations This discussion and analysis should be read in conjunction with Hudson City Bancorps Consolidated
Financial Statements and accompanying Notes to Consolidated Financial Statements in Item 8, and the
other statistical data provided elsewhere in this document. Executive Summary Our results of operations depend primarily on net interest income, which, in part, is a direct
result of the market interest rate environment. Our results of operations may also be affected
significantly by general and local economic and competitive conditions, particularly those with
respect to changes in market interest rates, government policies and actions of regulatory
authorities. Our results are also affected by the price of our stock, as the expense of certain of
our employee stock compensation plans is related to the current price of our common stock. Our net income for 2004 grew $31.9 million to $239.3 million. Basic and diluted earnings per share
for 2004 were $1.33 and $1.29, respectively. The increase in net income was primarily the result
of the growth of our assets to $20.15 billion at December 31, 2004 from $17.03 billion at December
31, 2003. Our return on average assets for 2004 was 1.29%. Our asset growth was funded from a $2.0
billion increase in borrowed funds and a $1.03 billion increase in total deposits. Stockholders
equity grew $73.5 million during 2004, with repurchases of common stock partially offsetting growth
due to net income. Our return on average stockholders equity for 2004 was 17.66%. During 2004, we continued to grow our balance sheet consistent with our traditional thrift business
model and the growth initiatives we have employed during recent periods. Our balance sheet growth,
primarily due to increases in residential first mortgage loans and callable government-sponsored
agency securities classified as held to maturity, was funded principally by customer deposits and
borrowed funds. The growth in our core investment of residential first mortgage loans was due to
our continued strong levels of loan purchases that allows us to grow and geographically diversify
our mortgage loan portfolio at a relatively low overhead cost while maintaining our traditional
thrift business model. The growth in customer deposits was primarily due to the continued success of our interest-bearing
High Value Checking account. Borrowed funds were increased to meet the goals of our growth
initiatives and to take advantage of the still historically low interest rate environment. Our
ability to grow our business with relatively low cost interest-bearing liabilities, notwithstanding
the general increase in short-term interest rates, resulted in the increase in our net interest
income during the year ended December 31, 2004. Short-term market interest rates generally increased during 2004, primarily during the last three
quarters of the year. The Federal Open Market Committee (FOMC) of the Federal Reserve Bank
increased the overnight lending rate 25 basis points at each of the five regularly scheduled
meetings beginning in June 2004. The rates we paid on our deposit products, which are generally
tied to short-term market rates, also increased during 2004. Overall, during 2004, long-term market
interest rates generally decreased, notwithstanding an increase during the second quarter of 2004.
The rates we earned on our mortgage loans, which are generally tied to long-term market rates, also
decreased during 2004. This general increase in short-term interest rates, in conjunction with the
slight decrease in long-term interest rates, has flattened the market yield curve. Page 53




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Despite the impact on our 2004 net interest income due to the increases in short-term interest
rates, the flattening of the market yield, and the timing impact of placement of interest-sensitive
assets and liabilities on the balance sheet, both our net interest rate spread and net interest
margin increased during 2004 due to the proportionally larger growth of our first mortgage loans
when compared to total interest-earning assets, as the interest rate earned on first mortgage loans
is greater than the overall yield on our total interest-earning assets. We anticipate short-term market interest rates will continue to increase in 2005, and long-term
market interest rates will begin to increase, but not as fast as short-term interest rates. The
result of this potential market interest rate scenario would be a further flattening of the market
yield curve, which would cause the spread between long-term interest rates and short-term interest
rates to decrease. If this occurs, the resulting interest rate environment is expected to have a negative impact on
our results of operations as our interest-bearing liabilities, both deposits and borrowed funds,
generally price off short-term interest rates, while our interest-earning assets, both mortgage
loans and securities, generally price off long-term interest rates. If both short- and long-term
interest rates increase by the same amount, and the shape of the yield curve does not change, the
resulting environment is also likely to have a negative impact on our results of operations, as our
interest-bearing liabilities will reset to the current market interest rate faster than our
interest-earning assets. Prepayment activity decreased on our mortgage-related assets during 2004 when compared to the
prepayment activity experienced during 2003. This decrease in prepayment activity was due to the
general stability of long-term interest rates during the second half of 2003 and 2004,
notwithstanding the slight decreases in long-term interest rates during 2004. The decrease in
prepayment rates was also due to the large volume of refinancing and modification activity that
occurred during the declining interest rate environment of 2003. The mortgage-related assets that
were purchased or originated with the cash flows from this prepayment activity will not tend to
prepay as fast, as their contractual interest rate is relatively low. The slowing of the prepayment
activity in turn decreased the amount of related premium amortized on these assets during 2004.
The decrease in the prepayment activity and the slowing of the premium amortization generally had a
positive impact on our net interest income, net interest rate spread and net interest margin for
2004 when compared to 2003. The low interest rate environment of 2004 afforded us the opportunity to realize gains on certain
of our mortgage-backed securities prior to interest rate changes, such as the long-term interest
rate increase seen in the second quarter of 2004, which would have adversely affected their fair
market value. The low market interest rates caused increases in the fair market value of the
fixed-rate mortgage-backed securities sold. The larger volume of sales and larger gain reported for
2003, when compared with the gain reported for 2004, resulted from the enhanced opportunities to
realize gains on sales due to the declining interest rate environment experienced during 2003. We
may continue to realize gains on the sale of securities if given the opportunity to sell these
assets in a favorable interest rate environment and reinvest the proceeds advantageously. We expect to continue to grow our assets primarily through the origination and purchase of mortgage
loans, while purchasing investment and mortgage-backed securities as a supplement to our mortgage
loans. We plan that approximately half of these originations and purchases will be short-term or
variable-rate in nature, in order to assist in the management of interest rate risk. The primary
funding for our asset growth is expected to come from customer deposits and borrowed funds, also
using borrowed funds as a means to extend the maturity of our liabilities. We plan that the funds
borrowed will have initial reprice or maturity dates of three to five years in order to assist in
the management of interest rate risk. Page 54




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We intend to grow customer deposits by continuing to offer desirable products at competitive rates
and by opening new branch offices. We opened three additional branch offices in New Jersey and our
first branch in Suffolk County, NY during 2004. We have received regulatory approval to open an
additional three branch offices in New Jersey and four additional branch offices in Suffolk County.
We also plan to open two branch offices in Staten Island, NY during the first half of 2005. We will
continue to explore branch expansion opportunities in market areas that present significant
opportunities for our traditional thrift business model and intend to open ten to fifteen branches
per year. Although new branching activity results in additional expenses, overall we continue to
maintain a low level of operating expenses. Effective January 1, 2004, Hudson City Savings converted to a federal savings bank charter and
became subject to supervision and regulation by the OTS. Hudson City Bancorp and Hudson City, MHC,
as savings and loan holding companies, are also subject to supervision and regulation by the OTS. On December 16, 2004, the Boards of Directors of Hudson City Bancorp, Hudson City Savings and
Hudson City, MHC unanimously adopted a Plan of Conversion and Reorganization (the Plan). Under
the terms of the Plan, Hudson City Savings will reorganize from the two-tier mutual holding company
structure to a stock holding company structure and Hudson City Bancorp will undertake a
second-step stock offering of new shares of common stock. Hudson City, MHC will be merged into
Hudson City Bancorp as part of the reorganization. The transactions contemplated by the Plan are
subject to the approval of Hudson City Savings depositors, Hudson City Bancorps stockholders
(other than Hudson City, MHC) and regulatory agencies. We believe the transactions should be
completed in the second quarter of 2005. Comparison of Financial Condition at December 31, 2004 and December 31, 2003 During 2004, our total assets increased $3.12 billion, or 18.3%, to $20.15 billion at December 31,
2004 from $17.03 billion at December 31, 2003. Loans increased $2.56 billion, or 29.1%, to $11.36
billion at December 31, 2004 from $8.80 billion at December 31, 2003. The increase in loans
reflected our loan purchase activity, our continued focus on the origination of one- to four-family
first mortgage loans, primarily in New Jersey and the New York metropolitan area, and a significant
decline in loan prepayment activity during the period. For 2004, we purchased first mortgage loans
of $3.12 billion and originated first mortgage loans of $1.38 billion, compared with purchases of
$3.21 billion and originations of $2.17 billion for 2003. The larger volume of purchased mortgage
loans, when compared to the amount of mortgage loans originated, allowed us to grow and
geographically diversify our mortgage loan portfolio at a relatively low overhead cost while
maintaining our traditional thrift business model. We will continue to purchase mortgage loans to grow and diversify our portfolio, as opportunities
and funding are available. The lower volume of origination activity was primarily due to a decline
in refinancing activity. Our first mortgage loan originations and purchases were exclusively in one-to four-family mortgage
loans and were primarily fixed-rate loans. At December 31, 2004, fixed-rate mortgage loans
accounted for 92.5% of our first mortgage loan portfolio compared with 90.9% at December 31, 2003.
This percentage of fixed-rate loans to total loans may have an adverse impact on our earnings in a
rising rate environment as the interest rate on these loans would not reprice, while our
interest-bearing deposits and callable borrowed funds would reprice, from time to time, to the
higher market interest rates. Page 55




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During 2004, $144.0 million of our loan originations were the result of refinancing of our existing
mortgage loans compared with $530.4 million during 2003. The dollar amount of refinancing of
existing mortgage loans was included in total loan originations. We allow customers with Hudson
City originated loans to modify, for a fee, their existing mortgage loans with the intent of
maintaining customer relationships in periods of extensive refinancing due to low long-term
interest rates. In general, all terms and conditions of the existing mortgage loan remain the same
except the adjustment of the interest rate to the currently offered fixed-rate product with a
similar term to maturity or to a reduced term at the request of the borrower. Modifications of our
existing mortgage loans during 2004 were approximately $220.1 million compared with $1.46 billion
during 2003. These loan modifications were not reflected in loan origination totals. We feel loan
refinancing and modification activity are inversely related to the level of interest rates. The
decrease in the refinancing and modification activity, when comparing the 2004 activity to the 2003
activity, was due to the general stability of long-term interest rates during 2004 compared to the
steeply declining interest rate environment during the first half of 2003 and prior periods. If
long-term rates increase or remain relatively stable, we expect the amount of loan refinancings and
modifications to remain at the 2004 levels or decrease. Investment securities held to maturity increased to $1.33 billion at December 31, 2004 from $1.4
million at December 31, 2003. During 2004, we began to classify certain of our government-sponsored
agency security purchases as held to maturity. This increase in investment securities held to
maturity reflected, in part, the subsequent reinvestment of part of the resulting cash flows from
the $649.2 million decrease of investment securities available for sale due to calls of such
securities during 2004. The increase in investment securities held to maturity also represented a
strategy to shorten the overall final maturity of our interest-earning assets, while continuing to
grow our balance sheet, by investing a portion of the cash flows from our mortgage-related assets
into investment securities. Of the agency securities purchased and classified as held to maturity,
$621.6 million have step-up features, where the interest rate is increased on scheduled future
dates. These securities have call options that are generally effective prior to the initial rate
increase but after an initial non-call period of three months to one year. The initial rate for the
securities purchased was higher than interest rates on similar agency securities offered at the
time of purchase without the step-up feature. The rate increases are at least one percent per
adjustment and are fixed over the life of the security. Overall, the aggregate balance of the mortgage-backed securities portfolio remained relatively
stable at $5.38 billion at December 31, 2004 compared with $5.42 billion at December 31, 2003.
Payments received on mortgage-backed securities were primarily reinvested into fixed-rate
mortgage-backed securities at the prevailing market interest rates. Accrued interest receivable
increased $17.3 million, primarily due to increased balances in loans and investments. Fixed
assets increased $5.0 million primarily due to our branch expansion. Total liabilities increased $3.04 billion, or 19.4%, to $18.74 billion at December 31, 2004
compared with $15.70 billion at December 31, 2003. Total deposits increased $1.03 billion, or 9.8%,
to $11.48 billion at December 31, 2004 from $10.45 billion at December 31, 2003. The increase in
total deposits was primarily used to fund our growth initiatives. Interest-bearing deposits
increased $1.00 billion primarily due to an increase of $1.48 billion in our interest-bearing High
Value Checking account product, partially offset by a $405.8 million decrease in time deposits. We
believe the increase in interest-bearing deposits was due primarily to our consistent offering of
competitive rates on our interest-bearing High Value Checking account product. The balance in the
High Value Checking account at December 31, 2004 was $4.19 billion compared with $2.71 billion at
December 31, 2003. We believe the decrease in time deposits was due, in part, to transfers to our
High Value Checking account and significant competition for deposits in the New York metropolitan
area. Page 56




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Borrowed funds increased $2.00 billion, or 38.8%, to $7.15 billion at December 31, 2004 from $5.15
billion at December 31, 2003. The additional borrowed funds were primarily used to fund our asset
growth. Borrowed funds were comprised of $5.30 billion of securities sold under agreements to
repurchase and $1.85 billion of FHLB advances. Securities pledged as collateral against our
securities sold under agreements to repurchase had a market value at December 31, 2004 of
approximately $5.63 billion. Advances from the FHLB utilize our mortgage portfolio as collateral.
The $3.75 billion in new borrowings, which had initial call dates of predominately two to four
years from the date of borrowing, were partially offset by calls and maturities of borrowed funds
in an aggregate amount of $1.75 billion. Total stockholders equity increased $73.5 million, or 5.5%, to $1.40 billion at December 31, 2004
from $1.33 billion at December 31, 2003. The increase in stockholders equity was primarily due to
net income of $239.3 million for 2004, a $6.5 million increase due to the exercise of 900,198 stock
options, a $20.9 million permanent tax benefit due to the exercise of stock options and the vesting
of employee stock benefit plans, and a $19.5 million increase due to the commitment of shares for
our employee stock benefit plans. These increases to stockholders equity were partially offset by repurchases of 4,590,200 shares of
our common stock at an aggregate cost of $161.7 million, purchases of 200,000 shares of common
stock for our recognition and retention plan at an aggregate cost of $7.3 million, cash dividends
declared and paid to common stockholders of $40.5 million and a $3.1 million increase in
accumulated other comprehensive loss primarily due to a decrease in the fair value of our available
for sale investment portfolio. As of December 31, 2004 there remained 3,076,221 shares authorized
to be purchased under our current stock repurchase program. The decrease from prior years in the
amount of the cash dividend paid to common stockholders reflects the waiver of receipt of the
dividend by Hudson City, MHC, the majority stockholder of Hudson City Bancorp in accordance with
the regulations and policies of the OTS. Prior to 2004, Hudson City, MHC was subject to the
policies of the FDIC, which did not permit dividend waivers. At December 31, 2004, the ratio of total stockholders equity to total assets was 6.96% compared
with 7.80% at December 31, 2003. For the year ended December 31, 2004, the ratio of average
stockholders equity to average assets was 7.29% compared with 8.73% for the year ended December
31, 2003. The decrease in these ratios was primarily due to our capital management strategy of planned asset
growth, and a slower percentage growth in stockholders equity as compared to the percentage growth
in assets, due to payment of cash dividends and stock repurchases. Stockholders equity per common
share was $7.85 at December 31, 2004 compared with $7.33 at December 31, 2003. Analysis of Net Interest Income Net interest income represents the difference between the interest income we earn on our
interest-earning assets, such as mortgage loans, mortgage-backed securities and investment
securities, and the expense we pay on interest-bearing liabilities, such as time deposits and
borrowed funds. Net interest income depends on our volume of interest-earning assets and
interest-bearing liabilities and the interest rates we earned or paid on them. Page 57




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##### Table of Contents



Average Balance Sheet.The following table presents certain information regarding our financial
condition and net interest income for 2004, 2003, and 2002. The table presents the average yield on
interest-earning assets and the average cost of interest-bearing liabilities for the periods
indicated. We derived the yields and costs by dividing income or expense by the average balance of
interest-earning assets or interest-bearing liabilities, respectively, for the periods shown. We
derived average balances from daily balances over the periods indicated. Interest income includes
fees that we considered adjustments to yields. Yields on tax-exempt obligations were not computed
on a tax equivalent basis. Page 58




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##### Table of Contents



For the Year Ended December 31,2004
    
    
    2003
    
    
    2002Average
    
    
    
    
    
    
    
    
    
    
    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)
    
    $
    9,783,953
    
    
    $
    539,966
    
    
    
    5.52
    %
    
    $
    6,989,907
    
    
    $
    414,417
    
    
    
    5.93
    %
    
    $
    6,352,764
    
    
    $
    440,073
    
    
    
    6.93
    %Consumer and other loans
    
    
    144,621
    
    
    
    8,650
    
    
    
    5.98
    
    
    
    129,087
    
    
    
    8,379
    
    
    
    6.49
    
    
    
    139,432
    
    
    
    10,027
    
    
    
    7.19Federal funds sold
    
    
    124,755
    
    
    
    1,580
    
    
    
    1.27
    
    
    
    170,302
    
    
    
    1,794
    
    
    
    1.05
    
    
    
    153,773
    
    
    
    2,427
    
    
    
    1.58Mortgage-backed securities,
at amortized cost
    
    
    5,379,439
    
    
    
    242,335
    
    
    
    4.50
    
    
    
    5,948,336
    
    
    
    268,235
    
    
    
    4.51
    
    
    
    5,461,673
    
    
    
    307,743
    
    
    
    5.63Federal Home Loan Bank stock
    
    
    150,104
    
    
    
    3,213
    
    
    
    2.14
    
    
    
    156,721
    
    
    
    4,424
    
    
    
    2.82
    
    
    
    101,591
    
    
    
    5,002
    
    
    
    4.92Investment securities at amortized cost
    
    
    2,671,263
    
    
    
    119,314
    
    
    
    4.47
    
    
    
    1,733,236
    
    
    
    80,079
    
    
    
    4.62
    
    
    
    315,153
    
    
    
    18,945
    
    
    
    6.01Total interest-earning assets
    
    
    18,254,135
    
    
    
    915,058
    
    
    
    5.01
    
    
    
    15,127,589
    
    
    
    777,328
    
    
    
    5.14
    
    
    
    12,524,386
    
    
    
    784,217
    
    
    
    6.26Noninterest-earning assets
    
    
    334,712
    
    
    
    
    
    
    
    
    
    
    
    325,230
    
    
    
    
    
    
    
    
    
    
    
    263,718Total assets
    
    $
    18,588,847
    
    
    
    
    
    
    
    
    
    
    $
    15,452,819
    
    
    
    
    
    
    
    
    
    
    $
    12,788,104Liabilities and stockholders equity:Interest-bearing liabilities:Savings accounts
    
    $
    942,486
    
    
    
    9,359
    
    
    
    0.99
    
    
    $
    927,191
    
    
    
    10,680
    
    
    
    1.15
    
    
    $
    869,823
    
    
    
    17,212
    
    
    
    1.98Interest-bearing demand accounts
    
    
    3,575,468
    
    
    
    79,750
    
    
    
    2.23
    
    
    
    1,971,581
    
    
    
    43,516
    
    
    
    2.21
    
    
    
    370,843
    
    
    
    9,450
    
    
    
    2.55Money market accounts
    
    
    593,426
    
    
    
    5,681
    
    
    
    0.96
    
    
    
    623,442
    
    
    
    6,889
    
    
    
    1.10
    
    
    
    593,021
    
    
    
    11,697
    
    
    
    1.97Time deposits
    
    
    5,482,554
    
    
    
    120,023
    
    
    
    2.19
    
    
    
    5,970,416
    
    
    
    148,254
    
    
    
    2.48
    
    
    
    6,311,562
    
    
    
    217,416
    
    
    
    3.44Total interest-bearing deposits
    
    
    10,593,934
    
    
    
    214,813
    
    
    
    2.03
    
    
    
    9,492,630
    
    
    
    209,339
    
    
    
    2.21
    
    
    
    8,145,249
    
    
    
    255,775
    
    
    
    3.14Borrowed funds
    
    
    6,098,282
    
    
    
    215,253
    
    
    
    3.53
    
    
    
    4,090,459
    
    
    
    167,015
    
    
    
    4.08
    
    
    
    2,854,658
    
    
    
    139,999
    
    
    
    4.90Total interest-bearing liabilities
    
    
    16,692,216
    
    
    
    430,066
    
    
    
    2.58
    
    
    
    13,583,089
    
    
    
    376,354
    
    
    
    2.77
    
    
    
    10,999,907
    
    
    
    395,774
    
    
    
    3.60Noninterest-bearing liabilities:Noninterest-bearing deposits
    
    
    415,905
    
    
    
    
    
    
    
    
    
    
    
    409,220
    
    
    
    
    
    
    
    
    
    
    
    391,865Other noninterest-bearing liabilities
    
    
    125,929
    
    
    
    
    
    
    
    
    
    
    
    111,706
    
    
    
    
    
    
    
    
    
    
    
    102,001Total noninterest-bearing liabilities
    
    
    541,834
    
    
    
    
    
    
    
    
    
    
    
    520,926
    
    
    
    
    
    
    
    
    
    
    
    493,866Total liabilities
    
    
    17,234,050
    
    
    
    
    
    
    
    
    
    
    
    14,104,015
    
    
    
    
    
    
    
    
    
    
    
    11,493,773Stockholders equity
    
    
    1,354,797
    
    
    
    
    
    
    
    
    
    
    
    1,348,804
    
    
    
    
    
    
    
    
    
    
    
    1,294,331Total liabilities and
stockholders equity
    
    $
    18,588,847
    
    
    
    
    
    
    
    
    
    
    $
    15,452,819
    
    
    
    
    
    
    
    
    
    
    $
    12,788,104Net interest income
    
    
    
    
    
    $
    484,992
    
    
    
    
    
    
    
    
    
    
    $
    400,974
    
    
    
    
    
    
    
    
    
    
    $
    388,443Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.43
    %
    
    
    
    
    
    
    
    
    
    
    2.37
    %
    
    
    
    
    
    
    
    
    
    
    2.66
    %Net interest-earning assets
    
    $
    1,561,919
    
    
    
    
    
    
    
    
    
    
    $
    1,544,500
    
    
    
    
    
    
    
    
    
    
    $
    1,524,479Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    2.66
    %
    
    
    
    
    
    
    
    
    
    
    2.65
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %Ratio of interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    1.09
    x
    
    
    
    
    
    
    
    
    
    
    1.11
    x
    
    
    
    
    
    
    
    
    
    
    1.14
    x
   (1)     Amount is net of deferred loan fees 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. Page 59




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Rate/Volume Analysis.The following table presents the extent to which the changes in
interest rates and the changes in volume of our interest-earning assets and interest-bearing
liabilities have affected our interest income and interest expense during the periods indicated.
Information is provided in each category with respect to:  
    changes attributable to changes in volume (changes in volume multiplied by prior rate);
    changes attributable to changes in rate (changes in rate multiplied by prior volume); and
    the net change. The changes attributable to the combined impact of volume and rate have been allocated
proportionately to the changes due to volume and the changes due to rate. 2004 Compared to 2003
    
    
    2003 Compared to 2002Increase (Decrease) Due To
    
    
    Increase (Decrease) Due ToVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In thousands)Interest-earning assets:First mortgage loans, net
    
    $
    155,901
    
    
    $
    (30,352
    )
    
    $
    125,549
    
    
    $
    41,578
    
    
    $
    (67,234
    )
    
    $
    (25,656
    )Consumer and other loans
    
    
    960
    
    
    
    (689
    )
    
    
    271
    
    
    
    (713
    )
    
    
    (935
    )
    
    
    (1,648
    )Federal funds sold
    
    
    (540
    )
    
    
    326
    
    
    
    (214
    )
    
    
    242
    
    
    
    (875
    )
    
    
    (633
    )Mortgage-backed securities
    
    
    (25,313
    )
    
    
    (587
    )
    
    
    (25,900
    )
    
    
    25,625
    
    
    
    (65,133
    )
    
    
    (39,508
    )Federal Home Loan Bank stock
    
    
    (181
    )
    
    
    (1,030
    )
    
    
    (1,211
    )
    
    
    2,064
    
    
    
    (2,642
    )
    
    
    (578
    )Investment securities
    
    
    41,920
    
    
    
    (2,685
    )
    
    
    39,235
    
    
    
    66,479
    
    
    
    (5,345
    )
    
    
    61,134Total
    
    
    172,747
    
    
    
    (35,017
    )
    
    
    137,730
    
    
    
    135,275
    
    
    
    (142,164
    )
    
    
    (6,889
    )Interest-bearing liabilities:Savings accounts
    
    
    175
    
    
    
    (1,496
    )
    
    
    (1,321
    )
    
    
    1,075
    
    
    
    (7,607
    )
    
    
    (6,532
    )Interest-bearing demand accounts
    
    
    35,836
    
    
    
    398
    
    
    
    36,234
    
    
    
    35,492
    
    
    
    (1,426
    )
    
    
    34,066Money market accounts
    
    
    (331
    )
    
    
    (877
    )
    
    
    (1,208
    )
    
    
    573
    
    
    
    (5,381
    )
    
    
    (4,808
    )Time deposits
    
    
    (11,613
    )
    
    
    (16,618
    )
    
    
    (28,231
    )
    
    
    (11,222
    )
    
    
    (57,940
    )
    
    
    (69,162
    )Borrowed funds
    
    
    73,146
    
    
    
    (24,908
    )
    
    
    48,238
    
    
    
    53,248
    
    
    
    (26,232
    )
    
    
    27,016Total
    
    
    97,213
    
    
    
    (43,501
    )
    
    
    53,712
    
    
    
    79,166
    
    
    
    (98,586
    )
    
    
    (19,420
    )Net change
in net interest income
    
    $
    75,534
    
    
    $
    8,484
    
    
    $
    84,018
    
    
    $
    56,109
    
    
    $
    (43,578
    )
    
    $
    12,531
 Comparison of Operating Results for the Years Ended December 31, 2004 and 2003 General.Net income was $239.3 million for the year ended December 31, 2004, an increase of
$31.9 million, or 15.4%, compared with net income of $207.4 million for the year ended December 31,
2003. Basic and diluted earnings per common share were $1.33 and $1.29, respectively, for 2004
compared with basic and diluted earnings per share of $1.14 and $1.11, respectively, for 2003. For
the year ended December 31, 2004 our return on average stockholders equity was 17.66% compared
with 15.38% for 2003. The increase in the return on average stockholders equity was primarily due
to the growth of our net income and a slower percentage growth of stockholders equity due to
payment of cash dividends and stock repurchases. Our return on average assets for 2004 was 1.29%
compared with 1.34% for 2003. The decrease in the return on average assets was primarily due to our
overall balance sheet growth in the prevailing interest rate environments of 2003 and 2004. Page 60




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Interest and Dividend Income.Total interest and dividend income increased $137.8 million,
or 17.7%, to $915.1 million for the year ended December 31, 2004 compared with $777.3 million for
the year ended December 31, 2003. The increase in total interest and dividend income was primarily
due to a $3.12 billion, or 20.6%, increase in the average balance of total interest-earning assets
to $18.25 billion for the year ended December 31, 2004 compared with $15.13 billion for the year
ended December 31, 2003. The growth in the average balance of total interest-earning assets was
consistent with the growth initiatives employed by us during recent periods. The impact on interest
and dividend income from the increase in the average balance of our total interest-earning assets
was partially off-set by a 13 basis point decrease in the average yield on total interest-earning
assets to 5.01% for 2004 from 5.14% for 2003, primarily reflecting the growth of our
interest-earning assets during the prevailing interest rate environments of 2003 and 2004. The $125.6 million increase in interest and fee income on first mortgage loans was primarily due to
a $2.79 billion increase in the average balance of first mortgage loans, which reflected our
continued emphasis on balance sheet growth in our core business of first mortgage loans. The
increase in mortgage loan income due to the increase in the average balance was partially offset by
a 41 basis point decrease in the average yield, which reflected the large volume of loan
origination and purchase activity during the prevailing long-term interest rate environments of
2003 and 2004. The $39.2 million increase in interest and dividends on total investment securities was primarily
due to an increase in the average balance of investment securities of $938.0 million, which
reflected the subsequent reinvestment of certain of the cash flows from the prepayment activity on
our mortgage-related assets in 2003 and 2004 into investment securities, and was consistent with
the decision to shorten the overall weighted-average life of our interest-earning assets by
investing in callable securities with initial call dates of three months to one year and final
maturity dates of five to seven years. The increase in income on total investment securities due to
the increase in the average balance was partially offset by a 15 basis point decrease in the
average yield on our investment securities, which reflected the large volume of purchases made
during the prevailing interest rate environments of 2003 and 2004. The $25.9 million decrease in interest income on total mortgage-backed securities was primarily due
to a $568.9 million decrease in the average balance of total mortgage-backed securities, which
reflected the high volume of prepayment activity, the sales of mortgage-backed securities available
for sale, and the subsequent reinvestment of certain of the resulting cash flows into investment
securities or purchased mortgage loans. The decrease in interest income on total mortgage-backed
securities also reflected a 1 basis point decrease in the average yield on mortgage-backed
securities. The impact on mortgage-backed securities interest income of the decline in the average balance and
weighted average yield was partially offset by the slowing of the net premium amortization due to
the decline in prepayment activity during the second half of 2003 and 2004. Interest Expense.Total interest expense, comprised of interest on deposits and interest on
borrowed funds, increased $53.7 million, or 14.3%, to $430.1 million for the year ended December
31, 2004 from $376.4 million for the year ended December 31, 2003. This increase was primarily due
to a $3.11 billion, or 22.9%, increase in the average balance of total interest-bearing liabilities
to $16.69 billion for the year ended December 31, 2004 compared with $13.58 billion for the year
ended December 31, 2003. The impact of the increase in the average balance of total
interest-bearing liabilities was offset, in part, by a 19 basis point decrease in the average cost
of total interest-bearing liabilities to 2.58% for 2004 from 2.77% for 2003. Page 61




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Interest expense on borrowed funds increased $48.3 million primarily due to a $2.01 billion
increase in the average balance of borrowed funds to $6.10 billion for 2004, the impact of which
was partially offset by a 55 basis point decrease in the average cost of borrowed funds to 3.53%
for 2004. The increase in the average balance of borrowed funds was used to fund asset growth. The
decrease in the average cost of borrowed funds reflected the continued growth of our borrowed funds
in the prevailing interest rate environments that existed during 2003 and 2004. We intend to
continue to use borrowed funds as a funding source for our asset growth initiatives, with new
borrowings primarily having periods to initial repricing of three to five years. Interest expense on interest-bearing deposits increased $5.5 million primarily due to a $1.10
billion increase in the average balance of interest-bearing deposits to $10.59 billion for 2004,
the impact of which was partially offset by an 18 basis point decrease in the average cost to
2.03%. The increase in the average balance of interest-bearing deposits, primarily used to fund
asset growth, reflected a $1.61 billion increase in the average balance of interest-bearing demand
accounts due to the growth in our High Value Checking account product. We believe the increase in
the average balance of interest-bearing deposits was primarily due to our consistent offering of
competitive rates on our High Value Checking account product. We believe the $487.9 million
decrease in the average balance of time deposits was due in part to transfers to our High Value
Checking account and significant competition for deposits in the New York metropolitan area. We
intend to continue to fund future asset growth using customer deposits as our primary source of
funds, by continuing to pay competitive rates and by opening new branch offices, while
supplementing the deposit growth with borrowed funds. The 18 basis point decrease in the average cost of interest-bearing deposits primarily reflected a
29 basis point decrease in the average cost of our time deposits, a 16 basis point decrease in the
average cost of savings accounts and a 14 basis point decrease in the average cost of money market
accounts. These decreases were partially offset by a 2 basis point increase in the average cost of
interest-bearing demand deposits reflecting the increasing short-term interest rate environment of
2004. This decrease in the average cost of interest-bearing deposits reflected the prevailing
interest rate environments experienced during 2003 and 2004. Net Interest Income.Net interest income increased $84.0 million, or 20.9%, to $485.0 million
for the year ended December 31, 2004 compared with $401.0 million for the year ended December 31,
2003. This increase primarily reflected our growth initiatives, which resulted in increases in the
average balance of both interest-earning assets and interest-bearing liabilities, and the net
interest rate spread earned on this growth. Our net interest rate spread, determined by subtracting
the weighted-average cost of total interest-bearing liabilities from the weighted-average yield on
total interest-earning assets, increased 6 basis points to 2.43% for 2004 from 2.37% for 2003. Our
net interest margin, determined by dividing net interest income by total average interest-earning
assets, increased 1 basis point to 2.66% for 2004 from 2.65% for 2003. The increases in these ratios reflected the larger decrease in the cost of total interest-bearing
liabilities compared with the decrease in the yield of total interest-earning assets primarily due
to the decreased prepayment activity on our mortgage-related assets, and the resulting decrease in
the amortization of the net premium on these assets. The increase in these ratios also reflected
the overall shift in our asset mix towards first mortgage loans, which have a higher yield than our
other interest-earning assets, the impact of which was partially offset by an overall shift in our
liability mix toward borrowed funds, which have a higher average rate than our other
interest-bearing liabilities. Page 62




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Provision for Loan Losses.Our provision for loan losses for the year ended December 31, 2004
was $790,000 compared with $900,000 for the year ended December 31, 2003. Net charge-offs for the
year ended December 31, 2004 were $18,000 compared with net recoveries of $146,000 for the year
ended December 31, 2003. The allowance for loan losses increased $772,000 to $27.3 million at
December 31, 2004 from $26.5 million at December 31, 2003. The increase in the allowance for loan
losses, through the provision for loan losses, reflected the overall growth of the loan portfolio,
increases in non-performing loans and low levels of charge-offs. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more,
increased $1.3 million to $21.6 million at December 31, 2004 from $20.3 million at December 31,
2003, primarily reflecting increases in non-accrual loans. The ratio of non-performing loans to
total loans was 0.19% at December 31, 2004 compared with 0.23% at December 31, 2003. The ratio of
the allowance for loan losses to non-performing loans was 126.44% at December 31, 2004 compared
with 131.09% at December 31, 2003. The ratio of the allowance for loan losses to total loans was
0.24% at December 31, 2004 compared with 0.30% at December 31, 2003. During 2004, we lowered the loss factors used in our worksheet on our purchased mortgage loans to
reflect the seasoning of the portfolio, and the charge-off and delinquency experience.
Notwithstanding such decrease, we have maintained a minimal provision for loan losses during 2004
to reflect expected losses resulting from the actual growth in our loan portfolio. We consider the
ratio of allowance for loan losses to total loans at December 31, 2004, given our primary lending
emphasis and current market conditions, to be at an acceptable level. Furthermore, the increase in
the allowance for loan losses during 2004 reflected the growth in the loan portfolio, the low
levels of loan charge-offs, the stability in the real estate market and the resulting stability in
our overall loan quality. Although we believe that we have established and maintained the allowance for loan losses at
adequate levels, additions may be necessary if future economic and other conditions differ
substantially from the current operating environment. Although we use the best information
available, the level of the allowance for loan losses remains an estimate that is subject to
significant judgment and short-term change. See Critical Accounting Policies. Non-Interest Income.Total non-interest income decreased $13.1 million to $16.6 million for the
year ended December 31, 2004 from $29.7 million for the year ended December 31, 2003. The decrease
in non-interest income primarily reflected a $12.9 million decrease in gains on securities
transactions, net to $11.4 million for 2004 from $24.3 million for 2003, primarily due to decreases
in sales of mortgage-backed securities. The $11.4 million gain on securities transactions during
2004 resulted from an opportunity to realize gains from the sale of certain available for sale
mortgage-backed securities prior to interest rate changes, such as seen in the second quarter of
2004, which would have had an adverse impact on their fair market value. The historically low
interest rate environment enabled us to realize these gains on the sales of securities, as the
lower rates increased the fair value of the fixed-rate securities sold. The gains in 2003 resulted
from the enhanced opportunities to realize gains due to the declining interest rate environment.
The total cash flow from the sales of these securities during 2004 was $510.5 million, which was
subsequently reinvested into mortgage loans and investment securities. Page 63




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Non-Interest Expense.Total non-interest expense increased $15.8 million, or 15.4%, to $118.3
million for the year ended December 31, 2004 from $102.5 million for the year ended December 31,
2003. The increase was primarily due to increases in compensation and employee benefit expense
related to our employee stock benefit plans, compensation expense related to staff increases due to
our branch expansion program, occupancy expenses due to our branch expansion program and expenses
related to internal control evaluation and testing in order to comply with the new certification
requirements imposed by the Sarbanes-Oxley Act and other regulatory costs. Our efficiency ratio was
23.60% for 2004 compared with 23.81% for 2003. Our ratio of non-interest expense to average total
assets for 2004 was 0.64% compared with 0.66% for 2003. The relative stability of these ratios
reflected our efforts to control costs, notwithstanding the actual increase in non-interest
expense, as our average assets grew in excess of 20.0% when comparing 2004 to 2003. Income Taxes.Income tax expense increased $23.3 million, or 19.4%, to $143.1 million for the
year ended December 31, 2004 from $119.8 million for the year ended December 31, 2003, primarily
due to the 16.9% increase in income before income tax expense. Our effective tax rate increased
for 2004 to 37.43% from 36.61% for 2003, primarily due to the expense of the employee stock
ownership plan, which is not fully deductible for income tax purposes. Comparison of Financial Condition at December 31, 2003 and December 31, 2002 During 2003, our total assets increased $2.89 billion, or 20.4%, to $17.03 billion at December 31,
2003 from $14.14 billion at December 31, 2002. Loans increased $1.83 billion, or 26.3%, to $8.80
billion at December 31, 2003 from $6.97 billion at December 31, 2002. The increase in loans
reflected a significant increase in our loan purchase activity as well as our continued focus on
the origination of one- to four-family first mortgage loans, consistent with our growth strategies.
For 2003, we originated first mortgage loans of $2.17 billion and purchased first mortgage loans
of $3.21 billion, compared with originations of $1.84 billion and purchases of $1.72 billion for
2002. Loan purchases exceeded originations due to their availability in the high prepayment
activity environment experienced during 2003 and the growth initiatives employed by us in recent
periods. These first mortgage loan originations and purchases were exclusively in one-to
four-family mortgage loans and were primarily fixed-rate loans. At December 31, 2003, fixed-rate
mortgage loans accounted for 90.9% of our first mortgage loan portfolio compared with 86.5% at
December 31, 2002. The strong levels of loan originations and purchases during 2003 reflected the
continuation of the impact of the low interest rate environment. During 2003, due to the low long-term interest rate environment, $530.4 million of our loan
originations were the result of refinancing of our existing mortgage loans. The dollar amount of
refinancing of existing mortgage loans was included in total loan originations. We allow certain
customers to modify, for a fee, their existing mortgage loans with the intent of maintaining
customer relationships in periods of extensive refinancing due to low long-term interest rates. In
general, all terms and conditions of the existing mortgage loan remain the same except the
adjustment of the interest rate to the currently offered fixed-rate product with a similar term to
maturity or to a reduced term at the request of the borrower. Modifications of our existing
mortgage loans during the 2003 were approximately $1.46 billion. These loan modifications were not
reflected in loan origination totals. We feel loan refinancing and modification activity are
directly tied to the level of interest rates. Page 64




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The loan purchases were made pursuant to our wholesale loan purchase program established to
supplement our retail loan originations. The purchasing agreements, as established with each
seller/servicer, contain parameters as to the loans that can be included in each package. These
parameters, such as maximum loan size and maximum loan-to-value ratio, conform to parameters
generally utilized by us to originate mortgage loans. Purchased loan packages are subject to
internal due diligence procedures that may include review of individual loan files. This review
subjects the purchased loan file to substantially the same underwriting standards used in our own
loan origination process. Loan packages purchased include mortgage loans secured by properties
located primarily in the east coast corridor states between Massachusetts and North Carolina, and
in Michigan and Illinois. Investment securities available for sale increased $1.68 billion to $2.24 billion at December 31,
2003 from $560.9 million at December 31, 2002. The increase in investment securities available for
sale primarily reflected the investment of part of the cash flow from the high levels of prepayment
activity on our mortgage-related assets into investment securities. The increase in investment
securities also reflected our decision to shorten the overall weighted-average life of our assets
by investing in callable government-sponsored agency securities with initial call dates of three
months to one year and terms to maturity of generally less than ten years. Mortgage-backed
securities decreased $703.5 million, or 11.5%, to $5.42 billion at December 31, 2003 from $6.13
billion at December 31, 2002. This decrease was primarily due to the high level of prepayment
activity and sales of approximately $1.37 billion of our mortgage-backed securities during 2003. The $27.4 million increase in Federal Home Loan Bank (FHLB) stock to $164.9 million at December
31, 2003, was due to the amount of stock we were required by the FHLB to hold. The $24.5 million
increase in other assets was primarily due to an increase in our deferred tax asset calculations as
required by generally accepted accounting principles. Total liabilities increased $2.87 billion, or 22.4%, to $15.70 billion at December 31, 2003
compared with $12.83 billion at December 31, 2002. Total deposits increased $1.31 billion, or
14.3%, to $10.45 billion at December 31, 2003 from $9.14 billion at December 31, 2002. The
increase in total deposits was primarily used to fund our growth initiatives. Interest-bearing
deposits increased $1.31 billion primarily due to an increase of $1.77 billion in our
interest-bearing High Value Checking account product. We believe the increase in interest-bearing
deposits was due primarily to our consistent offering of competitive rates on our deposit products,
primarily on our interest-bearing High Value Checking account product. The balance in the High
Value Checking account at December 31, 2003 was $2.71 billion compared with $943.2 million at
December 31, 2002. This growth in interest-bearing deposits was partially offset by a $508.9
million decrease in time deposits. Although our time deposit rates are competitive, we believe the
decrease in time deposits was due, in part, to transfers to our High Value Checking account. Borrowed funds increased $1.55 billion, or 43.1%, to $5.15 billion at December 31, 2003 from $3.60
billion at December 31, 2002. The additional borrowed funds were primarily used to fund asset
growth consistent with our capital management strategy. Borrowed funds were comprised of $3.20
billion of securities sold under agreements to repurchase and $1.95 billion of FHLB advances.
Securities pledged as collateral against our securities sold under agreements to repurchase had a
market value at December 31, 2003 of approximately $3.47 billion. Advances from the FHLB utilize
our mortgage portfolio as collateral. The $2.03 billion in new borrowings had initial call dates
of three months to three years from the date of borrowing. These short- and intermediate-term
borrowed funds complement the $3.60 billion of previously existing long-term borrowings. During
2003 we also restructured certain of our borrowed funds, which resulted in the extension of the
weighted-average maturity and lowered the contract interest rate. Page 65




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Total stockholders equity increased $13.3 million, or 1.0%, to $1.33 billion at December 31, 2003
from $1.32 billion at December 31, 2002. The increase was primarily the result of net income for
2003 of $207.4 million, an increase of $11.0 million due to the exercise of approximately 1.5
million stock options, and an increase of $14.2 million due to the commitment of shares for our
stock-related employee benefit plans. Partially offsetting these increases in stockholders equity were repurchases of approximately 3.7
million shares of our common stock at an aggregate cost of $101.1 million, cash dividends declared
and paid to common stockholders of $95.6 million and a $30.2 million decrease in accumulated other
comprehensive income due to the decrease in the overall market value of our investment and
mortgage-backed securities available for sale, reflecting a generally lower interest rate
environment. At December 31, 2003, the ratio of total stockholders equity to total assets was 7.80% compared
with 9.30% at December 31, 2002. For the year ended December 31, 2003, the ratio of average
stockholders equity to average assets was 8.73% compared with 10.12% for the year ended December
31, 2002. The decrease in these ratios was primarily due to our capital management strategy of
planned asset growth, and a slower percentage growth in stockholders equity as compared to the
percentage growth in assets, due to payment of cash dividends and stock repurchases. Stockholders
equity per common share was $7.33 at December 31, 2003 compared with $7.22 at December 31, 2002. Comparison of Operating Results for the Years Ended December 31, 2003 and 2002 General.Net income was $207.4 million for the year ended December 31, 2003, an increase of
$15.4 million, or 8.0%, compared with net income of $192.0 million for the year ended December 31,
2002. Basic and diluted earnings per common share were $1.14 and $1.11, respectively, for 2003
compared with basic and diluted earnings per share of $1.04 and $1.01, respectively, for 2002. For
the year ended December 31, 2003 our return on average stockholders equity was 15.38% compared
with 14.84% for 2002. The increase in the return on average stockholders equity was primarily due
to the growth of our net income and a slower percentage growth in stockholders equity as compared
to the percentage growth in assets due to payment of cash dividends and stock repurchases. Our
return on average assets for 2003 was 1.34% compared with 1.50% for 2002. The decrease in the
return on average assets was primarily due to the lower net interest margin due to the low interest
rate environment. The decline in the return on average assets also reflected our overall balance
sheet growth. Interest and Dividend Income.Total interest and dividend income decreased $6.9 million, or
0.9%, to $777.3 million for the year ended December 31, 2003 compared with $784.2 million for the
year ended December 31, 2002. The decrease in total interest and dividend income was primarily due
to a 112 basis point decrease in the average yield on interest-earning assets to 5.14% for 2003
from 6.26% for 2002, reflecting yield declines to varying degrees in all asset categories. The
impact on interest and dividend income from the decrease in the weighted-average yield on our
interest-earning assets was partially off-set by an increase in the average balance of total
interest-earning assets of $2.61 billion, or 20.8%, to $15.13 billion for the year ended December
31, 2003 compared with $12.52 billion for the year ended December 31, 2002. Page 66




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The $25.7 million decrease in interest and fee income on first mortgage loans was primarily due to
a 100 basis point decrease in the average yield, which reflected the large volume of loan
origination and purchase activity during the low long-term interest rate environment of 2003 and
the acceleration of the amortization of the net premium on these assets due to the high levels of
modification and refinancing activity. The decrease in mortgage loan income due to the decreases
in yields was partially off-set by a $637.1 million increase in the average balance of first
mortgage loans, which reflected internal growth that was consistent with our capital management
strategy and growth initiatives. The $39.5 million decrease in interest income on mortgage-backed securities was primarily due to a
112 basis point decrease in the average yield on mortgage-backed securities, which reflected the
significant turnover in the portfolio, the downward repricing of our adjustable-rate securities
during the low interest rate environment of 2003 and the acceleration of the net premium on these
assets. The decrease in income on mortgage-backed securities due to the decrease in yield was
partially off-set by the impact of a $486.7 million increase in the average balance of
mortgage-backed securities, which reflected our internal growth initiatives. The $61.1 million growth in interest and dividends on investment securities available for sale was
primarily due to an increase in the average balance of $1.42 billion, which reflected the
investment of certain of the cash flows from the high level of prepayment activity on our
mortgage-related assets into investment securities, and the decision to shorten the overall
weighted-average life of our assets by investing in callable securities with initial call dates of
three months to one year. The increase in income on investment securities due to the increase in
the average balance was partially off-set by a 139 basis point decrease in the average yield on our
investment securities, which reflected the large volume of purchases made during the low interest
rate environment of 2003. Interest Expense.Total interest expense, comprised of interest on deposits and interest on
borrowed funds, decreased $19.4 million, or 4.9%, to $376.4 million for the year ended December 31,
2003 from $395.8 million for the year ended December 31, 2002. This decrease was primarily due to
a decrease in the average cost of interest-bearing liabilities of 83 basis points to 2.77% for 2003
from 3.60% for 2002. The impact of the decline in the average cost of interest-bearing liabilities
was offset, in part, by an increase in the average balance of total interest-bearing liabilities of
$2.58 billion, or 23.5%, to $13.58 billion for 2003 from $11.00 billion for 2002. Interest expense on borrowed funds increased $27.0 million primarily due to an increase in the
average balance of $1.24 billion, the impact of which was partially off-set by a decrease in the
average cost of borrowed funds of 82 basis points. The increase in the average balance of borrowed
funds was used to fund asset growth consistent with our capital management and growth strategies.
The decrease in the average cost of borrowed funds reflected the continued growth of our borrowed
funds in the low interest rate environment that existed during 2003. The decrease in the average
cost of borrowed funds also reflected the restructuring of certain of our borrowed funds during
2003, which resulted in the extension of the weighted-average maturity and lowered the contract
rates. Interest expense on deposits decreased $46.5 million primarily due to a decrease in the average
cost of 93 basis points, the impact of which was partially off-set by an increase in the average
balance of deposits of $1.34 billion. The decrease in the average cost of interest-bearing
deposits reflected a 96 basis point decrease in the average cost of our time deposits, an 83 basis
point decrease in the average cost of savings accounts, an 87 basis point decrease in the average
cost of money market deposits, and a 34 basis point decrease in the average cost of
interest-bearing demand deposits. Page 67




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These decreases in the average cost of interest-bearing deposits reflected the low interest rate
environment experienced during 2003 and the growth of our High Value Checking account product, the
rate for which was lower than our average cost of total deposits during 2003. The increase in the average balance of deposits, primarily used to fund asset growth, reflected a
$1.60 billion increase in the average balance of interest-bearing demand accounts due to the growth
in our High Value Checking account product, and an increase of $57.4 million in the average balance
of our regular savings account. We believe the increase in the average balance of deposits was
primarily due to our consistent offering of competitive rates on desirable customer deposit
products. Although our time deposit rates are competitive, we believe the decrease of $341.1 million in the
average balance of time deposits was primarily due to transfers to our High Value Checking account. Net Interest Income.Net interest income increased $12.6 million, or 3.2%, to $401.0 million
for the year ended December 31, 2003 compared with $388.4 million for the year ended December 31,
2002. This increase primarily reflected our growth initiatives, which resulted in increases in the
average balance of both interest-earning assets and interest-bearing liabilities, and the net
interest rate spread earned on this growth. Our net interest rate spread, the difference between
the average yield on total interest-earning assets and the average cost of total interest-bearing
liabilities, decreased 29 basis points to 2.37% for 2003 from 2.66% for 2002. Our net interest
margin, represented by net interest income divided by average total interest-earning assets,
decreased 45 basis points to 2.65% for 2003 from 3.10% for 2002. These decreases reflected the larger decrease in the yield on interest-earning assets compared with
the decrease in the cost of interest-bearing liabilities due to the continued decline in long-term
market interest rates during the first six months of 2003 and the timing of the impact on earnings
of the market rate changes. The decrease also reflected the increased amortization of the net
premium on our mortgage loans and mortgage-backed securities due to the high level of prepayment
activity on these mortgage-related assets. However, the stabilized rate environment and steeper
yield curve which occurred in the second half of 2003 improved our net interest rate margin and net
interest rate spread in the fourth quarter of 2003 when compared to the prior quarters reported in
2003. Provision for Loan Losses.Our provision for loan losses for the year ended December 31, 2003
was $900,000, a decrease of $600,000, compared with $1.5 million for the year ended December 31,
2002. Net recoveries were $146,000 for the year ended December 31, 2003 compared with net
charge-offs of $9,000 for 2002. The decrease in the provision reflected our recent low charge-off
history given the relative stability of the housing market. The allowance for loan losses
increased $1.0 million, or 3.9%, to $26.5 million at December 31, 2003 from $25.5 million at
December 31, 2002. The increase in the allowance for loan losses, through the provision for loan
losses, reflected the overall growth of the loan portfolio and the level of delinquent and
non-performing loans. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more,
increased $100,000 to $20.3 million at December 31, 2003 from $20.2 million at December 31, 2002.
The ratio of non-performing loans to total loans was 0.23% at December 31, 2003 compared with
0.29% at December 31, 2002. The ratio of the allowance for loan losses to non-performing loans was
131.09% at December 31, 2003 compared with 126.27% at December 31, 2002. The ratio of the
allowance for loan losses to total loans was 0.30% at December 31, 2003 compared with 0.37% at
December 31, 2002. Page 68




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Non-Interest Income.Total non-interest income increased $21.7 million to $29.7 million for the
year ended December 31, 2003 from $8.0 million for the year ended December 31, 2002, primarily
reflecting gains on securities transactions, net. Service charges and other income, which
generally consist of service charges and fees on deposit accounts, decreased $600,000 to $5.3
million for 2003 compared with $5.9 million for 2002, due to a gain on the sale of a commercial
property in 2002. The $24.3 million gain on securities transactions, net, during 2003, resulted from an opportunity
to realize gains from the sale of certain available for sale mortgage-backed and investment
securities prior to an interest rate change which would have had an adverse impact on their fair
market value. The gain also reflected the disposition of certain of our held to maturity
mortgage-backed securities whose amortized principal was less than fifteen percent of the purchased
principal, as allowed under SFAS No. 115. The cash flow of $1.45 billion from the sale of the
securities was reinvested into fixed-rate securities. Non-Interest Expense.Total non-interest expense increased $9.0 million, or 9.6%, to $102.5
million for the year ended December 31, 2003 from $93.5 million for the year ended December 31,
2002. The increase was primarily due to an increase of $8.1 million in compensation and employee
benefits reflecting routine salary increases, increases in stock-related compensation expense and
increases in pension expense. Stock-related compensation expense increased $4.5 million primarily
due to increases in the current average market price of our common stock. Our efficiency ratio, determined by dividing total non-interest expense by the sum of net interest
income and non-interest income was 23.81% for 2003 compared with 23.59% for 2002. Our ratio of
non-interest expense to average total assets for 2003 was 0.66% compared with 0.73% for 2002. The
relative stability of these ratios reflected our efforts to control costs, notwithstanding the
actual increase in non-interest expense, as our assets grew in excess of 20%. Income Taxes.Income tax expense increased $10.4 million, or 9.5%, to $119.8 million for the
year ended December 31, 2003 from $109.4 million for the year ended December 31, 2002, primarily
due to the 8.6% increase in income before income tax expense. Our effective tax rate for the 2003
was 36.61% compared with 36.29% for 2002. Liquidity and Capital Resources The term liquidity refers to our ability to generate adequate amounts of cash to fund loan
originations, loan purchases, deposit withdrawals and operating expenses. Our primary sources of
funds are scheduled amortization and prepayments of loan and mortgage-backed securities principal,
new deposits, borrowed funds, maturities and calls of investment securities and funds provided by
our operations. Our membership in the FHLB provides us access to additional sources of borrowed
funds, which is generally limited to twenty times the amount of FHLB stock owned. Deposit flows, calls of investment securities and borrowed funds, and prepayments of loans and
mortgage-backed securities are strongly influenced by interest rates, general and local economic
conditions and competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds. As mortgage interest rates decline, customer-prepayment activity
tends to accelerate causing an increase in cash flow from both our mortgage loan and
mortgage-backed security portfolios. If our pricing is competitive, the demand for mortgage
originations also accelerates. Page 69




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When mortgage rates increase, the opposite effect on prepayment activity tends to occur and our
loan origination and purchase activity becomes increasingly dependent on the strength of the
residential real estate markets and the volume of home purchases and new construction activity in
the markets we serve. Principal repayments on loans were $2.02 billion during the year ended December 31, 2004 compared
with $3.63 billion for the year ended December 31, 2003. Principal payments received on
mortgage-backed securities totaled $1.73 billion during 2004 compared with $3.80 billion during
2003. The decrease in payments on loans and mortgage-backed securities reflected the high levels of
prepayment activity in 2003, due to the declining interest rate environment during that year. The
aggregate amount of maturities and calls of investment securities during 2004 was $1.42 billion
compared with maturities and calls of $1.33 billion during 2003. Total deposits increased $1.02 billion during the year ended December 31, 2004 compared with a
$1.32 billion increase during year ended December 31, 2003. Deposit flows are affected by the
level of market interest rates, the interest rates and products offered by competitors, the
volatility of equity markets, and other factors. We believe the increase in interest-bearing
deposits during 2004 was due primarily to our consistent offering of competitive rates on our
interest-bearing High Value Checking account. Time deposit accounts scheduled to mature within one
year were $3.71 billion at December 31, 2004. We anticipate that we will have sufficient resources
to meet this current funding commitment. Based on our deposit retention experience and current
pricing strategy, we anticipate that a significant portion of these time deposits will remain with
us as renewed time deposits or transfers to our High Value Checking account product. We are
committed to maintaining a strong liquidity position; therefore we monitor our liquidity position
on a daily basis. For the year ended December 31, 2004 we borrowed $3.75 billion compared with new borrowings of
$2.03 billion for the year ended December 31, 2003. Principal payments on borrowed funds during
2004 were $1.75 billion compared with $475.0 million in 2003. The increase in principal payments
reflected the increase in calls and maturities on borrowed funds during this generally increasing
short-term interest rate environment and the use of borrowed funds during 2004 with maturities of
less than one year. The increase in new borrowings reflected the increase in call activity and
maturities of short-term borrowings and the subsequent origination of new borrowed funds to support
our balance sheet growth initiatives. The funds borrowed during 2004 had initial call dates of one
month to four years from the date of borrowing and final maturities of one month to ten years. At
December 31, 2004, there were no borrowed funds scheduled to mature within one year, however, $2.03
billion of borrowed funds have the potential to be called within one year. We anticipate we will
have sufficient resources to meet this funding commitment by borrowing new funds at the prevailing
market interest rate, or paying-off the borrowed funds, as they mature or are called. Our primary investing activities are the origination and purchase of one- to four-family real
estate loans and consumer and other loans, the purchase of mortgage-backed securities, and the
purchase of investment securities. We originated total loans of $1.46 billion during the year ended
December 31, 2004 compared with $2.27 billion during the year ended December 31, 2003. The decrease
in originations reflected the high volume of refinancing and prepayment activity in 2003 due to the
declining interest rate environment. During 2004 we purchased total loans of $3.12 billion compared
with $3.21 billion during 2003. The continued larger volume of purchased mortgage loans in 2004,
when compared to originated loans, allowed us to grow and geographically diversify our mortgage
loan portfolio at a relatively low overhead cost while maintaining our traditional thrift business
model. The increase in loan purchases also reflected the asset growth strategies we have employed
during recent periods, using customer deposits and borrowed funds as our funding sources. We will
continue to purchase mortgage loans to grow and diversify our portfolio, as opportunities and
funding are available. Page 70




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Purchases of mortgage-backed securities during the year ended December 31, 2004 were $2.20 billion
compared with $4.53 billion during the year ended December 31, 2003. The decrease in purchases of
mortgage-backed securities reflected the decline in prepayment activity that resulted in a decrease
in funds to reinvest, and a shift of reinvestment of cash flows to purchases to
government-sponsored agency investment securities and mortgage loans. During the year ended December 31, 2004, we purchased $2.11 billion of investment securities
compared with purchases of $3.09 billion during the year ended December 31, 2003. This decrease in
purchases was primarily due to the lower amount of investable cash flows in 2004 caused by lower
prepayment activity on our mortgage-related assets. Of the investment securities purchased during
2004, $1.77 billion were classified as held to maturity. Of these securities, $621.6 million have
step-up features, where the interest rate is increased on scheduled future dates. These securities
have call options that are generally effective prior to the initial rate increase but after an
initial non-call period of three months to one year. The initial rate for the securities purchased
was higher than interest rates on similar agency securities offered at the time of purchase without
the step-up feature. The rate increases are at least one percent per adjustment and are fixed over
the life of the security. As part of the membership requirements of the FHLB, we are required to hold a certain dollar amount
of FHLB common stock based on our asset size or our borrowings from the FHLB. During 2004, we
redeemed $24.9 million of FHLB common stock due to calls of funds borrowed from the FHLB. During
2003, we purchased $27.4 million of FHLB stock. The redemptions made during 2004 brought our total
investment in FHLB stock to $140.0 million, the amount we are currently required to hold. Under our stock repurchase programs, shares of Hudson City Bancorp common stock may be purchased in
the open market and through other privately negotiated transactions, from time-to-time, depending
on market conditions. The repurchased shares are held as treasury stock for general corporate use.
During the year ended December 31, 2004, we purchased 4,590,200 shares of our common stock at an
aggregate cost of $161.7 million compared with purchases of 3,677,375 shares during the year ended
December 31, 2003 at an aggregate cost of $101.1 million. At December 31, 2004, there were
3,076,221 shares remaining to be repurchased under the existing stock repurchase program. During
2004, the trustee of our recognition and retention plan purchased 200,000 shares of common stock
for our recognition and retention plan at an aggregate cost of $7.3 million due to awards to
employees made during the year. Cash dividends declared and paid during 2004 were $40.5 million compared with $95.6 million during
2003. In the first quarter of 2004, Hudson City, MHC applied for and was granted approval from the
OTS to waive receipt of dividends declared by Hudson City Bancorp during 2004. This dividend
waiver provided additional operating capital and liquidity at Hudson City Bancorp. The decrease in
the dividend payment reflected the waiver by Hudson City, MHC. The dividend pay-out ratio, using
amount per share information that does not reflect the dividend waiver by Hudson City, MHC, was
52.63% for 2004 compared with 45.61% for 2003. On January 18, 2005, the Board of Directors
declared a quarterly cash dividend of twenty cents ($0.20) per common share. The dividend is
payable on March 1, 2005 to stockholders of record at the close of business on February 4, 2005. At December 31, 2004, Hudson City Savings exceeded all regulatory capital requirements. Hudson City
Savings tangible capital ratio, leverage (core) capital ratio and total risk-based capital ratio
were 6.36%, 6.36% and 17.49%, respectively. Page 71




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The primary source of liquidity for Hudson City Bancorp, the holding company of Hudson City
Savings, is capital distributions from the banking subsidiary. During 2004, Hudson City Bancorp
received $226.6 million in dividend payments from Hudson City Savings, which amounted to 95.7% of
Hudson City Savings net income for that period. The primary use of these funds is the payment of
dividends to our shareholders and the repurchase of our common stock. Hudson City Bancorps ability
to continue these activities is solely dependent upon capital distributions from Hudson City
Savings. Applicable federal law may limit the amount of capital distributions Hudson City Savings
may make. (See Regulation of Hudson City Savings Bank and Hudson City Bancorp) Management of Interest Rate Risk As a financial institution, our primary component of market risk is interest rate volatility. Net
interest income is the primary component of our net income, and fluctuations in interest rates will
ultimately impact the level of both income and expense recorded on a large portion of our assets
and liabilities. Fluctuations in interest rates will also affect the market value of all
interest-earning assets, other than those that possess a short term to maturity. During 2004,
short-term interest rates generally increased and long-term interest rates slightly decreased
causing a flattening of the market yield curve. This interest rate environment had an adverse
impact on our net interest income as our interest-bearing liabilities generally price off
short-term interest rates, while our interest-earning assets, a majority of which have initial
terms to maturity or repricing greater than one year, generally price off long-term rates. The timing of the placement of interest-earning assets and interest-bearing liabilities on our
balance sheet, particularly during this rising short-term interest rate environment, also had an
adverse impact on our net interest income. The impact of interest rate changes on our interest
income is generally felt in later periods than the impact on our interest expense due to the timing
of the recording on the balance sheet of our interest-earning assets and interest-bearing
liabilities. The recording of interest-earning assets on the balance sheet generally lags the
current market due to normal delays of up to three months between the
time we commit to originate or purchase a mortgage loan and the time
we fund the loan, while the recording of
interest-bearing liabilities on the balance sheet generally reflects
the current market rates. Also impacting our net interest income and net interest rate spread is the level of prepayment
activity on our mortgage-related assets. The actual amount of time before mortgage loans and
mortgage-backed securities are repaid can be significantly impacted by changes in market interest
rates and mortgage prepayment rates. Mortgage prepayment rates will vary due to a number of
factors, including the regional economy in the area where the underlying mortgages were originated,
seasonal factors, demographic variables and the assumability of the underlying mortgages. However,
the major factors affecting prepayment rates are prevailing interest rates, related mortgage
refinancing opportunities and competition. Generally, the level of prepayment activity directly
affects the yield earned on those assets, as the payments received on the interest-earning assets
will be reinvested at the prevailing market interest rate. Prepayment rates are generally inversely
related to the prevailing market interest rate, thus, as market interest rates increase, prepayment
rates tend to decrease. Prepayment activity decreased on our mortgage-related assets during 2004 when compared to the
prepayment activity experienced during 2003. This decrease in prepayment activity was due to the
general stability of long-term interest rates during the second half of 2003 and 2004, compared to
the first half of 2003 and earlier periods. Page 72




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The mortgage-related assets resulting from this prepayment activity will not tend to prepay as
fast, as their contractual interest rate is relatively low. The slowing of the prepayment activity
in turn decreased the amount of related premium amortized on these assets during 2004. The
decrease in the prepayment activity and the slowing of the premium amortization generally had a
positive impact on our net interest income, net interest rate spread and net interest margin for
2004 when compared to 2003. The primary objectives of our interest rate risk management strategy are to:  
    evaluate the interest rate risk inherent in our balance sheet accounts;
    determine the appropriate level of interest rate risk given our business plan, the
current business environment and our capital and liquidity requirements; and
    manage interest rate risk in a manner consistent with the approved guidelines and
policies set by our Board of Directors. We seek to manage our
asset/liability mix to help minimize the impact that interest rate
fluctuations may have on our earnings. To achieve the objectives of managing interest rate risk, our Asset/Liability Committee meets
weekly to discuss and monitor the market interest rate environment compared to interest rates that
are offered on our products. This committee consists of the Chief Executive Officer, the Chief
Operating Officer, the Investment Officer and other senior officers of the institution as required.
The Asset/Liability Committee presents periodic reports to the Board of Directors at its regular
meetings and, on a quarterly basis, presents a comprehensive report addressing the results of
activities and strategies and the effect that changes in interest rates will have on our results of
operations and the present value of our equity. Historically, our lending activities have emphasized one- to four-family fixed-rate first and
second mortgage loans. Our planned growth in adjustable-rate assets is expected to help reduce our
exposure to interest rate fluctuations and benefit our long-term profitability. However, the
prevailing interest rate environment has resulted in increased demand for fixed-rate first mortgage
loans. This may have an adverse impact on our net interest income, particularly in a rising
interest rate environment. The purchase of U.S. government-sponsored agency securities to supplement our purchases of
adjustable-rate mortgage-backed securities has given us additional interest rate risk protection.
The securities purchased have final maturity dates between five and seven years, which, when
compared to mortgage loans or mortgage-backed securities, limits extension risk of principal
repayment. Approximately $621.6 million of the agency securities purchased and classified as held
to maturity have step-up features, where the interest rate is increased on scheduled future dates.
These securities have call options that are generally effective prior to the initial rate increase
but after an initial non-call period of three months to one year. The initial rate for the
securities purchased was higher than interest rates on similar agency securities offered at the
time of purchase without the step-up feature. The rate increases are at least one percent per
adjustment and are fixed over the life of the security. Our primary source of funds has been deposits, consisting primarily of time deposits and the
interest-bearing High Value Checking demand account, which have substantially shorter terms to
maturity than our mortgage loan portfolio. We use securities sold under agreements to repurchase
and FHLB advances as additional sources of funds. These borrowings are generally long-term to
maturity, in an effort to offset our short-term deposit liabilities and assist in managing our
interest rate risk. Page 73




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Certain of these borrowings have call options that could shorten their maturities in a changing
interest rate environment. We intend to continue to grow our borrowed funds, as part of our
interest rate risk management strategy with new borrowings having maturities of ten years and
initial non-call periods of at least three to five years. Due to the nature of our operations, we are not subject to foreign currency exchange or commodity
price risk. Instead, our mortgage loan portfolio, the majority of which is located in New Jersey,
is subject to risks associated with the local economy. The purchases of mortgage loans have allowed
us to geographically diversify our mortgage loan portfolio in order to attempt to mitigate this
concentration risk. We do not own any trading assets. We did not engage in any hedging transactions
that use derivative instruments (such as interest rate swaps and caps) during 2004 and did not have
any such hedging transactions in place at December 31, 2004. In the future, we may, with approval
of our Board of Directors, engage in hedging transactions utilizing derivative instruments, but we
have no current plans to do so. Gap Analysis.The matching of the repricing characteristics of assets and liabilities may be
analyzed by examining the extent to which such assets and liabilities are interest rate-sensitive
and by monitoring a financial institutions interest rate sensitivity gap. An asset or liability
is said to be interest rate-sensitive within a specific time period if it will mature or reprice
within that time period. The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specific time period and the
amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered negative when the amount of interest-bearing liabilities maturing or repricing
within a specific time period exceeds the amount of interest-earning assets maturing or repricing
within that same period. A gap is considered positive when the amount of interest-earning assets
maturing or repricing within a specific time period exceeds the amount of interest-bearing
liabilities maturing or repricing within that same time period. During a period of rising interest
rates, a financial institution with a negative gap position would be expected, absent the effects
of other factors, to experience a greater increase in the costs of its interest-bearing liabilities
relative to the yields of its interest-earning assets and thus a decrease in the institutions net
interest income. An institution with a positive gap position would be expected, absent the effect
of other factors, to experience the opposite result. Conversely, during a period of falling
interest rates, a negative gap would tend to result in an increase in net interest income while a
positive gap would tend to reduce net interest income. The following table, referred to as the gap table, presents the amounts of our interest-earning
assets and interest-bearing liabilities outstanding at December 31, 2004, which we anticipate to
reprice or mature in each of the future time periods shown. Except as stated below, we determined
the amounts of assets and liabilities shown which reprice or mature during a particular period in
accordance with the earlier of the term to repricing or the contractual maturity of the asset or
liability. The information presented in the gap table is also based on the following assumptions:  
    we assumed an annual prepayment rate of 15.0% for mortgage loans repricing or maturing
after one year;
    we assumed an annual prepayment rate of 20.0% for mortgage-backed securities repricing
or maturing after one year; Page 74




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
    we reported savings accounts that had no stated maturity using decay rates (the assumed
rate at which the balance of existing accounts would decline) of: 2.5% in less than six
months, 2.5% 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 75.0% in over five years;
    we reported interest-bearing demand accounts that had no stated maturity using 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
over five years;
    we reported money market accounts that had no stated maturity using 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 over five years;
    we assumed $875.0 million of borrowed funds, which are reported at maturity date, will
be called in less than one year. At December 31, 2003, the prepayment assumptions for both mortgage loans and mortgage-backed
securities were 30.0%. The decrease in the assumed prepayment activity on our mortgage-related
assets was due to the decline in prepayment activity experienced during 2004 and the general
stability of long-term interest rates during the second half of 2003 and 2004, notwithstanding the
slight decrease of long-term interest rates during 2004. We believe the 15% prepayment assumption
for mortgage loans and 20% prepayment assumption for mortgage-backed securities is appropriate,
notwithstanding the anticipated long-term interest rate increases, due to recent prepayment
history. The prepayment assumption for mortgage loans is also supported by the fact that a
significant portion of our mortgage loan portfolio is in the active New Jersey and metropolitan New
York real estate market and is over the conforming loan limit. We believe these loans will tend to
prepay at higher levels than other types of loans. Our determination of deposit decay rates is based on historical experience with the varying
non-maturity deposit types and an analysis of the current deposit base. The deposit decay rate
assumptions are examined by a third-party for reasonableness. Deposit decay rates, prepayment rates
and anticipated calls of investment securities or borrowed funds can have a significant impact on
the estimated interest sensitivity gap. While we believe that our assumptions are reasonable,
actual future deposit decay activity, mortgage and mortgage-backed securities prepayments, and the
timing of calls of federal agency bonds and borrowings may vary materially from our estimates and
assumptions. Significant increases in market interest rates may tend to reduce prepayment speeds on
our mortgage-related assets, as fewer borrowers refinance their loans. At the same time, deposit
decay rates may tend to increase in the shorter-term periods, as depositors seek higher yielding
investments elsewhere. If these trends occur, the effect would be to make our interest sensitivity
gap more negative. We have excluded non-accrual mortgage loans totaling $6,057,000 from the table. Page 75




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At December 31, 2004More than
    
    
    More thanMore than
    
    
    More than
    
    
    two years
    
    
    three yearsSix months
    
    
    six months
    
    
    one year to
    
    
    to three
    
    
    to five
    
    
    More thanor less
    
    
    to one year
    
    
    two years
    
    
    years
    
    
    years
    
    
    five years
    
    
    Total(Dollars in thousands)Interest-earning assets:First mortgage loans
    
    $
    883,388
    
    
    $
    892,184
    
    
    $
    1,423,202
    
    
    $
    1,222,270
    
    
    $
    1,317,564
    
    
    $
    5,461,124
    
    
    $
    11,199,732Consumer and other loans
    
    
    28,989
    
    
    
    301
    
    
    
    1,386
    
    
    
    2,281
    
    
    
    16,843
    
    
    
    107,450
    
    
    
    157,250Federal funds sold
    
    
    45,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    45,700Mortgage-backed securities
    
    
    810,663
    
    
    
    999,416
    
    
    
    713,610
    
    
    
    571,933
    
    
    
    520,569
    
    
    
    1,760,438
    
    
    
    5,376,629FHLB stock
    
    
    140,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,000Investment securities
    
    
    10,246
    
    
    
    
    
    
    
    8
    
    
    
    60
    
    
    
    1,084,032
    
    
    
    1,834,542
    
    
    
    2,928,888Total interest-earning assets
    
    
    1,918,986
    
    
    
    1,891,901
    
    
    
    2,138,206
    
    
    
    1,796,544
    
    
    
    2,939,008
    
    
    
    9,163,554
    
    
    
    19,848,199Interest-bearing liabilities:Savings accounts
    
    
    23,980
    
    
    
    24,532
    
    
    
    46,488
    
    
    
    46,488
    
    
    
    92,976
    
    
    
    697,319
    
    
    
    931,783Interest-bearing demand accounts
    
    
    107,252
    
    
    
    107,252
    
    
    
    429,010
    
    
    
    429,010
    
    
    
    858,020
    
    
    
    2,359,555
    
    
    
    4,290,099Money market accounts
    
    
    14,118
    
    
    
    14,118
    
    
    
    56,470
    
    
    
    56,470
    
    
    
    112,940
    
    
    
    310,584
    
    
    
    564,700Time deposits
    
    
    2,458,701
    
    
    
    1,248,415
    
    
    
    911,789
    
    
    
    341,139
    
    
    
    313,172
    
    
    
    
    
    
    
    5,273,216Borrowed funds
    
    
    100,000
    
    
    
    775,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,275,000
    
    
    
    7,150,000Total interest-bearing liabilities
    
    
    2,704,051
    
    
    
    2,169,317
    
    
    
    1,443,757
    
    
    
    873,107
    
    
    
    1,377,108
    
    
    
    9,642,458
    
    
    
    18,209,798Interest rate sensitivity gap
    
    $
    (785,065
    )
    
    $
    (277,416
    )
    
    $
    694,449
    
    
    $
    923,437
    
    
    $
    1,561,900
    
    
    $
    (478,904
    )
    
    $
    1,638,401Cumulative interest rate sensitivity
gap
    
    $
    (785,065
    )
    
    $
    (1,062,481
    )
    
    $
    (368,032
    )
    
    $
    555,405
    
    
    $
    2,117,305
    
    
    $
    1,638,401Cumulative interest rate sensitivity gap
as a percent of total assets
    
    
    (3.90
    )%
    
    
    (5.27
    )%
    
    
    (1.83
    )%
    
    
    2.76
    %
    
    
    10.51
    %
    
    
    8.13
    %Cumulative interest-earning assets
as a percent of interest-bearing
liabilities
    
    
    70.97
    %
    
    
    78.20
    %
    
    
    94.17
    %
    
    
    107.72
    %
    
    
    124.71
    %
    
    
    109.00
    %
 Page 76




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As indicated in the gap table at December 31, 2004, our interest-bearing liabilities maturing
or repricing within one year exceeded our interest-earning assets maturing or repricing within the
same period by $1.06 billion compared with our interest-bearing assets exceeding our
interest-earning liabilities by $434.3 million at December 31, 2003. This represented a cumulative
one-year interest rate sensitivity gap as a percent of total assets of negative 5.3% at December
31, 2004 compared with positive 2.6% at December 31, 2003. The ratio of interest-earning assets
maturing or repricing within one year to interest-bearing liabilities maturing or repricing within
one year was 78.2% at December 31, 2004 compared with 108.9% at December 31, 2003. This negative
gap position is expected to have an adverse impact on our net interest income in a rising interest
rate environment. The change in these ratios, year-to-year, was partially due to the decrease of the assumed
prepayment rate on our mortgage-related assets and the continued growth of our primarily fixed-rate
long-term mortgage loan portfolio. The change also reflects the anticipated calls of borrowed funds
in the current year due to the rising interest rate environment. The impact of these items was
partially offset by a shift of time deposit maturities to over one year due to internal pricing
strategies, and the growth of our High Value Checking account, which we have estimated to have a
decay rate in excess of one year of 95%. Had the mortgage-related prepayment assumptions used at
December 31, 2003 been applied to our December 31, 2004 gap analysis, and all other assumption used
at December 31, 2004 were not changed, the cumulative one-year gap as a percent of total assets
would have been a positive 5.19%. The methods used in the gap table are inherently imprecise. For example, although certain assets
and liabilities may have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Interest rates on certain types of assets and

liabilities may fluctuate in advance of changes in market interest rates, while interest rates on
other types may lag behind changes in market rates. Certain assets, such as adjustable-rate loans
and mortgage-backed securities, have features that limit changes in interest rates on a short-term
basis and over the life of the loan. If interest rates change, prepayment and early withdrawal
levels would likely deviate from those assumed in calculating the table. Finally, the ability of
borrowers to make payments on their adjustable-rate loans may decrease if interest rates increase. Present Value of Equity.In addition to the gap analysis, we also use a simulation model to
monitor interest rate risk. This model reports the present value of equity in different interest
rate environments, assuming an instantaneous and permanent interest rate shock to all interest
rate-sensitive assets and liabilities. The present value of equity is the difference between the
estimated fair value of interest rate-sensitive assets and liabilities. The changes in market value
of assets and liabilities due to changes in interest rates reflect the interest sensitivity of
those assets and liabilities as their values are derived from the characteristics of the asset or
liability (i.e., fixed-rate, adjustable-rate, caps, floors) relative to the current interest rate
environment. For example, in a rising interest rate environment the fair market value of a
fixed-rate asset will decline, whereas the fair market value of an adjustable-rate asset, depending
on its repricing characteristics, may not decline. Increases in the market value of assets will
increase the present value of equity whereas decreases in the market value of assets will decrease
the present value of equity. Conversely, increases in the market value of liabilities will decrease
the present value of equity whereas decreases in the market value of liabilities will increase the
present value of equity. The following table presents the estimated present value of equity over a range of interest rate
change scenarios at December 31, 2004. The present value ratio shown in the table is the present
value of equity as a percent of the present value of total assets in each of the different rate
environments. For purposes of this table, we have made assumptions such as prepayment rates and
decay rates similar to those used for the gap analysis table. Page 77




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Our current policy sets a minimum ratio of the present value of equity to the fair value of assets
in the current interest rate environment (no rate shock) of 7.50% and in the plus 200 basis point
interest rate shock scenario of 5.50%. The policy in effect at December 31, 2003 set a maximum
percentage change in the present value of equity of 55% in the plus and minus 200 basis points
shock tests. The internal policy change from prior periods, regarding the minimum present value
ratio, was due to the change in our primary regulatory agency and that agencys interest rate risk
policy requirements. We believe the 200 basis point decrease scenario may not be meaningful given
the prevailing low market interest rate environment and it is not presented in the table. Present Value of EquityAs Percent of PresentPresent Value of Equity
    
    
    Value of AssetsChange in
    
    Dollar
    
    
    Dollar
    
    
    Percent
    
    
    Present
    
    
    PercentInterest Rates
    
    Amount
    
    
    Change
    
    
    Change
    
    
    Value Ratio
    
    
    Change(Basis points)
    
    (Dollars in thousands)200
    
    $
    1,752,586
    
    
    $
    (782,548
    )
    
    
    (30.87
    )%
    
    
    9.44
    %
    
    
    (24.54
    )%100
    
    
    2,186,949
    
    
    
    (348,185
    )
    
    
    (13.73
    )
    
    
    11.25
    
    
    
    (10.07
    )50
    
    
    2,387,254
    
    
    
    (147,880
    )
    
    
    (5.83
    )
    
    
    12.02
    
    
    
    (3.92
    )0
    
    
    2,535,134
    
    
    
    
    
    
    
    
    
    
    
    12.51
    
    
    
    (50)
    
    
    2,467,662
    
    
    
    (67,472
    )
    
    
    (2.66
    )
    
    
    12.04
    
    
    
    (3.76
    )(100)
    
    
    2,271,184
    
    
    
    (263,950
    )
    
    
    (10.41
    )
    
    
    11.02
    
    
    
    (11.91
    )
 At December 31, 2003, the percent change in the present value of equity in the 200 basis point
increase scenario was negative 34.95% and in the 100 basis point decrease scenario it was negative
8.26% compared with the table above. The decreases in the present value of equity and the percent
change in the present value of equity in the increasing rate scenarios in the December 31, 2004
analysis were primarily due to the high percentage of fixed-rate mortgage loans, mortgage-backed
securities and investment securities in our portfolio. At December 31, 2004, fixed-rate interest
earning-assets were 85.2% of total interest-earning assets. This percentage of fixed-rate
interest-earning assets to total interest-earning assets may have an adverse impact on our earnings
in a rising rate environment, as these assets will not reprice in a rising rate environment. The
decrease of the percent change in the present value of equity to negative 30.87% at December 31,
2004 from negative 34.95% at December 31, 2003 reflected the growth of our borrowed funds with ten
year maturities and the growth of our High Value Checking product. The decreases in the present
value of equity and the percent change in the present value of equity in the decreasing rate
scenarios in the December 31, 2004 analysis were primarily due to the growth of our fixed-rate
borrowed funds with long terms to maturity and the growth in our interest-bearing demand accounts.
Fixed-rate borrowed funds, even those with call options, generally do not reprice in a decreasing
rate environment. As in the case of the gap table, the methods we used in the previous table are also inherently
imprecise. This type of modeling requires that we make assumptions that may not reflect the manner
in which actual yields and costs respond to changes in market interest rates. For example, we
assume the composition of the interest rate-sensitive assets and liabilities will remain constant
over the period being measured and that all interest rate shocks will be uniformly reflected across
the yield curve, regardless of the duration to maturity or repricing. The table assumes that we
will take no action in response to the changes in interest rates. In addition, prepayment estimates
and other assumptions within the model are subjective in nature, involve uncertainties, and,
therefore, cannot be determined with precision. Accordingly, although the present value of equity
model may provide an estimate of our interest rate risk at a particular point in time, such
measurements are not intended to and do not provide a precise forecast of the effect of changes in
interest rates on our present value of equity. Page 78




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Net Interest Income.As a primary means of managing interest rate risk, we monitor the impact
of interest rate changes on our net interest income over the next twelve-month period. This model
does not purport to provide estimates of net interest income over the next twelve-month period, but
attempts to assess the impact of a simultaneous and parallel interest rate change on our net
interest income. Assumptions for this model are the same as those used for our present value of
equity analysis. Change inInterest Rates
    
    Percent Change in(Basis points)
    
    Net Interest Income200
    
    
    (6.80
    )%100
    
    
    (2.21
    )50
    
    
    (0.54
    )0
    
    
    (50)
    
    
    (1.86
    )(100)
    
    
    (5.81
    )
 Off-Balance Sheet Arrangements and Contractual Obligations Hudson City is a party to certain off-balance sheet arrangements, which occur in the normal course
of our business, to meet the credit needs of our customers and the growth initiatives of the Bank.
These arrangements are primarily commitments to originate and purchase mortgage loans, and to
purchase mortgage-backed securities. We did not engage in any hedging transactions that use
derivative instruments (such as interest rate swaps and caps) during 2004 and did not have any such
hedging transactions in place at December 31, 2004, which would create other off-balance sheet
arrangements. The following table reports the amounts of contractual obligations for Hudson City as of December
31, 2004. Payments Due By PeriodLess Than
    
    
    1 Year to
    
    
    3 Years to
    
    
    More ThanContractual Obligation
    
    Total
    
    
    1 Year
    
    
    3 Years
    
    
    5 Years
    
    
    5 Years(In thousands)First mortgage loan originations
    
    $
    192,191
    
    
    $
    192,191
    
    
    $
    
    
    
    $
    
    
    
    $
    Mortgage loan purchases
    
    
    298,396
    
    
    
    298,396
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed security purchases
    
    
    317,250
    
    
    
    317,250
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    73,753
    
    
    
    4,449
    
    
    
    9,522
    
    
    
    9,131
    
    
    
    50,651Total
    
    $
    881,590
    
    
    $
    812,286
    
    
    $
    9,522
    
    
    $
    9,131
    
    
    $
    50,651
 Commitments to extend credit are agreements to lend money to a customer as long as there is no
violation of any condition established in the contract. Commitments to fund first mortgage loans
generally have fixed expiration dates of approximately 90 days and other termination clauses.
Since some commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. Hudson City Savings evaluates each
customers credit-worthiness on a case-by-case basis. Additionally, we have available home equity
and overdraft lines of credit, which do not have fixed expiration dates, of approximately $80.4
million. Page 79




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We are not obligated to advance further amounts on credit lines if the customer is delinquent, or
otherwise in violation of the agreement. The commitments to purchase first mortgage loans and
mortgage-backed securities had a normal period from trade date to settlement date of approximately
60 days. Recent Accounting Pronouncements On January 12, 2004, the FASB issued Staff Position No. 106-1 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,
which allows companies to recognize or defer recognizing the effects of the Medicare Prescription
Drug Improvement and Modernization Act of 2003, or Medicare Act, for annual financial statements of
fiscal years ending after December 7, 2003. The Medicare Act introduced both a Medicare
prescription-drug benefit and a federal subsidy to sponsors of retiree health-care plans that
provide a benefit at least actuarially equivalent to the Medicare benefit. These provisions of
the Medicare Act affect accounting measurements. We adopted Staff Position No. 106-1 in the third
quarter of 2004. Our disclosure in Note 11 of the Consolidated Financial Statements in Item 8 of
this report incorporates the requirements of Staff Position No. 106-1. On September 30, 2004, the FASB issued Staff Position Emerging Issues Task Force (EITF) Issue No.
03-01, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-01, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, which delays the
effective date for the measurement and recognition guidance contained in EITF Issue No. 03-01.
EITF Issue No. 03-01 provides guidance for evaluating whether an investment is
other-than-temporarily impaired and was originally effective for other-than-temporarily impairment
evaluations made in reporting periods beginning after June 15, 2004. The delay in the effective
date for the measurement and recognition guidance contained in paragraphs 10 through 20 of EITF
Issue No. 03-01 does not suspend the requirement to recognize other-than-temporary impairments as
required by existing authoritative literature. The disclosure guidance in paragraphs 21 and 22 of
EITF Issue No. 03-01 remains effective. The delay will be superseded concurrent with the final
issuance of EITF Issue No. 03-01a, which is expected to provide implementation guidance on matters
such as impairment evaluations for declines in value caused by increases in interest rates and/or
sector spreads. In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
153, Exchanges of Nonmonetary Assets, which amends APB Opinion No. 29, Accounting for
Nonmonetary Transactions. SFAS No. 153 eliminates the exception from fair value measurement for
nonmonetary exchanges of similar productive assets in Opinion No. 29 and replaces it with an
exception for exchanges that do not have commercial substance. SFAS No. 153 specifies that a
nonmonetary exchange has commercial substance if the future cash flows of the entity are expected
to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary
exchanges occurring in fiscal periods beginning after June 15, 2005. We do not expect the adoption
of SFAS No. 153 will have a material impact on our financial condition or results of operations. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. This
Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related guidance. SFAS No.
123 (revised 2004) established standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. This Statement requires that the cost
resulting from all share-based payment transactions be recognized in the financial statements. Page 80




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This Statement establishes fair value as the measurement objective in accounting for share-based
payment arrangements and requires all entities to apply a fair-value-based measurement method in
accounting for share-based payment transactions with employees, except for equity instruments held
by employee share ownership plans. This Statement is effective for public entities that do not file
as small business issuers as of the beginning of the first interim or annual reporting period that
begins after June 15, 2005. We do not expect the adoption of SFAS No. 123 (revised 2004) will have
a material impact on our financial condition or results of operations. Impact of Inflation and Changing Prices The Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements
of Hudson City Bancorp have been prepared in accordance with accounting principles generally
accepted in the United States of America, commonly referred as GAAP. GAAP generally requires the
measurement of financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time due to inflation.
The impact of inflation is reflected in the increased cost of our operations. Unlike industrial
companies, our assets and liabilities are primarily monetary in nature. As a result, changes in
market interest rates have a greater impact on performance than do the effects of inflation. Critical Accounting Policies Note 1 to our Audited Consolidated Financial Statements in Item 8 of this report contains a summary
of our significant accounting policies. We believe our policies with respect to the methodology
for our determination of the allowance for loan losses and asset impairment judgments, including
other than temporary declines in the value of our securities, involve a higher degree of complexity
and require management to make difficult and subjective judgments which often require assumptions
or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates
could cause reported results to differ materially. These critical policies and their application
are continually reviewed by management, and are periodically reviewed with the Audit Committee and
our Board of Directors. Allowance for Loan Losses.The allowance for loan losses has been determined in accordance with
accounting principles generally accepted in the United States of America, under which we are
required to maintain adequate allowances for loan losses. We are responsible for the timely and
periodic determination of the amount of the allowance required. We believe that our allowance for
loan losses is adequate to cover specifically identifiable loan losses, as well as estimated losses
inherent in our portfolio for which certain losses are probable but not specifically identifiable. Our primary lending emphasis is the origination and purchase of one- to four-family first mortgage
loans on residential properties and, to a lesser extent, second mortgage loans on one- to
four-family residential properties resulting in a loan concentration in residential first mortgage
loans at December 31, 2004. As a result of our lending practices, we also have a concentration of
loans secured by real property located in New Jersey. Based on the composition of our loan
portfolio and the growth in our loan portfolio, we believe the primary risks inherent in our
portfolio are increases in interest rates, a decline in the economy, generally, and a decline in
real estate market values. Any one or a combination of these events may adversely affect our loan
portfolio resulting in increased delinquencies, loan losses and future levels of provisions. We
consider it important to maintain the ratio of our allowance for loan losses to total loans at an
acceptable level given current economic conditions, interest rates and the composition of our
portfolio. Page 81




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Due to the nature of our loan portfolio, our evaluation of the adequacy of our allowance for loan
losses is performed each month on a pooled basis. Each month we prepare a worksheet 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 worksheet, 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 worksheet, the amount of the allowance for loan losses in relation to the total loan balance,
loan portfolio growth, accounting principles generally accepted in the United States of America and
regulatory guidance. We have applied this process consistently and we have made minimal changes in
the estimation methods and assumptions that we have used. During 2004, we lowered the loss factors used in our worksheet on our purchased mortgage loans to
reflect the seasoning of the portfolio, and the charge-off and delinquency experience.
Notwithstanding such decrease, we have maintained a minimal provision for loan losses during 2004
to reflect expected losses resulting from the actual growth in our loan portfolio. At December 31,
2004, the allowance for loan losses as a percentage of total loans was 0.24%, which, given the
primary emphasis of our lending practices and the current market conditions, we consider to be at
an acceptable level. Furthermore, the increase in the allowance for loan losses during 2004
reflected the growth in the loan portfolio, the low levels of loan charge-offs, the stability in
the real estate market and the resulting stability in our overall loan quality. Although we believe that we have established and maintained the allowance for loan losses at
adequate levels, additions may be necessary if future economic and other conditions differ
substantially from the current operating environment. Although management uses the best
information available, the level of the allowance for loan losses remains an estimate that is
subject to significant judgment and short-term change. Asset Impairment Judgments.Certain of our assets are carried in our consolidated statements of
financial condition at fair value or at the lower of cost or fair value. Valuation allowances are
established when necessary to recognize impairment of such assets. We periodically perform
analyses to test for impairment of various assets. In addition to our impairment analyses related
to loans discussed above, another significant impairment analysis relates to the value of other
than temporary declines in the value of our securities. Our available for sale portfolio is carried at estimated fair value, with any unrealized gains and
losses, net of taxes, reported as accumulated other comprehensive income in stockholders equity.
The securities which we have the positive intent and ability to hold to maturity are classified as
held to maturity and are carried at amortized cost. We conduct a periodic review and evaluation of
the securities portfolio to Page 82




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determine if the value of any security has declined below its carrying value and whether such
decline is other than temporary. If such decline is deemed other than temporary, we would adjust the carrying amount of the security
by writing down the security to fair market value through a charge to current period operations.
The market values of our securities are significantly affected by changes in interest rates. In
general, as interest rates rise, the market value of fixed-rate securities will decrease; as
interest rates fall, the market value of fixed-rate securities will increase. With significant
changes in interest rates, we evaluate our intent and ability to hold the security to maturity or
for a sufficient time to recover the recorded principal balance. Estimated fair values for
securities are based on published or securities dealers market values. 
 Item 7a. Quantitative and Qualitative Disclosures About Market Risk. Information regarding
quantitative and qualitative disclosures about market risk appears under Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations 
Management of Interest Rate Risk. Page 83




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Item 8. Financial Statements and Supplementary Data. Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders
Hudson City Bancorp, Inc.: We have audited the accompanying consolidated statements of financial condition of Hudson City
Bancorp, Inc. and subsidiary (the Company) as of December 31, 2004 and 2003, and the related
consolidated statements of income, changes in stockholders equity, and cash flows for each of the
years in the three-year period ended December 31, 2004. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Hudson City Bancorp, Inc. and subsidiary as of
December 31, 2004 and 2003, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Hudson City Bancorp, Inc. and subsidiarys internal
control over financial reporting as of December 31, 2004, based on criteria established in Internal
Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 22, 2005 expressed an unqualified opinion on managements
assessment of, and the effective operation of, internal controls over financial reporting. (KPMG LLP)  Short Hills, New Jersey
February 22, 2005 Page 84




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Report of Independent Registered Public Accounting FirmOn Internal Control Over Financial Reporting The Board of Directors and Stockholders
Hudson City Bancorp, Inc.: We have audited managements assessment, included in the accompanying Management Report on Internal
Control Over Financial Reporting, that Hudson City Bancorp, Inc. and subsidiary (the Company)
maintained effective internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control -Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission.Management of the Company is responsible for
maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Hudson City Bancorp, Inc. and subsidiary maintained
effective internal control over financial reporting as of December 31, 2004, is fairly stated, in
all material respects, based on criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.Also, in our
opinion, Hudson City Bancorp, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2004, based on criteria established in Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission. Page 85




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##### Table of Contents



We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated statements of financial condition of Hudson City Bancorp,
Inc. and subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of
income, changes in stockholders equity, and cash flows for each of the years in the three-year
period ended December 31, 2004, and our report dated February 22, 2005 expressed an unqualified
opinion on those consolidated financial statements. (KPMG LLP) Short Hills, New Jersey
February 22, 2005 Page 86




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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition December 31,
    
    
    December 31,2004
    
    
    2003(In thousands)Assets:Cash and due from banks
    
    $
    122,483
    
    
    $
    190,984Federal funds sold
    
    
    45,700
    
    
    
    63,600Total cash and cash equivalents
    
    
    168,183
    
    
    
    254,584Investment securities held to maturity, market value of $1,326,336 at
December 31, 2004 and $1,443 at December 31, 2003
    
    
    1,334,249
    
    
    
    1,366Investment securities available for sale, at market value
    
    
    1,594,639
    
    
    
    2,243,812Federal Home Loan Bank of New York stock
    
    
    140,000
    
    
    
    164,850Mortgage-backed securities held to maturity, market value of $3,721,029
at December 31, 2004 and $4,250,688 at December 31, 2003
    
    
    3,755,921
    
    
    
    4,292,444Mortgage-backed securities available for sale, at market value
    
    
    1,620,708
    
    
    
    1,130,257Loans
    
    
    11,363,039
    
    
    
    8,803,066Less:Deferred loan fees
    
    
    8,073
    
    
    
    10,255Allowance for loan losses
    
    
    27,319
    
    
    
    26,547Net loans
    
    
    11,327,647
    
    
    
    8,766,264Foreclosed real estate, net
    
    
    878
    
    
    
    1,002Accrued interest receivable
    
    
    97,490
    
    
    
    80,220Banking premises and equipment, net
    
    
    36,399
    
    
    
    31,354Other assets
    
    
    69,867
    
    
    
    67,207Total Assets
    
    $
    20,145,981
    
    
    $
    17,033,360Liabilities and Stockholders Equity:Deposits:Interest-bearing
    
    $
    11,059,798
    
    
    $
    10,057,285Noninterest-bearing
    
    
    417,502
    
    
    
    396,495Total deposits
    
    
    11,477,300
    
    
    
    10,453,780Borrowed funds
    
    
    7,150,000
    
    
    
    5,150,000Accrued expenses and other liabilities
    
    
    115,797
    
    
    
    100,214Total liabilities
    
    
    18,743,097
    
    
    
    15,703,994Common stock, $0.01 par value, 800,000,000 shares authorized; 231,276,600
shares issued, 186,145,995 shares outstanding at December 31, 2004,
189,835,997 shares outstanding at December 31, 2003
    
    
    2,313
    
    
    
    2,313Additional paid-in capital
    
    
    570,505
    
    
    
    543,589Retained earnings
    
    
    1,588,792
    
    
    
    1,396,257Treasury stock, at cost; 45,130,605 shares at December 31, 2004 and
41,440,603 shares at December 31, 2003
    
    
    (696,812
    )
    
    
    (547,859
    )Unallocated common stock held by the employee stock
ownership plan
    
    
    (47,552
    )
    
    
    (49,513
    )Unearned common stock held by the recognition and
retention plan
    
    
    (5,267
    )
    
    
    (9,463
    )Accumulated other comprehensive loss, net of tax
    
    
    (9,095
    )
    
    
    (5,958
    )Total stockholders equity
    
    
    1,402,884
    
    
    
    1,329,366Commitments and contingenciesTotal Liabilities and Stockholders Equity
    
    $
    20,145,981
    
    
    $
    17,033,360
 See accompanying notes to consolidated financial statements. Page 87




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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Income Year Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands, except per share data)Interest and Dividend Income:Interest and fees on first mortgage loans
    
    $
    539,966
    
    
    $
    414,417
    
    
    $
    440,073Interest and fees on consumer and other loans
    
    
    8,650
    
    
    
    8,379
    
    
    
    10,027Interest on mortgage-backed securities held to maturity
    
    
    174,596
    
    
    
    217,962
    
    
    
    265,144Interest on mortgage-backed securities available for sale
    
    
    67,739
    
    
    
    50,273
    
    
    
    42,599Interest on investment securities held to maturity
    
    
    41,435
    
    
    
    87
    
    
    
    89Interest and dividends on investment securities
available for sale
    
    
    77,879
    
    
    
    79,992
    
    
    
    18,856Dividends on Federal Home Loan Bank of New York stock
    
    
    3,213
    
    
    
    4,424
    
    
    
    5,002Interest on federal funds sold
    
    
    1,580
    
    
    
    1,794
    
    
    
    2,427Total interest and dividend income
    
    
    915,058
    
    
    
    777,328
    
    
    
    784,217Interest Expense:Interest on deposits
    
    
    214,813
    
    
    
    209,339
    
    
    
    255,775Interest on borrowed funds
    
    
    215,253
    
    
    
    167,015
    
    
    
    139,999Total interest expense
    
    
    430,066
    
    
    
    376,354
    
    
    
    395,774Net interest income
    
    
    484,992
    
    
    
    400,974
    
    
    
    388,443Provision for Loan Losses
    
    
    790
    
    
    
    900
    
    
    
    1,500Net interest income after provision for loan losses
    
    
    484,202
    
    
    
    400,074
    
    
    
    386,943Non-interest Income:Service charges and other income
    
    
    5,128
    
    
    
    5,338
    
    
    
    5,947Gains on securities transactions, net
    
    
    11,429
    
    
    
    24,326
    
    
    
    2,066Total non-interest income
    
    
    16,557
    
    
    
    29,664
    
    
    
    8,013Non-interest Expense:Compensation and employee benefits
    
    
    79,195
    
    
    
    68,776
    
    
    
    60,731Net occupancy expense
    
    
    16,035
    
    
    
    14,981
    
    
    
    13,888Federal deposit insurance assessment
    
    
    1,644
    
    
    
    1,564
    
    
    
    1,415Computer and related services
    
    
    2,041
    
    
    
    1,714
    
    
    
    1,213Other expense
    
    
    19,433
    
    
    
    15,492
    
    
    
    16,294Total non-interest expense
    
    
    118,348
    
    
    
    102,527
    
    
    
    93,541Income before income tax expense
    
    
    382,411
    
    
    
    327,211
    
    
    
    301,415Income Tax Expense
    
    
    143,145
    
    
    
    119,801
    
    
    
    109,382Net income
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033Basic earnings per share
    
    $
    1.33
    
    
    $
    1.14
    
    
    $
    1.04Diluted earnings per share
    
    $
    1.29
    
    
    $
    1.11
    
    
    $
    1.01
 See accompanying notes to consolidated financial statements. Page 88




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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders Equity Unallocated
    
    
    Unearned
    
    
    AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Common
    
    
    Common
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury
    
    
    Stock Held
    
    
    Stock Held
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    by the ESOP
    
    
    by the RRP
    
    
    Income (Loss)
    
    
    Equity(In thousands)Balance at December 31, 2001
    
    $
    2,313
    
    
    $
    527,724
    
    
    $
    1,170,138
    
    
    $
    (340,716
    )
    
    $
    (53,435
    )
    
    $
    (22,132
    )
    
    $
    4,844
    
    
    $
    1,288,736Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    192,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192,033Other comprehensive income:Unrealized holding gains arising during
period (net of tax of $11,918)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,446
    
    
    
    19,446Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,479Declaration of dividends ($0.345 per share)
    
    
    
    
    
    
    
    
    
    
    (64,504
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,504
    )Allocation of ESOP stock
    
    
    
    
    
    
    3,144
    
    
    
    
    
    
    
    
    
    
    
    1,961
    
    
    
    
    
    
    
    
    
    
    
    5,105Purchase of RRP stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,854
    )
    
    
    
    
    
    
    (1,854
    )Vesting of RRP stock
    
    
    
    
    
    
    (372
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,733
    
    
    
    
    
    
    
    7,361Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,173
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,173
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (5,707
    )
    
    
    15,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,933Balance at December 31, 2002
    
    
    2,313
    
    
    
    530,496
    
    
    
    1,291,960
    
    
    
    (465,249
    )
    
    
    (51,474
    )
    
    
    (16,253
    )
    
    
    24,290
    
    
    
    1,316,083Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    207,410
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207,410Other comprehensive income :Unrealized holding losses arising during
period (net of tax of $9,065)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,859
    )
    
    
    (15,859
    )Reclassification adjustment for gains in
net income (net of tax of $9,937)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,389
    )
    
    
    (14,389
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177,162Declaration of dividends ($0.52 per share)
    
    
    
    
    
    
    
    
    
    
    (95,627
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95,627
    )Tax benefit from stock plans
    
    
    
    
    
    
    7,686
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,686Allocation of ESOP stock
    
    
    
    
    
    
    5,724
    
    
    
    
    
    
    
    
    
    
    
    1,961
    
    
    
    
    
    
    
    
    
    
    
    7,685Vesting of RRP stock
    
    
    
    
    
    
    (317
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,790
    
    
    
    
    
    
    
    6,473Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,057
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,057
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (7,486
    )
    
    
    18,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,961Balance at December 31, 2003
    
    
    2,313
    
    
    
    543,589
    
    
    
    1,396,257
    
    
    
    (547,859
    )
    
    
    (49,513
    )
    
    
    (9,463
    )
    
    
    (5,958
    )
    
    
    1,329,366Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    239,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239,266Other comprehensive income :Unrealized holding gains arising during
period (net of tax of $2,503)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,623
    
    
    
    3,623Reclassification adjustment for gains in
net income (net of tax of $4,669)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,760
    )
    
    
    (6,760
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    236,129Declaration of dividends ($0.70 per share)
    
    
    
    
    
    
    
    
    
    
    (40,482
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,482
    )Tax benefit from stock plans
    
    
    
    
    
    
    20,880
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,880Allocation of ESOP stock
    
    
    
    
    
    
    8,544
    
    
    
    
    
    
    
    
    
    
    
    1,961
    
    
    
    
    
    
    
    
    
    
    
    10,505Purchase of RRP stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,299
    )
    
    
    
    
    
    
    (7,299
    )Vesting of RRP stock
    
    
    
    
    
    
    (2,508
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,495
    
    
    
    
    
    
    
    8,987Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (161,662
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (161,662
    )Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    (6,249
    )
    
    
    12,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,460Balance at December 31, 2004
    
    $
    2,313
    
    
    $
    570,505
    
    
    $
    1,588,792
    
    
    $
    (696,812
    )
    
    $
    (47,552
    )
    
    $
    (5,267
    )
    
    $
    (9,095
    )
    
    $
    1,402,884
 See accompanying notes to consolidated financial statements. Page 89




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Hudson City Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows Year Ended December 31,2004
    
    
    2003
    
    
    2002(In thousands)Cash Flows from Operating Activities:Net income
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation, accretion and amortization expense
    
    
    24,129
    
    
    
    44,497
    
    
    
    14,269Provision for loan losses
    
    
    790
    
    
    
    900
    
    
    
    1,500Gains on net securities transactions
    
    
    (11,429
    )
    
    
    (24,326
    )
    
    
    (2,066
    )Allocation of stock for employee benefit plans
    
    
    19,492
    
    
    
    14,158
    
    
    
    12,466Deferred tax benefit
    
    
    (6,912
    )
    
    
    (6,392
    )
    
    
    (4,756
    )Net proceeds from sale of foreclosed real estate
    
    
    2,509
    
    
    
    3,144
    
    
    
    231Increase in accrued interest receivable
    
    
    (17,270
    )
    
    
    (10,972
    )
    
    
    (7,440
    )Decrease(increase)in other assets
    
    
    6,418
    
    
    
    2,606
    
    
    
    (9,587
    )Increase in accrued expenses and other liabilities
    
    
    15,583
    
    
    
    8,565
    
    
    
    14,622Tax benefit from stock plans
    
    
    20,880
    
    
    
    7,686
    
    
    
    Net Cash Provided by Operating Activities
    
    
    293,456
    
    
    
    247,276
    
    
    
    211,272Cash Flows from Investing Activities:Originations of loans
    
    
    (1,464,641
    )
    
    
    (2,271,148
    )
    
    
    (1,907,298
    )Purchases of loans
    
    
    (3,122,409
    )
    
    
    (3,205,249
    )
    
    
    (1,717,406
    )Payments on loans
    
    
    2,016,447
    
    
    
    3,630,638
    
    
    
    2,625,551Principal collection of mortgage-backed securities held to maturity
    
    
    1,445,507
    
    
    
    3,387,605
    
    
    
    2,133,902Proceeds from sales of mortgage-backed securities held to maturity
    
    
    
    
    
    
    68,652
    
    
    
    Purchases of mortgage-backed securities held to maturity
    
    
    (921,765
    )
    
    
    (3,038,153
    )
    
    
    (2,400,445
    )Principal collection of mortgage-backed securities available for sale
    
    
    282,901
    
    
    
    410,316
    
    
    
    250,244Proceeds from sales of mortgage-backed securities available for sale
    
    
    510,496
    
    
    
    1,329,731
    
    
    
    78,164Purchases of mortgage-backed securities available for sale
    
    
    (1,278,921
    )
    
    
    (1,489,154
    )
    
    
    (1,168,106
    )Proceeds from maturities and calls of investment securities held to maturity
    
    
    436,770
    
    
    
    40
    
    
    
    35Proceeds from maturities and calls of investment securities available for sale
    
    
    986,343
    
    
    
    1,332,222
    
    
    
    203,338Purchases of investment securities held to maturity
    
    
    (1,769,643
    )
    
    
    
    
    
    
    Proceeds from sales of investment securities available for sale
    
    
    
    
    
    
    50,557
    
    
    
    10,504Purchases of investment securities available for sale
    
    
    (337,306
    )
    
    
    (3,089,474
    )
    
    
    (598,547
    )Purchases of Federal Home Loan Bank of New York stock
    
    
    
    
    
    
    (27,350
    )
    
    
    (56,351
    )Redemption of Federal Home Loan Bank of New York stock
    
    
    24,850
    
    
    
    
    
    
    
    Purchases of premises and equipment, net
    
    
    (9,023
    )
    
    
    (2,149
    )
    
    
    (5,144
    )Net Cash Used in Investment Activities
    
    
    (3,200,394
    )
    
    
    (2,912,916
    )
    
    
    (2,551,559
    )Cash Flows from Financing Activities:Net increase in deposits
    
    
    1,023,520
    
    
    
    1,315,151
    
    
    
    1,225,867Proceeds from borrowed funds
    
    
    3,750,000
    
    
    
    2,025,000
    
    
    
    1,450,000Principal payments on borrowed funds
    
    
    (1,750,000
    )
    
    
    (475,000
    )
    
    
    Dividends paid
    
    
    (40,482
    )
    
    
    (95,627
    )
    
    
    (64,504
    )Purchases of stock by the RRP
    
    
    (7,299
    )
    
    
    
    
    
    
    (1,854
    )Purchases of treasury stock
    
    
    (161,662
    )
    
    
    (101,057
    )
    
    
    (140,173
    )Exercise of stock options
    
    
    6,460
    
    
    
    10,961
    
    
    
    9,933Net Cash Provided by Financing Activities
    
    
    2,820,537
    
    
    
    2,679,428
    
    
    
    2,479,269Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (86,401
    )
    
    
    13,788
    
    
    
    138,982Cash and Cash Equivalents at Beginning of Year
    
    
    254,584
    
    
    
    240,796
    
    
    
    101,814Cash and Cash Equivalents at End of Year
    
    $
    168,183
    
    
    $
    254,584
    
    
    $
    240,796Supplemental Disclosures:Interest paid
    
    $
    422,862
    
    
    $
    373,234
    
    
    $
    390,038Income taxes paid
    
    $
    133,800
    
    
    $
    122,535
    
    
    $
    111,219
 See accompanying notes to consolidated financial statements. Page 90




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1. Summary of Significant Accounting Policies a)Basis of Presentation The following are the significant accounting and reporting policies applied by Hudson City Bancorp,
Inc. (Hudson City Bancorp) and its wholly-owned subsidiary, Hudson City Savings Bank (Hudson
City Savings), in the preparation of the accompanying consolidated financial statements. The
consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America. 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. Hudson City Bancorp is a Delaware corporation organized in March 1999 by 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, referred to as the
Reorganization. In preparing the consolidated financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the
statements of financial condition and income for the period. Actual results could differ from
these estimates. b)Comprehensive Income Comprehensive income is comprised of net income and other comprehensive income. Other
comprehensive income includes items such as unrealized gains and losses on securities available for
sale, net of tax. Comprehensive income is presented in the consolidated statements of changes in
stockholders equity. c)Statements of Cash Flows For purposes of reporting cash flows, cash and cash equivalents includes cash on hand, amounts due
from banks and federal funds sold. Generally, federal funds are sold for one-day periods. Transfers of loans to foreclosed real estate of $2,348,000, $2,994,000 and $1,257,000 for the years
ended December 31, 2004, 2003 and 2002, respectively, did not result in cash receipts or cash
payments. d)Investment Securities Investment securities are classified as either held to maturity or available for sale. Investment
securities classified as held to maturity are stated at cost, adjusted for amortization of premiums
and accretion of discounts. Such amortization and accretion is reflected in interest income over
the life of the security as an adjustment to yield. 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
other comprehensive income, which is included in stockholders equity. Page 91




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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. e)Mortgage-Backed Securities Mortgage-backed securities include pass-through certificates, which represent participating
interests in pools of long-term first mortgage loans originated and serviced by third-party issuers
of the securities, and real estate mortgage investment conduits (REMICs), which are debt
securities that are secured by mortgage loans or other mortgage-backed securities. Mortgage-backed securities are classified as either held to maturity or available for sale.
Mortgage-backed securities classified as held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Such amortization and accretion is reflected
in interest income over the life of the security as an adjustment to yield. 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, 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. f)Security Impairment We periodically perform analyses to test for impairment of various assets. A significant
impairment analysis relates to the other than temporary declines in the value of our securities.
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 would adjust the amount of the
security by writing it down to fair market value through a charge to current period operations. g)Loans Loans are stated at their principal amounts outstanding. Interest income on loans is accrued and
credited to income as earned. Net loan origination fees and broker costs are deferred and
amortized to interest income over the life of the loan as an adjustment to the yield. Purchased
loans are stated at their principal amounts outstanding, adjusted for amortization of premiums and
accretion of discounts. Such amortization and accretion is reflected in interest income over the
life of the security as an adjustment to yield. The accrual of income on loans that do not carry private mortgage insurance, are not guaranteed by
a federal agency or are serviced by others 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 only 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. Serviced
loans delinquent 90 days or more continue to accrue interest through settlement. Page 92




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Hudson City defines the population of 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. h)Allowance for Loan Losses The allowance for loan losses has been determined in accordance with accounting principles
generally accepted in the United States of America, under which we are required to maintain
adequate allowances for loan losses. We are responsible for the timely and periodic determination
of the amount of the allowance required. We believe that our allowance for loan losses is adequate
to cover specifically identifiable loan losses, as well as estimated losses inherent in our
portfolio for which certain losses are probable but not specifically identifiable. Our primary lending emphasis is the origination and purchase of one- to four-family first mortgage
loans on residential properties and, to a lesser extent, second mortgage loans on one- to
four-family residential properties resulting in a loan concentration in residential first mortgage
loans at December 31, 2004. As a result of our lending practices, we also have a concentration of
loans secured by real property located in New Jersey. Based on the composition of our loan
portfolio and the growth in our loan portfolio, we believe the primary risks inherent in our
portfolio are increases in interest rates, a decline in the economy, generally, and a decline in
real estate market values. Any one or a combination of these events may adversely affect our loan
portfolio resulting in increased delinquencies, loan losses and future levels of provisions. We
consider it important to maintain the ratio of our allowance for loan losses to total loans at an
acceptable level given current economic conditions, interest rates and the composition of our
portfolio. 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. Each month we prepare a worksheet 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
worksheet, 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 worksheet, the amount of the allowance for loan losses in relation to the total loan balance,
loan portfolio growth, accounting principles generally accepted in the United States of America and
regulatory guidance. Page 93




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We have applied this process consistently and we have made minimal changes in the estimation
methods and assumptions that we have used. i)Foreclosed Real Estate Foreclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure.
After foreclosure, foreclosed properties held for sale are carried at the lower of fair value minus
estimated cost to sell, or at cost. Fair market value is generally based on recent appraisals.
Subsequent provisions, which may result from the ongoing periodic valuations of these properties,
are charged to income in the period in which they are identified and credited to a valuation
allowance account. Foreclosed real estate is reported net of the valuation allowance. Carrying
costs, such as maintenance and taxes, are charged to operating expenses as incurred. j)Banking Premises and Equipment Land is carried at cost. Buildings, leasehold improvements and furniture, fixtures and equipment
are carried at cost, less accumulated depreciation and leasehold amortization. Buildings are
depreciated over their estimated useful lives using the straight-line method. Furniture, fixtures
and equipment are depreciated over their estimated useful lives using the double-declining balance
method. Leasehold improvements are amortized over the shorter of their estimated useful lives or
the term of the respective leases. The costs for major improvements and renovations are
capitalized, while maintenance, repairs and minor improvements are charged to operating expenses as
incurred. Gains and losses on dispositions are reflected currently as other non-interest income or
expense. k) Income Taxes We utilize the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. l)Employee Benefit Plans Hudson City maintains certain noncontributory benefit plans, which cover all employees who have met
the eligibility requirements of the plans. Certain health care and life insurance benefits are
provided for retired employees. The expected cost of benefits provided for retired employees is
actuarially determined and accrued ratably from the date of hire to the date the employee is fully
eligible to receive the benefits. The employee stock ownership plan (ESOP) is accounted for in accordance with the provisions of
Statement of Position 93-6, Employer Accounting for Employee Stock Ownership Plans. Page 94




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The funds borrowed by the ESOP from Hudson City Bancorp to purchase Hudson City Bancorp common
stock are being repaid from Hudson City Savings contributions and dividends paid on unallocated
ESOP shares over a period of up to 30 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. The Hudson City stock option plans and the recognition and retention plans (RRP) are accounted
for in accordance with the provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), and related Interpretations. Accordingly, no compensation expense has been
recognized for the stock option plans. The fair value pro forma disclosures required by Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, are
presented below. Expense for the RRP in the amount of the fair value of the common stock at the
date of grant is recognized ratably over the vesting period. Unvested and unallocated RRP shares
are recorded as a reduction of stockholders equity at cost. Had expense for Hudson Citys stock option plans been determined based on the fair value at the
grant date for our stock options consistent with the method of SFAS No. 123, our net income and
earnings per share for all expenses related to stock options and stocks granted in our recognition
and retention plans would have been reduced to the pro forma amounts that follow: 2004
    
    
    2003
    
    
    2002(In thousands, except per share data)Net income, as reported
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033Add: expense recognized for the recognition and
retention plans, net of related tax effect
    
    5,623
    
    
    
    4,103
    
    
    
    4,690Less: total stock option and recognition and
retention plans expense, determined under the
fair value method, net of related tax effect
    
    (8,939
    )
    
    
    (6,529
    )
    
    
    (7,038
    )Pro forma net income
    
    $
    235,950
    
    
    $
    204,984
    
    
    $
    189,685Basic earnings per share:
    As reported
    $
    1.33
    
    
    $
    1.14
    
    
    $
    1.04Pro forma
    
    1.31
    
    
    
    1.12
    
    
    
    1.03Diluted earnings per share:
    As reported
    $
    1.29
    
    
    $
    1.11
    
    
    $
    1.01Pro forma
    
    1.27
    
    
    
    1.09
    
    
    
    1.00
 The fair value of the option grants was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: For the Year Ended December 31,2004
    
    
    2003
    
    
    2002Expected dividend yield
    
    
    1.69
    %
    
    
    2.24
    %
    
    
    1.34
    %Expected volatility
    
    
    19.66
    
    
    
    24.71
    
    
    
    17.94Risk-free interest rate
    
    
    3.05
    
    
    
    2.98
    
    
    
    4.40Expected option life
    
    5 years
    
    5 years
    
    5 years
 Page 95




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m)Borrowed Funds Hudson City enters into sales of securities under agreements to repurchase with selected brokers
and the Federal Home Loan Bank (FHLB). These agreements are recorded as financing transactions
as Hudson City maintains effective control over the transferred securities. The dollar amount of
the securities underlying the agreements continues to be carried in Hudson Citys securities
portfolio. The obligations to repurchase the securities are reported as a liability in the
consolidated statements of financial condition. The securities underlying the agreements are delivered to the party with whom each transaction is
executed. They agree to resell to Hudson City the same securities at the maturity or call of the
agreement. Hudson City retains the right of substitution of the underlying securities throughout
the terms of the agreements. Hudson City has also obtained advances from the FHLB, which are generally secured by a blanket lien
against our mortgage portfolio. Total borrowings with the FHLB are generally limited to twenty
times the amount of FHLB stock owned or the fair value of our mortgage portfolio, whichever is
greater. n)Earnings Per Share Basic earnings per share is computed by dividing income available to common stockholders by the
weighted average number of shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to issue common stock
(such as stock options) were exercised or resulted in the issuance of common stock. These potentially dilutive
shares would then be included in the weighted average number of shares outstanding for the period using
the treasury stock method. Shares issued and shares reacquired during any period are weighted for
the portion of the period that they were outstanding. In computing both basic and diluted earnings per share, the weighted average number of common
shares outstanding includes all 122,576,600 shares issued to Hudson City, MHC. Also included are
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. 2. Plan of Conversion and Reorganization On December 16, 2004 the Boards of Directors of Hudson City Bancorp, Hudson City Savings and Hudson
City, MHC unanimously adopted a Plan of Conversion and Reorganization (the Plan). Under the terms
of the Plan, Hudson City Savings will reorganize from the two-tier mutual holding company structure
to a stock holding company structure and Hudson City Bancorp will undertake a second-step stock
offering of new shares of common stock. Hudson City, MHC, which owns approximately 65.9% of the
outstanding common stock of Hudson City Bancorp, will be merged into Hudson City Bancorp as part of
the reorganization. Page 96




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Pursuant to the Plan, shareholders other than Hudson City, MHC will receive new shares of common
stock of Hudson City Bancorp pursuant to a split ratio designed to preserve their aggregate
percentage of ownership interest. The split ratio will be determined based upon an appraisal of
Hudson City Bancorp, which is to be performed by an independent appraiser. Additionally, the
shares held by Hudson City, MHC will be retired and Hudson City Bancorp will offer and sell shares
of common stock in an amount representing the percentage ownership interest currently held by
Hudson City, MHC, also to be based on the appraisal of Hudson City Bancorp. The shares will be
offered and sold in a subscription offering to depositors and, if necessary, a syndicated offering,
subject to the priorities set forth in the Plan. Depositors of Hudson City Savings as of June 30,
2003 will receive first priority. The transactions contemplated by the Plan are subject to the approval of Hudson City Savings
depositors, Hudson City Bancorps shareholders (other than Hudson City, MHC) and regulatory
agencies. 3. Stockholders Equity As part of the conversion and reorganization to the mutual holding company structure in 1999, a
liquidation account was established in an amount equal to the total equity of Hudson City Savings
as of the latest practicable date prior to the Reorganization. The liquidation account was
established to provide a limited priority claim to the assets of Hudson City Savings to eligible
account holders and supplemental eligible account holders, as defined, who continue to maintain
deposits in Hudson City Savings after the Reorganization. In the unlikely event of a complete
liquidation of Hudson City Savings, and only in such event, each eligible account holder and
supplemental eligible account holder would receive a liquidation distribution, prior to any payment
to the holder of the Banks common stock. This distribution would be based upon each eligible
account holders and supplemental account holders proportionate share of the then total remaining
qualifying deposits. Hudson City Savings is not permitted to declare or pay dividends on its capital stock or repurchase
any of its outstanding stock if it would cause Hudson City Savings stockholders equity to be
reduced below the amounts required for the liquidation accounts or applicable regulatory capital
requirements. Under our stock repurchase programs shares of Hudson City Bancorp may be purchased in the open
market or through other privately negotiated transactions, from time-to-time, depending on market
conditions. The repurchased shares are held as treasury stock for general corporate use. During
the years ended December 31, 2004 and 2003, we purchased 4,590,200 and 3,667,375 shares of our
common stock at an aggregate cost of $161.7 and $101.1 million, respectively. At December 31,
2004, there were 3,076,221 shares remaining to be repurchased under our existing stock repurchase
programs. 4. Restrictions on Cash and Due From Banks 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, 2004 and
2003 was approximately $26,281,000 and $18,642,000, respectively. Page 97




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5. Investment Securities The amortized cost and estimated fair market value of investment securities at December 31 are as
follows: Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair MarketCost
    
    
    Gains
    
    
    Losses
    
    
    Value(In thousands)2004Held to Maturity:United States government-sponsored
agencies
    
    $
    1,333,018
    
    
    $
    1,144
    
    
    $
    (9,108
    )
    
    $
    1,325,054Municipal bonds
    
    
    1,231
    
    
    
    51
    
    
    
    
    
    
    
    1,282$
    1,334,249
    
    
    $
    1,195
    
    
    $
    (9,108
    )
    
    $
    1,326,336Available for Sale:United States government-sponsored
agencies
    
    $
    1,597,351
    
    
    $
    919
    
    
    $
    (13,886
    )
    
    $
    1,584,384Corporate bonds
    
    
    74
    
    
    
    1
    
    
    
    (1
    )
    
    
    74Equity securities
    
    
    10,168
    
    
    
    63
    
    
    
    (50
    )
    
    
    10,181Total available for sale
    
    $
    1,607,593
    
    
    $
    983
    
    
    $
    (13,937
    )
    
    $
    1,594,6392003Held to Maturity:Municipal bonds
    
    $
    1,366
    
    
    $
    77
    
    
    $
    
    
    
    $
    1,443Available for Sale:United States government-sponsored
agencies
    
    $
    2,246,358
    
    
    $
    3,074
    
    
    $
    (16,397
    )
    
    $
    2,233,035Corporate bonds
    
    
    82
    
    
    
    
    
    
    
    (1
    )
    
    
    81Equity securities
    
    
    10,168
    
    
    
    528
    
    
    
    
    
    
    
    10,696Total available for sale
    
    $
    2,256,608
    
    
    $
    3,602
    
    
    $
    (16,398
    )
    
    $
    2,243,812
 Page 98




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The following tables summarize the fair value and unrealized losses of those investment
securities which reported an unrealized loss at December 31, 2004 and 2003, and if the unrealized
loss position was continuous for the twelve months prior to December 31, 2004 and 2003. Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)2004United States
government-sponsored
agencies
    
    $
    1,543,473
    
    
    $
    18,231
    
    
    $
    216,626
    
    
    $
    4,763
    
    
    $
    1,760,099
    
    
    $
    22,994Corporate bonds
    
    
    66
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    1Equity securities
    
    
    9,950
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    9,950
    
    
    
    50Total
    
    $
    1,553,489
    
    
    $
    18,282
    
    
    $
    216,626
    
    
    $
    4,763
    
    
    $
    1,770,115
    
    
    $
    23,0452003United States
government-sponsored
agencies
    
    $
    1,237,930
    
    
    $
    16,397
    
    
    $
    
    
    
    $
    
    
    
    $
    1,237,930
    
    
    $
    16,397Corporate bonds
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    1
    
    
    
    49
    
    
    
    1Total
    
    $
    1,237,930
    
    
    $
    16,397
    
    
    $
    49
    
    
    $
    1
    
    
    $
    1,237,979
    
    
    $
    16,398
 The unrealized losses are primarily due to the changes in interest rates. We have not
classified these items as impaired as the scheduled coupon payments have been made, we anticipate
collecting the entire principal balance as scheduled, we believe the price variation is temporary
in nature and we have the intent and ability to hold these securities to maturity or for a
sufficient amount of time to recover the recorded principal. The amortized cost and estimated fair market value of investment securities held to maturity and
available for sale at December 31, 2004, by contractual maturity, are shown below. The expected
maturity may differ from the contractual maturity because issuers may have the right to call or
prepay obligations. Equity securities have been excluded from this table. EstimatedAmortized
    
    
    Fair MarketCost
    
    
    Value(In thousands)Held to MaturityDue in one year or less
    
    $
    65
    
    
    $
    66Due after one year through five years
    
    
    10
    
    
    
    11Due after five years through ten years
    
    
    712,409
    
    
    
    713,308Due after ten years
    
    
    621,765
    
    
    
    612,951Total held to maturity
    
    $
    1,334,249
    
    
    $
    1,326,336Available for SaleDue after one year through five years
    
    $
    669,109
    
    
    $
    662,466Due after five years through ten years
    
    
    928,316
    
    
    
    921,992Total available for sale
    
    $
    1,597,425
    
    
    $
    1,584,458
 Page 99




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Interest and dividend income for the years ended December 31, 2004, 2003 and 2002 consists of
the following: 2004
    
    
    2003
    
    
    2002(In thousands)United States government-sponsored agencies
    
    $
    118,653
    
    
    $
    79,411
    
    
    $
    18,258Municipal bonds
    
    
    83
    
    
    
    87
    
    
    
    89Corporate bonds
    
    
    4
    
    
    
    7
    
    
    
    30Equity securities
    
    
    574
    
    
    
    574
    
    
    
    568Total interest and dividend income
    
    $
    119,314
    
    
    $
    80,079
    
    
    $
    18,945
 There were no gains or losses from investment securities transactions during 2004. Gross
realized gains on sales of investment securities available for sale during 2003 and 2002 were
$537,000 and $585,000, respectively. The carrying value of securities pledged as required security
for deposits and for other purposes required by law amounted to $15,509,000 and $10,838,000 at
December 31, 2004 and 2003, respectively. Page 100




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6. Mortgage-Backed Securities The 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)2004Held to Maturity:GNMA pass-through certificates
    
    $
    416,665
    
    
    $
    5,453
    
    
    $
    (86
    )
    
    $
    422,032FNMA pass-through certificates
    
    
    2,017,165
    
    
    
    9,923
    
    
    
    (9,297
    )
    
    
    2,017,791FHLMC pass-through certificates
    
    
    561,095
    
    
    
    1,296
    
    
    
    (8,050
    )
    
    
    554,341FHLMC and FNMA - REMICs
    
    
    760,996
    
    
    
    132
    
    
    
    (34,263
    )
    
    
    726,865Total held to maturity
    
    $
    3,755,921
    
    
    $
    16,804
    
    
    $
    (51,696
    )
    
    $
    3,721,029Available for Sale:GNMA pass-through certificates
    
    $
    504,812
    
    
    $
    1,196
    
    
    $
    (2,169
    )
    
    $
    503,839FNMA pass-through certificates
    
    
    747,252
    
    
    
    812
    
    
    
    (4,684
    )
    
    
    743,380FHLMC pass-through certificates
    
    
    371,066
    
    
    
    2,852
    
    
    
    (429
    )
    
    
    373,489Total available for sale
    
    $
    1,623,130
    
    
    $
    4,860
    
    
    $
    (7,282
    )
    
    $
    1,620,7082003Held to Maturity:GNMA pass-through certificates
    
    $
    616,618
    
    
    $
    11,270
    
    
    $
    (1,649
    )
    
    $
    626,239FNMA pass-through certificates
    
    
    1,650,544
    
    
    
    7,206
    
    
    
    (4,896
    )
    
    
    1,652,854FHLMC pass-through certificates
    
    
    439,793
    
    
    
    3,764
    
    
    
    (10,460
    )
    
    
    433,097FHLMC, FNMA and GNMA-REMICs
    
    
    1,585,489
    
    
    
    3,744
    
    
    
    (50,735
    )
    
    
    1,538,498Total held to maturity
    
    $
    4,292,444
    
    
    $
    25,984
    
    
    $
    (67,740
    )
    
    $
    4,250,688Available for Sale:GNMA pass-through certificates
    
    $
    336,364
    
    
    $
    126
    
    
    $
    (32
    )
    
    $
    336,458FNMA pass-through certificates
    
    
    493,870
    
    
    
    
    
    
    
    (487
    )
    
    
    493,383FHLMC pass-through certificates
    
    
    297,300
    
    
    
    3,277
    
    
    
    (161
    )
    
    
    300,416Total available for sale
    
    $
    1,127,534
    
    
    $
    3,403
    
    
    $
    (680
    )
    
    $
    1,130,257
 Page 101




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##### Table of Contents



The following tables summarize the fair value and unrealized losses of those mortgage-backed
securities which reported an unrealized loss at December 31, 2004 and 2003, and if the unrealized
loss position was continuous for the twelve months prior to December 31, 2004 and 2003. Less Than 12 Months
    
    
    12 Months or Longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses(In thousands)2004GNMA
pass-through certificates
    
    $
    320,069
    
    
    $
    2,255
    
    
    $
    
    
    
    $
    
    
    
    $
    320,069
    
    
    $
    2,255FNMA pass-through certificates
    
    
    1,575,778
    
    
    
    9,462
    
    
    
    196,579
    
    
    
    4,519
    
    
    
    1,772,357
    
    
    
    13,981FHLMC pass-through certificates
    
    
    223,234
    
    
    
    1,597
    
    
    
    244,757
    
    
    
    6,882
    
    
    
    467,991
    
    
    
    8,479FHLMC and
FNMA - REMICs
    
    
    23,720
    
    
    
    174
    
    
    
    699,272
    
    
    
    34,089
    
    
    
    722,992
    
    
    
    34,263Total
    
    $
    2,142,801
    
    
    $
    13,488
    
    
    $
    1,140,608
    
    
    $
    45,490
    
    
    $
    3,283,409
    
    
    $
    58,9782003GNMA pass-through certificates
    
    $
    43,881
    
    
    $
    1,681
    
    
    $
    
    
    
    $
    
    
    
    $
    43,881
    
    
    $
    1,681FNMA pass-through certificates
    
    
    226,747
    
    
    
    5,383
    
    
    
    
    
    
    
    
    
    
    
    226,747
    
    
    
    5,383FHLMC pass-through certificates
    
    
    267,997
    
    
    
    10,621
    
    
    
    
    
    
    
    
    
    
    
    267,997
    
    
    
    10,621FHLMC, FNMA and
GNMA- REMICs
    
    
    992,887
    
    
    
    50,735
    
    
    
    
    
    
    
    
    
    
    
    992,887
    
    
    
    50,735Total
    
    $
    1,531,512
    
    
    $
    68,420
    
    
    $
    
    
    
    $
    
    
    
    $
    1,531,512
    
    
    $
    68,420
 The unrealized losses are primarily due to the changes in interest rates. We have not
classified these items as impaired as the scheduled principal and interest payments have been made,
we anticipate collecting the entire principal balance as scheduled, we believe the price variation
is temporary in nature and we have the intent and ability to hold these securities to maturity or
for a sufficient amount of time to recover the recorded principal. The amortized cost and estimated fair market value of mortgage-backed securities held to maturity
and available for sale at December 31, 2004, by contractual maturity, are shown below. EstimatedAmortized
    
    
    Fair MarketCost
    
    
    Value(In thousands)Held to MaturityDue in one year or less
    
    $
    164
    
    
    $
    167Due after one year through five years
    
    
    19,245
    
    
    
    20,256Due after five years through ten years
    
    
    56,924
    
    
    
    56,832Due after ten years
    
    
    3,679,588
    
    
    
    3,643,774Total held to maturity
    
    $
    3,755,921
    
    
    $
    3,721,029Available for SaleDue after ten years
    
    $
    1,623,130
    
    
    $
    1,620,708
 Gross realized gains on sales of mortgage-backed securities available for sale during 2004
were $11,429,000. Gross realized gains on sales of mortgage-backed securities available for sale
and mortgage-backed securities held to maturity during 2003 were $19,727,000 and $4,062,000,
respectively. Gross realized gains on sales of mortgage-backed securities available for sale during
2002 were $1,481,000. Page 102




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##### Table of Contents



7. Loans and Allowance for Loan Losses Loans at December 31 are summarized as follows: 2004
    
    
    2003(In thousands)First mortgage loans:One- to four-family
    
    $
    11,120,874
    
    
    $
    8,567,442FHA/VA
    
    
    81,915
    
    
    
    98,502Multi-family and commercial
    
    
    3,000
    
    
    
    2,843Total first mortgage loans
    
    
    11,205,789
    
    
    
    8,668,787Consumer and other loans:Fixedrate second mortgages
    
    
    127,737
    
    
    
    105,361Home equity credit lines
    
    
    28,929
    
    
    
    28,217Other
    
    
    584
    
    
    
    701Total consumer and other loans
    
    
    157,250
    
    
    
    134,279Total loans
    
    $
    11,363,039
    
    
    $
    8,803,066
 Substantially all of Hudson Citys loans are secured by first or second liens on real estate
property, the majority of which are located in the State of New Jersey. The ultimate ability to
collect the loan portfolio and realize the carrying value of real estate is subject to changes in
the real estate market and future economic conditions. There are no loans classified as impaired
at December 31, 2004. The following is a comparative summary of loans on which the accrual of income has been
discontinued and loans that are contractually past due 90 days or more but have not been classified
non- accrual at December 31: 2004
    
    
    2003(In thousands)Non-accrual loans
    
    $
    6,057
    
    
    $
    4,503Accruing loans delinquent 90 days or more
    
    
    15,550
    
    
    
    15,748Total non-performing loans
    
    $
    21,607
    
    
    $
    20,251
 The total amount of interest income received during the year on non-accrual loans outstanding
and additional interest income on non-accrual loans that would have been recognized if interest on
all such loans had been recorded based upon original contract terms is immaterial. Hudson City is
not committed to lend additional funds to borrowers on non-accrual status. Page 103




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##### Table of Contents



An analysis of the allowance for loan losses at December 31 follows: 2004
    
    
    2003
    
    
    2002(In thousands)Balance at beginning of year
    
    $
    26,547
    
    
    $
    25,501
    
    
    $
    24,010Charge-offs
    
    
    (20
    )
    
    
    (96
    )
    
    
    (13
    )Recoveries
    
    
    2
    
    
    
    242
    
    
    
    4Net (charge-offs) recoveries
    
    
    (18
    )
    
    
    146
    
    
    
    (9
    )Provision for loan losses
    
    
    790
    
    
    
    900
    
    
    
    1,500Balance at end of year
    
    $
    27,319
    
    
    $
    26,547
    
    
    $
    25,501
 8. Banking Premises and Equipment, net A summary of the net carrying value of banking premises and equipment at December 31 is as follows: 2004
    
    
    2003(In thousands)Land
    
    $
    5,215
    
    
    $
    5,215Buildings
    
    
    32,378
    
    
    
    30,334Leasehold improvements
    
    
    15,493
    
    
    
    12,776Furniture, fixtures and equipment
    
    
    44,955
    
    
    
    40,693Total acquisition value
    
    
    98,041
    
    
    
    89,018Accumulated depreciation and amortization
    
    
    (61,642
    )
    
    
    (57,664
    )Total banking premises
and equipment, net
    
    $
    36,399
    
    
    $
    31,354
 Amounts charged to net occupancy expense for depreciation and amortization of banking premises
and equipment amounted to $3,978,000, $3,520,000 and $3,775,000 in 2004, 2003 and 2002,
respectively. Hudson City has entered into non-cancelable operating lease agreements with respect to banking
premises and equipment. It is expected that many agreements will be renewed at expiration in the
normal course of business. Page 104




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##### Table of Contents



Future minimum rental commitments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year are as follows: Year
    
    Amount(In thousands)2005
    
    $
    4,4492006
    
    
    4,7852007
    
    
    4,7372008
    
    
    4,6052009
    
    
    4,526Thereafter
    
    
    50,651Total
    
    $
    73,753
 Net occupancy expense included gross rental expense for certain bank premises of $4,279,000 in
2004, $3,810,000 in 2003 and $3,531,000 in 2002, and rental income of $358,000, $603,000 and
$861,000 for the respective years. 9. Deposits Deposits at December 31 are summarized as follows: 2004
    
    
    2003Balance
    
    
    Percent
    
    
    Balance
    
    
    Percent(Dollars in thousands)Savings
    
    $
    931,783
    
    
    
    8.12
    %
    
    $
    945,595
    
    
    
    9.05
    %Noninterest-bearing demand
    
    
    417,502
    
    
    
    3.64
    
    
    
    396,495
    
    
    
    3.79Interest-bearing demand
    
    
    4,290,099
    
    
    
    37.38
    
    
    
    2,808,901
    
    
    
    26.87Money market
    
    
    564,700
    
    
    
    4.92
    
    
    
    623,811
    
    
    
    5.97Time deposits
    
    
    5,273,216
    
    
    
    45.94
    
    
    
    5,678,978
    
    
    
    54.32Total deposits
    
    $
    11,477,300
    
    
    
    100.00
    %
    
    $
    10,453,780
    
    
    
    100.00
    %
 Time deposits of $100,000 and over amounted to $886,079,000 and $914,639,000 at December 31,
2004 and 2003, respectively. Interest expense on time deposits of $100,000 and over for the years
ended December 31, 2004, 2003 and 2002 was $18,182,000, $20,078,000 and $27,399,000, respectively.
Included in noninterest-bearing demand accounts are mortgage escrow deposits of $54,115,000 and
$49,756,000 at December 31, 2004 and 2003, respectively. Scheduled maturities of time deposits are as follows: Year
    
    Amount(In thousands)2005
    
    $
    3,705,8262006
    
    
    913,0792007
    
    
    341,1402008
    
    
    124,2512009
    
    
    188,920Total
    
    $
    5,273,216
 Page 105




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##### Table of Contents



10. Borrowed Funds Borrowed funds at December 31 are summarized as follows: 2004
    
    
    2003Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AveragePrincipal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)Securities sold under agreements to repurchase:FHLB
    
    $
    950,000
    
    
    
    4.73
    %
    
    $
    1,250,000
    
    
    
    4.00
    %Other brokers
    
    
    4,350,000
    
    
    
    3.11
    
    
    
    1,950,000
    
    
    
    3.14Total securities sold under
agreements to
repurchase
    
    
    5,300,000
    
    
    
    3.40
    
    
    
    3,200,000
    
    
    
    3.48Advances from the FHLB
    
    
    1,850,000
    
    
    
    3.81
    
    
    
    1,950,000
    
    
    
    3.69Total borrowed funds
    
    $
    7,150,000
    
    
    
    3.51
    
    
    $
    5,150,000
    
    
    
    3.56
 At December 31, 2004, borrowed funds had scheduled maturities and potential call dates as
follows: Borrowings by Scheduled
    
    
    Borrowings by NextMaturity Date as of
    
    
    Potential Call Date as ofDecember 31, 2004
    
    
    December 31, 2004Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageYear
    
    Principal
    
    
    Rate
    
    
    Principal
    
    
    Rate(Dollars in thousands)2005
    
    $
    
    
    
    
    
    %
    
    $
    2,025,000
    
    
    
    3.93
    %2006
    
    
    
    
    
    
    
    
    
    
    2,275,000
    
    
    
    3.262007
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    3.272008
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    3.802009
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    3.632010
    
    
    300,000
    
    
    
    5.68
    
    
    
    50,000
    
    
    
    5.272011
    
    
    950,000
    
    
    
    4.65
    
    
    
    150,000
    
    
    
    4.762012
    
    
    1,500,000
    
    
    
    4.06
    
    
    
    
    
    
    
    2013
    
    
    1,550,000
    
    
    
    3.08
    
    
    
    
    
    
    
    2014
    
    
    2,850,000
    
    
    
    2.84
    
    
    
    
    
    
    
    Total
    
    $
    7,150,000
    
    
    
    3.51
    
    
    $
    7,150,000
    
    
    
    3.51
 Page 106




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##### Table of Contents



The amortized cost and fair value of the underlying securities used as collateral for
securities sold under agreements to repurchase, the average balances and the maximum outstanding at
any month-end at or for the years ended December 31, 2004 and 2003 are as follows: 2004
    
    
    2003(In thousands)Amortized cost of collateral:United
States government-sponsored agency securities
    
    $
    2,030,978
    
    
    $
    615,806Mortgage-backed securities
    
    
    3,198,768
    
    
    
    2,369,058REMICs
    
    
    455,598
    
    
    
    495,074Total amortized cost of collateral
    
    $
    5,685,344
    
    
    $
    3,479,938Fair value of collateral:United
States government-sponsored agency securities
    
    $
    2,008,710
    
    
    $
    604,397Mortgage-backed securities
    
    
    3,188,386
    
    
    
    2,387,457REMICs
    
    
    434,249
    
    
    
    478,192Total fair value of collateral
    
    $
    5,631,345
    
    
    $
    3,470,046Average balance of outstanding repurchase
agreements during the year
    
    $
    4,182,197
    
    
    $
    2,253,025Maximum balance of outstanding repurchase
agreements at any month-end during the year
    
    $
    5,300,000
    
    
    $
    3,200,000Average cost of securities sold under agreements
to repurchase
    
    
    3.41
    %
    
    
    4.26
    %
 The average balances of our advances from the FHLB during 2004 and 2003 were $1.92 billion and
$1.84 billion, respectively, and the maximum FHLB advances outstanding during 2004 and 2003 were
$1.95 billion and $2.05 billion, respectively. 11. Employee Benefit Plans a) Retirement and Other Postretirement Benefits Non-contributory retirement and postretirement plans are maintained to cover all employees,
including retired employees, who have met the eligibility requirements of the plans. Benefits
under the qualified and non-qualified defined benefit retirement plans are based primarily on years
of service and compensation. Funding of the qualified retirement plan is actuarially determined on
an annual basis. It is our policy to fund the qualified retirement plan sufficiently to meet the
minimum requirements set forth in the Employee Retirement Income Security Act of 1974. The
non-qualified retirement plan, for certain executive officers, is unfunded and had a benefit
obligation of $6,396,000 at December 31, 2004 and $5,373,000 at December 31, 2003. Certain health
care and life insurance benefits are provided to eligible retired employees (other benefits).
Participants generally become eligible for retiree health care and life insurance benefits after
ten years of service. The measurement date for year-end disclosure information is December 31 and
the measurement date for net periodic benefit cost is January 1. Page 107




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The following table shows the change in benefit obligation, the change in plan assets, and the
funded status for the retirement plans and other benefits at December 31: Retirement Plans
    
    Other Benefits2004
    
    2003
    
    2004

    
    2003(In thousands)Change in Benefit Obligation:Benefit obligation at beginning of year
    
    $
    73,753
    
    
    $
    67,134
    
    
    $
    41,464
    
    
    $
    30,035Service cost
    
    
    2,945
    
    
    
    2,709
    
    
    
    2,120
    
    
    
    1,643Interest cost
    
    
    4,527
    
    
    
    4,270
    
    
    
    2,318
    
    
    
    1,958Participant contributions
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    20Reduction due to Medicare Prescription Plan
    
    
    
    
    
    
    
    
    
    
    (5,399
    )
    
    
    Actuarial loss
    
    
    4,185
    
    
    
    1,535
    
    
    
    7,415
    
    
    
    8,807Benefits paid
    
    
    (2,142
    )
    
    
    (1,895
    )
    
    
    (1,547
    )
    
    
    (999
    )Benefit obligation at end of year
    
    
    83,268
    
    
    
    73,753
    
    
    
    46,396
    
    
    
    41,464Change in Plan Assets:Fair value
of plan assets at beginning of year
    
    
    76,066
    
    
    
    59,102
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    4,974
    
    
    
    12,856
    
    
    
    
    
    
    
    Employer contribution
    
    
    3
    
    
    
    6,003
    
    
    
    1,522
    
    
    
    979Participant contributions
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    20Benefits paid
    
    
    (2,142
    )
    
    
    (1,895
    )
    
    
    (1,547
    )
    
    
    (999
    )Fair value of plan assets at end of year
    
    
    78,901
    
    
    
    76,066
    
    
    
    
    
    
    
    Funded Status
    
    
    (4,367
    )
    
    
    2,313
    
    
    
    (46,396
    )
    
    
    (41,464
    )Unrecognized prior service cost
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Unrecognized net actuarial loss (gain)
    
    
    13,098
    
    
    
    7,414
    
    
    
    1,232
    
    
    
    (825
    )Prepaid (accrued)benefit cost
    
    $
    8,746
    
    
    $
    9,727
    
    
    $
    (45,164
    )
    
    $
    (42,289
    )
 In 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Medicare Act). Effective July 1, 2004, Hudson City adopted FASB Staff
Position 106-2, which requires companies to recognize the effects of the Medicare Act. The effect
of the Medicare Act reduced the accumulated postretirement benefit obligation by $5,399,000 as of
January 1, 2004. In addition, the Medicare Act reduced the net periodic benefit cost by $684,000
for the year ended December 31, 2004, which included reductions in service cost, interest cost and
amortization of net gain as a result of a reduction of the benefit obligation of $326,000, $337,000
and $21,000, respectively. Amounts recognized in the consolidated statements of financial condition consist of: Retirement Plans
    
    
    Other Benefits2004
    
    
    2003
    
    
    2004
    
    
    2003(In thousands)Prepaid benefit
cost
    
    $
    13,763
    
    
    $
    14,189
    
    
    $
    
    
    
    $
    Accrued benefit
cost
    
    
    (5,017
    )
    
    
    (4,462
    )
    
    
    (45,164
    )
    
    
    (42,289
    )Net amount
recognized
    
    $
    8,746
    
    
    $
    9,727
    
    
    $
    (45,164
    )
    
    $
    (42,289
    )
 Page 108




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The accumulated benefit obligation for all defined benefit retirement plans was $71,137,000
and $61,558,000 at December 31, 2004 and 2003, respectively. Net periodic benefit cost (income) for the year ended December 31 included the following
components: Retirement Plans
    
    
    Other Benefits2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    2,945
    
    
    $
    2,709
    
    
    $
    2,351
    
    
    $
    2,120
    
    
    $
    1,643
    
    
    $
    1,393Interest cost
    
    
    4,527
    
    
    
    4,270
    
    
    
    4,187
    
    
    
    2,318
    
    
    
    1,958
    
    
    
    1,883Expected return on assets
    
    
    (6,532
    )
    
    
    (5,286
    )
    
    
    (5,950
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of:Net loss (gain)
    
    
    59
    
    
    
    528
    
    
    
    33
    
    
    
    (40
    )
    
    
    (368
    )
    
    
    (499
    )Unrecognized prior service cost
    
    
    (16
    )
    
    
    (16
    )
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    Unrecognized remaining net assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    983
    
    
    $
    2,205
    
    
    $
    605
    
    
    $
    4,398
    
    
    $
    3,233
    
    
    $
    2,777
 The following are the weighted average assumptions used to determine net periodic benefit cost
for the period ended December 31: Retirement Plans
    
    
    Other Benefits2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002Discount rate
    
    
    6.25
    %
    
    
    6.50
    %
    
    
    7.25
    %
    
    
    6.25
    %
    
    
    6.50
    %
    
    
    7.25
    %Expected return on
assets
    
    
    8.75
    
    
    
    8.75
    
    
    
    9.00
    
    
    
    
    
    
    
    
    
    
    
    Rate of
compensation
increase
    
    
    4.75
    
    
    
    5.00
    
    
    
    6.00
    
    
    
    
    
    
    
    
    
    
    
    
 The following are the weighted-average assumptions used to determine benefit obligations at
December 31: Retirement Plans
    
    
    Other Benefits2004
    
    
    2003
    
    
    2004
    
    
    2003Discount
rate
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    5.75
    %
    
    
    6.25
    %Rate of
compensation
increase
    
    
    4.25
    
    
    
    4.75
    
    
    
    
    
    
    
    
 The overall expected return on assets assumption is based on the historical performance of the
pension fund. The average return over the past ten years was determined for the market value of
assets, which is the value used in the calculation of annual net periodic benefit cost. The assumed health care cost trend rate used to measure the expected cost of other benefits for
2005 was 10.00%. The rate was assumed to decrease gradually to 4.75% for 2012 and remain at that
level thereafter. Page 109




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Assumed health care cost trend rates have a significant effect on the amounts reported for health
care plans. A 1% change in the assumed health care cost trend rate would have the following
effects on other benefits: 1% Increase
    
    
    1% Decrease(In thousands)Effect on total service cost and
interest cost
    
    $
    1,056
    
    
    $
    (843
    )Effect on other benefit
obligations
    
    
    9,156
    
    
    
    (7,579
    )
 The retirement plans weighted-average asset allocations at December 31, 2004 and 2003, by
asset category were as follows: Plan Assetsat December 31,Asset Category
    
    2004
    
    
    2003Equity securities
    
    
    59.0
    %
    
    
    63.0
    %Fixed Income
    
    
    37.0
    
    
    
    34.0Cash
    
    
    4.0
    
    
    
    3.0Total
    
    
    100.0
    %
    
    
    100.0
    %
 Equity securities include Hudson City Bancorp, Inc. common stock in the amount of $8.0 million
(10.1% of total plan assets) at December 31, 2004. At December 31, 2003, equity securities
included Hudson City Bancorp, Inc. common stock in the amount of $8.4 million (11.0% of total plan
assets). Funds in Hudson Citys qualified retirement plan are invested in a commingled asset allocation fund
(the Fund) of a well-established asset management company and in Hudson City Bancorp, Inc. common
stock. The purpose of the Fund is to provide a diversified portfolio of equities, fixed income
instruments and cash. Its trustee, in the trustees absolute discretion, manages the Fund. The Fund is maintained with the objective of providing investment results that outperform a static
mix of 55% equity, 35% bond and 10% cash, as well as the median manager of balanced funds. In
order to achieve the Funds return objective, the Fund will combine fundamental analysis and a
quantitative proprietary model to allocate and reallocate assets among the three broad investment
categories of equities, money market instruments and other fixed income obligations. As market and
economic conditions change, these ratios will be adjusted in moderate increments of about five
percentage points. It is intended that the equity portion will represent approximately 40% to 70%,
the bond portion approximately 25% to 55% and the money market portion 0% to 25%. Performance
results are reviewed at least annually with the asset management company of the Fund. During 2003, the Retirement Committee of the Board of Directors determined that it was appropriate
to establish a segregated asset account whereby funds transferred or contributed into the account
would be used for the purchase of Hudson City Bancorp, Inc. common stock. In July 2003,
approximately $6.0 million was contributed into the segregated asset account of the defined benefit
retirement plan. At that time, the funds contributed were invested in Hudson City Bancorp, Inc.
common stock. Page 110




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Due to the funded status of its qualified retirement plan, Hudson City did not make a contribution
for 2004 and does not intend to make a contribution in 2005. The following benefit payments, which reflect expected future service, as appropriate, are expected
to be paid: Retirement
    
    
    OtherPlans
    
    
    Benefits(In thousands)2005
    
    $
    3,467
    
    
    $
    1,4492006
    
    
    3,540
    
    
    
    1,5672007
    
    
    3,686
    
    
    
    1,7112008
    
    
    3,841
    
    
    
    1,8912009
    
    
    4,122
    
    
    
    2,1442010 through 2014
    
    
    23,932
    
    
    
    14,052
 b) Employee Stock Ownership Plan The ESOP is a tax-qualified plan designed to invest primarily in Hudson City common stock that
provides employees with the opportunity to receive a Hudson City-funded retirement benefit based
primarily on the value of Hudson City common stock. The ESOP was authorized to purchase, and did
purchase, 8,696,000 shares of Hudson City common stock at an average price of $6.74 per share with
a loan from Hudson City Bancorp. The outstanding loan principal at December 31, 2004 was $52.7
million. Those shares were pledged as collateral for the loan and are released from the pledge for
allocation to participants as loan payments are made. At December 31, 2004, shares allocated to participants were 1,594,267. For the plan year ending
December 31, 2005, there are 289,867 shares that are committed to be released and will be allocated
to participants at the end of the plan year. Unallocated ESOP shares held in suspense totaled
7,101,733 at December 31, 2004 and had a fair market value of $261.5 million. ESOP compensation
expense for the years ended December 31, 2004, 2003 and 2002 was $10,505,000, $7,685,000 and
$5,105,000, respectively. The ESOP restoration plan is a non-qualified plan that provides supplemental benefits to certain
executives who are prevented from receiving the full benefits contemplated by the employee stock
ownership plans benefit formula. The supplemental payments consist of payments representing
shares that cannot be allocated to participants under the ESOP due to the legal limitations imposed
on tax-qualified plans and, in the case of participants who retire before the repayment in full of
the ESOPs loan, payments representing the shares that would have been allocated if employment had
continued through the full term of the loan. Compensation expense related to this plan amounted to
$4,173,000 in 2004, $5,018,000 in 2003 and $2,250,000 in 2002. Page 111




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c) Recognition and Retention Plans The purpose of the RRP is to promote the growth and profitability of Hudson City Bancorp by
providing directors, officers and employees with an equity interest in Hudson City Bancorp as an
incentive to achieve corporate goals. The RRP have invested money primarily in shares of Hudson
City common stock that were used to make restricted stock awards. The RRP were authorized, in the aggregate, to purchase not more than 4,648,000 shares of common
stock, and have purchased 4,607,616 shares on the open market at an average price of $9.11 per
share. As a general rule, restricted stock grants are held in escrow for the benefit of the award
recipient until vested. Awards outstanding generally vest in five annual installments commencing
one year from the date of the award. As of December 31, 2004, common stock that had not been
awarded totaled 51,250 shares. Expense attributable to the RRP amounted to $8,987,000 for the year
2004, $6,473,000 for 2003 and $7,362,000 for 2002. A summary of the status of the granted, but unvested shares under the RRP as of December 31, and
changes during those years, is presented below: Restricted Stock Awards2004
    
    
    2003
    
    
    2002Outstanding at beginning of year
    
    
    1,747,120
    
    
    
    2,561,520
    
    
    
    3,341,560Granted
    
    
    237,950
    
    
    
    16,500
    
    
    
    167,900Vested
    
    
    (1,057,500
    )
    
    
    (830,900
    )
    
    
    (947,940
    )Outstanding at end of year
    
    
    927,570
    
    
    
    1,747,120
    
    
    
    2,561,520
 d) Stock Option Plans Each stock option granted entitles the holder to purchase one share of Hudson Citys common stock
at an exercise price not less than the fair market value of a share of common stock at the date of
grant. Options granted generally vest over a five year period from the date of grant and will
expire no later than 10 years following the grant date. Under the Hudson City stock option plans,
11,330,000 shares of Hudson City Bancorp, Inc. common stock have been reserved for issuance.
Directors and employees have been granted 11,231,000 stock options. Page 112




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A summary of the status of the granted, but unexercised stock options as of December 31, and
changes during those years, is presented below: 2004
    
    
    2003
    
    
    2002Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    Average
    
    
    Number of
    
    
    AverageStock
 Options
    
    

Exercise

Price
    
    

Stock

Options
    
    

Exercise

Price
    
    

Stock

Options
    
    

Exercise

PriceOutstanding at beginning
of year
    
    
    6,865,156
    
    
    $
    8.103
    
    
    
    8,230,070
    
    
    $
    7.685
    
    
    
    9,214,400
    
    
    $
    7.208Granted
    
    
    1,031,000
    
    
    
    38.263
    
    
    
    174,000
    
    
    
    19.694
    
    
    
    426,000
    
    
    
    15.887Exercised
    
    
    (900,198
    )
    
    
    7.176
    
    
    
    (1,530,114
    )
    
    
    7.164
    
    
    
    (1,410,330
    )
    
    
    7.043Forfeited
    
    
    (1,200
    )
    
    
    9.938
    
    
    
    (8,800
    )
    
    
    9.787
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    6,994,758
    
    
    
    12.668
    
    
    
    6,865,156
    
    
    
    8.103
    
    
    
    8,230,070
    
    
    
    7.685
 The following table summarizes information about our stock options outstanding at December 31,
2004: Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageExercise
    
    
    Of Options
    
    
    Contractual
    
    
    Exercise
    
    
    Of Options
    
    
    ExercisePrice
    
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$
    6.938
    
    
    
    4,909,458
    
    
    5 years
    
    $
    6.938
    
    
    
    3,678,658
    
    
    $
    6.9389.938
    
    
    
    87,200
    
    
    6 years
    
    
    9.938
    
    
    
    44,000
    
    
    
    9.93810.925
    
    
    
    137,600
    
    
    6 years
    
    
    10.925
    
    
    
    68,800
    
    
    
    10.92511.515
    
    
    
    256,000
    
    
    6 years
    
    
    11.515
    
    
    
    128,000
    
    
    
    11.51513.495
    
    
    
    169,200
    
    
    7 years
    
    
    13.495
    
    
    
    59,400
    
    
    
    13.49517.740
    
    
    
    240,000
    
    
    7 years
    
    
    17.740
    
    
    
    160,000
    
    
    
    17.74019.110
    
    
    
    84,300
    
    
    8 years
    
    
    19.110
    
    
    
    13,100
    
    
    
    19.11020.380
    
    
    
    80,000
    
    
    8 years
    
    
    20.380
    
    
    
    40,000
    
    
    
    20.38033.130
    
    
    
    140,000
    
    
    9 years
    
    
    33.130
    
    
    
    
    
    
    
    33.13038.200
    
    
    
    116,000
    
    
    9 years
    
    
    38.200
    
    
    
    
    
    
    
    38.20039.200
    
    
    
    775,000
    
    
    9 years
    
    
    39.200
    
    
    
    
    
    
    
    39.20012.668
    
    
    
    6,994,758
    
    
    
    
    
    
    
    12.668
    
    
    
    4,191,958
    
    
    
    7.846
 c) Incentive Plans A tax-deferred profit incentive bonus savings plan is maintained based on Hudson Citys
profitability. All employees are eligible after one year of employment and the attainment of age
21. The expense was $1,380,000, $1,320,000 and $1,230,000 in 2004, 2003 and 2002, respectively. Certain incentive plans are maintained to recognize key executives who are able to make substantial
contributions to the long-term success and financial strength of Hudson City. At the end of each
performance period, the value of the award is determined in accordance with established criteria.
Participants can elect cash payment or elect to defer the award until retirement. The expense
related to these plans was $2,988,000 in 2004, $2,482,000 in 2003 and $2,462,000 in 2002. Page 113




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12. Income Taxes Income tax expense (benefit) for each of the years in the three-year period ended December 31, 2003
is summarized as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Federal:Current
    
    $
    139,839
    
    
    $
    120,498
    
    
    $
    108,916Deferred
    
    
    (4,838
    )
    
    
    (4,564
    )
    
    
    (3,007
    )Total federal
    
    
    135,001
    
    
    
    115,934
    
    
    
    105,909State:Current
    
    
    10,218
    
    
    
    5,695
    
    
    
    5,222Deferred
    
    
    (2,074
    )
    
    
    (1,828
    )
    
    
    (1,749
    )Total state
    
    
    8,144
    
    
    
    3,867
    
    
    
    3,473Total income tax expense
    
    $
    143,145
    
    
    $
    119,801
    
    
    $
    109,382
 Not included in the above table are deferred income tax benefits of $2,166,000 and $19,002,000
for 2004 and 2003, respectively, and a deferred income tax expense of $11,918,000 for 2002, which
represent the deferred income tax (benefit)expense on the net unrealized (losses)gains of
securities available for sale. The amounts reported as income tax expense vary from the amounts that would be reported by applying
the statutory federal income tax rate to income before income taxes due to the following: 2004
    
    
    2003
    
    
    2002(Dollars in thousands)Income before income tax expense
    
    $
    382,411
    
    
    $
    327,211
    
    
    $
    301,415Statutory income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Computed expected income tax expense
    
    
    133,844
    
    
    
    114,524
    
    
    
    105,495State income taxes, net of federal income tax benefit
    
    
    5,294
    
    
    
    2,514
    
    
    
    2,257Tax-exempt interest
    
    
    (71
    )
    
    
    (84
    )
    
    
    (106
    )ESOP fair market value adjustment
    
    
    2,990
    
    
    
    2,003
    
    
    
    1,100Other, net
    
    
    1,088
    
    

    
    844
    
    
    
    636Income tax expense
    
    $
    143,145
    
    
    $
    119,801
    
    
    $
    109,382
 Page 114




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The net deferred tax asset at December 31 consists of the following: 2004
    
    
    2003(In thousands)Deferred tax asset:Discount accretion
    
    $
    
    
    
    $
    92Deferred loan origination fees
    
    
    1,425
    
    
    
    Postretirement benefits
    
    
    18,667
    
    
    
    17,413Book loan loss reserve
    
    
    10,116
    
    
    
    9,829Mortgage premium amortization
    
    
    5,417
    
    
    
    5,207Non-accrual interest income
    
    
    105
    
    
    
    46Non-qualified benefit plans
    
    
    12,358
    
    
    
    7,436Net unrealized loss on securities available for sale
    
    
    6,281
    
    
    
    4,115Other
    
    
    6,954
    
    
    
    8,96961,323
    
    
    
    53,107Deferred tax liability:Discount accretion
    
    
    239
    
    
    
    Retirement plan
    
    
    5,622
    
    
    
    5,796Deferred loan origination fees
    
    
    
    
    
    
    1,282Other
    
    
    2,702
    
    
    
    2,3478,563
    
    
    
    9,425Net deferred tax asset
    
    $
    52,760
    
    
    $
    43,682
 The net deferred tax asset represents the anticipated federal and state tax benefits expected
to be realized in future years upon the utilization of the underlying tax attributes comprising
this balance. In managements opinion, in view of Hudson Citys previous, current and projected
future earnings trends, such net deferred tax asset will more likely than not be fully realized.
Accordingly, no valuation allowance was deemed to be required at December 31, 2004 and 2003. Retained earnings at December 31, 2004 included approximately $49,000,000 for which no deferred
income taxes have been provided. This amount represents the base year allocation of income to bad
debt deduction for tax purposes. Under SFAS No. 109, this amount is treated as a permanent
difference and deferred taxes are not recognized unless it appears that it will be reduced and
result in taxable income in the foreseeable future. Events that would result in taxation of these
reserves include failure to qualify as a bank for tax purposes or distributions in complete or
partial liquidation. 13. Fair Value of Financial Instruments The fair value of financial instruments represents the estimated amounts at which the asset or
liability could be exchanged in a current transaction between willing parties, other than in a
forced liquidation sale. These estimates are subjective in nature, involve uncertainties and
matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates. Further,
certain tax implications related to the realization of the unrealized gains and losses could have a
substantial impact on these fair value estimates and have not been incorporated into any of the
estimates. Page 115




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Carrying amounts of cash, due from banks and federal funds sold are considered to approximate fair
value. The fair value of one- to four-family mortgages and home equity loans are generally
estimated using the present value of expected future cash flows. For time deposits and borrowed
funds, the fair value is estimated by discounting estimated future cash flows using currently
offered rates. For deposit liabilities payable on demand, the fair value is the carrying value at
the reporting date. There is no material difference between the fair value and the committed
amounts of our off-balance commitments. Other important elements that are not deemed to be financial assets or liabilities and, therefore,
not considered in these estimates include the value of Hudson Citys retail branch delivery system,
its existing core deposit base and banking premises and equipment. The estimated fair value of Hudson Citys financial instruments at December 31 are summarized as
follows: 2004
    
    
    2003Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(In thousands)Assets:Cash and due from banks
    
    $
    122,483
    
    
    $
    122,483
    
    
    $
    190,984
    
    
    $
    190,984Federal funds sold
    
    
    45,700
    
    
    
    45,700
    
    
    
    63,600
    
    
    
    63,600Investment securities held to maturity
    
    
    1,334,249
    
    
    
    1,326,336
    
    
    
    1,366
    
    
    
    1,443Investment securities available for sale
    
    
    1,594,639
    
    
    
    1,594,639
    
    
    
    2,243,812
    
    
    
    2,243,812Federal Home Loan Bank of New York stock
    
    
    140,000
    
    
    
    140,000
    
    
    
    164,850
    
    
    
    164,850Mortgage-backed securities held to maturity
    
    
    3,755,921
    
    
    
    3,721,029
    
    
    
    4,292,444
    
    
    
    4,250,688Mortgage-backed securities available for sale
    
    
    1,620,708
    
    
    
    1,620,708
    
    
    
    1,130,257
    
    
    
    1,130,257Loans, net
    
    
    11,327,647
    
    
    
    11,486,022
    
    
    
    8,766,264
    
    
    
    8,943,991Liabilities:Deposits
    
    
    11,477,300
    
    
    
    11,475,827
    
    
    
    10,453,780
    
    
    
    10,474,126Borrowed funds
    
    
    7,150,000
    
    
    
    7,238,626
    
    
    
    5,150,000
    
    
    
    5,326,182
 14. Regulatory Capital Deposits at Hudson City Savings are insured up to standard limits of coverage provided by the Bank
Insurance Fund (BIF) of the Federal Deposit Insurance Corporation (FDIC). Effective January 1,
2004, Hudson City Savings converted from a New Jersey state-chartered savings bank to a federally
chartered savings bank and is now subject to comprehensive regulation, supervision and periodic
examination by the Office of Thrift Supervision (OTS). The OTS capital regulations require federally chartered savings banks to meet three minimum capital
ratios: a 1.5% tangible capital ratio, a 4% leverage (core capital) ratio and an 8% total
risk-based capital ratio. In assessing an institutions capital adequacy, the OTS takes into
consideration not only these numeric factors but also qualitative factors as well, and has the
authority to establish higher capital requirements for
individual institutions where necessary. Hudson City Savings, as a matter of prudent management,
targets as its goal the maintenance of capital ratios which exceed these minimum requirements and
that are consistent with Hudson City Savings risk profile. Page 116




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The OTS may take certain supervisory actions under the prompt corrective action regulations of
FDICIA with respect to an undercapitalized institution. Such actions could have a direct material
effect on the institutions financial statements. The regulations establish a framework for the
classification of savings institutions into five categories: well-capitalized,
adequately-capitalized, undercapitalized, significantly undercapitalized, and critically
undercapitalized. Under the OTS regulations, an institution is considered well-capitalized if it
has a leverage (Tier 1) capital ratio of at least 5.0% and a total risk-based capital ratio of at
least 10.0%. The foregoing capital ratios are based in part on specific quantitative measures of assets,
liabilities and certain off-balance sheet items as calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative judgments by the
OTS about capital components, risk-weightings and other factors. Management believes that, as of
December 31, 2004, Hudson City Savings met all capital adequacy requirements to which it is subject
and would have been categorized as a well-capitalized institution under the prompt corrective
action regulations. There have been no conditions or events since December 31, 2004 that
management believes have changed Hudson City Savings capital classification. The following is a summary of Hudson City Savings actual capital amounts and ratios as of December
31, 2004 and 2003, compared to the OTS minimum capital adequacy requirements and the OTS
requirements for classification as a well-capitalized institution: OTS RequirementsMinimum Capital
    
    
    For Classification asBank Actual
    
    
    Adequacy
    
    
    Well-CapitalizedAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Dollars in thousands)December 31, 2004Tangible capital
    
    $
    1,282,665
    
    
    
    6.36
    %
    
    $
    302,325
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core)
capital
    
    
    1,282,665
    
    
    
    6.36
    
    
    
    806,200
    
    
    
    4.00
    
    
    $
    1,007,750
    
    
    
    5.00
    %Total-risk-based capital
    
    
    1,309,984
    
    
    
    17.49
    
    
    
    599,199
    
    
    
    8.00
    
    
    
    748,998
    
    
    
    10.00December 31, 2003Tangible capital
    
    $
    1,234,212
    
    
    
    7.24
    %
    
    $
    255,588
    
    
    
    1.50
    %
    
    
    n/a
    
    
    
    n/aLeverage (core) capital
    
    
    1,234,212
    
    
    
    7.24
    
    
    
    681,569
    
    
    
    4.00
    
    
    $
    851,961
    
    
    
    5.00
    %Total-risk-based capital
    
    
    1,260,759
    
    
    
    20.89
    
    
    
    482,877
    
    
    
    8.00
    
    
    
    603,597
    
    
    
    10.00
 As a result of Hudson City Savings charter conversion, Hudson City Bancorp and Hudson City,
MHC are also regulated, supervised and examined by the OTS as savings and loan holding companies
and, as such, are no longer subject to regulatory capital requirements. 15. Off-Balance Sheet Risk and Contingencies Hudson City Savings is a party to commitments to extend credit in the normal course of business to
meet the financial needs of its customers and commitments to purchase loans and mortgage-backed
securities to meet our growth initiatives. Commitments to extend credit are agreements to lend
money to a customer as long as there is no violation of any condition established in the contract. Page 117




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Commitments to fund first mortgage loans generally have fixed expiration dates or other termination
clauses, whereas home equity lines of credit have no expiration date. Since some commitments are
expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Hudson City Savings evaluates each customers credit-worthiness
on a case-by-case basis. At December 31, 2004, Hudson City Savings had fixed- and variable-rate first mortgage loan
commitments to extend credit of approximately $116,908,000 and $75,283,000, respectively,
commitments to purchase loans of $298,396,000, commitments to purchase mortgage-backed securities
of $317,250,000 and unused home equity and overdraft lines of credit of approximately $80,350,000.
No commitments are included in the accompanying financial statements. There is no exposure to
credit loss in the event the other party to commitments to extend credit does not exercise its
rights to borrow under the commitment. In the normal course of business, there are various outstanding legal proceedings. In the opinion
of management, the consolidated financial statements of Hudson City will not be materially affected
as a result of such legal proceedings. 16. Parent Company Only Financial Statements The following condensed financial statements for Hudson City Bancorp, Inc. (parent company only)
reflect Hudson City Bancorps investment in its wholly-owned subsidiary, Hudson City Savings Bank,
using the equity method of accounting. Statements of Financial Condition December 31,
    
    

December 31,2004
    
    
    2003(In thousands)Assets:Cash and due from bank
    
    $
    76,761
    
    
    $
    47,723Investment in subsidiary
    
    
    1,273,453
    
    
    
    1,228,137ESOP loan receivable
    
    
    52,715
    
    
    
    53,441Other assets
    
    
    81
    
    
    
    95Total Assets
    
    $
    1,403,010
    
    
    $
    1,329,396Liabilities and Stockholders Equity:Accrued expenses
    
    $
    126
    
    
    $
    30Total stockholders equity
    
    
    1,402,884
    
    
    
    1,329,366Total Liabilities and Stockholders Equity
    
    $
    1,403,010
    
    
    $
    1,329,396
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Statements of Income Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2002(In thousands)Income:Dividends received from subsidiary
    
    $
    226,592
    
    
    $
    203,149
    
    
    $
    178,223Interest on ESOP loan receivable
    
    
    4,128
    
    
    
    4,180
    
    
    
    4,230Interest on deposit with subsidiary
    
    
    423
    
    
    
    721
    
    
    
    657Total income
    
    
    231,143
    
    
    
    208,050
    
    
    
    183,110Expenses
    
    
    673
    
    
    
    749
    
    
    
    844Income before income tax expense
and equity in
undistributed
earnings of
subsidiary
    
    
    230,470
    
    
    
    207,301
    
    
    
    182,266Income tax expense
    
    
    1,464
    
    
    
    1,555
    
    
    
    1,524Income before equity in undistributed
earnings of subsidiary
    
    
    229,006
    
    
    
    205,746
    
    
    
    180,742Equity in undistributed earnings
of subsidiary
    
    
    10,260
    
    
    
    1,664
    
    
    
    11,291Net Income
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033
 Page 119




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Statements of Cash Flows Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2002(In thousands)Cash Flows from Operating Activities:Net income
    
    $
    239,266
    
    
    $
    207,410
    
    
    $
    192,033Adjustments to reconcile net income
to cash provided by operating activities:Equity in undistributed earnings
    
    
    (10,260
    )
    
    
    (1,664
    )
    
    
    (11,291
    )Decrease (increase) in other assets
    
    
    14
    
    
    
    (5
    )
    
    
    (28
    )Increase (decrease) in accrued expenses
    
    
    96
    
    
    
    (28
    )
    
    
    30Net Cash Provided by Operating Activities
    
    
    229,116
    
    
    
    205,713
    
    
    
    180,744Cash Flows from Investing Activities:Principal collected on ESOP loan
    
    
    726
    
    
    
    674
    
    
    
    626Net Cash Provided by Investing Activities
    
    
    726
    
    
    
    674
    
    
    
    626Cash Flows from Financing Activities:Purchase of treasury stock
    
    
    (161,662
    )
    
    
    (101,057
    )
    
    
    (140,173
    )Exercise of stock options
    
    
    6,460
    
    
    
    10,961
    
    
    
    9,933Cash dividends paid to unallocated ESOP shares
    
    
    (5,120
    )
    
    
    (3,978
    )
    
    
    (2,741
    )Cash dividends paid
    
    
    (40,482
    )
    
    
    (95,627
    )
    
    
    (64,504
    )Net Cash Used by Financing Activities
    
    
    (200,804
    )
    
    
    (189,701
    )
    
    
    (197,485
    )Net Increase (Decrease) in Cash Due from Bank
    
    
    29,038
    
    
    
    16,686
    
    
    
    (16,115
    )Cash Due from Bank at Beginning of Year
    
    
    47,723
    
    
    
    31,037
    
    
    
    47,152Cash Due from Bank at End of Year
    
    $
    76,761
    
    
    $
    47,723
    
    
    $
    31,037
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17. Selected Quarterly Financial Data (Unaudited) The following tables are a summary of certain quarterly financial data for the years ended December
31, 2004 and 2003. 2004 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)Interest income
    
    $
    213,027
    
    
    $
    220,791
    
    
    $
    234,261
    
    
    $
    246,979Interest expense
    
    
    97,488
    
    
    
    101,831
    
    
    
    110,293
    
    
    
    120,454Net interest income
    
    
    115,539
    
    
    
    118,960
    
    
    
    123,968
    
    
    
    126,525Provision for loan losses
    
    
    225
    
    
    
    225
    
    
    
    225
    
    
    
    115Net interest income after
provision for loan losses
    
    
    115,314
    
    
    
    118,735
    
    
    
    123,743
    
    
    
    126,410Non-interest income
    
    
    3,631
    
    
    
    3,916
    
    
    
    4,899
    
    
    
    4,111Non-interest expense
    
    
    29,053
    
    
    
    29,184
    
    
    
    28,888
    
    
    
    31,223Income before income
tax expense
    
    
    89,892
    
    
    
    93,467
    
    
    
    99,754
    
    
    
    99,298Income tax expense
    
    
    33,663
    
    
    
    35,049
    
    
    
    37,734
    
    
    
    36,699Net income
    
    $
    56,229
    
    
    $
    58,418
    
    
    $
    62,020
    
    
    $
    62,599Basic earnings per share
    
    $
    0.31
    
    
    $
    0.32
    
    
    $
    0.35
    
    
    $
    0.35Diluted earnings per share
    
    $
    0.30
    
    
    $
    0.32
    
    
    $
    0.34
    
    
    $
    0.34
 2003 Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share data)Interest income
    
    $
    198,536
    
    
    $
    192,656
    
    
    $
    186,685
    
    
    $
    199,451Interest expense
    
    
    95,954
    
    
    
    94,592
    
    
    
    91,996
    
    
    
    93,812Net interest income
    
    
    102,582
    
    
    
    98,064
    
    
    
    94,689
    
    
    
    105,639Provision for loan losses
    
    
    225
    
    
    
    225
    
    
    
    225
    
    
    
    225Net interest income after
provision for loan losses
    
    
    102,357
    
    
    
    97,839
    
    
    
    94,464
    
    
    
    105,414Non-interest income
    
    
    5,473
    
    
    
    9,937
    
    
    
    9,431
    
    
    
    4,823Non-interest expense
    
    
    25,522
    
    
    
    24,912
    
    
    
    25,611
    
    
    
    26,482Income before income
tax expense
    
    
    82,308
    
    
    
    82,864
    
    
    
    78,284
    
    
    
    83,755Income tax expense
    
    
    30,107
    
    
    
    30,318
    
    
    
    28,021
    
    
    
    31,355Net income
    
    $
    52,201
    
    
    $
    52,546
    
    
    $
    50,263
    
    
    $
    52,400Basic earnings per share
    
    $
    0.29
    
    
    $
    0.29
    
    
    $
    0.28
    
    
    $
    0.29Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.28
    
    
    $
    0.27
    
    
    $
    0.28
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18. Earnings Per Share The following is a reconciliation of the numerators and denominators of the basic and diluted
earnings per share computations. For the Year Ended December 31,2004
    
    
    2003
    
    
    2002Per
    
    
    
    
    
    
    
    
    
    
    Per
    
    
    
    
    
    
    
    
    
    
    PerShare
    
    
    
    
    
    
    
    
    
    
    Share
    
    
    
    
    
    
    
    
    
    
    ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount(In thousands, except per share data)Net income
    
    $
    239,266
    
    
    
    
    
    
    
    
    
    
    $
    207,410
    
    
    
    
    
    
    
    
    
    
    $
    192,033Basic earnings per share:Income available to
common stockholders
    
    $
    239,266
    
    
    
    179,857
    
    
    $
    1.33
    
    
    $
    207,410
    
    
    
    182,569
    
    
    $
    1.14
    
    
    $
    192,033
    
    
    
    184,928
    
    
    $
    1.04Effect of dilutive common
stock equivalents
    
    
    
    
    
    
    5,109
    
    
    
    
    
    
    
    
    
    
    
    5,105
    
    
    
    
    
    
    
    
    
    
    
    5,077Diluted earnings per share:Income available to
common stockholders
    
    $
    239,266
    
    
    
    184,966
    
    
    $
    1.29
    
    
    $
    207,410
    
    
    
    187,674
    
    
    $
    1.11

    
    
    $
    192,033
    
    
    
    190,005
    
    
    $
    1.01
 19. Recent Accounting Pronouncements On January 12, 2004, the FASB issued Staff Position No. 106-1 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,
which allows companies to recognize or defer recognizing the effects of the Medicare Prescription
Drug Improvement and Modernization Act of 2003, or Medicare Act, for annual financial statements of
fiscal years ending after December 7, 2003. The Medicare Act introduced both a Medicare
prescription-drug benefit and a federal subsidy to sponsors of retiree health-care plans that
provide a benefit at least actuarially equivalent to the Medicare benefit. These provisions of
the Medicare Act affect accounting measurements. We adopted Staff Position No. 106-1 in the third
quarter of 2004. Our disclosure in Note 11 of the Consolidated Financial Statements incorporates
the requirements of Staff Position No. 106-1. On September 30, 2004, the FASB issued Staff Position Emerging Issues Task Force (EITF) Issue No.
03-01, Effective Date of Paragraphs 10-20 of EITF Issue No. 03-01, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, which delays the
effective date for the measurement and recognition guidance contained in EITF Issue No. 03-01.
EITF Issue No. 03-01 provides guidance for evaluating whether an investment is
other-than-temporarily impaired and was originally effective for other-than-temporarily impairment
evaluations made in reporting periods beginning after June 15, 2004. The delay in the effective
date for the measurement and recognition guidance contained in paragraphs 10 through 20 of EITF
Issue No. 03-01 does not suspend the requirement to recognize other-than-temporary impairments as
required by existing authoritative literature. The disclosure guidance in paragraphs 21 and 22 of
EITF Issue No. 03-01 remains effective. The delay will be superseded concurrent with the final
issuance of EITF Issue No. 03-01a, which is expected to provide implementation guidance on matters
such as impairment evaluations for declines in value caused by increases in interest rates and/or
sector spreads. Page 122




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In December 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 153,
Exchanges of Nonmonetary Assets, which amends APB Opinion No. 29, Accounting for Nonmonetary
Transactions. SFAS No. 153 eliminates the exception from fair value measurement for nonmonetary
exchanges of similar productive assets in Opinion No. 29 and replaces it with an exception for
exchanges that do not have commercial substance. SFAS No. 153 specifies that a nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges
occurring in fiscal periods beginning after June 15, 2005. We do not expect the adoption of SFAS
No. 153 will have a material impact on our financial condition or results of operations. In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment. This
Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes
APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related guidance. SFAS No.
123 (revised 2004) established standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. This Statement requires that the cost
resulting from all share-based payment transactions be recognized in the financial statements. This
Statement establishes fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement method in accounting
for share-based payment transactions with employees, except for equity instruments held by employee
share ownership plans. This Statement is effective for public entities that do not file as small
business issuers as of the beginning of the first interim or annual reporting period that begins
after June 15, 2005. We do not expect the adoption of SFAS No. 123 (revised 2004) will have a
material impact on our financial condition or results of operations. Page 123




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None. 
 Item 9a. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Ronald E. Hermance, Jr., our Chairman, President and Chief Executive Officer, and Denis J. Salamone, our
Senior Executive Vice President and Chief Operating Officer, conducted an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the
Securities Exchange Act of 1934, as amended) as of December 31, 2004. Based upon their evaluation,
they each found that our disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports that we file and submit under the Exchange Act
is recorded, processed, summarized and reported as and when required and that such information is
accumulated and communicated to our management as appropriate to allow timely decisions regarding
required disclosures. Managements Report on Internal Control Over Financial Reporting The management of Hudson City Bancorp, Inc. (Hudson City) is responsible for establishing and
maintaining adequate internal control over financial reporting. Hudson Citys internal control
system is a process designed to provide reasonable assurance to the companys management and board
of directors regarding the preparation and fair presentation of published financial statements. Our internal control over financial reporting includes policies and procedures that pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of assets; provide reasonable assurances that transactions are recorded as necessary
to permit preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of Hudson City; and provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Hudson Citys assets that could have a material effect on our financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. Hudson Citys management assessed the effectiveness of the companys internal control over
financial reporting as of December 31, 2004. In making this assessment, we used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2004,
the companys internal control over financial reporting is effective based on those criteria. Hudson Citys independent registered public accounting firm that audited the consolidated
financial statements has issued an audit report on our assessment of, and the effective operation
of, the companys internal control over financial reporting as of December 31, 2004. This report
appears on page 85. Page 124




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Changes in Internal Control Over Financial Reporting There were no changes in our internal controls over financial reporting that occurred during the
period covered by this report that have materially affected, or are reasonably likely to materially
affect, our internal controls over financing reporting and we identified no significant
deficiencies or material weaknesses requiring corrective action with respect to those controls. 
 Item 9b. Other Information. None. Page 125




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PART III 
 Item 10. Directors and Executive Officers of the Company. Information regarding directors and executive
officers of the Company is presented under the
headings Proposal 3  Election of
Directors-General, -Who Our Directors Are, -Our Directors
Backgrounds, -Nominees for Election as Directors, -Continuing Directors, -Meetings of the
Board of Directors and Its Committees, -Executive Officers, -Director Compensation,
-Executive Officer Compensation, and Section 16(a) Beneficial Ownership Reporting Compliance in
the Companys definitive Proxy Statement for the 2005 Annual Meeting of Stockholders to be held on
May 27, 2005, which will be filed with the SEC no later than April 30, 2005, and is incorporated
herein by reference. Audit Committee Financial Expert Information regarding the audit committee of the Companys Board of Directors, including
information regarding audit committee financial expert serving on the audit committee, is presented
under the heading Corporate Governance  Meetings of the Board of Directors and its Committees in
the Companys definitive Proxy Statement for the 2005 Annual Meeting of Stockholders to be held on
May 27, 2005, which will be filed with the SEC no later than April 30, 2005, and is incorporated
herein by reference. Code of Ethics We have adopted a written code of ethics that applies to our principal executive officer and senior
financial officers, which is available free of charge by contacting Louis Beierle, our Investor
Relations Officer, at (201) 967-8290. 
 Item 11. Executive Compensation. Information regarding executive compensation is presented under the headings Election of
Directors-Director Compensation,  Executive Officer Compensation, -Summary Compensation
Table, Employment Agreements, Change of Control Agreements, and Benefit Plans in the
Companys definitive Proxy Statement for the 2005 Annual Meeting of Stockholders to be held on May
27, 2005, which will be filed with the SEC no later than April 30, 2005, and is incorporated herein
by reference. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management. Information regarding security ownership of certain beneficial owners and management is
presented under the heading Security Ownership of Certain Beneficial Owners and Management in the
Companys definitive Proxy Statement for the 2005 Annual Meeting of Stockholders to be held on May
27, 2005, which will be filed with the SEC no later than April 30, 2005, and is incorporated herein
by reference. 
 Item 13. Certain Relationships and Related Transactions. Information regarding certain relationships and related transactions is presented under the
heading Certain Transactions with Members of our Board of Directors and Executive
Officers in the Companys definitive Proxy Statement for the 2005 Annual Meeting of Stockholders
to be held on May 27, 2005, which will be filed with the SEC no later than April 30, 2005, and is
incorporated herein by reference. Page 126




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Item 14. Principal Accounting Fees and Services. Information regarding principal accounting
fees and services is presented under the heading
Proposal 5  Ratification of Appointment of Independent Auditors in Hudson City Bancorps
definitive Proxy Statement for the 2005 Annual Meeting of Stockholders to be held on May 27, 2005,
which will be filed with the SEC no later than April 30, 2005 and is incorporated herein by
reference. Page 127




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PART IV 
 Item 15. Exhibits, Financial Statement Schedules (a) List of Documents Filed as Part of this Annual Report on Form 10-K  (1)
    The following consolidated financial statements are in Item 8
of this annual report:  
    Report of Independent Registered Public Accounting Firm
    Report of Independent Registered Public Accounting Firm On Internal Control Over Financial Reporting
    Consolidated Statements of Financial Condition as of
December 31, 2004 and 2003
    Consolidated Statements of Income for the years ended
December 31, 2004, 2003 and 2002
    Consolidated Statements of Changes in Stockholders
Equity for the years ended December 31, 2004, 2003 and 2002
    Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
    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 128




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EXHIBIT
    
    DESCRIPTION2.1
    
    Amended and Restated Plan of Reorganization and Stock Issuance of Hudson City Savings Bank (1)3.1
    
    Certificate of Incorporation of Hudson City Bancorp, Inc. (1)3.2
    
    Amended and Restated Bylaws of Hudson City Bancorp, Inc. (2)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. (1)10.1
    
    Employee Stock Ownership Plan of Hudson City Savings Bank (Incorporating amendments No.
1,2,3,4,and 5) (*)10.2
    
    Profit Incentive Bonus Plan of Hudson City Savings Bank (*)10.3
    
    Supplementary Savings Plan of Hudson City Savings Bank (1)10.4
    
    Form of ESOP Loan Commitment Letter and ESOP Loan Documents (1)10.5
    
    Employment Agreement by and among Hudson City Savings Bank, Hudson City Bancorp, Inc. and
Ronald E. Hermance, Jr. (*)10.6
    
    Employment Agreement by and among Hudson City Savings Bank, Hudson City Bancorp, Inc. and
John M. Tassillo. (*)10.7
    
    Form of One-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson
City Bancorp, Inc. and certain officers (1)10.8
    
    Form of Two-Year Change in Control Agreement by and among Hudson City Savings Bank and Hudson
City Bancorp, Inc. and certain officers (*)10.9
    
    Severance Pay Plan of Hudson City Savings Bank (1)10.10
    
    ESOP Restoration Plan of Hudson
City Savings Bank (Incorporating Amendment No.1)(*)10.11
    
    Hudson City Savings Bank Outside Directors Consultation Plan (1)10.12
    
    Hudson City Savings Bank
Supplemental Executive Retirement Plan (1)10.13
    
    Hudson City Bancorp, Inc. 2000 Stock Option Plan (3)10.14
    
    Hudson City Bancorp, Inc. 2000 Recognition and Retention Plan (3)10.15
    
    Employment Agreement by and among Hudson City Savings Bank, Hudson City Bancorp, Inc.
and Denis J. Salamone (5)10.16
    
    Hudson City Bancorp, Inc. Denis J. Salamone Restricted Stock Award Plan (5)10.17
    
    Hudson City Bancorp, Inc. Denis J. Salamone Stock Option Plan (5)10.18
    
    Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Ronald E. Butkovich
(7)10.19
    
    Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program with Christopher Nettleton
(7)10.20
    
    Hudson City Savings Bank Post
Retirement Death Benefit for Senior Officers between Hudson City
Savings Bank and Ronald E. Hermance, Jr. (*)10.21
    
    Hudson City Savings Bank Post
Retirement Death Benefit for Senior Officers between Hudson City
Savings Bank and Leonard S. Gudelski (*)10.22
    
    Hudson City Savings Bank Post
Retirement Death Benefit for Senior Officers between Hudson City
Savings Bank and Denis J. Salamone (*)10.23
    
    Hudson City Savings Bank Post
Retirement Death Benefit for Senior Officers between Hudson City
Savings Bank and John M. Tassillo (*)10.24
    
    Hudson City Savings Bank Post
Retirement Death Benefit for Senior Officers between Hudson City
Savings Bank and James C. Kranz (*)11.1
    
    Statement Re: Computation of Per Share Earnings21.1
    
    Subsidiaries of Hudson City Bancorp, Inc.23.1
    
    Consent of KPMG LLP (6)31.1
    
    Certification of Disclosure of Ronald E. Hermance, Jr.31.2
    
    Certification of Disclosure of Denis J. Salamone32.1
    
    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. 333-74383 on Form S-1,
filed with the Securities and Exchange Commission on March 15, 1999, 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 January 27, 2003.(3)
    
    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.(4)
    
    Incorporated herein by reference to the Exhibits to the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 filed with the Securities and Exchange Commission on March 29, 2000.(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, 2001 filed with the Securities and Exchange Commission on March 28, 2002.(6)
    
    Submitted only with filing in electronic format.(7)
    
    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.(*) Filed herewith. Page 129




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in Paramus, New Jersey, on February 22, 2005. Hudson City Bancorp, Inc.By:
    /s/ Ronald E. Hermance, Jr.Ronald E. Hermance, Jr.Chairman, President and Chief Executive Officer
(principal executive officer) Page 130




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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the capacities and on the dates
indicated. NAME
    
    TITLE
    
    DATE/s/ Ronald E. Hermance, Jr.
    
    Director, Chairman, President and
    
    February 22, 2005Chief Executive OfficerRonald E. Hermance, Jr.
    
    (principal executive officer)/s/ Denis J. Salamone
    
    Director, Senior Executive Vice President and
    
    February 22, 2005Denis J. Salamone
    
    Chief Operating Officer (principal financial and
accounting officer)/s/ Verne S. Atwater
    
    Director
    
    February 22, 2005Verne S. Atwater/s/ Michael W. Azzara
    
    Director
    
    February 22, 2005Michael W. Azzara/s/ William G. Bardel
    
    Director
    
    February 22, 2005William G. Bardel/s/ Scott A. Belair
    
    Director
    
    February 22, 2005Scott A. Belair/s/ John D. Birchby
    
    Director
    
    February 22, 2005John D. Birchby/s/ Victoria H. Bruni
    
    Director
    
    February 22, 2005Victoria H. Bruni/s/ William J. Cosgrove
    
    Director
    
    February 22, 2005William J. Cosgrove/s/ Andrew J. Egner, Jr.
    
    Director
    
    February 22, 2005Andrew J. Egner, Jr./s/ Leonard S. Gudelski
    
    Director
    
    February 22, 2005Leonard S. Gudelski/s/ John W. Klie
    
    Director
    
    February 22, 2005John W. Klie/s/ Donald O. Quest
    
    Director
    
    February 22, 2005Donald O. Quest/s/ Joseph G. Sponholz
    
    Director
    
    February 22, 2005Joseph G. Sponholz
 Page 131