HCBK (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials

o   Soliciting Material Under Rule 14a-12

 

HUDSON CITY BANCORP, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 18, 2010

 

Dear Shareholder:

 

You are cordially invited to attend the 2010 Annual Meeting of Shareholders of Hudson City Bancorp, Inc., which will be held on April 21, 2010 at 4:30 p.m., Eastern Time, at the Park Ridge Marriott, 300 Brae Boulevard, Park Ridge, New Jersey 07656.

 

The attached Notice of the 2010 Annual Meeting of Shareholders and the attached Proxy Statement describe the business to be transacted at the annual meeting. Directors and officers of Hudson City Bancorp, as well as a representative of KPMG LLP, the accounting firm appointed by the Audit Committee of the Board of Directors to be Hudson City Bancorp’s independent registered public accounting firm for the fiscal year ending December 31, 2010, will be present at the annual meeting to respond to appropriate questions.

 

The Board of Directors of Hudson City Bancorp has determined that an affirmative vote on each matter to be considered at the annual meeting is in the best interests of Hudson City Bancorp and its shareholders and recommends a vote “FOR” each of these matters.

 

Please complete, sign, date and return the enclosed proxy card promptly, or if you prefer, vote by using the telephone or Internet, whether or not you plan to attend the annual meeting. Your vote is important regardless of the number of shares you own. Voting by proxy will not prevent you from voting in person at the annual meeting, but will assure that your vote is counted if you are unable to attend the meeting. If you are a shareholder whose shares are not registered in your own name, you will need additional documentation from your record holder to attend and to vote personally at the annual meeting. Examples of appropriate documentation include a broker’s statement, letter or other document confirming your ownership of shares of Hudson City Bancorp common stock.

 

On behalf of the Board of Directors and the employees of Hudson City Bancorp, we thank you for your continued support and hope to see you at the annual meeting.

 

Sincerely yours,

 

Ronald E. Hermance, Jr.
Chairman of the Board of Directors,
President and Chief Executive Officer

 

Hudson City Bancorp, Inc.

West 80 Century Road

Paramus, New Jersey 07652

(201) 967-1900

 

NOTICE OF THE 2010 ANNUAL MEETING OF SHAREHOLDERS

To Be Held on April 21, 2010

 

NOTICE IS HEREBY GIVEN that the 2010 Annual Meeting of Shareholders of Hudson City Bancorp, Inc. will be held at the Park Ridge Marriott, 300 Brae Boulevard, Park Ridge, New Jersey 07656, on April 21, 2010 at 4:30 p.m., Eastern Time, to consider and vote upon the following matters:

 

(1) The election of two directors for terms of three years each;

 

(2) The adoption of the Executive Officer Annual Incentive Plan of Hudson City Bancorp, Inc.; and

 

(3) The ratification of the appointment of KPMG LLP as Hudson City Bancorp’s independent registered public accounting firm for the fiscal year ending December 31, 2010.

 

Shareholders may also be asked to vote upon such other business as may properly come before the annual meeting, and any adjournment or postponement thereof. Please note that we are not aware of any such business.

 

The Board of Directors has fixed March 1, 2010 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof. Only shareholders of record at the close of business on that date will be entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof. A list of shareholders of record will be available for inspection at the branch office of Hudson City Savings Bank located at West 80 Century Road, Paramus, New Jersey 07652 for 10 days prior to the annual meeting. The list will also be available at the annual meeting.

 

By Order of the Board of Directors

 

Veronica Olszewski
Senior Vice President, Treasurer

and Corporate Secretary

 

Paramus, New Jersey

March 18, 2010

 

 

 

 

 

TABLE OF CONTENTS

 

 

HUDSON CITY BANCORP, INC.

PROXY STATEMENT FOR THE
2010 ANNUAL MEETING OF SHAREHOLDERS

To Be Held on April 21, 2010

GENERAL INFORMATION

 

This proxy statement, accompanying proxy card and the 2009 Annual Report to Shareholders are being furnished to the shareholders of Hudson City Bancorp, Inc., referred to as Hudson City Bancorp, in connection with the solicitation of proxies by the Board of Directors of Hudson City Bancorp for use at the 2010 Annual Meeting of Shareholders. The 2010 Annual Meeting of Shareholders will be held on April 21, 2010 at the Park Ridge Marriott, 300 Brae Boulevard, Park Ridge, New Jersey 07656 at 4:30 p.m., Eastern Time. This proxy statement, together with the enclosed proxy card, is first being mailed to shareholders on or about March 18, 2010.

 

Hudson City Bancorp, a Delaware corporation, operates as a savings and loan holding company for its wholly owned subsidiary, Hudson City Savings Bank, referred to as Hudson City Savings. As used in this proxy statement, “we,” “us,” “our” and “the Company” refer to Hudson City Bancorp or Hudson City Bancorp and its consolidated subsidiaries, depending on the context. The term “annual meeting,” as used in this proxy statement, includes any adjournment or postponement of such meeting.

 

The Board of Directors has fixed the close of business on March 1, 2010 as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting. Accordingly, only holders of record of shares of Hudson City Bancorp common stock, par value $0.01 per share, at the close of business on such date will be entitled to vote at the annual meeting. On March 1, 2010, there were 526,871,902 shares of Hudson City Bancorp common stock outstanding. The presence, in person or by proxy, of the holders of at least a majority of the total number of outstanding shares of Hudson City common stock entitled to vote at the annual meeting is necessary to constitute a quorum at the meeting.

 

Each holder of shares of Hudson City Bancorp common stock outstanding on March 1, 2010 will be entitled to one vote for each share held of record (other than excess shares, as defined below) at the annual meeting. As provided in Hudson City Bancorp’s certificate of incorporation, record holders of common stock who beneficially own in excess of 10% of the issued and outstanding shares of common stock are record holders of excess shares, which shall be entitled to one-hundredth of one vote per share for each excess share. A person or entity is deemed to beneficially own shares owned by an affiliate or associate as well as by persons acting in concert with such person or entity. Hudson City Bancorp’s certificate of incorporation authorizes the Board of Directors to interpret and apply the provisions of the certificate of incorporation governing excess shares, and to determine on the basis of information known to the Board of Directors after reasonable inquiry of all facts necessary to ascertain compliance with the certificate of incorporation, including, without limitation, (1) the number of shares of common stock beneficially owned by any person or purported owner, (2) whether a person or purported owner is an affiliate or associate of, or is acting in concert with, any other person or purported owner and (3) whether a person or purported owner has an agreement, arrangement or understanding with any person or purported owner as to the voting or disposition of any shares of common stock.

 

You may vote your shares:

 

 

Alternatively, you may attend the annual meeting and vote in person. If you are a shareholder whose shares are not registered in your own name (for example, if your shares are held in a bank or brokerage account), you will need to obtain a written legal proxy from your shareholder of record to vote personally at the annual meeting. If you do not obtain a legal proxy from your shareholder of record, you will not be entitled to vote your shares in person at the annual meeting, but you can still attend the annual meeting if you bring a recent bank or brokerage statement showing that you owned your shares of common stock on March 1, 2010.

 

Proposal 1.   In 2008, the Board of Directors amended Hudson City Bancorp’s bylaws to provide a majority voting standard for the election of directors in uncontested elections and plurality voting in any election that is contested. At the 2010 Annual Meeting of Shareholders, each nominee must receive the affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy in respect of such nominee’s election to be elected. For purposes of the election of directors, “a majority of the votes cast” means that the number of votes cast “FOR” a nominee’s election exceeds the number of votes cast “AGAINST” that nominee’s election. If an incumbent nominee is not elected by the requisite vote, he or she must tender his or her resignation, and the Board of Directors, through a process managed by the Nominating and Governance Committee, will decide whether to accept the resignation within 90 days following certification of the vote by the inspectors of election. Shares as to which the “ABSTAIN” box has been selected on the proxy card, shares held by a broker who submits a proxy card but fails to cast a vote on this proposal (also known as a “broker non-vote”) and shares for which a proxy card is not returned (and are not otherwise voted in person) will be treated as shares that are not represented and will have no effect on the outcome of the vote.

 

Proposals 2 and 3.   In order for the shareholders to approve Proposal 2 or Proposal 3, we must obtain the affirmative vote of the holders of a majority of the shares of our common stock represented in person or by proxy at the annual meeting and entitled to vote on the proposal. Under the voting standard for Proposals 2 and 3, shares as to which the “ABSTAIN” box has been selected on the proxy card for the proposal will count as shares represented and entitled to vote and will be treated as votes “AGAINST” that proposal. Shares held by a broker who submits a proxy card but fails to cast a vote on a proposal and shares for which a proxy card is not returned (and are not otherwise voted in person) will be treated as shares that are not represented and will have no effect on the outcome of the vote.

Our Board of Directors recommends that you promptly complete, sign and date the enclosed proxy card(s) in favor of Proposals 1, 2 and 3 and return the card(s) in the enclosed self-addressed, postage-prepaid envelope or, if you prefer, vote by using the telephone or Internet. Proxy cards must be received prior to the commencement of the annual meeting. Returning the proxy card will not prevent you from voting in person if you attend the annual meeting. Your vote is very important.

 

You may revoke your grant of a proxy at any time before it is voted at the annual meeting by:

 

 

If you voted using the Internet, you can change your vote at the Internet address shown on your proxy card. The Internet voting system is available 24 hours a day until 11:59 p.m., Eastern Time, on Tuesday, April 20, 2010.

 

If you voted by telephone, you can change your vote by using the toll free telephone number shown on your proxy card. The telephone voting system is available 24 hours a day until 11:59 p.m., Eastern Time, on Tuesday, April 20, 2010.

 

We are soliciting proxies only for the 2010 Annual Meeting of Shareholders. If you grant us a proxy to vote your shares, the proxy will only be exercised at the 2010 Annual Meeting of Shareholders.

 

Our officers, members of our Board of Directors and our employees may solicit proxies on our behalf by telephone or through other forms of communication but none of these persons will receive any compensation for their solicitation activities in addition to their regular compensation. We have retained Laurel Hill Advisory Group to assist in the solicitation of proxies for a fee of $7,000 plus out-of-pocket expenses. We request that persons, firms and corporations holding shares in their own name or in the name of nominees, in each case which are beneficially owned by others, send proxy materials to and obtain proxies from such beneficial owners, and we will reimburse such holders for the reasonable expenses incurred in connection therewith. We will bear all costs of solicitation.

 

Management and directors of Hudson City Bancorp have an interest in the matters that will be acted upon that are different from the interests of other shareholders as follows:

 

 

The Board of Directors has taken the above interests into account in recommending that shareholders approve Proposal 2.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on April 21, 2010

 

This proxy statement and the 2009 Annual Report to Shareholders are available on Hudson City Bancorp’s website at www.hcbk.com.

Principal Shareholders

 

The following table sets forth, as of February 28, 2010, certain information as to Hudson City Bancorp common stock beneficially owned by persons owning in excess of 5% of the outstanding shares of our common stock. We know of no person, except as listed below, who beneficially owned more than 5% of the outstanding shares of our common stock as of February 28, 2010. Except as otherwise indicated, the information provided in the following table was obtained from filings with the Securities and Exchange Commission and with Hudson City Bancorp pursuant to the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act. Addresses provided are those listed in the filings as the address of the person authorized to receive notices and communications. For purposes of the table below and the table set forth under the caption “Directors and Executive Officers,” in accordance with Rule 13d-3 under the Exchange Act, a person is deemed to be the beneficial owner of any shares of common stock (1) over which that person has or shares, directly or indirectly, voting or investment power, or (2) of which that person has the right to acquire beneficial ownership at any time within 60 days after February 28, 2010. As used herein, “voting power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. Except as otherwise indicated, (i) each shareholder shown in the table below has sole voting and investment power with respect to the shares of common stock indicated and (ii) none of such shares are listed because the person has the right to acquire beneficial ownership within 60 days after February 28, 2010.

 

 

 

 

 

(Notes continued on following page)

 

The following table sets forth information about the shares of common stock beneficially owned by each director of Hudson City Bancorp, by each named executive officer of Hudson City Bancorp identified in the Summary Compensation Table included elsewhere herein, and all directors and executive officers of Hudson City Bancorp or Hudson City Bancorp’s wholly owned subsidiary, Hudson City Savings, as a group as of February 28, 2010. Except as otherwise indicated, each person and each group shown in the table has sole voting and investment power with respect to the shares of common stock indicated.

 

 

 

 

(Notes continued on following page)

 

PROPOSAL 1

ELECTION OF DIRECTORS

 

The certificate of incorporation and bylaws of Hudson City Bancorp provide for the election of directors by the shareholders. The Board of Directors of Hudson City Bancorp is divided into three classes with each class as nearly equal in number as possible. The terms of office of the members of one class expire, and a successor class is to be elected, at each annual meeting of shareholders. There are currently nine directors on the Board of Directors of Hudson City Bancorp.

 

The terms of three directors expire at the 2010 Annual Meeting of Shareholders. Pursuant to the bylaws of Hudson City Bancorp, no member of the Board of Directors who has reached the age of 75 shall be eligible for reelection. One of our directors, William J. Cosgrove, has reached the age of 75 and is, therefore, not standing for reelection at the annual meeting. Pursuant to the bylaws of Hudson City Bancorp, the Board of Directors has reduced the size of the Board of Directors from nine members to eight members, effective as of the close of the 2010 Annual Meeting of Shareholders. The remaining two incumbent directors with terms expiring at the annual meeting, Donald O. Quest, M.D. and Joseph G. Sponholz, have been nominated by the Board of Directors, upon recommendation by the Nominating and Governance Committee, to be reelected at the 2010 Annual Meeting of Shareholders for three-year terms expiring at the Annual Meeting of Shareholders to be held in 2013, or when their successors are otherwise duly elected and qualified. Each nominee has consented to being named in this proxy statement and to serve if elected.

 

Assuming the reelection of Dr. Quest and Mr. Sponholz, at the conclusion of the annual meeting, our Board of Directors will consist of eight members divided into three classes as nearly equal in number as possible, and our Chief Executive Officer and Chief Operating Officer will be the only members of the Board of Directors who are not “independent” under the NASDAQ listing rules. See “Corporate Governance.”

 

The terms of the remaining two classes of directors expire at the Annual Meetings of Shareholders to be held in 2011 and 2012, respectively, or when their successors are otherwise duly elected and qualified. In the event that any nominee for election as a director at the 2010 Annual Meeting of Shareholders is unable or declines to serve, which the Board of Directors has no reason to expect, the persons named in the completed and returned proxy cards will vote for the substitute nominee designated by the present Board of Directors to serve until the next annual meeting of shareholders. Proxies cannot be voted for a greater number of persons than the two nominees named in this Proposal 1.

 

The table below states certain information with respect to each nominee for election as a director and each director whose term does not expire at the 2010 Annual Meeting of Shareholders (including time spent on the Board of Directors or Board of Managers of Hudson City Savings prior to the incorporation of Hudson City Bancorp on March 4, 1999). There are no arrangements or understandings between Hudson City Bancorp and any director or nominee pursuant to which such person was elected or nominated to be a director of Hudson City Bancorp. For information with respect to security ownership of directors, see “Security Ownership of Certain Beneficial Owners and Management — Directors and Executive Officers.”

 

 

 

 

The business experience, qualifications and other attributes that led to the conclusion by the Nominating and Governance Committee and the Board of Directors that each person identified below should serve as a director of Hudson City Bancorp is as follows:

 

Nominees for Election as Director

 

Donald O. Quest, M.D. has been a neurological surgeon since 1976, a professor at Columbia University since 1989, Assistant Dean for Student Affairs at Columbia University, and an attending physician at The Valley Hospital and Columbia-Presbyterian Medical Center since 1978. He is a member of the Neurosurgical Associates of New York and New Jersey and a member of the Board of Trustees of Mary Imogene Bassett Hospital in New York. Dr. Quest has been President of the American Association of Neurological Surgeons, the American Academy of Neurological Surgeons, the Congress of Neurological Surgeons, the Chairman of the American Board of Neurological Surgery and the Chairman of the Residency Review Committee for Neurological Surgery. A graduate of the University of Illinois, he received his M.D. from Columbia University.

 

As a result of the senior positions Dr. Quest has held in professional organizations during his career, Dr. Quest has developed valuable leadership skills and experience related to governance and ethical issues. In addition, Dr. Quest has developed a broad understanding of the banking industry based on his service on the Board of Directors since 1983. As Hudson City’s longest serving continuing director, Dr. Quest makes a unique contribution through his institutional knowledge of the evolution of the Company’s business and the policies and practices of the Board as its governing body. The Nominating and Governance Committee

considers Dr. Quest’s leadership skills, governance experience and knowledge of Hudson City as assets to the Board and, accordingly, has recommended Dr. Quest for reelection to the Board.

 

Joseph G. Sponholz is a retired Vice Chairman of Chase Manhattan Bank, a position he held from 1997 to his retirement in 2000. Prior to assuming the position of Vice Chairman, Mr. Sponholz had served as Chief Administrative Officer of Chase Manhattan Bank. Serving as a member of Chase’s Executive Committee, Mr. Sponholz spearheaded the company’s Internet efforts as leader of Chase.com. Prior to its merger with Chase, he served as Chief Financial Officer and Chief Technology Officer at Chemical Bank as part of a 20 year career at that institution and its successor. Prior to joining Chemical Bank, Mr. Sponholz spent 7 years, including two years as a Partner, at the financial advisory firm of Booz Allen Hamilton. A graduate of Fordham University, Mr. Sponholz holds an MBA in Finance from New York University. Mr. Sponholz currently serves as our lead independent director.

 

As the former Chief Financial Officer of one of the largest banks in the country, Mr. Sponholz is recognized as an industry leader in the areas of business strategy, technology and financial management. During his 30 year career working in the banking industry, Mr. Sponholz held many significant leadership roles and developed a detailed understanding of financial institutions and the financial, operational and regulatory issues they confront on a daily basis. The Nominating and Governance Committee considers Mr. Sponholz’s financial and leadership skills and his experience and knowledge of the financial services industry, and the unique contribution he makes as the only continuing outside director with experience as a senior retail and commercial banking executive, as assets to the Board and, accordingly, has recommended Mr. Sponholz for reelection to the Board.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE NOMINEES FOR ELECTION AS DIRECTORS.

 

Continuing Directors

 

Ronald E. Hermance, Jr. has been President and Chief Executive Officer of Hudson City Bancorp and Hudson City Savings since January 1, 2002 and Chairman of the Board since January 1, 2005. Prior to assuming these positions, Mr. Hermance had served as President and Chief Operating Officer of Hudson City Bancorp since its incorporation in 1999 and of Hudson City Savings since January 1997. Mr. Hermance previously was Senior Executive Vice President and Chief Operating Officer from the time he joined Hudson City Savings in 1988. He was elected to the Board of Managers of Hudson City Savings in 1988. Prior to joining Hudson City Savings, Mr. Hermance was Chief Financial Officer of Southold Savings Bank, Long Island, New York. In addition to his most recent service, Mr. Hermance was Senior Vice-President and Chief Lending Officer for Bankers Trust Company of Western New York, a division of Bankers Trust Company of New York. In 2004, Mr. Hermance was elected to the board of directors of the Federal Home Loan Bank of New York where he is Chairman of the Nominating and Corporate Governance Committee and serves also on the Executive Committee. He also serves as a member of the Thrift Institutions Advisory Panel for the Federal Reserve Bank of New York and as a Trustee on the Board of St. John Fisher College in Rochester, New York.

 

Mr. Hermance has over 40 years of experience in the banking industry, both in management and as a board member. Of these 40 years, Mr. Hermance has spent 21 years with the Company serving in senior management capacities. Under Mr. Hermance’s leadership the Company has been able to grow to an asset size of in excess of $60 billion from $11 billion over his tenure as Chief Executive Officer while posting record profits in all 8 of those years. Mr. Hermance’s management skills, leadership skills and knowledge of the banking industry, strengthen the Board’s collective knowledge, capabilities and experience.

 

Michael W. Azzara has been a part-time Senior Consultant with the executive search and consulting firm of Foley Proctor Yoskowitz since October 2003. He is the retired President and Chief Executive Officer of Valley Health System, a regional health care provider comprised of The Valley Hospital in Ridgewood, New Jersey, Valley Home Care and the Valley Health Medical Group, a position

he held from 1997 to his retirement in 2003. Prior to assuming such position, Mr. Azzara served as President and Chief Executive Officer of The Valley Hospital. Mr. Azzara serves on the Advisory Board to the Dean of the School of Arts and Sciences, Rutgers University. He also serves on the Board of Directors of the non-profit Bergen Volunteer Medical Initiative and the Planned Giving Advisory Committee at the Ramapo College Foundation. Mr. Azzara had served on the Board of Directors of Ridgewood Savings Bank for 13 years until its purchase by another community bank. A graduate of Rutgers University, he has a Masters degree from Cornell Graduate School of Business and Public Administration. Mr. Azzara is also a Life Fellow of the American College of Health Care Executives.

 

As a former health care executive with 22 years of experience serving as a Chief Executive Officer, Mr. Azzara has developed and demonstrated valuable leadership skills and extensive experience with the myriad of issues facing corporate entities, including government regulations, risk management, governance, leadership development and human resources. A resident of Northern New Jersey for his entire life, and a former board member of a Northern New Jersey savings bank, Mr. Azzara possesses insightful knowledge of the market area currently served by Hudson City, including regional economic conditions and the competitive landscapes. All of these qualities, as well as the unique contributions Mr. Azzara makes as the only outside director with experience as a chief executive officer, strengthen the Board’s collective knowledge, capabilities and experience.

 

William G. Bardel was the Associate Headmaster and Chief Financial Officer of the Lawrenceville School, a preparatory high school in Lawrenceville, New Jersey, from 1994 until 2006. The Lawrenceville School had an annual budget of $40 million and an endowment of $200 million. Previously, from 1988 to 1994, he served as head of the Government Advisory Group of Lehman Brothers in London, England, which provided financial market guidance to developing nations in Africa, Asia, Eastern Europe, South America and the Middle East, having been named a Managing Director of Lehman Brothers in 1984. Since 2006, Mr. Bardel has acted as a financial consultant to a number of educational institutions. Mr. Bardel currently serves as Hudson City’s Audit Committee financial expert. A graduate of Yale University, he has a Masters degree from Oxford University where he was a Rhodes Scholar. Mr. Bardel received his J.D. from Harvard Law School and is currently admitted to the bar in the state of New York.

 

Having worked for many years in the financial services industry and as the Chief Financial Officer of a prestigious educational institution, Mr. Bardel possesses a strong overall knowledge of both business and finance. In addition, as an attorney Mr. Bardel also possesses a valuable understanding of the legal system and an ability to assess and evaluate risk from a legal as well as a business standpoint. These skills, combined with Mr. Bardel’s leadership experience in several capacities, strengthen the Board’s collective knowledge, capabilities and experience.

 

Scott A. Belair is a co-founder of Urban Outfitters, Inc., a NASDAQ-listed retailer and wholesaler operating under the brand names Urban Outfitters, Anthropologie and Free People, and has served on its Board of Directors since 1970. Previously, Mr. Belair, a CPA, was a Principal at Morgan Stanley and Vice President and Chief Financial Officer of the international offices and subsidiaries at Goldman Sachs, having worked at these investment banks for more than 15 years. In addition, Mr. Belair has been Principal at The ZAC Group, performing financial advisory services, since 1989. A graduate of Lehigh University, he has an MBA from the University of Pennsylvania.

 

As a CPA and having previously served in various senior managerial roles for financial services companies, Mr. Belair has gained extensive knowledge of the financial services industry and the many accounting, regulatory and risk management issues faced by financial institutions. These skills, combined with the unique perspective Mr. Belair brings from his background as an entrepreneur and his extensive experience in the areas of business growth and the development of business strategy as a co-founder of Urban Outfitters, strengthen the Board’s collective knowledge, capabilities and experience.

Victoria H. Bruni served as Vice President for Administration and Finance at Ramapo College of New Jersey, a public four year liberal arts college with an annual budget of over $100 million, from June 1993 until July 2006. She was responsible for financial planning and reporting, budgets, public financings, accounting operations, and purchasing, as well as administrative functions such as human resources and capital facilities planning, construction and maintenance. From 1964 to 1993 she served in various management and executive positions at New Jersey Bell Telephone Co./Bell Atlantic, including Assistant Comptroller, Treasurer, Assistant Secretary and Attorney. A graduate of Smith College, she received her J.D. with honors from Seton Hall University School of Law. Ms. Bruni is admitted to the bar in the state of New Jersey and is a member of the NYC Downtown Economists Club.

 

Prior to Ms. Bruni’s retirement in 2006, her professional career spanned 42 years, 29 of which were spent in managerial and executive positions where she gained valuable leadership and governance experience and a strong understanding of corporate financial matters and human resources related issues. In addition, as an attorney admitted to the bar since 1978, Ms. Bruni possesses a valuable understanding of the legal system and the ability to assess and evaluate risk from a legal as well as a business standpoint. Ms. Bruni’s skills, experience and knowledge, as well as the unique perspective she brings as the only outside director with line officer experience in human resources management, strengthen the Board’s collective knowledge, capabilities and experience.

 

Denis J. Salamone has served as Senior Executive Vice President of Hudson City Bancorp and Hudson City Savings since October 2001 and succeeded Mr. Hermance as Chief Operating Officer on January 1, 2002. He was elected to the Board of Directors in October 2001. Prior to joining the Company, Mr. Salamone had a twenty-six year career with the independent accounting firm of PricewaterhouseCoopers LLP, where he had been a partner for sixteen years. Immediately prior to joining Hudson City Bancorp, Mr. Salamone was the Global Financial Services leader for Audit and Business Advisory Services, and a member of the PricewaterhouseCoopers eighteen member board of partners. Mr. Salamone is a member of the American Institute of CPAs and a member of the New York State Society of CPAs. He graduated in 1975 with a B.S. in Accounting from St. Francis College where he is currently a member of its Board of Trustees.

 

Mr. Salamone has 34 years of experience in the financial services industry. Prior to joining the Company, for 27 years Mr. Salamone served a clientele consisting of many banks and investment banks as a professional advisor. As a partner at a major accounting firm working with financial institutions, Mr. Salamone developed a depth of knowledge in areas of accounting, risk management, internal control, regulatory compliance and operational efficiency and effectiveness which are a valuable asset to the Board of Directors. Mr. Salamone’s skills, experience and knowledge strengthen the Board’s collective knowledge, capabilities and experience.

 

Retiring Director

 

William J. Cosgrove served at Citibank, N.A. from 1963 to 1991 when he retired as a Senior Banker, Senior Credit Officer. From 1993 to 2004, he served as Executive Vice President at Citadel Group Representatives Inc. From 1991 to 2005, he served as Trustee and later as Lead Trustee of John Hancock Funds, and from 1991 to 2006 as an adjunct Professor at the Lubin Graduate School of Business of Pace University. From 1966 to 1991, Mr. Cosgrove served as an instructor at the American Institute of Banking. Mr. Cosgrove holds a B.A. from Fordham College, an MBA from New York University and a J.D. from Fordham University School of Law. Mr. Cosgrove is admitted to the New York bar and the United States Supreme Court bar.

 

Having worked for many years in the banking industry, Mr. Cosgrove held many significant leadership roles and developed a detailed understanding of financial institutions and the financial, operational and regulatory issues they confront on a daily basis. In addition, his 15 years of service as a trustee of the John Hancock Funds has enhanced his knowledge of corporate governance matters and the

relationship of independent directors and management. Mr. Cosgrove’s skills, experience and knowledge strengthen the Board’s collective knowledge, capabilities and experience.

 

In addition to Messrs. Hermance and Salamone, Hudson City Bancorp and Hudson City Savings have the following executive officers:

 

Ronald J. Butkovich , age 60, has been Senior Vice President of Hudson City Savings and Hudson City Bancorp since April 2004. He is responsible for the development of the Long Island Region. Mr. Butkovich joined Hudson City Savings in 2004. He formerly served as Operations/Retail Banking officer of Southold Savings Bank on Long Island, New York for 16 years and the Director of Real Estate, Branch Development, and Construction for North Fork Bank for 16 years. Mr. Butkovich holds an undergraduate degree from Albany State University and is a graduate of the National School of Savings Banking and the Executive Development Program at Fairfield University. Mr. Butkovich has served on various industry, community, and civic associations including treasurer of the Southold Fire Department since 1978.

 

V. Barry Corridon , age 61, joined Hudson City Savings in 1970. He has been Senior Vice President of Mortgage Servicing of Hudson City Savings since January 2000 and Senior Vice President of Hudson City Bancorp since January 2004. He previously served as First Vice President of Mortgage Servicing of Hudson City Savings from 1995 to 2000 and as a Vice President from 1982 to 1995. He is responsible for the administration of our mortgage portfolio, supervision of new loan set-up, post-closing, payoffs, mortgage accounting, collections and foreclosures. Mr. Corridon was President of the Mortgage Bankers Association of New Jersey in 1995. He is the past President of the Mortgage Bankers Association’s Educational Foundation. Mr. Corridon also serves on the board of WOODLEA/PATH Advisory Council of Children’s Aid and Family Services. He earned his undergraduate degree at Fairleigh Dickinson University and is also a graduate of the Graduate School of Savings Banking at Brown University and the Executive Development Program at Fairfield University.

 

Anthony J. Fabiano , age 49, has served as Senior Vice President — Finance of Hudson City Savings and Hudson City Bancorp since January 2010. He previously served as First Vice President — Finance of Hudson City Savings and Hudson City Bancorp from January 2007 to December 2009. Mr. Fabiano has also served as the Vice President and Treasurer of each of Hudson City Preferred Funding and Sound REIT, Inc. and as the Secretary and Director of HudCiti Service Corp. since January 2008. Immediately prior to joining the Company, Mr. Fabiano was the Senior Vice President, Chief Financial Officer and Corporate Secretary of Sound Federal Bancorp from January 2001 to July 2006, and the Vice President and Chief Financial Officer of Sound Federal Bancorp from July 1998 to December 2000. Mr. Fabiano was the Senior Vice President and Chief Financial Officer of MSB Bancorp, Inc. from July 1992 to June 1998 and was employed by KPMG from August 1982 until June 1992 in the Audit Practice. Mr. Fabiano is a member of the American Institute of CPAs and the New York State Society of CPAs. Mr. Fabiano is a graduate of Manhattan College and the National School of Banking at Fairfield University.

 

James A. Klarer , age 57, joined Hudson City Savings in 1976. He has served as Senior Vice President of Hudson City Savings and Hudson City Bancorp since January 2005. He previously served as First Vice President of Hudson City Savings from 2002 to 2004, and as a Vice President from 1992 to 2002. Mr. Klarer has also served as Secretary of HudCiti Service Corp. from January 1993 to January 2008. He is responsible for real estate development, branch expansion, insurance, purchasing and general services. Mr. Klarer also manages the disposition of ORE properties originated and serviced by Hudson City Savings Bank. Mr. Klarer is a former member of the Institute of Real Estate Management (IREM) and is a current member of the Building Owners and Managers Association (BOMA). He is a graduate of William Paterson College.

James C. Kranz , age 61, has been Executive Vice President and Chief Financial Officer of Hudson City Savings and Hudson City Bancorp since October 2007. He previously served as Senior Vice President and Chief Financial Officer of Hudson City Savings and Hudson City Bancorp from January 2007 to October 2007, and as Senior Vice President and Investment Officer of Hudson City Savings from January 2000 to January 2007, and as Senior Vice President of Hudson City Bancorp from January 2004 to 2006. He maintains oversight of the entire accounting and finance functions as well as primary execution responsibility for investments and borrowings. Mr. Kranz joined Hudson City Savings in 1983. Mr. Kranz is a member of the New Jersey Bond Club and serves on the Asset and Liability Management Committee of the New Jersey League of Community and Savings Bankers. Mr. Kranz has an undergraduate degree and an MBA from Lehigh University. He is a graduate of the Graduate School of Savings Banking at Brown University.

 

Thomas E. Laird , age 57, joined Hudson City Savings in 1974. He has served as Executive Vice President and Chief Lending Officer of Hudson City Savings and Hudson City Bancorp since October 2007. He previously served as Senior Vice President and Chief Lending Officer of Hudson City Savings Bank and Hudson City Bancorp from January 2002 to September 2007, Senior Vice President of Hudson City Bancorp since January 2004 and Senior Vice President and Mortgage Officer from January 2000 to 2002. Prior to that, he served as First Vice President and Mortgage Officer from 1991 to 2000. His primary areas of responsibility are mortgage and consumer lending and loan production. Mr. Laird holds an undergraduate degree from St. Peter’s College and is a graduate of the National School of Banking at Fairfield University. Mr. Laird was actively involved from 1989 to 1999 on the Wanaque Board of Education, having served for two terms as Board President. He has also been active in the New Jersey League of Community and Savings Bankers. He is a former member of the Board of Governors of the Mortgage Bankers Association of New Jersey and a former board member of the Dover Housing Development Corporation.

 

Michael B. Lee , age 60, has served as Senior Vice President of Hudson City Savings since January 2000 and as Senior Vice President of Hudson City Bancorp since January 2004. He previously served as First Vice President of Hudson City Savings from 1989 to 2000, and as Secretary from 1989 to 2003. He is responsible for branch administration, training and customer retirement programs. He has an undergraduate degree in management from St. Peter’s College and a Masters Degree from New Jersey Institute of Technology. He has also graduated from the National School of Finance and Management at Fairfield University. Mr. Lee is a Past President of the Bergen Chapter of the American Institute of Banking and has served on several committees of the New Jersey League of Community and Savings Bankers. Mr. Lee joined Hudson City Savings in 1971.

 

Christopher L. Mahler, age 49, has worked for Hudson City Savings since 1982 in various capacities related to retail banking, mortgage servicing and mortgage originations and he has served as Senior Vice President of Hudson City Savings and Hudson City Bancorp since January 2010. He was previously appointed First Vice President and Mortgage Officer of Hudson City Savings and Hudson City Bancorp in December 2003. Additionally, Mr. Mahler has served as President and Chief Executive Officer of Hudson City Preferred Funding since its incorporation in May 2000. Mr. Mahler graduated from Providence College in Rhode Island with a B.S. degree. He received his MBA from Saint Peter’s College in New Jersey. He also graduated from the National School of Banking at Fairfield University. Mr. Mahler has been a member of the Mortgage Bankers Association of New Jersey on both the Affordable Housing Committee as well as the Conventional Loan Committee. He is also active with the Community Bankers Association of New Jersey. Mr. Mahler also had been active with the Bergen County Habitat for Humanity having served three years on its board of directors as well as Vice President and Chairman of the Construction Committee.

 

Michael McCambridge, age 47, joined Hudson City Savings in 1986 and has served as Senior Vice President of Hudson City Savings and Hudson City Bancorp since January 2010. He previously served as First Vice President of Hudson City Savings and Hudson City Bancorp from 2003 to 2009, and as Vice President from 1998 to 2002. Mr. McCambridge is responsible for asset/liability management reports including income and growth forecasting and interest rate risk analysis. He also manages the borrowing

portfolio and is responsible for daily cash management. Mr. McCambridge, a CPA, received a B.A. from the University of Delaware and a B.S. in accounting from Ramapo College of New Jersey. Mr. McCambridge is a member of the American Institute of CPAs and the New Jersey Society of CPAs.

 

Veronica A. Olszewski , age 50, has served as Senior Vice President, Treasurer and Corporate Secretary of Hudson City Bancorp and Hudson City Savings since June 2007. She previously served as Senior Vice President and Corporate Secretary of Hudson City Bancorp and Hudson City Savings from January 2004 to June 2007, Senior Vice President from January 2002 to December 2003, First Vice President from January 2000 to December 2001 and Vice President and Assistant Auditor from March 1997 to December 1999. Ms. Olszewski joined Hudson City Savings in 1980. She is responsible for the functions of Corporate Secretary, special projects and strategic planning. Ms. Olszewski is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants, New Jersey Society of CPAs and the American Society of Corporate Governance Professionals. She is a graduate of Jersey City State College.

 

Steven M. Schlesinger , age 54, joined Hudson City Savings Bank in 1978. He has served as Senior Vice President of Information Services of Hudson City Savings and Hudson City Bancorp since January 2009. He previously served as First Vice President of Information Services of Hudson City Savings and Hudson City Bancorp from 2003 to 2008 and Vice President from 1989 to 2003. He is responsible for the Information Services department and has over thirty-six years of progressive experience in information technology including operations, programming, systems and data communication. He holds an AAS degree in Computer Sciences and is a graduate of the National School of Banking at Fairfield University.

Certain Transactions with Members of Our Board of Directors and Executive Officers

 

Transactions with related persons, including directors, executive officers and their immediate family members, have the potential to create actual or perceived conflicts of interest between Hudson City Bancorp and such persons. Transactions with related persons generally are categorized as either loans that we may make in the ordinary course of business as a financial institution or all other related person transactions.

 

We do not currently make loans or extend credit to directors or executive officers. We have made residential mortgage loans to two of our executive officers prior to promotion to executive officer status and to members of the immediate families of certain of our officers and directors. Such loans were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features.

 

All other related person transactions are generally treated as potential violations of our Code of Ethics for which a waiver must otherwise be obtained if they are found to create a conflict of interest. Under both our Code of Ethics and our Audit Committee Charter, the Audit Committee is charged with reviewing and approving all related person transactions, including any loans to directors, executive officers or their immediate family members, for potential conflicts of interest.

 

Section 16(a) of the Exchange Act requires Hudson City Bancorp’s executive officers and directors, and persons who own more than 10% of Hudson City Bancorp common stock to file with the Securities and Exchange Commission reports of ownership and changes of ownership. Officers, directors and greater than 10% shareholders are required by Securities and Exchange Commission regulation to furnish Hudson City Bancorp with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, Hudson City Bancorp believes that all filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were complied with.

 

PROPOSAL 2

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Hudson City Bancorp is asking shareholders to approve the Executive Officer Annual Incentive Plan to help Hudson City Bancorp and Hudson City Savings maximize the tax deductibility of incentives that we pay to our executive officers.

 

Since 2005, Hudson City Bancorp and Hudson City Savings have paid incentive compensation to their executive officers under the shareholder-approved Executive Officer Annual Incentive Plan, which enables us to link a portion of cash compensation to our performance. We do this using awards under the plan which allow executive officers to earn incentives that vary based on performance relative to goals pre-set annually by the Compensation Committee, acting as the administrative committee referenced below. Under the Internal Revenue Code of 1986, as amended (the “Code”), Hudson City Bancorp cannot deduct fiscal year taxable compensation in excess of $1,000,000 that it pays to either its Chief Executive Officer or any of its three highest paid officers other than its Chief Executive Officer and Chief Financial Officer, unless such compensation meets the Code’s definition of “qualified performance-based compensation.” Incentives cannot be qualified performance-based compensation unless paid by Hudson City Bancorp pursuant to a written plan that its shareholders approve.

 

Our shareholders last approved the Executive Officer Annual Incentive Plan in 2005. Where performance-linked compensation is paid under a shareholder-authorized plan that allows discretion in the selection of performance goals and the establishment of specific targets, section 162(m) of the Code requires that the range of available performance goals be disclosed to and approved by shareholders every five years. The Company is not implementing an additional compensation plan, but instead is seeking shareholder approval to continue the existing Executive Officer Annual Incentive Plan, with certain modifications, for another five years. If the shareholders do not approve the Executive Officer Annual Incentive Plan, the Company will not pay incentives under the plan.

 

Appendix A to this Proxy Statement contains the full text of the plan. Appendix A is incorporated by reference into the following plan summary. The summary is qualified in its entirety by this reference.

 

Nature of the Plan.   Under this plan, Hudson City Bancorp and Hudson City Savings may pay cash incentives which may be deductible under the Code. The amount of such incentives will vary based on the level of achievement relative to performance goals pre-established by the administrative committee. Incentive payouts may be zero if threshold performance goals are not attained. Historically, such incentives have been paid annually based on achievement of performance targets measured over a one-year period. If shareholders approve the Executive Officer Annual Incentive Plan, the Compensation Committee will have the added flexibility to award incentives based on achievement of performance targets measured over periods of one year or longer.

 

Administration of the Plan.   A committee of outside directors administers this plan. The administrative committee must have at least two members and has broad discretionary powers. Its members are the members of the Compensation Committee of the Board of Directors who are “outside directors” under the federal tax laws. In general, disinterested directors are directors who (1) are not, and never were, officers or employees of Hudson City Bancorp or Hudson City Savings and (2) do not receive material compensation from Hudson City Bancorp except for service as a director.

Eligibility.   Eligibility is restricted to top-level executive employees of Hudson City Bancorp and Hudson City Savings who are responsible for establishing strategic direction and long-range plans. Currently, the Chief Executive Officer, Chief Operating Officer and any and all Senior Executive, Executive and Senior Vice Presidents, a total of 13 people, are eligible employees. During the first 90 days of each performance measurement period, the administrative committee selects participants from among the eligible employees. After the first 90 days, the administrative committee may allow participation on a pro-rated basis by employees who are placed in eligible positions through hiring, promotion or transfer before the last four months of the performance period.

 

Target Awards and Performance Goals.   When the administrative committee selects a participant for a designated performance measurement period, it sets the participant’s target incentive and the performance goals which must be achieved to earn the incentive. The target incentive is typically a percentage of the participant’s base salary. The performance goals will be target levels established with respect to any or all of the following corporate performance measures:

 

 

The administrative committee will assign a percentage weight to each performance goal. The aggregate weight for all goals must be 100%. The committee may also set one or more performance levels below or above the target level and assign lower or higher percentages that will be paid if these levels are attained.

 

Certification of Performance and Payment of Incentives.   After the end of each performance measurement period, the administrative committee will determine the extent of achievement of the established performance goals and certify the results. Hudson City Bancorp and Hudson City Savings will pay the incentive amounts assigned to the performance level achieved as soon as practicable. Historically, the maximum incentive that could be paid under the plan to any participant for a year was $3.0 million. If shareholders approve the Executive Officer Annual Incentive Plan, the maximum incentive that Hudson City Bancorp may pay under the plan to any participant for any performance measurement period will be 0.6% of consolidated operating income before income taxes (excluding extraordinary items) for the period for any

participant who holds the title of Senior Executive Vice President (or more senior position) on the first day of the measurement period and 0.15% of consolidated operating income before income taxes (excluding extraordinary items) for the measurement period for any other participant.

 

Committee Discretion to Adjust Incentive Amounts and Performance Measures; Clawbacks.   After setting the target incentives and performance goals for a measurement period, the administrative committee may change them only in limited instances. It may also exercise discretion to reduce, but not increase, the incentive payable to any participant. If there is a change in generally accepted accounting principles, a stock split, stock dividend, reclassification, merger, spin-off, infrequently occurring or extraordinary item or other corporate event, it may adjust the performance goals in a manner designed to neither enlarge nor diminish a participant’s incentive opportunity. Historically, the administrative committee has had the power to interpret the plan and adopt rules for its administration. If the shareholders approve the Executive Officer Annual Incentive Plan, the administrative committee will have added flexibility to adopt policies or procedures that establish terms, conditions or limitations with respect to awards or payments under the plan. These policies could, among other things, provide for awards of shares authorized under other plans in lieu of cash and provide for a clawback policy under which incentives paid may be recalled, in whole or in part, in appropriate circumstances, such as if it is subsequently determined that the measurement of achievement of performance targets was inaccurate.

 

Retirement, Death, Disability and Change of Control.   Generally, a participant will not receive an incentive for a performance measurement period unless he or she is an employee on the last day of the period. In cases of retirement, death or disability, the administrative committee may authorize a pro-rated payment. The administrative committee may also authorize pro-rated payments following a change of control, based on the attainment of adjusted performance goals through the date of the change of control. Such payments may not be considered qualified performance-based compensation for tax deduction purposes.

 

Amendment and Termination.   If approved, this plan will be in effect for a five-year period ending December 31, 2014. The Board may suspend or terminate this plan before then. It may also amend this plan at any time and in any respect. Any amendment that would change the list of performance measures, the class of eligible employees or the maximum annual incentive amount must first be approved by shareholders.

 

The benefits or amounts that will be received by or paid to participants, any Named Executive Officer, or the executive officers as a group pursuant to the Executive Officer Annual Incentive Plan are not currently determinable. The following table reflects the amounts paid under the Executive Officer Annual Incentive Plan for 2009:

 

New Plan Benefits Table

 

 

The following table presents equity compensation plan information as of December 31, 2009.

 

Equity Compensation Plan Information

 

 

 

 

The Hudson City Bancorp, Inc. Denis J. Salamone Restricted Stock Award Plan was adopted in fiscal year 2001. Pursuant to the Denis J. Salamone Stock Option Plan, Mr. Salamone was granted an option to purchase 1,025,920 shares at a per share exercise price of $3.59, all of which became exercisable. Of these options, 820,736 remained unexercised as of December 31, 2009. These awards were granted as a recruitment incentive to induce Mr. Salamone to leave his prior position and join Hudson City.

 

The Hudson City Bancorp, Inc. 2004 Employment Inducement Stock Program was adopted in fiscal year 2004. Pursuant to this plan, Mr. Butkovich was granted an option to purchase 320,600 shares and another officer was granted an option to purchase 128,240 shares, all of which became exercisable. All of these options remained unexercised as of December 31, 2009. The per share exercise price of these options is $10.33.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” APPROVAL OF THE EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN OF HUDSON CITY BANCORP, INC.

 

PROPOSAL 3

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The Audit Committee of the Board of Directors has appointed the firm of KPMG LLP to act as Hudson City Bancorp’s independent registered public accounting firm for the fiscal year ending December 31, 2010, subject to ratification of such appointment by our shareholders. A representative of KPMG LLP is expected to be present at the annual meeting and will be given an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions. No determination has been made as to what action the Board of Directors would take if the shareholders do not ratify the appointment.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” APPROVAL OF THE RATIFICATION OF APPOINTMENT OF KPMG LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF HUDSON CITY BANCORP FOR THE FISCAL YEAR ENDING DECEMBER 31, 2010.

 

Audit Fees

 

For the fiscal year ended December 31, 2009, KPMG LLP billed Hudson City Bancorp an aggregate of $991,000 for professional services rendered for the audits of the Company’s financial statements for such period and internal control over financial reporting as of December 31, 2009, and the reviews of the financial statements included in Hudson City Bancorp’s Quarterly Reports on Form 10-Q during such period. Such fees were $966,325 for the fiscal year ended December 31, 2008.

 

Audit-Related Fees

 

For the fiscal year ended December 31, 2009, KPMG LLP billed Hudson City Bancorp an aggregate of $159,900 for services that are reasonably related to the audit or review of the Company’s financial statements and not described above under the caption “Audit Fees.” The services comprising these fees were employee benefit plan audits and services related to the shelf registration statement filed by the Company in 2009. Audit-related fees were $130,000 for the fiscal year ended December 31, 2008.

 

Tax Fees

 

For the fiscal year ended December 31, 2009, KPMG LLP billed Hudson City Bancorp an aggregate of $75,000 for professional services rendered for federal and state tax compliance, advice and planning. Tax fees were $109,400 for the fiscal year ended December 31, 2008.

 

All Other Fees

 

KPMG LLP did not perform any other services for Hudson City Bancorp for the fiscal years ended December 31, 2009 and 2008.

 

Acting under its charter, the Audit Committee annually appoints the independent registered public accounting firm, in its sole discretion, and reviews the scope of the audit services to be performed for the year with the independent registered public accounting firm, the principal accounting officer and the

senior internal auditing executive, and pre-approves all such audit services. In addition, the Audit Committee pre-approves the retention of the independent registered public accounting firm for all non-audit services and the fees to be paid for such services. In accordance with its charter, the Audit Committee pre-approved 100% of the services described above under “Audit-Related Fees,” “Tax Fees” and “All Other Fees.”

Audit Committee Report

 

Management is responsible for the financial reporting process, the system of internal controls, including internal control over financial reporting, risk management and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. Hudson City’s independent registered public accounting firm is responsible for the integrated audit of the consolidated financial statements and internal control over financial reporting. The responsibilities of the Audit Committee are as set forth in the Audit Committee Charter, adopted by the Board of Directors, which is available at www.hcbk.com. Under the guidance of the Audit Committee Charter, the Audit Committee is primarily responsible for:

 

 

In fulfilling its responsibilities, the Audit Committee, among other things:

 

 

In accordance with the Audit Committee Charter, the Audit Committee has reviewed and discussed the audited financial statements of Hudson City Bancorp for the fiscal year ended December 31, 2009, with Hudson City Bancorp’s management. In addition, the Audit Committee has discussed with KPMG LLP Hudson City Bancorp’s audited financial statements for the fiscal year ended December 31, 2009, including the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees), as adopted by the Public Company Accounting Oversight Board.

The Audit Committee has also received the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the independence of KPMG LLP with that firm. The Audit Committee has also considered whether KPMG LLP’s provision of non-audit services is compatible with its independence.

 

Based on the review and discussions with Hudson City Bancorp’s auditors and management and KPMG LLP as noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2009 be included in Hudson City Bancorp’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

 

Audit Committee of Hudson City Bancorp, Inc.

 

William G. Bardel, Chair

 

William J. Cosgrove, Member

 

Victoria H. Bruni, Member

 

Hudson City Bancorp aspires to the highest standards of ethical conduct. In that spirit, we are committed to being a leader in corporate governance matters. In addition to our ongoing compliance with the Sarbanes-Oxley Act of 2002, the rules of the NASDAQ Global Select Market and Delaware law, Hudson City Bancorp continues to strive to follow high standards of corporate governance.

 

A majority of the Board of Directors and each member of the Compensation, Nominating and Governance and Audit Committees is independent, as affirmatively determined by the Board consistent with the criteria established by the NASDAQ listing rules and as required by Hudson City Bancorp’s bylaws. In addition to explicitly requiring compliance with the NASDAQ listing rules and in order to further ensure the independence of our directors, Hudson City Bancorp’s bylaws prohibit directors from serving on the board of directors of an insured depository institution, bank holding company, financial holding company or thrift holding company, other than Hudson City Bancorp and its affiliated entities or the Federal Home Loan Bank of New York, while serving as a member of the Board of Directors. This prohibition prevents directors from simultaneously serving as a director of another financial institution that may have a business relationship with Hudson City Bancorp.

 

The Board has conducted an annual review of director independence for all current nominees for election as directors and all continuing directors. During this review, the Board considered transactions and relationships during the prior year between each director or any member of his or her immediate family and Hudson City Bancorp and its subsidiaries, affiliates and equity investors, including those reported under “Certain Transactions with Members of Our Board of Directors and Executive Officers” above. The Board also examined transactions and relationships between directors or their affiliates and members of the senior management or their affiliates. The purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent.

 

As a result of this review, the Board affirmatively determined that both of the nominees, Donald O. Quest, M.D. and Joseph G. Sponholz, and the following continuing directors, meet Hudson City Bancorp’s standard of independence: Michael W. Azzara, William G. Bardel, Scott A. Belair and Victoria H. Bruni. The remaining directors were determined not to be independent for the following reasons: Ronald E. Hermance, Jr. and Denis J. Salamone are currently executive officers of Hudson City Bancorp and Hudson City Savings Bank.

 

The positions of Chairman of the Board, President and Chief Executive Officer are held by Mr. Hermance. In these roles, Mr. Hermance has general charge, supervision and control of the business and affairs of Hudson City Bancorp, and is responsible generally for assuring that policy decisions of the Board are implemented as adopted. As part of his duties, Mr. Hermance is also responsible for planning Hudson City Bancorp’s growth, for shareholder relations and relations with investment bankers and other similar financial institutions and financial advisors, for exploring opportunities for mergers, acquisitions and new business, and for performing such other duties as the Board may from time to time assign. As the Chairman of the Board, Mr. Hermance provides leadership to the Board and works with the Board to define its structure and activities in the fulfillment of its responsibilities. We believe this Board leadership structure is appropriate for our Company, in that the combined role of Chairman of the Board, President and Chief Executive Officer promotes unified leadership and direction for our Company, allowing for a single, clear focus for management to execute the Company’s strategy and business plan while contributing to a more efficient and effective Board. The Board also believes that Hudson City’s strong performance under Mr. Hermance, especially in light of the recent financial crisis, demonstrates the effectiveness of its leadership approach.

In addition, the Board of Directors has created the position of lead independent director, whose primary responsibility is to preside over periodic executive sessions of the independent members of the Board of Directors. The lead independent director also prepares the agenda for meetings of the independent directors, serves as a liaison between the independent directors and management and outside advisors, and makes periodic reports to the Board of Directors regarding the actions and recommendations of the independent directors. The independent members of the Board of Directors have designated Joseph G. Sponholz to serve in this position for 2010.

 

The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks. The Board receives these reports to enable it to understand the Company’s risk identification, risk management and risk mitigation strategies. While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of both management and the Board also have responsibility for risk management. In particular, a new Risk Management Department was created in the fourth quarter of 2009 and the Board appointed a Chief Risk Officer. The Risk Management Department is responsible for enhancing the Company’s ability to manage and monitor material risks to the Company, in particular, its exposure to credit and interest rate risk. In order to facilitate improvements in risk management and oversight by the Board of Directors, the Chief Risk Officer is responsible for preparing a comprehensive risk management report and presenting it to the Asset and Liability Committee and the Board monthly, summarizing the key risks facing the Company. In addition, as a part of its charter, the Audit Committee assists the Board in its oversight of the Company’s risk assessment and risk management policies as well as the procedures and the safety and soundness of Hudson City Savings. The Audit Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors.

 

We will continue our effort to be a leader in corporate governance. Hudson City Bancorp’s bylaws, among other things, define who may be considered an “independent” director, establish a mandatory retirement age for all directors, require the independent directors to meet periodically in executive session, and require that the responsibilities of the committees of the Board of Directors conform with the requirements of the Sarbanes-Oxley Act and related rules and regulations. In addition, Hudson City Bancorp has Corporate Governance Guidelines and a Code of Ethics, both of which are available on our website at www.hcbk.com. Further actions to enhance our corporate governance mechanisms will be taken as required by law and the NASDAQ Global Select Market or as otherwise deemed necessary or appropriate by the Board of Directors, with a continuing focus on high standards of corporate governance.

 

Shareholders of Hudson City Bancorp may contact the Board of Directors, either individually or as a group, by writing to the Board of Directors, c/o Corporate Secretary, Hudson City Bancorp, Inc., West 80 Century Road, Paramus, New Jersey 07652. The Corporate Secretary will forward a copy of all written communications to each member of the Board of Directors.

 

During 2009, Hudson City Bancorp’s Board of Directors held nine meetings. The independent members of the Board of Directors met in executive session four times during 2009. No current director attended fewer than 75% of (a) the total number of Board meetings held in 2009 during the period for

which such director was a director and (b) the total number of committee meetings held in 2009 during the period which such director was a committee member. While we do not have a specific policy regarding attendance at the annual meeting, all nominees and continuing directors are expected to attend. All of the incumbent directors attended last year’s annual meeting of shareholders.

 

The Board of Directors of Hudson City Bancorp maintains the following three independent standing committees:

 

The Nominating and Governance Committee consists of Mr. Azzara, Mr. Bardel, Mr. Belair, Ms. Bruni, Mr. Cosgrove and Dr. Quest, with Mr. Azzara serving as Chairman. All members of the Nominating and Governance Committee have been determined by the Board to be independent of Hudson City Bancorp and meet the definition of independence set forth in Rule 5605(a)(2) of the NASDAQ listing rules. The Nominating and Governance Committee acts under a written charter adopted by Hudson City Bancorp’s Board of Directors, a copy of which is available on Hudson City Bancorp’s website at www.hcbk.com. This committee is responsible for developing and implementing policies and practices relating to corporate governance, including developing and monitoring implementation of Hudson City Bancorp’s Corporate Governance Guidelines. In addition, the Nominating and Governance Committee is responsible for developing criteria for the selection and evaluation of directors and recommends to the Board of Directors candidates for election as directors and senior management.

 

The Nominating and Governance Committee employs a variety of methods for identifying and evaluating nominees for director. The Nominating and Governance Committee will review the performance of Hudson City Bancorp’s current Board members up for election to determine if they should stand for reelection. If a determination is made that a current Board member will not be recommended by the Nominating and Governance Committee for reelection, due to no longer satisfying the minimum qualifications, retirement or otherwise, the Nominating and Governance Committee will conduct a search for individuals qualified to become members of Hudson City Bancorp’s Board of Directors, unless the Board of Directors decides to reduce the size of the Board. The Nominating and Governance Committee will also evaluate director nominations by shareholders that are submitted in accordance with the procedural and informational requirements set forth in Hudson City Bancorp’s bylaws and described herein under “Additional Information — Notice of Business to be Conducted at Annual Meeting.”

 

Hudson City Bancorp’s Corporate Governance Guidelines contain criteria considered by the Nominating and Governance Committee in evaluating nominees for a position on the Board. All nominees, including incumbent directors, other board nominees and shareholder nominees, are evaluated in the same manner. Although the Board of Directors does not have a formal diversity policy, the Corporate Governance Guidelines set forth Hudson City Bancorp’s goal to have a Board of Directors comprised of members who have diverse professional backgrounds and have demonstrated personal achievement, the highest personal and professional ethics and integrity and have broad experience in positions with a high degree of responsibility, corporate board experience and the ability to commit adequate time and effort to serve as a director. Other criteria that the Nominating and Governance Committee will consider include expertise currently desired on the Board of Directors, geography, finance or financial services industry experience and involvement in the community. The Nominating and Governance Committee also evaluates potential nominees to determine if they meet Hudson City Bancorp’s standard of independence (to ensure that at least a majority of the directors will, at all times, be independent).

 

Directors of Hudson City Bancorp may not serve on the board of more than three other public companies and may not serve on the board of another unaffiliated insured depository institution, bank holding company, financial holding company or thrift holding company, other than the Federal Home Loan Bank of New York, while serving as a director of Hudson City Bancorp. The Nominating and Governance Committee met nine times during 2009.

 

The Audit Committee consists of Mr. Bardel, Ms. Bruni and Mr. Cosgrove, each of whom has been determined by the Board to be independent of Hudson City Bancorp and meets the definition of

independence set forth in Rule 5605(a)(2) of the NASDAQ listing rules. Mr. Bardel serves as Chairman of the Audit Committee, and Hudson City Bancorp’s Board of Directors has determined that Mr. Bardel is an “audit committee financial expert,” as defined by the rules and regulations of the Securities and Exchange Commission.

 

The Audit Committee acts under a written charter adopted by Hudson City Bancorp’s Board of Directors, a copy of which is available on Hudson City Bancorp’s website at www.hcbk.com. The Audit Committee is primarily responsible for: monitoring the integrity of Hudson City Bancorp’s financial reporting process and systems of internal controls regarding finance, accounting, legal compliance and public disclosure of financial information; monitoring the independence and performance of Hudson City Bancorp’s independent registered public accounting firm and internal auditing department; and maintaining free and open communication between the Audit Committee, the independent registered public accounting firm, management, the internal auditing department, and the Board of Directors. The Audit Committee met five times during 2009.

 

The Compensation Committee consists of the following members: Mr. Azzara, Mr. Belair and Dr. Quest, with Mr. Belair serving as Chairman. None of the members is or previously has been an officer or employee, or has had a relationship with us requiring disclosure in this proxy statement under the caption “Certain Transactions with Members of our Board of Directors and Executive Officers.” The Compensation Committee has a written charter that has been approved by the Board of Directors, a copy of which is available on Hudson City Bancorp’s website at www.hcbk.com. The Compensation Committee met eight times during 2009.

 

Our bylaws require that the Board of Directors, or a board committee to which decision-making authority has been delegated, set executive officer compensation. As a NASDAQ Global Select Market listed company, we must observe governance standards that require independent directors or a committee of independent directors to set executive officer compensation. Consistent with these requirements, our Board of Directors has established the Compensation Committee, all of whose members meet the definition of independence set forth in Rule 5605(a)(2) of the NASDAQ listing rules. The Board of Directors has delegated authority to the Compensation Committee to:

 

 

The Compensation Committee meets in executive session and with its advisors and invited management present. It considers the expectations of the Chief Executive Officer and the Chief Operating Officer with respect to these officers’ compensation, and these officers’ recommendations with respect to the compensation of directors and more junior executive officers. It also considers empirical data and the recommendations of advisors. Executive officer compensation matters are presented for discussion at periodic executive sessions of the independent directors and at meetings of the full Board of Directors.

 

The Compensation Committee may delegate any or all of its powers and responsibilities only to subcommittees of its membership. During 2009, the Committee did not delegate any of its powers or responsibilities.

 

During 2009, the Compensation Committee continued to work with Frederic W. Cook & Co., Inc., a nationally recognized compensation consulting firm, to assist it in carrying out its duties. The consultant’s

specific assignments included a competitive review of our named executive officer compensation levels and practices and a more focused review of equity compensation strategies. The Compensation Committee communicates directly with, and receives written work product directly from, its consultant. It determines the compensation of its consultant and meets with the consultant both in executive session and with invited executive officers present. The Compensation Committee relies on consultants for survey data, for assistance in understanding market practices and trends and for recommended compensation strategies. The Compensation Committee has relied on Hudson City Bancorp’s outside legal counsel for advice as to its obligations under applicable corporate, securities, tax and employment laws, for assistance in interpreting its obligations under compensation plans and agreements, and for drafting plans and agreements to document business decisions. The Compensation Committee has the right to select other legal counsel.

Compensation Committee Interlocks and Insider Participation

 

During 2009, the following directors served as members of the Compensation Committee: Mr. Azzara, Mr. Belair and Dr. Quest, with Mr. Belair serving as Chairman. None of the members was, during 2009, an officer or employee of Hudson City Bancorp or Hudson City Savings; and none of them has formerly been an officer or employee of Hudson City Bancorp or Hudson City Savings. In addition, none of them has any relationship requiring disclosure by us in this proxy statement under the caption “Certain Transactions with Members of Our Board of Directors and Executive Officers.”

 

None of our executive officers served as a director or member of the compensation committee (or equivalent body) of another entity where any of our directors or any member of our Compensation Committee served as an executive officer or director.

Compensation Committee Report

 

The Compensation Committee has reviewed the Compensation Discussion and Analysis included in this proxy statement and has discussed it with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Compensation Committee of Hudson City Bancorp, Inc.

 

Scott A. Belair, Chair

 

Michael W. Azzara, Member

 

Donald O. Quest, Member

 

Private Securities Litigation Reform Act Safe Harbor Statement

 

This Compensation Discussion and Analysis 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,” “consider” “should,” “plan,” “estimate,” “predict,” “continue,” “probable” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to estimates with respect to the financial condition, results of operations and business of Hudson City Bancorp, Inc. These factors include, but are not limited to:

 

 

Our ability to predict results or the actual effects of our plans or strategies is inherently uncertain. As such, forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak

only as of the date of this filing. We do not intend to update any of the forward-looking statements after the date of this proxy statement or to conform these statements to actual events.

Introduction

 

This section of the proxy statement (1) describes our decision- and policy-making process for executive compensation, (2) discusses the background and objectives of our compensation programs for executive officers, and (3) sets forth the material elements of the compensation of the following individuals, whom we refer to as our “named executive officers”:

 

 

Descriptions of compensation plans, programs and individual arrangements referred to in this Compensation Discussion and Analysis (other than broad-based plans that are open to substantially all salaried employees) that are governed by written documents are qualified in their entirety by reference to the full text of their governing documents. We have filed these documents as exhibits to our Annual Report on Form 10-K for the year ended December 31, 2009 and incorporate them here by this reference.

 

The creation of long-term value for our shareholders is highly dependent on the development and execution of our business strategy by our executive officers. Our executive officer compensation program, consistent with previous years, seeks to:

 

 

The factors that influence the design of our executive compensation program include the following:

 

 

 

The executive compensation program includes several components designed, in combination, to address these factors. We expect that the components of our executive compensation program and their relative significance could change in the future from year to year as circumstances change.

 

In General.   Our executive compensation program consists of three key elements: base salary to provide a reasonable level of predictable income; annual cash incentives to motivate our executives to meet or exceed annual performance objectives derived from our business plan; and long-term incentives to retain talented executives and provide an incentive to maximize shareholder return in the long term. We also provide fringe benefits and perquisites, and retirement and other termination benefits, to reduce outside distractions. Performance-based compensation opportunities make up a significant portion of each named executive officer’s total annual compensation opportunities. Long-term incentives, with values derived from stock price, make up a majority of the performance-based compensation opportunities. In 2006 through 2008, we granted long-term incentives exclusively in the form of stock options, the ultimate value of which depend entirely on stock price appreciation and, for performance-based awards, the attainment of performance objectives. In 2009, long-term incentives reflect a mix of performance-based stock options, whose value is related to stock price appreciation, and performance-based restricted stock grants, whose value is related to stock price performance. This change reflects our strategy to retain our incumbent management team during a period of unprecedented disruption in the financial markets and the financial services sector and our belief that in current market conditions, stock options alone may not provide an effective retention incentive.

Use of Discretion.   The Compensation Committee exercises substantial discretion in setting pay levels and determining the elements of compensation, and their relative weight in the compensation packages of our named executive officers. The following table summarizes the most significant elements of our named executive officers’ compensation packages and the basis, in addition to cost considerations, on which each has been determined:

 

Base Salary.   Base salaries are reviewed annually. They do not vary substantially and directly with annual performance. Instead, they reflect market factors, experience and tenure in office, job content and sustained job performance over an extended period, and general cost of living. In 2009, all of our named executive officers’ base salaries were set above the median of an indicated range of salaries for their position derived from an independent compensation consultant’s report. These decisions reflect a combination of the individual’s experience and tenure in office and sustained performance. In 2009, base salary increases for our named executive officers were as follows:

 

 

Cash Incentives.   Our Executive Officer Annual Incentive Plan provides performance-based annual incentives to motivate named executive officers to execute specific financial and non-financial elements of our business plan, and to reward individual conduct that supports shared corporate goals. A subjective evaluation of individual performance, in addition to the achievement of shared corporate financial goals, influences actual incentive payments.

 

Our business plan includes the following elements:

 

 

For 2009, each of our named executive officers had the opportunity to earn an incentive payment once the Company’s annual income before income taxes and extraordinary items equaled or exceeded a threshold level of $592.9 million. In the cases of Messrs. Hermance and Salamone we set a maximum incentive payment for each in early 2009 and the actual payment was based on a subjective, retrospective review of corporate and individual performance indicators. In the case of Messrs. Kranz, Laird and Butkovich, we established target and superior payment levels that each executive could earn based on the Compensation Committee’s subjective review of our annual income before income taxes and extraordinary items and individual performance factors. The Compensation Committee set target and superior payment levels to create a linkage between the executive’s incentive payment and the Compensation Committee’s assessment of his performance. In light of the subjective nature of the individual performance factors, the Compensation Committee did not attach quantitative performance measures to the payment levels. This approach enabled us to control the portion of our income before income taxes and extraordinary items expended for cash incentives. It focused management on the income effects of increases in overhead expense associated with expansion of the branch network, balance sheet growth and other strategic and operating decisions. It also afforded management flexibility to adapt to business conditions as they emerged during the year and afforded the Compensation Committee the ability to reward or discipline management for its actions based on a retrospective review of the business context in which action was taken.

For 2009, the named executive officers’ target and maximum award opportunities, and actual incentives awarded as a percentage of maximum, were:

 

 

Final award decisions reflected our actual income before income taxes and extraordinary items of $874.0 million, a record amount for Hudson City Bancorp which the Compensation Committee regarded as a superior achievement, and the Compensation Committee’s subjective assessment of the individual performance factors described above, and, in the case of executives other than the Chief Executive Officer, the Chief Executive Officer’s subjective assessment of their individual performance. The Compensation Committee also considered the Chief Operating Officer’s views regarding the performance of his direct reports.

 

Mr. Hermance’s incentive payment for 2009 reflects the Compensation Committee’s assessment of his success in directing the Company to an eighth consecutive year of record earnings on continued strong mortgage volume with continued deposit growth and sustained operating efficiency. The Compensation Committee attributed these results to Mr. Hermance’s core vision for the Company and discipline in adhering to a business model focused on high operating efficiency, conservative credit underwriting, traditional mortgage products, favorable pricing and measured, organic growth. The Company achieved its earnings performance despite elevated levels of non-performing assets and credit losses, which occurred due to continuing negative trends in employment and real estate values in the Company’s markets and reflect management’s efforts to proactively identify and address problem loans. Even at elevated levels, non-performing asset and credit loss measures remained superior in relation to industry averages.

 

Mr. Salamone’s incentive payment for 2009 reflects his success in continuing to assume investor relations responsibilities previously borne exclusively by Mr. Hermance, and in deepening the Company’s senior management team as part of the evolving management development and succession plan. It also reflects Mr. Salamone’s contributions, through oversight of his direct reports, to our disciplined growth and superior operating performance in a difficult economic environment.

 

Mr. Kranz’ incentive payment for 2009 reflects an assessment of his success as Chief Financial Officer in executing our financial plan and overseeing the Company’s balance sheet management. In particular, during 2009 this included the execution of a funds diversification plan designed to enhance the Company’s ability to respond to future changes in interest rates. Mr. Kranz also had responsibility for supervision of accounting and finance and oversight of financial reporting and internal controls during a year of record earnings.

 

Mr. Laird’s incentive payment for 2009 reflects his overall responsibility for our continuing strong mortgage volume, achieved through internal originations and an expanded broker network, in a very volatile mortgage market. His incentive payment also reflects his adherence to the conservative internal underwriting standards that are critical to differentiating us from our competitors in the investment markets and maintaining our high operating efficiency.

 

Mr. Butkovich’s incentive payout for 2009 reflects his continuing success in building what is, in effect, a de novo banking franchise on Long Island. During 2009, Mr. Butkovich successfully identified and opened new bank branch locations that have achieved high rates of deposit growth, and has recruited experienced, service-oriented branch managers to build customer relationships and brand loyalty. He actively participated in community events to raise Hudson City Savings’ profile and build brand recognition.

Equity Compensation.   In 2009, we continued a transition begun in 2006 to a performance-based equity compensation program from a more traditional service-based approach.

 

Prior to 2006, it had been our practice to consider stock option and restricted stock grants at the time of hire or promotion for newly hired or promoted executive officers and annually in connection with our annual executive officer compensation review for incumbent executive officers. We used equity awards as a retention tool and as an incentive for executive officers to make strategic and operating decisions that, over time, result in stock price appreciation. Awards vested ratably over a vesting period, contingent only on continued service through the vesting date or the occurrence of certain acceleration events such as death, disability, retirement and change in control. We valued awards based on the grant-date fair market value of our common stock (in the case of restricted stock awards) and the grant-date value of stock options based on a recognized option valuation methodology. We amortized the grant-date value over the award’s vesting period and included each year’s amortization amount as part of that year’s compensation package in evaluating the overall compensation package. It has not been our practice to reduce compensation or retirement benefits in subsequent years based on stock price performance that causes previously granted equity awards to increase in value, or to grant additional compensation or retirement benefits where stock price performance has impaired the value of previous awards, because such practices could weaken the intended linkage between equity compensation and mid- to long-term shareholder return.

 

In 2006, we implemented, with shareholder approval, the 2006 Stock Incentive Plan, our first equity compensation plan since 2000. During 2009, we made our fourth award under the 2006 Stock Incentive Plan. We granted and priced these awards on the third trading day after our release of annual financial results for 2008. Awards took the form of stock option grants and performance-based restricted stock awards. While stock options granted in 2006 were a mix of retention awards with service-based vesting and performance awards with a combination of service- and performance-based vesting, the stock options granted to our named executive officers in 2007 through 2009 were all performance awards.

 

In contrast to grants prior to 2006 and in order to strengthen the retention aspect of retention stock options, vesting of retention stock options does not accelerate on retirement, and acceleration in cases of death or disability is limited to those options scheduled to vest within six months of the termination date. Vesting accelerates in the event of a change of control only if the executive is discharged without cause or resigns with good reason before the option’s regularly scheduled vesting date.

 

In 2009, we changed our approach to equity compensation, granting a mix of performance-based stock options and performance-based restricted stock awards to each named executive officer. We consider retention of our experienced management team a high priority in this period of stress in the financial services industry and in the regional economy where we operate. The deterioration of the markets for financial institution stocks has significantly impaired the in-the-money value of the stock options outstanding to our named executive officers and compromised the effectiveness of outstanding and potential new option grants as retention incentives. We have included performance-based restricted stock as part of the 2009 long-term incentive awards so that these awards have some tangible value at grant. We have tied the vesting of these awards to the attainment of financial performance targets that should beneficially affect both stock price performance and the Company’s financial strength.

 

Performance stock options granted in 2009 have been structured to reward option holders for stock price appreciation that is achieved through sustained earnings and increased return on equity. All performance stock options will vest 100% on January 23, 2012, if certain performance measurements are satisfied. The specified performance measures are (1) as to one-half of the number of options granted to each recipient, a target level of aggregate diluted earnings per share measured over any four consecutive calendar quarters during calendar years 2009, 2010 or 2011, and (2) as to the balance of the number of options, a target level for return on average equity which must be attained or exceeded for at least one calendar quarter during 2009, 2010 or 2011. Performance stock options have the same acceleration features as retention stock options. We have tied vesting of performance stock options to targets for earnings per share and return on equity in order to

encourage conduct that produces stock price appreciation. See the notes to unexercised unearned options in the “Outstanding Equity Awards at Fiscal Year-End Table —  2009” below for additional detail on the vesting conditions attached to performance stock option grants.

 

Performance-based restricted stock awards granted in 2009 have been structured to reward recipients based on stock price performance that is achieved through efficiency. All performance-based stock awards will vest in three equal installments on January 23 in 2010, 2011 and 2012, if a specified performance measurement is satisfied. The specified performance measure is the average quarterly efficiency ratio for calendar quarters during 2009. Performance-based restricted stock awards have the same acceleration features as performance and retention stock options. We have tied vesting of performance-based restricted stock awards to a target for efficiency in order to encourage conduct that increases corporate value. We achieved this performance target in 2009.

 

Our current policy is to consider equity grants to incumbent executive officers in the first quarter of each year, giving consideration to any episodic grants we may award to promoted or newly hired executives. We seek to price our performance stock option grants shortly after the release of quarterly or annual financial results or at other times when we would permit our directors and executives to purchase or sell our common stock on the open market under our securities trading policy.

Other Elements of the Executive Compensation Package

 

Our 2009 compensation program for our named executive officers includes the following additional elements:

 

Retirement Benefits.   In addition to base salary, annual cash incentives and long-term equity incentives, our named executive officers are eligible to participate in the same broad-based, tax-qualified retirement and savings plans as other employees with similar dates of hire. They are also eligible to participate in certain non-qualified supplemental executive retirement plans because applicable tax rules do not permit them to receive benefits under our broad-based, tax-qualified plans at the same percentage of salary as other employees. The supplemental executive retirement plans generally provide benefits that, when added to the benefits available under our qualified plans, are equivalent, as a percentage of salary, to the benefits provided to other employees. We provide these benefits in lieu of additional current cash or equity compensation to assure that our named executive officers have a source of retirement income that is available at the time of retirement without regard to the performance of their personal savings and investment portfolios and because these programs enjoy more favorable corporate and/or personal income tax treatment under the federal tax laws than current compensation.

 

We also use the supplemental plans to provide additional pension benefits to executives who are recruited from other employers in mid-career by granting additional years of service credits for periods of employment with a prior employer. It has been our practice to grant additional years of service credit only at the time of hire and as part of the employment negotiation. Messrs. Hermance, Salamone and Butkovich received negotiated prior service credits as part of their hiring packages in their respective years of hire.

 

Under our supplemental employee stock ownership plan, Messrs. Hermance and Salamone also participate in an additional benefit designed to duplicate the benefits each would earn under our leveraged employee stock ownership plan if the plan were to repay all acquisition debt incurred by the plan to purchase common stock for future allocation on or before their respective retirement dates. The plan will award this benefit only in the event of early or normal retirement while our employee stock ownership plan has unpaid acquisition debt. We designed the benefit to approximate an additional employee stock ownership plan benefit that would be provided if, prior to the executive’s retirement, we should experience a change in control that would result in a mandatory prepayment of our tax-qualified employee stock ownership plan’s acquisition debt and an accelerated allocation of any remaining common stock that had secured the acquisition debt. We provide this benefit primarily so that the change in control feature of our employee stock ownership plan does not serve as a financial disincentive to retirement. In addition, in the event of a change in control, we

expect that the payment of this benefit to a retirement-eligible executive would reduce the cost of change-in-control benefits otherwise payable to him.

 

Benefits under our broad-based and executive-level retirement programs are tied to base salary. Cash incentives, restricted stock, option-related compensation and other items of compensation do not increase or reduce benefit levels.

 

Perquisites and Other Benefits.   We also provide certain perquisites and benefits to our named executive officers. We provide the use of a company automobile to Messrs. Hermance, Salamone and Butkovich. We pay membership dues in private clubs for Messrs. Hermance and Salamone. We cover travel and entertainment expenses for the wives of all named executive officers to accompany them on certain business travel, both as a convenience and because we believe our business benefits from their participation. We provide these benefits in kind, but the Compensation Committee takes the cost of these items into account in setting other elements of compensation.

 

Each of our named executive officers is also eligible, under our charitable matching contribution program, to direct us to make charitable gifts in limited dollar amounts to the tax-exempt organizations of their choice. We offer this program to encourage philanthropy among our named executives and to capture any benefit to our corporate reputation that may result from our named executives’ philanthropic activity.

 

Employment Agreements and Change in Control Agreements.   Consistent with the practices of other financial institutions of similar size and asset and business mix, we have entered into employment or change of control severance agreements with each of our named executive officers. We have found it necessary to offer these arrangements as part of the recruitment packages for newly hired executives. We have offered them to incumbent executives in order to make our package of employment and change in control protections comparable to those available at other employers. If we did not follow market practice in this regard, we believe we would compromise our relationship with our executives and would have to offer increased annual compensation packages, at increased recurring annual cost, in order to attract and retain the executive talent we require.

 

The employment agreements with Messrs. Hermance and Salamone help us protect our franchise in two ways. First, each agreement restricts the named executive’s ability to work for competitors in our markets for a specified period following a voluntary resignation without good reason or a discharge with cause. Second, each agreement prohibits solicitation of or disturbance of our relations with customers or employees by the named executive for a specified period following termination for any reason. We have chosen to secure these restrictions through employment agreements rather than by attaching them to equity compensation grants or other items of compensation so that they remain in effect indefinitely and are not tied to a decision to continue or discontinue, or to the value of, a particular item of compensation. In return for these restrictions, these agreements provide the executives a termination benefit equal in value to three years’ compensation and benefits (excluding stock options, restricted stock or other equity compensation) in the event of termination under certain circumstances. These circumstances include discharge without cause or resignation following certain triggering events, including a diminution in title, position, duties or authority, failure to pay or a reduction in compensation, involuntary relocation or other material breach of contract. In addition, for a limited period of time following a change in control, Messrs. Hermance and Salamone may each choose to resign for any reason or no reason and collect the same termination benefits that would be available if their resignation had followed a specified triggering event. We provide these benefits as a retention incentive for these named executives to remain in their positions through the conclusion of a change in control transaction that will be in place regardless of the existence or value, from time to time, of other items of compensation with retention features. We have provided this resignation window following a change in control to reduce the extent to which personal issues might serve to distract these executives from corporate matters during the negotiation and execution of a change in control transaction. Our employment agreements provide benefits only in the

event of an actual termination of employment; payments are not due in the event of a change of control following which the executive retains his position beyond the expiration of the resignation window.

 

The change-in-control agreements in effect with our other named executive officers restrict their right to solicit or disturb our relations with our customers or employees following termination of employment for any reason following a change in control. We chose to secure these restrictions through change in control agreements rather than by attaching them to equity compensation grants or other items of compensation so that they remain in effect indefinitely and are not tied to a decision to continue or discontinue, or to the value of, a particular item of compensation. These agreements provide a termination benefit equal in value to two years’ compensation and benefits (excluding stock options, restricted stock or other equity compensation) in the event of discharge without cause or resignation following certain triggering events. These triggering events include a diminution in title, position, duties or authority, failure to pay or a reduction in compensation, involuntary relocation or other material breach of contract. We provide these benefits as a retention incentive for these named executives to remain in their positions through the conclusion of a change in control transaction that will be in place regardless of the existence or value, from time to time, of other items of compensation with retention features. As is the case with our employment agreements, change in control agreements do not provide payments unless the officer experiences a termination of employment.

 

Benchmarking and Survey Data

 

The Compensation Committee requests and reviews survey data for information relating to compensation practices at other financial institutions of similar asset and business mix as well as general compensation trends in the private sector. For 2009, the Compensation Committee considered survey data for the following companies: Associated Banc-Corp; Astoria Financial Corp.; Blackrock, Inc.; Comerica, Inc.; Cullen/Frost Bankers; Franklin Resources; Huntington Bancshares, Inc.; M & T Bank Corp.; New York Community Bancorp, Inc.; Northern Trust Corporation; People’s United Financial; and Zions Bancorporation. Sovereign Bancorp, Inc. was removed from this list in 2009 because it was acquired. The Compensation Committee, in consultation with its compensation consultant, selected these companies based on their asset size, market capitalization, headcount and/or business focus. The Compensation Committee does not seek to set compensation levels at prescribed percentile rankings within a peer group. It does use survey data to determine on a historical basis the degree of correlation between the base salary, annual incentive and equity compensation provided by us (expressed as a percentile ranking relative to our peers) and our percentile ranking among the same peer group for performance measures that include, but are not limited to, return on average assets, return on average equity, asset growth, total shareholder return, efficiency ratio and net income growth.

 

Risk.   We have sought to establish a compensation package for our named executive officers that rewards success without promoting excessive or unnecessary risk in the conduct of our business. We seek to set base compensation, insurance coverages and retirement savings benefits at levels that support a reasonable standard of living without reliance on incentive pay. Our cash bonus program is not formulaic. We set a challenging but realistic financial goal and afford the Compensation Committee substantial discretion to determine final payouts based on a retrospective, subjective evaluation of corporate and individual conduct using a variety of financial and operational factors. In particular, we do not promise increased payouts for achieving pre-determined, aggressively set goals. We impose stock ownership requirements on our executive officers to discourage activities with short-term benefits to corporate performance but potentially adverse long term effects. We tie these guidelines to compensation levels, rather than requiring ownership of a defined number of shares or retention of all or a portion of shares delivered as compensation, so that required holdings are meaningful but should not be so large a portion of any executive’s income or net worth as to impair his judgment in the performance of his duties.

Impact of Accounting and Tax Treatment

 

Section 162(m).   Section 162(m) of the Internal Revenue Code imposes a $1 million annual limit per executive officer on our federal tax deduction for certain types of compensation paid to some of the named executive officers. It has been the Compensation Committee’s practice to structure the compensation and benefit programs offered to the named executive officers with a view to maximizing the tax deductibility for the Company of amounts paid. However, in structuring compensation programs and making compensation decisions, the Compensation Committee considers a variety of factors, including the materiality of the payments and tax deductions involved, the need for flexibility to address unforeseen circumstances and the need to attract and retain qualified management. After considering these factors, the Compensation Committee may decide to authorize payments all or part of which would be nondeductible for federal tax purposes. We anticipate that certain restricted stock awards made before 2009 may be non-deductible, in whole or in part, as a result of section 162(m).

 

Sections 4999 and 280G.   Section 4999 of the Internal Revenue Code imposes a 20% excise tax on certain “excess parachute payments” made to “disqualified individuals.” Under section 280G of the Internal Revenue Code, such excess parachute payments are also nondeductible to Hudson City. If payments that are contingent on a change of control to a disqualified individual (which terms include the named executive officers) exceed three times the individual’s “base amount,” they constitute “excess parachute payments” to the extent they exceed one times the individual’s base amount.

 

We have entered into employment agreements with each of Messrs. Hermance and Salamone, pursuant to which we will make an indemnification payment to the executive officer so that, after payment of the initial excise tax and all additional income and excise taxes imposed on the indemnification payment, the executive officer would retain approximately the same net after-tax amounts under the employment agreement that he would have retained if there was no excise tax. We have done this so that, in general, whether or not we have experienced a change in control will not affect the net after-tax value to these individuals of termination benefits under their employment agreements. Messrs. Kranz, Laird and Butkovich are not entitled to such payments under their change in control agreements. Neither Hudson City Savings, nor Hudson City Bancorp, is permitted to claim a federal income tax deduction for the portion of the change of control payment that constitutes an “excess parachute payment,” or the indemnification payment.

 

Accounting Considerations.   The Compensation Committee is informed of the financial statement implications of the elements of the executive officer compensation program. However, a compensation element’s contribution to the objectives of our executive officer compensation program and its projected economic cost, which may or may not be reflected on our financial statements, are the primary drivers of executive officer compensation decisions.

 

Personal Income Tax Considerations.   Federal and state income tax laws do not apply uniformly to all items of compensation, with the result that certain items of compensation are more valuable, on a net after-tax basis, to our named executives, or less costly, on a net after-tax basis, to us. We take the federal and state personal income tax treatment of various items of compensation into account to the extent consistent with the corporate goals and objectives of our executive compensation program.

 

Stock Ownership Policy

 

In February of 2005, we set stock ownership targets for our directors and officers with a title of Executive Vice President or higher. The purpose of these guidelines is to promote director and officer stock ownership that will cause our directors and officers to share, with other shareholders, a financial interest in the performance of our stock. Pursuant to these stock ownership targets, we expect each outside director to own an amount of our common stock equal to ten times the annual cash retainer for such director’s service. In addition, we expect each officer to own an amount of our common stock equal to three times the senior executive officer’s base salary. The board has authorized the Nominating and Governance Committee to

adopt stock ownership guidelines for our other officers as it deems necessary or appropriate. Current stock ownership by our directors and named executive officers meets or exceeds the target levels.

 

Role of CEO in Determining the Compensation of Other Named Executive Officers

 

We believe that compensation policy is an important tool that should be available to the Chief Executive Officer in setting and executing corporate strategy. Our Compensation Committee, alone or in consultation with the other independent members of our Board of Directors, determines the compensation of each executive officer but considers the views of the Chief Executive Officer and Chief Operating Officer in setting the compensation of the more junior executive officers.

COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

 

The following table provides information about the compensation of our named executive officers for fiscal years 2007 through 2009.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

(Notes continued on following page)

 

 

Salary and bonus (Columns (C) and (D)) as a percentage of total compensation (Column (J)) in 2009 ranged from approximately 13.31% for Mr. Hermance to 29.46% for Mr. Butkovich. Total cash compensation (Columns (C), (D) and (G)) as a percentage of total compensation (Column (J)) ranged from approximately 35.54% for Mr. Hermance to 45.84% for Mr. Butkovich. Total performance-based

compensation (Columns (E) (F) and (G)) as a percentage of total compensation (Column (J)) ranged from approximately 47.00% for Mr. Butkovich to approximately 72.54% for Mr. Hermance.

 

Hudson City Bancorp and Hudson City Savings have each entered into employment agreements dated as of December 31, 2008 with Messrs. Hermance and Salamone to secure their services as officers. These employment agreements amend and restate prior agreements among Hudson City Bancorp, Hudson City Savings and each of Messrs. Hermance and Salamone. Other than as noted in this summary or any other discussion of the employment agreements in this annual proxy statement, the terms and conditions of the employment agreements between the executives and Hudson City Bancorp are substantially similar in all material respects to the terms and conditions of the employment agreements between the executives and Hudson City Savings.

 

The employment agreements between Hudson City Bancorp and each of Messrs. Hermance and Salamone have rolling three-year terms, until the executive or Hudson City Bancorp gives notice of non-extension, at which time the terms are fixed for three years. The employment agreements between Hudson City Savings and each of Messrs. Hermance and Salamone have an initial three-year term, subject to annual extensions based on a review by the Board of Directors of Hudson City Savings of the executive’s performance. The executives’ current annual salary rates payable pursuant to these agreements are their current rates of $1,600,000 for Mr. Hermance and $970,000 for Mr. Salamone. The agreements also provide for discretionary cash bonuses, participation on generally applicable terms and conditions in compensation and fringe benefit plans and customary corporate indemnification and errors and omissions insurance coverage throughout the employment term and for six years after termination. The employment agreements with Hudson City Bancorp also provide for the use of an automobile owned or leased by Hudson City Bancorp and reimbursement for memberships in mutually agreed upon clubs and organizations. See “Executive Officer Compensation — Termination and Change of Control Benefits” for a description of the severance provisions contained in the employment agreements.

 

Incentive Plans

 

Executive Officer Annual Incentive Plan.   Officers at and above the level of Senior Vice President are eligible to earn cash incentives each year under the Executive Officer Annual Incentive Plan upon achievement of corporate and individual performance goals. We intend incentives payable under the Executive Officer Annual Incentive Plan to constitute qualified performance-based compensation under section 162(m) of the Internal Revenue Code.

 

In order to be eligible for incentive payments under the Executive Officer Annual Incentive Plan for a given year, participants must (with certain exceptions for death, disability, retirement or a change in control) be employed on the last day of the plan year. The amount of the incentive payable to each participant is either a fixed dollar amount or a percentage of his or her annual rate of base salary. The committee administering the plan determines the incentive payments after the end of the year based on the achievement of pre-established corporate performance goals and a subjective review of individual performance in the context of pre-established subjective performance factors. Generally no incentives are payable if corporate and individual performance are below minimum thresholds. We generally pay incentives under the Executive Officer Annual Incentive Plan on or before March 15 of the year following the plan year in which they are earned, following determination of the level of achievement of corporate and individual performance goals. In the event that a deferred compensation plan for officers is in effect, participants may elect to defer payment of their bonus until a later date.

 

The Compensation Committee of our Board of Directors has been appointed to be the administrative committee of the Executive Officer Annual Incentive Plan at all times during that plan’s existence.

Annual Bonus Plan.   None of our named executive officers participated in our annual bonus program for 2008. This program covers substantially all of our salaried employees. This program was discontinued for executive officers beginning in 2008.

 

2000 Stock Option Plan and 2000 Restricted Stock Plan.   Our Board of Directors adopted the 2000 Stock Option Plan and 2000 Restricted Stock Plan in 1999 and our shareholders approved the plans in 2000. We have not made any awards under these plans since 2005 and will not make any more in the future. Awards made to our named executive officers under these plans after 2000 and prior to 2006 vest in 20% increments over a five year period beginning at the date of grant and continued to vest during 2009. The vesting of all awards made under these plans accelerates upon the named executive officer’s death, disability or retirement or in the event of a change in control. The Compensation Committee of our Board of Directors has been appointed to be the administrative committee of the 2000 Stock Option Plan and 2000 Restricted Stock Plan at all times during those plans’ existence.

 

2006 Stock Incentive Plan.   Our Board of Directors adopted the 2006 Stock Incentive Plan in 2006. Our shareholders approved the plan in the same year. Subject to the terms of the 2006 Stock Incentive Plan, employees, directors and officers of Hudson City Bancorp and Hudson City Savings and any other subsidiary are eligible to participate. Hudson City Bancorp reserved 30,000,000 shares of Common Stock for issuance under the 2006 Stock Incentive Plan.

 

The committee administering the 2006 Stock Incentive Plan may, in its discretion, grant any or all of nine types of equity-linked awards to eligible individuals: stock options, stock appreciation rights, restricted stock (both time-based and performance-based), performance shares, performance units, deferred stock, phantom stock and other stock-based awards. The administrative committee will, in its discretion, determine the type of awards made and establish other terms and conditions applicable to the award. The Compensation Committee of our Board of Directors has been appointed to be the administrative committee of the 2006 Stock Incentive Plan at all times during that plan’s existence.

 

The following table sets forth information regarding plan-based awards granted to the named executive officers of Hudson City Bancorp during the last fiscal year.

 

GRANTS OF PLAN-BASED AWARDS TABLE — 2009

 

 

(Notes on following page)

 

 

The following tables set forth information regarding stock awards, stock options and similar equity compensation outstanding at December 31, 2009, whether granted in 2009 or earlier, including awards that have been transferred other than for value.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE — 2009