HCBK (MM)

Item 1. Business

Hudson City Bancorp, Inc. Hudson City Bancorp is a Delaware corporation organized in 1999 and serves as the holding company of its only subsidiary, Hudson City Savings Bank. The principal asset of Hudson City Bancorp is its investment in Hudson City Savings Bank. As a savings and loan holding company, Hudson City Bancorp is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “FRB”).

Hudson City Bancorp’s executive offices are located at West 80 Century Road, Paramus, New Jersey 07652 and our telephone number is (201) 967-1900.

On August 27, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with M&T and WTC. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Hudson City Bancorp will merge with and into WTC, with WTC continuing as the surviving entity.

On April 12, 2013, M&T and the Company announced that additional time would be required to obtain a regulatory determination on the applications necessary to complete the proposed Merger. On April 13, 2013, M&T and the Company entered into Amendment No. 1 to the Merger Agreement. Amendment No. 1, among other things, extended the date after which either party may elect to terminate the Merger Agreement from August 27, 2013 to January 31, 2014. On December 17, 2013, M&T and the Company announced that they entered into Amendment No. 2 to the Merger Agreement. Amendment No. 2 extends the date after which either party may terminate the Merger Agreement if the Merger has not yet been completed from January 31, 2014 to December 31, 2014, and provides that the Company may terminate the Merger Agreement at any time if it reasonably determines that M&T is unlikely to be able to obtain the requisite regulatory approvals in time to permit the closing to occur on or prior to December 31, 2014. Amendment No. 2 also permits the Company to take certain interim actions without the prior approval of M&T, including with respect to our conduct of business, implementation of our strategic plan, retention incentives and certain other matters with respect to our personnel, prior to the completion of the Merger. While M&T and the Company extended the date after which either party may elect to terminate the Merger Agreement from January 31, 2014 to December 31, 2014, there can be no assurances that the Merger will be completed by that date or that the Company will not exercise its right to terminate the Merger Agreement in accordance with its terms.

Prior to the announcement of the Merger, the Company retained an outside consultant to assist management in developing a strategic plan (the “Strategic Plan”). The operational core of the Strategic Plan is the expansion of our loan and deposit product offerings over time to create more balanced sources of revenue and funding. We believe that the markets in which we operate provide significant opportunities for the Hudson City brand to capture market share in products and services that we have not actively pursued previously. The Strategic Plan includes initiatives such as:

Prior to the execution of Amendment No. 1, the implementation of the Strategic Plan was suspended pending completion of the Merger. When we announced in April 2013 that additional time would be required to obtain regulatory approval for the Merger, we charted a dual path for the Company. We continued to plan for the

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completion of the Merger, but we also refreshed the Strategic Plan prioritizing the matters that we could achieve during the pendency of the Merger such as secondary mortgage market operations and commercial real estate lending, and proceeded with planning for the implementation of those prioritized matters. Given the further delay in completing the Merger, the Company and M&T have agreed that the Company is permitted to proceed with the implementation of the Strategic Plan. Many of the initiatives require significant lead time for full implementation and roll out to our customers. We expect commencement of the roll out of the prioritized initiatives during the second half of 2014.

On March 30, 2012, the Bank entered into a Memorandum of Understanding with the OCC (the “Bank MOU”), which is substantially similar to and replaced the memorandum of understanding the Bank entered into with our former regulator, the Office of Thrift Supervision (the “OTS”), on June 24, 2011. In accordance with the Bank MOU, the Bank has adopted and has implemented enhanced operating policies and procedures that are intended to enable us to continue to: (a) reduce our level of interest rate risk, (b) reduce our funding concentration, (c) diversify our funding sources, (d) enhance our liquidity position, (e) monitor and manage loan modifications and (f) maintain our capital position in accordance with our existing capital plan. In addition, we developed the Strategic Plan for the Bank which establishes objectives for the Bank’s overall risk profile, earnings performance, growth and balance sheet mix and to enhance our enterprise risk management program.

The Company entered into a separate Memorandum of Understanding with the FRB (the “Company MOU”) on April 24, 2012, which is substantially similar to and replaced the memorandum of understanding the Company entered into with our former regulator, the OTS, on June 24, 2011. In accordance with the Company MOU, the Company must, among other things support the Bank’s compliance with the Bank MOU. The Company MOU also requires the Company to: (a) obtain approval from the FRB prior to receiving a capital distribution from the Bank or declaring a dividend to shareholders and(b) obtain approval from the FRB prior to repurchasing or redeeming any Company stock or incurring any debt with a maturity of greater than one year. In accordance with the Company MOU, the Company submitted a comprehensive capital plan and a comprehensive earnings plan to the FRB. These agreements will remain in effect until modified or terminated by the OCC (with respect to the Bank MOU) and the FRB (with respect to the Company MOU).

Hudson City Savings. Hudson City Savings is a federally chartered stock savings bank subject to supervision and examination by the OCC. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”).

Hudson City Savings Bank has served its customers since 1868. We conduct our operations out of our corporate offices in Paramus in Bergen County, New Jersey and through 135 branches in the New York metropolitan area. We operate 97 branches located in 17 counties throughout the State of New Jersey. In New York State, we operate 10 branch offices in Westchester County, 12 branch offices in Suffolk County, 1 branch office each in Putnam and Rockland Counties and 5 branch offices in Richmond County (Staten Island). We also operate 9 branch offices in Fairfield County, Connecticut. We also open deposit accounts through our internet banking service.

We are a community and consumer-oriented retail savings bank offering traditional deposit products, residential real estate mortgage loans and consumer loans. In addition, we purchase mortgages and mortgage-backed securities and other securities issued by U.S. government-sponsored enterprises (“GSEs”) as well as other investments permitted by applicable laws and regulations. We currently retain substantially all of the loans we originate in our portfolio. As part of our Strategic Plan, beginning in the second half of 2014, we intend to originate loans for sale in the secondary market and to commence diversifying our loan portfolio through the purchase and origination of commercial real estate loans and interests in such loans.

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

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

Available Information

Our periodic and current reports, proxy and information statements, and other information that we file with the Securities and Exchange Commission (the “SEC”), are available free of charge through our website, www.hcbk.com , as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. Unless specifically incorporated by reference, the information on our website is not part of this annual report. Such reports are also available on the SEC’s website at www.sec.gov, or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC, 20549. Information may be obtained on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Market Area

Through our branch offices, we have operations in 9 of the top 50 counties in the United States ranked by median household income. Operating in high median household income counties fits well with our jumbo mortgage loan and consumer deposit business model. Prior to 2010, we purchased first mortgage loans in states that are east of the Mississippi River and as far south as South Carolina. Our loan purchase activity has declined significantly since 2010 and has been limited to our primary market area, which consists of New Jersey, New York and Connecticut. We experienced a decrease in our loan purchase activity as sellers from whom we have historically purchased loans are either retaining these loans in their portfolios or selling them to the GSEs. Historically, our wholesale loan purchase program complemented our retail loan origination by enabling us to diversify our assets outside of our local market area.

The northern New Jersey market represents the greatest concentration of population, deposits and income in New Jersey. The combination of these counties represents more than half of the entire New Jersey population and more than half of New Jersey households. The northern New Jersey market also represents the greatest concentration of Hudson City Savings retail operations – both lending and deposit gathering – and based on its high level of economic activity, we believe that the northern New Jersey market provides significant opportunities for future growth. The New Jersey shore market represents a strong concentration of population and income, and is a popular resort and retirement market area, which provides healthy opportunities for deposit growth and residential lending. The southwestern New Jersey market consists of communities adjacent to the Philadelphia metropolitan area.

The New York counties of Richmond, Westchester, Suffolk, Rockland and Putnam as well as Fairfield County, Connecticut have similar demographic and economic characteristics to the northern New Jersey market area. Our entry into these counties, which started in 2004, has allowed us to expand our retail operations and geographic footprint.

We also open deposit accounts through our internet banking service which allows us to serve customers throughout the United States. As of December 31, 2013, we had $146.1 million of deposits that were opened through our internet banking service.

Our future growth opportunities will be influenced by the growth and stability of the regional economy, other demographic population trends and the competitive environment in the New York metropolitan area (which we define to include New York, New Jersey and Connecticut). During 2013, the national economy expanded at a

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moderate pace. The unemployment rate, which declined to 6.7% in December 2013 from 7.8% in December 2012, remains elevated. Housing market conditions in our primary lending area improved in 2013 after several years of reduced levels of sales, elevated levels of housing inventories, declining house prices, increasing home foreclosures and an increase in the length of time houses remain on the market. Housing prices increased during 2013 as indicated by the S&P/Case-Shiller Home Price Indices. Approximately 84.5% of our mortgage loans are located in the New York metropolitan area. The Federal Housing Finance Agency (“FHFA”), an independent entity within the Department of Housing and Urban Development, publishes housing market data on a quarterly basis. According to the most recent data published by the FHFA, house prices in New Jersey have increased 3.29% from the third quarter of 2012. For New York and Connecticut, house prices increased 2.97% and 2.30%, respectively during this same period. Additionally, according to the FHFA data, the states of Pennsylvania, Virginia, Massachusetts, Illinois and Maryland experienced increases in house prices of 4.84%, 4.78%, 6.23%, 4.33%, and 7.15%, respectively for those same periods. These eight states account for 96.3% of our total mortgage portfolio. We can give no assurance as to whether economic and housing conditions will continue to improve in the near future.

Competition

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

Our competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, insurance companies and brokerage firms. We have also faced increased competition for mortgage loans due to the unprecedented involvement of the GSEs in the mortgage market in recent years.

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

Lending Activities

Loan Portfolio Composition. Our loan portfolio primarily consists of one- to four-family residential first mortgage loans, which represent 99.0% of total loans. The remaining loans in our portfolio include multi-family and commercial mortgage loans, construction loans and consumer loans, which primarily consist of fixed-rate second mortgage loans and home equity credit lines. Beginning in the second half of 2014, we expect to commence diversifying our loan portfolio through the purchase and origination of commercial real estate loans and interests in such loans.

At December 31, 2013, we had total loans of $24.11 billion, of which $23.90 billion, or 99.1%, were first mortgage loans. Of the first mortgage loans outstanding at that date, 55.4% were fixed-rate mortgage loans and 44.6% were adjustable-rate mortgage (“ARM”) loans. At December 31, 2013, multi-family and commercial mortgage loans totaled $25.7 million, construction loans totaled $294,000, and consumer and other loans, primarily fixed-rate second mortgage loans and home equity credit lines, amounted to $214.7 million, or 0.89%, of total loans.

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

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

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The following tables present the composition of our loan portfolio by credit quality indicator at the dates indicated:

Loan classifications are defined as follows:

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We evaluate the classification of our one-to four-family mortgage loans, consumer loans and other loans primarily on a pooled basis by delinquency. Loans that are past due 60 to 89 days are classified as special mention and loans that are past due 90 days or more are classified as substandard. We obtain updated valuations for one- to four- family mortgage loans by the time a loan becomes 180 days past due. If necessary, we charge-off an amount to reduce the carrying value of the loan to the value of the underlying property, less estimated selling costs. Since we record the charge-off when we receive the updated valuation, we typically do not have any residential first mortgages classified as doubtful or loss. We evaluate troubled debt restructurings, multi-family, commercial and construction loans individually and base our classification on the debt service capability of the underlying property as well as secondary sources of repayment such as the borrower’s and any guarantor’s ability and willingness to provide debt service. Residential mortgage loans that are classified as troubled debt restructurings are individually evaluated for impairment based on the present value of each loan’s expected future cash flows.

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

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Loan Maturity . The following table presents the contractual maturity of our loans at December 31, 2013. The table does not include the effect of prepayments or scheduled principal amortization. Prepayments and scheduled principal amortization on first mortgage loans totaled $6.27 billion for 2013, $7.03 billion for 2012 and $6.59 billion for 2011.

The following table presents, as of December 31, 2013, the dollar amounts of all fixed-rate and adjustable-rate loans that are contractually due after December 31, 2014:

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

Residential Mortgage Lending. Historically, our primary lending emphasis has been the origination and purchase of first mortgage loans secured by one- to four-family properties that serve as the primary or secondary residence of the owner. We do not offer loans secured by cooperative apartment units or interests therein. We currently originate and purchase substantially all of our one- to four-family first mortgage loans for retention in our portfolio. We specialize in residential mortgage loans with principal balances in excess of the Fannie Mae, single-family limit which, prior to 2008, was $417,000 (“non-conforming” or “jumbo” loans). Beginning in 2008, Fannie Mae instituted two sets of loan limits – a conforming loan limit at $417,000 and a “high-cost” loan limit at $729,750. On October 1, 2011, the “high-cost” loan limit was reduced to $625,500.

Most of our retail loan originations are from licensed mortgage bankers or brokers, existing or past customers, members of our local communities or referrals from local real estate agents, attorneys and builders. Our extensive branch network is also a source of new loan generation. We also employ a staff of representatives who call on real estate professionals to disseminate information regarding our loan programs and take applications directly from their clients. These representatives are paid for each origination. Originated loans represent 79.5% of our one- to four- family first mortgage loans.

We currently offer loans that generally conform to underwriting standards specified by Fannie Mae (“conforming loans”) and non-conforming loans. These loans may be fixed-rate one- to four-family mortgage loans or adjustable-rate one- to four-family mortgage loans with maturities of up to 30 years. The average size of our one- to four-family mortgage loans originated in 2013 was approximately $610,000. The overall average

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size of our one- to four-family first mortgage loans held in portfolio was approximately $413,000 and $418,000 at December 31, 2013 and 2012, respectively. We sold no loans in 2013, 2012 or 2011 and had no loans classified as held for sale at December 31, 2013.

Our originations of residential first mortgage loans amounted to $3.44 billion in 2013, $4.98 billion in 2012 and $4.85 billion in 2011. Included in these totals are refinancings of our existing first mortgage loans as follows:

Prior to January 1, 2012, we allowed certain existing customers to reduce the interest rates on their mortgage loans, for a fee, with the intent of maintaining our customer relationship in periods of extensive refinancing due to a low interest rate environment. This program changed the existing interest rate to the market rate for a product currently offered by us with a similar or reduced term. The program did not extend the maturity date of the loan. To qualify for an interest rate reduction, the loan had to be current with no payments past due in any of the 12 preceding months. In general, all other terms and conditions of the existing mortgage loan remained the same. During 2011, mortgage loans with principal balances of $2.77 billion had interest rates reduced pursuant to this program. Effective December 31, 2011, we discontinued this program but continue to allow borrowers to refinance their loans with us subject to meeting our normal underwriting requirements, including obtaining a new appraisal.

We offer a variety of adjustable-rate and fixed-rate one- to four-family mortgage loans with maximum loan to value (“LTV”) ratios that depend on the type of property and the size of loan involved. The LTV ratio is the loan amount divided by the appraised value of the property. The LTV ratio is a measure commonly used by financial institutions to determine exposure to risk. Loans on owner-occupied one- to four-family homes of up to $1.0 million are generally subject to a maximum LTV ratio of 80%. LTV ratios of 75% or less are generally required for one- to four-family loans in excess of $1.0 million and less than $1.5 million. Loans in excess of $1.5 million and less than $2.0 million are generally subject to a maximum LTV ratio of 70%. Loans in excess of $2.0 million and up to $2.5 million are generally subject to a maximum LTV ratio of 65%. Loans in excess of $2.5 million and up to $3.0 million are generally subject to a maximum LTV ratio of 60%. We typically do not originate mortgage loans in excess of $3.0 million.

We also offer a variety of ARM loans secured by one- to four-family residential properties with a fixed rate for initial terms of three years, five years, seven years or ten years. After the initial adjustment period, ARM loans adjust on an annual basis. These loans are originated in amounts generally up to $3.0 million. The ARM loans that we currently originate have a maximum 30-year amortization period and are generally subject to the LTV ratios described above. The interest rates on ARM loans fluctuate based upon a fixed spread above the monthly average yield on United States Treasury securities adjusted to a constant maturity of one year and generally are subject to a maximum increase or decrease of 2% per adjustment period and a limitation on the aggregate adjustment of 5% over the life of the loan. As a result of generally low market interest rates for ARM loans, the initial offered rate on these loans was 12.5 to 175 basis points above the current fully indexed rate at December 31, 2013. We originated $2.74 billion of one- to four-family ARM loans in 2013. At December 31, 2013, 44.6% of our one- to four-family mortgage loans consisted of ARM loans.

The origination and retention of ARM loans helps reduce exposure to increases in interest rates. However, ARM loans can pose credit risks different from the risks inherent in fixed-rate loans, primarily because as interest

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rates rise, the underlying payments of the borrower may rise, which increases the potential for default. The marketability of the underlying property also may be adversely affected by higher interest rates. In order to minimize risks, we evaluate borrowers of ARM loans based on their ability to repay the loans at the higher of the initial interest rate or the fully indexed rate. On January 10, 2014, the Bank began to utilize the guidelines included in Appendix Q of the qualified mortgage regulation when qualifying ARM borrowers. In an effort to further reduce risk, we have not in the past, nor do we currently, originate ARM loans that provide for negative amortization of principal.

Historically, our wholesale loan purchase program complemented our retail loan origination production by enabling us to diversify assets outside our local market area. At December 31, 2013, $4.89 billion, or 20.5%, of our one- to four-family first mortgage loans were purchased loans. Our loan purchase activity has significantly declined as the GSEs have been actively purchasing loans as part of their efforts to keep mortgage rates low to support the housing market during the recent economic recession and subsequent recovery. As a result, the sellers from whom we have historically purchased loans are originating loans at lower rates than we would accept, selling many of their loans to the GSEs or keeping them in their portfolio. We expect that the amount of loan purchases will continue to be at reduced levels for the near future.

We have developed written standard operating guidelines relating to the purchase of these assets. These guidelines include an evaluation and approval process for the various sellers from whom we choose to buy whole loans, the acceptable types of whole loans and acceptable property locations. The purchase agreements, as established with each seller/servicer, contain parameters of the loan characteristics that can be included in each package. These parameters, such as maximum loan size and maximum weighted average LTV, generally conform to parameters utilized by us to originate mortgage loans. All loans are reviewed for compliance with the agreed upon parameters. All purchased loan packages are subject to internal due diligence procedures including review of a sampling of individual loan files. We generally perform full credit reviews of 10% to 20% of the mortgage loans in each package purchased. Our due diligence procedures include a review of the legal documents, including the note, the mortgage and the title policy, review of the credit file, evaluating debt service ratios, review of the appraisal and verifying LTV ratios and evaluating the completeness of the loan package. This review subjects the loan files in the sample to substantially the same underwriting standards used in our own loan origination process. We maintain custody of the legal documents including the original note.

We purchased first mortgage loans of $96.9 million in 2013, $28.7 million in 2012 and $344.8 million in 2011. The average size of our one-to four-family mortgage loans purchased during 2013 was approximately $240,000. Substantially all of the loans purchased in 2013, 2012 and 2011 were loans guaranteed by the Federal Housing Administration (the “FHA”).

We also purchase and originate interest-only mortgage loans. These loans are designed for customers who desire flexible amortization schedules. These loans are originated as ARM loans with initial terms of five, seven or ten years with the interest-only portion of the payment based upon the initial loan term, or offered on a 30-year fixed-rate loan, with interest-only payments for the first 10 years of the obligation. At the end of the initial 5-, 7- or 10-year interest-only period the loan payment will adjust to include both principal and interest and will amortize over the remaining term so the loan will be repaid at the end of its original life. These loans are underwritten using fully amortizing payment amounts, more restrictive standards and generally are made with lower LTV limitations imposed to help minimize any potential credit risk. These loans may involve higher risks compared to standard loan products since there is the potential for higher payments once the interest rate resets and the principal begins to amortize and they rely on a stable or rising housing market to maintain an acceptable LTV ratio. However, we do not believe these programs will have a material adverse impact on our asset quality based on our underwriting criteria and the average LTV ratios on the loans originated in this program. During 2013, we originated $451.6 million of interest-only loans with an average LTV ratio of 58.4% based on the appraised value at the time of origination. The outstanding principal balance of interest-only loans in our portfolio was approximately $3.65 billion as of December 31, 2013. Non-performing interest-only loans amounted to $135.2 million, or 12.9%, of non-

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performing loans at December 31, 2013 as compared to non-performing interest-only loans of $182.2 million, or 15.7%, of non-performing loans at December 31, 2012. We have not in the past, nor do we currently, originate or purchase option ARM loans, where the borrower is given various payment options that could change payment flows to the Bank. For a description of guidance on nontraditional mortgage products, see “Regulation of Hudson City Savings Bank and Hudson City Bancorp.”

In addition to our full documentation loan program, prior to January 2014, we originated and purchased loans to certain eligible borrowers as reduced documentation loans. Generally the maximum loan amount for reduced documentation loans was $750,000 and these loans were subject to higher interest rates than our full documentation loan products. We required applicants for reduced documentation loans to complete a Freddie Mac/Fannie Mae loan application and requested income, asset and credit history information from the borrower. Additionally, we verified asset holdings and obtained credit reports from outside vendors on all borrowers to ascertain the credit history of the borrower. Applicants with delinquent credit histories generally did not qualify

for the reduced documentation processing, although delinquencies that were adequately explained did not prohibit processing as a reduced documentation loan. We reserved the right to verify income and did require asset verification but we may not have elected to verify or corroborate certain income information where we believed circumstances warrant. We originated $780.2 million of reduced documentation loans in 2013 as compared to $895.7 million in 2012. Reduced documentation loans represent 21.3% of our one- to four-family first mortgage loans at December 31, 2013. Included in our loan portfolio at December 31, 2013 are $4.27 billion of amortizing reduced documentation loans and $826.5 million of reduced documentation interest-only loans as compared to $4.24 billion and $1.00 billion, respectively, at December 31, 2012. Non-performing loans at December 31, 2013 include $182.9 million of amortizing reduced documentation loans and $48.8 million of interest-only reduced documentation loans as compared to $189.5 million and $74.5 million, respectively, at December 31, 2012.

In January 2013, the Consumer Financial Protection Bureau (the “CFPB”) issued a series of final rules related to mortgage loan origination and mortgage loan servicing. Among other things, these final rules, which went into effect on January 10, 2014, prohibit creditors, such as Hudson City Savings, from extending mortgage loans without regard to the consumer’s ability to repay and establishes certain protections from liability for loans that meet the requirements of a “qualified mortgage.” As of January 10, 2014, we only originate loans that meet the requirements of a “qualified mortgage”, except we may continue to originate interest only loans subject to our compliance with the ability to repay provisions of the CFPB’s final rule. As a result, in January 2014 we discontinued our reduced documentation loan program in order to comply with the newly effective CFPB requirements to validate a borrower’s ability to repay and the corresponding safe harbor for qualified mortgages. Accordingly, we expect our future loan production volume to decrease. See “Regulation of Hudson City Savings Bank and Hudson City Bancorp.”

We offer mortgage programs designed to address the credit needs of low and moderate-income home mortgage applicants and low and moderate-income home improvement loan applicants. We define low and moderate-income applicants as borrowers residing in low- and moderate-income census tracts or households with income not greater than 80% of the median income of the Metropolitan Statistical Area in the county where the subject property is located. Among the features of the low- and moderate-income home mortgage programs are reduced rates, reduced fees and closing costs, and generally less restrictive requirements for qualification compared with our traditional one- to four-family mortgage loans. For example, these programs have generally provided for loans with up to 80% LTV ratios and rates which are 25 basis points lower than our traditional mortgage loans. In 2013, we originated $29.7 million in mortgage loans under these programs.

Origination and Sale in the Secondary Market of Residential Mortgage Loans. In accordance with our Strategic Plan, we intend to begin to originate residential mortgage loans that conform to GSE guidelines for sale to the GSEs in the second half of 2014. Initially, all loans sold to the GSEs will be serviced by a third party subservicing vendor, however, we intend to enhance our servicing function to allow us to service our sold portfolio in the future. As we originate, sell and service our sold loan portfolio, we would expect to have a mortgage servicing rights asset build up over time. We are currently in the process of hiring secondary mortgage market professionals, enhancing our existing servicing program, building out necessary systems and establishing processes and procedures for originating and selling residential mortgage loans to the GSEs.

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Multi-family and Commercial Mortgage Loans. At December 31, 2013, $25.7 million, or 0.11%, of the total loan portfolio consisted of multi-family and commercial mortgage loans. Commercial mortgage loans are secured by office buildings and other commercial properties. Multi-family mortgage loans generally are secured by multi-family rental properties (including mixed-use buildings and walk-up apartments). Substantially all of these loans were acquired in the acquisition of Sound Federal Bancorp, Inc. in 2006. Since our primary lending product has historically been one-to four-family mortgage loans, we have not actively pursued the origination of commercial and multi-family mortgage loans. We did not originate any such loans in 2013. However, commercial real estate lending is a prioritized initiative included in our Strategic Plan. We expect to begin originating and purchasing commercial real estate loans and interests in such loans in the second half of 2014. We anticipate that these loans will consist primarily of mortgage loans on office buildings, mixed-use buildings and multi-family properties. We are currently in the process of hiring commercial real estate professionals, building out necessary systems and establishing processes and procedures for originating, purchasing and monitoring commercial real estate loans.

At December 31, 2013, the largest commercial mortgage loan had a principal balance of $6.0 million and was secured by a storage unit facility. This borrower also had $1.9 million of commercial mortgage loans outstanding with us at December 31, 2013. These loans were restructured during 2010 to allow for a deferment of principal payments. During 2012, the borrower did not perform in accordance with the restructured agreements which resulted in a charge-off of $873,000 against these loans. These loans are included in troubled debt restructurings and classified as substandard at December 31, 2013.

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

Consumer Loans . At December 31, 2013, consumer and other loans amounted to $214.7 million, or 0.89%, of our total loans and consisted primarily of fixed-rate second mortgage loans and home equity credit lines. Consumer loans generally have shorter terms to maturity, relative to our mortgage portfolio, which reduces our exposure to changes in interest rates. Consumer loans generally carry higher rates of interest than do one- to four-family residential mortgage loans. In addition, we believe that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

We offer fixed-rate second mortgage loans generally in amounts up to $250,000 secured by owner-occupied one- to four-family residences located in the State of New Jersey, and the portions of New York and Connecticut served by our first mortgage loan products, for terms of up to 20 years. At December 31, 2013 these loans totaled $86.1 million, or 0.36% of total loans. The underwriting standards applicable to these loans generally are the same as one- to four-family first mortgage loans, except that the combined LTV ratio, including the balance of the first mortgage, generally cannot exceed 80% of the appraised value of the property at time of origination.

Our home equity credit line loans totaled $108.6 million or 0.45% of total loans at December 31, 2013. These loans are either fixed-rate or adjustable-rate loans secured by a first or second mortgage on owner-occupied one- to four-family residences located in our market area. The interest rates on adjustable-rate home equity credit lines are based on the “prime rate” as published in The Wall Street Journal (the “Index”) subject to certain interest rate limitations. Interest rates on home equity credit lines are adjusted monthly based upon changes in the Index. Minimum monthly principal payments on currently offered home equity lines of credit are based on

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1/240th of the outstanding principal balance or $100, whichever is greater. The maximum credit line generally available is $250,000. The underwriting terms and procedures applicable to these loans are substantially the same as for our fixed-rate second mortgage loans.

Other loans totaled $20.1 million at December 31, 2013 and consisted of collateralized passbook loans, overdraft protection loans, unsecured personal loans, and secured and unsecured commercial lines of credit. We have not originated unsecured personal loans since 2005.

Loan Approval Procedures and Authority . All residential mortgage loans up to $600,000 must be approved by two underwriting officers in the Mortgage Origination Department. Residential mortgage loans in excess of $600,000 up to $1.0 million in size require that one of the two officers signing off on the loan be a senior underwriting staff member assigned and approved by senior management in the Mortgage Origination area or any officer bearing the title of First Vice President-Mortgage Officer, Senior Vice President-Mortgage Officer, Executive Vice President-Lending, Chief Operating Officer or Chief Executive Officer prior to issuance of a commitment letter. Residential mortgage loans in excess of $1.0 million up to $3.0 million require that in addition to the standard underwriter approval, one of the officers signing off on the loan must be a senior underwriting staff member assigned and approved by senior management in the Mortgage Origination area and one additional officer signing off on the loan must bear the title of the First Vice President-Mortgage Officer, Senior Vice President-Mortgage Officer, Executive Vice President-Lending, Chief Operating Officer or Chief Executive Officer prior to issuance of a commitment letter. Residential mortgage loans in excess of $3.0 million require that in addition to the standard underwriter approval, two additional signatures are required with the officers bearing the title of Senior Vice President-Mortgage Officer, Executive Vice President-Lending, Chief Operating Officer or Chief Executive Officer prior to issuance of a commitment letter. Loan requests in excess of $5.0 million must be approved by at least two of the following senior officers, Executive Vice President-Lending, Chief Operating Officer or Chief Executive Officer and will be reported to the Board of Directors at the next regularly scheduled Board meeting. The maximum number of first mortgage loans outstanding at any one time per borrower (obligor on the note) shall not exceed three loans with only one loan being permitted for investment purposes. The aggregate of all residential loans, existing and/or committed to any one borrower, generally shall not exceed $5.0 million. Aggregate loan balances exceeding this limit must be approved by at least two of the following senior officers: Executive Vice President-Lending, Chief Operating Officer or Chief Executive Officer and will be reported to the Board of Directors at the next regularly scheduled Board meeting.

Historically, our primary lending emphasis has been the origination and purchase of residential first mortgage loans, however, commercial real estate lending is a prioritized initiative included in our Strategic Plan. Beginning in the second half of 2014, we intend to commence diversifying our loan portfolio through the purchase and origination of commercial real estate loans and interest in such loans. We are currently in the process of hiring commercial real estate professionals, building out necessary systems and establishing processes and procedures for originating, purchasing and monitoring commercial real estate loans.

Home equity credit lines and fixed-rate second mortgage loans in principal amounts of $50,000 or less require approval by one of our designated Consumer Loan Department underwriters. Home equity credit lines and fixed-rate home equity loans in excess of $50,000, up to the $250,000 maximum, require approval by an underwriter and either our Consumer Loan Officer, Executive Vice President-Lending, Chief Executive Officer or Chief Operating Officer. Home equity credit lines and loans involving mortgage liens where the combined first and second mortgage principal balances exceed $750,000 require approval by an underwriter, our Consumer Loan Officer and either our Executive Vice President-Lending, Chief Executive Officer or Chief Operating Officer.

Upon receipt of a completed loan application from a prospective borrower, we order a credit report and we verify certain other information. If necessary, we obtain additional financial or credit-related information. We require an appraisal for all first mortgage loans. Appraisals may be performed by our in-house Appraisal Department or by licensed or certified third-party appraisal firms. Currently most appraisals are performed by third-party appraisers and are reviewed by our in-house Appraisal Department.

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We require title insurance on all mortgage loans, except for home equity credit lines and fixed-rate second mortgage loans. For these loans, we require a property search detailing the current chain of title. We require borrowers to obtain hazard insurance and we require borrowers to obtain flood insurance prior to closing, if appropriate. We require most borrowers to advance funds on a monthly basis together with each payment of principal and interest to a mortgage escrow account from which we make disbursements for items such as real estate taxes, flood insurance and private mortgage insurance premiums, if required. Presently, we do not escrow for real estate taxes on properties located in the states of New York, Connecticut, Massachusetts and Pennsylvania.

Asset Quality

One of our key operating objectives has been, and continues to be, to maintain a high level of asset quality. Through a variety of strategies we have been proactive in addressing problem loans and non-performing assets. Charge-offs, net of recoveries, amounted to $62.8 million in 2013 and $66.4 million in 2012. Economic conditions have improved at a moderate pace. The unemployment rate, which declined to 6.7% in December 2013 from 7.8% in 2012, remains elevated. During 2013, house prices increased both nationally and in our primary lending markets. We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. We determined the provision for loan losses for 2013 based on our allowance for loan loss (“ALL”) methodology that considers a number of quantitative and qualitative factors, including the amount of non-performing loans, the loss experience of our non-performing loans, recent collateral valuations, conditions in the real estate and housing markets, current economic conditions, continued elevated levels of unemployment, and growth or shrinkage in the loan portfolio.

Historically, our primary lending emphasis has been the origination and purchase of one- to four-family first mortgage loans on residential properties and, to a lesser extent, second mortgage loans on one- to four-family residential properties. Our loan growth is primarily concentrated in one- to four-family mortgage loans with original LTV ratios of less than 80%. The average LTV ratio of our 2013 first mortgage loan originations and our total first mortgage loan portfolio were 58.4% and 58.9%, respectively, using the appraised value at the time of origination. The value of the property used as collateral for our loans is dependent upon local market conditions. As part of our estimation of the ALL, we monitor changes in the values of homes in each market using indices published by various organizations. Based on our analysis of the data for 2013, we concluded that home values in our primary lending markets increased during 2013 but remain lower than their peak levels reached in 2006 prior to the economic recession. Due to the decline of real estate values starting in 2006 and continuing through 2011, the LTV ratios based on appraisals obtained at time of origination do not necessarily indicate the extent to which we may incur a loss on any given loan that may go into foreclosure.

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

Delinquent Loans and Foreclosed Assets . When a borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to a current status. In the case of originated mortgage loans, our Mortgage Servicing Department is responsible for collection procedures from the 15th day up to the 119th day of delinquency. Specific procedures include a late charge notice being sent at the time a payment is over 15 days past due. Telephone contact is attempted on approximately the 20th day of the month to avoid a 30-day delinquency. A second written notice is sent at the time the payment becomes 30 days past due.

We send additional letters if no contact is established by approximately the 45th day of delinquency. On the 60th day of delinquency, we send another letter followed by continued telephone contact. Between the 30th and the 60th day of delinquency, if telephone contact has not been established, an independent contractor may be sent to make a physical inspection of the property. When contact is made with the borrower at any time prior to foreclosure, we attempt to obtain full payment, work out a repayment schedule, or discuss other loss mitigation options with the borrower in order to avoid foreclosure.

We send a foreclosure notice when a loan is over 90 days delinquent. The accrual of income on loans that are not guaranteed by a federal agency is generally discontinued when interest or principal payments are 90 days in arrears and any accrued but unpaid interest is reversed. We commence foreclosure proceedings if the loan is not brought current between the 120th and 150th day of delinquency unless specific limited circumstances warrant an exception. The collection procedures for mortgage loans guaranteed by federal agencies follow the collection guidelines outlined by those agencies.

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

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

Foreclosed real estate is property acquired through foreclosure or deed in lieu of foreclosure. Write-downs to fair value (net of estimated costs to sell) at the time of acquisition are charged to the ALL. After acquisition, foreclosed properties are held for sale and carried at the lower of fair value minus estimated cost to sell, or at cost. If a foreclosure action is commenced and the loan is not brought current, paid in full or refinanced before the foreclosure sale, the real property securing the loan is either sold at the foreclosure sale, or we or our servicer sells the property as soon thereafter as practicable.

Management continuously monitors the status of the loan portfolio and reports to the Board of Directors at each regular meeting. Our Asset Quality Committee (“AQC”) is responsible for monitoring our loan portfolio, delinquencies and foreclosed real estate. This committee includes members of senior management from the Loan Originations, Loan Servicing, Appraisal, Risk Management and Finance Departments.

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

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The following table is a comparison of our delinquent loans by class as of the dates indicated:

We continue to closely monitor the local and national real estate markets and other factors related to risks inherent in our loan portfolio. Economic conditions improved modestly during 2013, but were adversely affected since 2006 by the decline in the housing and real estate markets. Beginning in 2012, house prices stabilized and increased during 2013. However, the recent increases in market interest rates and the continued elevated level of unemployment may have adverse implications for the housing markets.

With the exception of first mortgage loans guaranteed by a federal agency, we stop accruing income on loans when interest or principal payments are 90 days in arrears or earlier when the timely collectability of such interest or principal is doubtful. We reverse any accrued, but unpaid interest on non-accrual loans that we previously credited to income. We recognize income in the period that we collect it or when the ultimate collectability of principal is no longer in doubt. We return a non-accrual loan to accrual status when factors indicating doubtful collection no longer exist.

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