This discussion and analysis should be read in conjunction with Hudson City Bancorp's Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements in Item 8, and the other statistical data provided elsewhere in this document.

Executive Summary

Pending Merger

On August 27, 2012, the Company entered into an Agreement and Plan of Merger with M&T and WTC, with WTC as the surviving entity. As part of the Merger, the Bank will merge with and into Manufacturers and Traders Trust Company. Subject to the terms and conditions of the Merger Agreement, in the Merger, Hudson City shareholders will have the right to receive with respect to each of their shares of common stock of the Company, at their election (but subject to proration and adjustment procedures), 0.08403 of a share of common stock, or cash having a value equal to the product of 0.08403 multiplied by the average closing price of the M&T Common Stock for the ten days immediately prior to the completion of the Merger. The Merger Agreement also provides that at the closing of the Merger, 40% of the outstanding shares of Hudson City common stock will be converted into the right to receive cash and the remainder of the outstanding shares of Hudson City common stock will be converted into the right to receive shares of M&T Common Stock. In connection with the Merger, M&T has filed a registration statement on Form S-4 with the SEC that includes a joint proxy statement of the Company and M&T and a prospectus of M&T, as well as other relevant documents concerning the Merger. On February 21, 2013, M&T filed Amendment No. 3 to the S-4. The registration statement was declared effective by the SEC on February 22, 2013. A definitive proxy statement has been mailed to the Company's shareholders. The Merger is subject to shareholder and regulatory approvals and the satisfaction of other customary conditions. The Company anticipates that the closing of the Merger will take place in the second quarter of 2013.

Financial Condition and Results of Operations

During 2012, we continued to focus on our consumer-oriented business model through the origination of one- to four-family mortgage loans. We have traditionally funded this loan production with customer deposits and borrowings. Market interest rates remained at historically low levels during 2012 and, as a result, we continued to reduce the size of our balance sheet. Our assets decreased by 10.5% to $40.60 billion at December 31, 2012 from $45.36 billion at December 31, 2011, primarily due to elevated repayments of mortgage-related assets in this low interest rate environment.

During the first quarter of 2011, the Bank completed the Restructuring Transaction which involved the extinguishment of $12.5 billion of structured putable borrowings with an average cost of 3.56%. The extinguishment of the borrowings was funded by the sale of $8.66 billion of securities with an average yield of 3.20% and $5.00 billion of new short-term fixed-maturity borrowings with an average cost of 0.66%. Interest rates continued to decline during 2011 which resulted in increased prepayments on our mortgage-related assets and calls of our investment securities. During the fourth quarter of 2011, the Bank used the excess liquidity provided by the prepayments of mortgage-related assets and calls of investment securities to extinguish $4.3 billion of structured putable borrowings with a weighted average cost of 4.21%. The Restructuring Transaction and the extinguishment of debt during the fourth quarter of 2011 are collectively referred to as the "Transactions". The Transactions reduced after-tax earnings by $1.07 billion.

The Transactions were part of our ongoing strategy to reduce interest rate risk and realign our funding mix. We decided to complete the Transactions because of the effect of the market events during 2011, including the unprecedented involvement of the U.S. government and the GSEs in the mortgage market and the protracted period of historically low market interest rates had on our balance sheet. The extended low interest rate

environment caused accelerated prepayment speeds on our mortgage-related assets and calls of our investment securities resulting in the reinvestment of these funds at the current low market interest rates. These lower-yielding assets and higher-cost borrowings, which did not reprice during this extended low rate environment, caused margin compression and heightened interest rate risk concerns for us.

Our results of operations depend primarily on net interest income, which, in part, is a direct result of the market interest rate environment. Net interest income is the difference between the interest income we earn on our interest-earning assets, primarily mortgage loans, mortgage-backed securities and investment securities, and the interest we pay on our interest-bearing liabilities, primarily time deposits, interest-bearing transaction accounts and borrowed funds. Net interest income is affected by the shape of the market yield curve, the timing of the placement and repricing of interest-earning assets and interest-bearing liabilities on our balance sheet, the prepayment rate on our mortgage-related assets and the puts of our borrowings. Our results of operations may also be affected significantly by general and local economic and competitive conditions, particularly those with respect to changes in market interest rates, credit quality, government policies and actions of regulatory authorities. Our results are also affected by the market price of our stock, as the expense of our employee stock ownership plan is related to the current price of our common stock.

The FOMC noted that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions, although the unemployment rate remains elevated. The FOMC noted that while the housing sector and household spending continue to show signs of improvement, growth in business fixed investment has slowed. The national unemployment rate was 7.8% in December 2012, a decline from an 8.5% unemployment rate in December 2011. The FOMC decided to maintain the overnight lending rate at zero to 0.25% during the fourth quarter of 2012 and stated that exceptionally low levels for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%. Previously, the FOMC stated that these levels for the federal funds rate are likely to be warranted at least through mid-2015. As a result, market interest rates have remained at low levels, and consequently, the yields on our mortgage-related assets continued to decrease during 2012.

The FOMC decided to expand its accommodative monetary policy by purchasing an additional $40.0 billion of agency mortgage-backed securities per month to ensure that inflation is at the rate most consistent with its dual mandate regarding both inflation and unemployment. In addition, during 2013 the Federal Reserve will purchase longer-term Treasury securities initially at a pace of $45.0 billion per month. This follows the completion of "Operation Twist" at the end of 2012. These programs will continue to put downward pressure on longer-term interest rates.

During 2012, our net interest rate spread increased 18 basis points to 1.85% and our net interest margin increased 17 basis points to 2.06% as compared to 1.67% and 1.89%, respectively for 2011. The increase in our interest rate spread and net interest margin during 2012 is primarily due to the effects of the Transactions. Notwithstanding the increases in our interest rate spread and net interest margin, net interest income decreased $127.0 million, or 12.9%, to $853.9 million for 2012 as compared to $980.9 million for 2011. The decrease in net interest income reflects the overall decrease in the size of our balance sheet as a result of the Transactions and the lack of reinvestment opportunities in 2012.

Mortgage-related assets represented 95.9% of our average interest-earning assets during 2012. Market interest rates on mortgage-related assets remained at near-historic lows primarily due to the FRB's program to purchase mortgage-backed securities to keep mortgage rates low and provide stimulus to the housing markets. In addition, over the past few years, we have faced increased competition for mortgage loans due to the unprecedented involvement of the GSEs in the mortgage market as a result of the economic crisis. The GSEs involvement is also an attempt to provide stimulus to the housing markets and has caused the interest rates for the thirty year fixed rate mortgage loans that conform to the GSEs' guidelines for purchase to remain low. We originate such conforming loans and retain them in our portfolio. Further, the FOMC has decided to maintain the overnight lending rate at the current level of zero to 0.25% through mid-2015 if recent economic conditions

continue. The resulting low market interest rates have made reinvestment opportunities scarce. We expect this adverse environment for portfolio lending to continue, with the likely result that we will continue to reduce the size of our balance sheet and experience compression of our net interest margin.

The provision for loan losses amounted to $95.0 million for 2012 as compared to $120.0 million for 2011. The decrease in the provision for loan losses for the year ended December 31, 2012 was due primarily to the overall declining trends in net charge-offs, the stabilization of home prices and a decrease in the size of the loan portfolio, yet resulted in an overall increase in our allowance for loan losses as non-performing loans continued to increase and unemployment levels remain elevated. Non-performing loans, defined as non-accruing loans and accruing loans delinquent 90 days or more, amounted to $1.16 billion at December 31, 2012 compared with $1.02 billion at December 31, 2011. The ratio of non-performing loans to total loans was 4.29% at December 31, 2012 compared with 3.48% at December 31, 2011. The highly publicized foreclosure issues that have recently affected the nation's largest mortgage loan servicers have resulted in greater bank regulatory, court and state attorney general scrutiny. As a result, our foreclosure process and the time to complete a foreclosure continue to be prolonged, especially in New Jersey and New York where 70% of our non-performing loans are located. We continue to experience a time frame to repayment or foreclosure ranging from 30 to 36 months from the initial non-performing period. This protracted foreclosure process delays our ability to resolve non-performing loans through the sale of the underlying collateral.

Total non-interest income was $11.5 million for 2012 as compared to $113.9 million for 2011. Included in non-interest income for the year 2011 were net gains on securities transactions of $102.5 million which resulted from the sale of $9.04 billion of securities available-for-sale. Substantially all of the proceeds from the sale of securities were used to repay borrowings as part of the Restructuring Transaction. There were no security sales for the year ended December 31, 2012.

Total non-interest expense amounted to $356.6 billion for 2012 as compared to $2.23 billion for 2011. Included in total non-interest expense for 2011 was a $1.90 billion loss on the extinguishment of debt related to the Transactions.

Loans decreased $2.25 billion to $26.89 billion at December 31, 2012 from $29.14 billion at December 31, 2011. Our loan production was $5.06 billion for 2012 offset by $7.13 billion in principal repayments. Loan production declined during 2012 which reflects our low appetite for adding long-term fixed-rate mortgage loans in the current low market interest rate environment. The decrease in net loans was also due to continued elevated levels of refinancing activity caused by low market interest rates.

Mortgage-backed securities decreased $2.27 billion to $11.02 billion at December 31, 2012 from $13.29 billion at December 31, 2011. The decrease in mortgage-backed securities reflected repayments of $3.69 billion, partially offset by purchases of $1.47 billion of mortgage-backed securities issued by GSEs.

Investment securities decreased $79.30 million to $467.1 million at December 31, 2012 due to calls of $500.0 million during 2012. The proceeds from the calls were used to purchase $407.8 million of corporate bonds.

Total deposits decreased $2.03 billion, or 8.0%, to $23.48 billion at December 31, 2012 from $25.51 billion at December 31, 2011 due to planned reductions in deposit rates to curtail deposit growth during this time of limited investment opportunities.

Borrowings amounted to $12.18 billion at December 31, 2012 as compared to $15.08 billion at December 31, 2011. The decrease in borrowed funds is a result of the maturity of short-term borrowings during 2012 and the continuation of our strategy of allowing the balance sheet to deleverage as the borrowings mature.

The Bank is currently subject to the Bank MOU. In accordance with the Bank MOU, the Bank has adopted and has implemented enhanced operating policies and procedures that are intended 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 a written strategic plan for the Bank which establishes various objectives, including, but not limited to, objectives for the Bank's overall risk profile, earnings performance, growth and balance sheet mix and to enhance our enterprise risk management program. The implementation of the strategic plan has been suspended pending the completion of the Merger.

The Company is currently subject to the Company MOU. 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, (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 and (c) submit 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).

Comparison of Financial Condition at December 31, 2012 and December 31, 2011

Total assets decreased $4.76 billion, or 10.5%, to $40.60 billion at December 31, 2012 from $45.36 billion at December 31, 2011. The decrease in total assets reflected a $2.27 billion decrease in total mortgage-backed securities, a $2.25 billion decrease in net loans and a $154.1 million decrease in Federal Home Loan Bank ("FHLB") stock.

Our net loans decreased $2.25 billion to $26.89 billion at December 31, 2012 as compared to $29.14 billion at December 31, 2011. The decrease in loans primarily reflects reduced levels of purchases as well as elevated levels of loan repayments during 2012 as a result of continued low market interest rates. Historically our focus has been on loan portfolio growth through the origination of one- to four-family first mortgage loans in New Jersey, New York, Pennsylvania and Connecticut and, to a lesser extent, the purchases of mortgage loans. During 2012, we originated $5.04 billion and purchased $28.7 million of loans, compared to originations of $4.93 billion and purchases of $344.8 million for 2011. The originations and purchases of loans were offset by principal repayments of $7.13 billion in 2012, as compared to $6.71 billion for 2011. The decrease in loan originations and purchases during 2012 reflects our low appetite for adding long-term fixed-rate mortgage loans in the current low market interest rate environment. The decrease in net loans was also due to continued elevated levels of refinancing activity caused by low market interest rates.

Our first mortgage loan production during 2012 was substantially all in one- to four-family mortgage loans. Approximately 65% of mortgage loan originations for 2012 were variable-rate loans as compared to approximately 45% for 2011. Approximately 82.5% of mortgage loans purchased for the year ended December 31, 2012 were fixed-rate mortgage loans. Fixed-rate mortgage loans accounted for 61.1% of our first mortgage loan portfolio at December 31, 2012 and 66.8% at December 31, 2011.

Our ALL amounted to $302.3 million at December 31, 2012 and $273.8 million at December 31, 2011. Non-performing loans amounted to $1.16 billion or 4.29% of total loans at December 31, 2012 as compared to $1.02 billion or 3.48% of total loans at December 31, 2011.

Total mortgage-backed securities decreased $2.27 billion to $11.02 billion at December 31, 2012 from $13.29 billion at December 31, 2011. The decrease in mortgage-backed securities reflected repayments of $3.69 billion, partially offset by purchases of $1.47 billion of mortgage-backed securities issued by GSEs. At December 31, 2012, variable-rate mortgage-backed securities accounted for 86.0% of our portfolio compared with 84.1% at December 31, 2011.

Total investment securities decreased $79.3 million to $467.1 million at December 31, 2012 from $546.4 million at December 31, 2011. This decrease was primarily due to the calls of $500.0 million of investment securities during 2012, partially offset by the purchase of corporate bonds in the amount of $407.8 million during the year ended December 31, 2012.

FHLB stock decreased $154.1 million to $356.5 million at December 31, 2012 as compared to $510.6 million at December 31, 2011. The decrease in the balance of FHLB stock was primarily due to mandatory redemptions of stock due to a decrease in the amount of borrowings outstanding with the FHLB.

Total cash and cash equivalents increased $73.9 million to $828.0 million at December 31, 2012 as compared to $754.1 million at December 31, 2011. This increase is primarily due to increased repayments on mortgage-related assets and the lack of reinvestment opportunities due to low market interest rates. Other assets decreased $49.3 million to $679.9 million at December 31, 2012 as compared to $729.2 million at December 31, 2011. The decrease in other assets is primarily due to a decrease of $54.0 million in current and deferred tax assets. The decrease in current and deferred tax assets is primarily due to accrued tax expense related to earnings during 2012.

Total liabilities decreased $4.90 billion, or 12.0%, to $35.90 billion at December 31, 2012 from $40.80 billion at December 31, 2011. The decrease in total liabilities primarily reflected a $2.90 billion decrease in borrowed funds and a decrease in total deposits of $2.03 billion.

Total deposits decreased $2.03 billion, or 8.0%, to $23.48 billion at December 31, 2012 as compared to $25.51 billion at December 31, 2011. The decrease in total deposits reflected a $1.82 billion decrease in our money market accounts and a $640.1 million decrease in time deposits, partially offset by an increase interest-bearing transaction and savings accounts of $315.2 million and $77.3 million, respectively. The decrease in our money market and time deposit accounts is primarily due to planned reductions in our deposit rates to curtail deposit growth while we experience excess liquidity from prepayment activity and limited investment opportunities. We had 135 branches at both December 31, 2012 and 2011.

Borrowings amounted to $12.18 billion at December 31, 2012 as compared to $15.08 billion at December 31, 2011. The decrease in borrowed funds was primarily a result of the maturing of the short-term borrowings utilized as part of the Restructuring Transaction.

At December 31, 2012, we had $4.00 billion of borrowed funds with put dates within one year, including $2.68 billion that can be put back to the Company during any three-month period. If interest rates were to decrease, or remain consistent with current rates, we believe these borrowings would probably not be put back and our average cost of existing borrowings would not decrease even as market interest rates decrease. Conversely, if interest rates increase above the market interest rate for similar borrowings, we believe these borrowings would likely be put back at their next put date and our cost to replace these borrowings would increase. However, we believe, given current market conditions, that the likelihood that a significant portion of these borrowings would be put back will not increase substantially unless interest rates were to increase by at least 300 basis points.

Other liabilities increased $24.9 million to $237.6 million at December 31, 2012 from $212.7 million at December 31, 2011. The increase is due to a $25.8 million increase in accrued expenses. The increase in accrued expenses is primarily the result of an increase in accrued FDIC premiums of $20.9 million and a $6.2 million increase in the postretirement benefit plan liability.

Total shareholders' equity increased $139.4 million to $4.70 billion at December 31, 2012 from $4.56 billion at December 31, 2011. The increase was primarily due to net income of $249.1 million for the year ended

December 31, 2012 and an increase in accumulated other comprehensive income of $30.3 million. This increase was partially offset by cash dividends paid to common shareholders of $158.8 million.

Accumulated other comprehensive income amounted to $70.0 million at December 31, 2012 and included a $122.5 million after-tax net unrealized gain on securities available for sale ($207.2 million pre-tax) partially offset by a $52.5 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans. Accumulated other comprehensive income amounted to $39.7 million at December 31, 2011 and included an $89.3 million after-tax net unrealized gain on securities available for sale ($150.9 million pre-tax) partially offset by a $49.6 million after-tax accumulated other comprehensive loss related to the funded status of our employee benefit plans.

As of December 31, 2012, there remained 50,123,550 shares that may be purchased under our existing stock repurchase programs. We did not repurchase any shares of our common stock during 2012 pursuant to our repurchase programs. Pursuant to the Company MOU, any future share repurchases must be approved by the FRB. In addition, pursuant to the terms of the Merger Agreement, we may not repurchase shares of Hudson City Bancorp common stock without the consent of M&T. During 2012, 62,579 shares were surrendered by employees for withholding taxes related to vesting stock awards. At December 31, 2012, our capital ratios were in excess of the applicable regulatory requirements to be considered well-capitalized. See "Liquidity and Capital Resources."

At December 31, 2012, our shareholders' equity to asset ratio was 11.58% compared with 10.05% at December 31, 2011. The ratio of average shareholders' equity to average assets was 10.89% for the year ended December 31, 2012 as compared to 9.41% for the year ended December 31, 2011. Our book value per share, using the period-end number of outstanding shares, less purchased but unallocated employee stock ownership plan shares and less purchased but unvested recognition and retention plan shares, was $9.46 at December 31, 2012 and $9.20 at December 31, 2011. Our tangible book value per share, calculated by deducting goodwill and the core deposit intangible from shareholders' equity, was $9.15 as of December 31, 2012 and $8.89 at December 31, 2011.

Analysis of Net Interest Income

Net interest income represents the difference between the interest income we earn on our interest-earning assets, such as mortgage loans, mortgage-backed securities and investment securities, and the expense we pay on interest-bearing liabilities, such as time deposits and borrowed funds. Net interest income depends on our volume of interest-earning assets and interest-bearing liabilities and the interest rates we earned or paid on them.

Average Balance Sheet. The following table presents certain information regarding our financial condition and net interest income for 2012, 2011 and 2010. The table presents the average yield on interest-earning assets and the average cost of interest-bearing liabilities for the periods indicated. We derived the yields and costs by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods shown. We derived average balances from daily balances over the periods indicated. Interest income includes fees that we considered adjustments to yields. Yields on tax-exempt obligations were not computed on a tax equivalent basis. Non-accrual loans were included in the computation of average balances and therefore have a zero yield. The yields set forth below include the effect of deferred loan origination fees and costs, and purchase premiums and discounts that are amortized or accreted to interest income.

                                                                                                                                             For the Year Ended December 31,

                                                                                                 2012                                                     2011                                                     2010

                                                                                                                    Average                                                  Average                                                 Average
                                                                               Average                              Yield/             Average                               Yield/             Average                               Yield/
                                                                               Balance             Interest          Cost              Balance             Interest           Cost              Balance             Interest           Cost

Assets:                                                                                                                                          (Dollars in thousands)
Interest-earning assets:
First mortgage loans, net (1)                                                 $ 27,677,039         $1,309,568           4.73  %       $ 29,722,678         $ 1,492,989           5.02  %       $ 31,395,378         $ 1,667,027          5.31  %
Consumer and other loans                                                           270,188             12,887           4.77               309,245              15,740           5.09               346,166              18,409          5.32
Federal funds sold                                                                 591,092              1,443           0.24             1,668,333               4,392           0.26             1,102,575               2,614          0.24
. . .