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Employees

At March 31, 2004, the Company had 664 full-time equivalent employees.  The Company's employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

Website Information

            The Company makes available on its website: www.hudsonriverbank.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

REGULATION

Set forth below is a brief description of the laws and regulations applicable to the Company and the Bank.  The description of the laws and regulations hereunder, as well as descriptions of laws and regulations contained elsewhere herein, does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.  Legislation is introduced from to time in the United States Congress that may affect the operations of the Company and the Bank.  In addition, the regulations by which the Company and the Bank are governed may be amended from time to time.  Any such legislative or regulatory changes could adversely affect the Bank or the Company.  No assurance can be made as to whether or in what form any such changes will occur.

The Company

General.  The Company is subject to regulation as a savings and loan holding company under the Home Owners’ Loan Act, as amended (“HOLA”), instead of being subject to regulation as a bank holding company under the Bank Holding Company Act of 1956, because the Bank has made an election under Section 10(l) of HOLA to be treated as a “savings association” for purposes of Section 10(e) of HOLA.  As a result, the Company has registered with the OTS and is subject to OTS regulations, examinations, supervision and reporting requirements relating to savings and loan holding companies.  The Company is also required to file certain reports with, and otherwise comply with the rules and regulations of, the New York State Banking Board (the "NYBB") and the Securities and Exchange Commission (“SEC”).  As a subsidiar y of a savings and loan holding company, the Bank is subject to certain restrictions in its dealings with the Company and other Bank affiliates.

Activities Restrictions.   The Bank is presently the sole savings association subsidiary of the Company.  There are generally no restrictions on the activities of a savings and loan holding company which has held only one subsidiary savings association since before May 4, 1999.  If the savings association subsidiary of such a holding company fails to meet the qualified thrift lender ("QTL") test, then the Company’s activities are restricted to those permissible for a multiple savings and loan holding company or a financial holding company.    Unless the savings association requalifies as a QTL within one year thereafter, it shall register as, and become subject to the restrictions applicable to, a bank holding company.

Qualified Thrift Lender Test.  A savings association can comply with the QTL test by either meeting the QTL test set forth in the HOLA and or qualifying as a domestic building and loan association as defined in Section 7701(a)(19) of the Internal Revenue Code of 1986, as amended.  

The QTL test set forth in the HOLA requires that qualified thrift investments ("QTLs") represent 65% of portfolio assets of the savings institution and its consolidated subsidiaries.  Portfolio assets are defined as total assets less intangibles, property used by a savings association in its business and liquidity investments in an amount not exceeding 20% of assets.  Generally, QTLs are residential housing related assets.  Small business loans, credit card loans, student loans and loans for personal, family and household purposes may be included without limitation as qualified investments. At March 31, 2004, the Bank’s assets invested in QTLs were in excess of the percentage required to qualify the Bank under the QTL te st in effect at that time.  

Limitations on Transactions with Affiliates.  Transactions between FDIC insured institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act.  An affiliate of a FDIC insured institution is any company or entity which controls, is controlled by or is under common control with the FDIC insured institution.  The parent company of a insured FDIC institution (such as the Company) and any companies which are controlled by such parent company are affiliates of the insured FDIC institution.  Generally, Sections 23A and 23B (i) limit the extent to which the savings institution or its subsidiaries may engage in "covered transactions" with any one affiliate up to an amount equal to 10% of such institution's capital stock and surplus, and its covered transactions with all affiliates in the aggregate amount up to an amo unt equal to 20% of such capital stock and surplus and (ii) require that all such transactions be on terms substantially the same, or, at least as favorable, to the institution as those provided to a non-affiliate.  The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and other similar transactions.

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            Restrictions on Acquisitions. The Company may not acquire control of another savings association unless the OTS approves.  The Company may not by acquired by a company, other than a bank holding company, unless the OTS approves, or by an individual unless the OTS does not object after receiving notice.  The Company may not be acquired by a bank holding company unless the Board of Governors of the Federal Reserve System (the “Federal Reserve”) approves.  In any case, the public must have an opportunity to comment on the proposed acquisition, and the OTS or Federal Reserve must complete an application review.  Without prior approval from the OTS, the Company may not acquire more than 5% of the voting stock of any savings association that is not one of its su bsidiaries.

            The Gramm-Leach-Bliley Act generally restricts any non-financial entity from acquiring the Company unless such non-financial entity was, or had submitted an application to become, a savings and loan holding company as of May 4, 1999.  Since the Company was treated as a unitary savings and loan holding company prior to that date, the Company may engage in non-financial activities and acquire non-financial subsidiaries.

The Bank

General.  The Bank is subject to extensive regulation and examination by the New York State Banking Department (“NYSBD”), as its chartering authority, and by the Federal Deposit Insurance Corporation (“FDIC”), as the insurer of its deposits and is subject to certain requirements established by the OTS as a result of the Company's savings and loan holding company status.  The federal and state laws and regulations which are applicable to banks and their holding companies regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans.  The Bank must file reports with the NYSBD and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as establishing branches and mergers with, or acquisitions of, other depository institutions.  There are periodic examinations by the NYSBD and the FDIC to test the Bank's compliance with various regulatory requirements.  This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors.  The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.  Any change in such regulation, whether by the NYSBD, the FDIC or as a result of the enactment of legislation, could have a material adverse impact on the Company, the Bank and their operations.

Capital Requirements.  The FDIC has promulgated regulations and adopted a statement of policy regarding the capital adequacy of state-chartered banks, which, like the Bank, are not members (“non-members”) of the Federal Reserve System.  See Note 9 of the Notes to Consolidated Financial Statements included in the Company’s 2004 Annual Report to Shareholders incorporated herein by reference as Exhibit 13.

Activities and Investments of New York-Chartered Savings Banks.  The Bank derives its lending, investment and other authority primarily from the applicable provisions of New York State Banking Law and regulations, as limited by FDIC regulations and other federal laws and regulations.  The New York laws and regulations authorize savings banks, including the Bank, to invest in real estate mortgages, consumer and commercial loans, certain types of debt securities, including certain corporate debt securities and obligations of federal, State and local governments and agencies, certain types of corporate equity securities up to specified limits and certain other assets. The lending powers of a New York chartered stock bank like this bank are not subject to percentage of asset limitations, although there ar e limits applicable to single borrowers.  A savings bank may also, pursuant to the "leeway" authority, make investments not otherwise permitted under the New York State Banking Law.  This authority permits investments in otherwise impermissible investments of up to 1% of the savings bank's assets in any single investment, subject to certain restrictions and to an aggregate limit for all such investments of up to 5% of assets.  Additionally, in lieu of investing in such securities in accordance with the reliance upon the specific investment authority set forth in the New York State Banking Law, savings banks are authorized to elect to invest under a "prudent person" standard in a wider range of debt and equity securities as compared to the types of investments permissible under such specific investment authority.  However, in the event a savings bank elects to utilize the "prudent person" standard, it will be unable to avail itself of the other provisions of the New Yor k State Banking Law and regulations which set forth specific investment authority.  A New York chartered stock savings bank may also exercise trust powers upon approval of the NYSBD.

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New York-chartered savings banks may invest in operating subsidiaries, which may engage in the same activities at the same locations as the parent bank.  New York-chartered savings banks may also invest in subsidiaries under their service corporation investment power.  A savings bank may use this power to invest in corporations that engage in various activities authorized for savings banks, plus any additional activities authorized by the NYBB.  Investment by a savings bank in the stock, capital notes and debentures of its service corporations is limited to 3% of the bank's assets, and such investments, together with the bank’s loans to its service corporations, may not exceed 10% of the savings bank's assets.

With certain limited exceptions, a New York-chartered savings bank may not make loans or extend credit to a single borrower, the aggregate amount of which would be in excess of 15% of the bank's equity.  The Bank currently complies with all applicable loans-to-one-borrower limitations.

Activities and Investments of FDIC-Insured State-Chartered Banks.  The activities and equity investments of FDIC-insured, state-chartered banks are generally limited to those that are permissible for national banks.  Under regulations dealing with equity investments, an insured state bank generally may not directly or indirectly acquire or retain any equity investment of a type, or in an amount, that is not permissible for a national bank.  In addition, an FDIC-insured state-chartered bank may not directly, or indirectly through a subsidiary, engage as "principal" in any activity that is not permissible for a national bank unless the FDIC has determined that such activities would pose no risk to the insurance fund of which it is a member and the bank is in compliance with applicable regulatory capital requirements.

Regulatory Enforcement Authority.  Applicable banking laws include substantial enforcement powers available to federal banking regulators.  This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions against banking organizations and institution-affiliated parties, as defined.  In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.  Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with regulatory authorities.

            Under the New York State Banking Law, the Department may issue an order to a New York-chartered banking institution to appear and explain an apparent violation of law, to discontinue unauthorized or unsafe practices and to keep prescribed books and accounts.  Upon a finding by the Department that any director or officer of any banking organization has violated any law, or has continued unauthorized or unsafe practices in conducting the business of the banking organization after having been notified by the Department to discontinue such practices, such director, or officer may be removed from office by the Department after notice and an opportunity to be heard.  The Bank does not know of any past or current practice, condition or violation that might lead to any proceeding by the Department against the Bank or any of its directors or officers.  The Department also may take possession of a banking organization under specified statutory criteria.

Prompt Corrective Action.  Section 38 of the Federal Deposit Improvement Act provides the federal banking regulators with broad power to take "prompt corrective action" to resolve the problems of undercapitalized institutions.  The extent of the regulators' powers depends on whether the institution in question is "well-capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." Under regulations adopted by the federal banking regulators, an institution shall be deemed to be (i) "well-capitalized" if it has total risk-based capital ratio of 10.0% or more, has a Tier I risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not subject to specified requirements to meet and maintain a specific capital le vel for any capital measure, (ii) "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of "well-capitalized," (iii) "undercapitalized" if it has a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0% under certain circumstances), (iv) "significantly undercapitalized" if it has a total risk-based capital ratio that is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is less than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%. The regulations also provide that a federal banking regulator may, after notice and an opportunity for a hearing, reclas sify a "well-capitalized" institution as "adequately capitalized" and may require an "adequately capitalized" institution or an "undercapitalized" institution to comply with supervisory actions as if it were in the next lower category if the institution is in an unsafe or unsound condition or engaging in an unsafe or unsound practice.  The federal banking regulator may not, however, reclassify a "significantly undercapital­ized" institution as "critically undercapitalized."

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An institution generally must file a written capital restoration plan which meets specified requirements, as well as a performance guaranty by each company that controls the institution, with its appropriate federal banking regulator within 45 days of the date that the institution receives notice or is deemed to have notice that it is "undercapitalized," "significantly undercapitalized" or "critically undercapitalized.”  Immediately upon becoming undercapitalized, an institution becomes subject to statutory provisions which, among other things, set forth various mandatory and discretionary restrictions on the operations of such an institution.

At March 31, 2004, the Bank had capital levels which qualified it as a "well-capitalized" institution.   

            FDIC Insurance Premiums.  The Bank is a member of the Bank Insurance Fund (“BIF”) administered by the FDIC but has accounts insured by both the BIF and the Savings Association Insurance Fund (“SAIF”).  The SAIF-insured accounts are held by the Bank as a result of certain acquisitions and branch purchases.  As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, FDIC-­insured institutions.  It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the insurance funds.

Community Investment and Consumer Protection Laws.  In connection with its lending activities, the Bank is subject to a variety of federal laws designed to protect borrowers and promote lending to various sectors of the economy and population.  Included among these are the federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act and Community Reinvestment Act (“CRA”).

The CRA requires insured institutions to define the communities that they serve, identify the credit needs of those communities and help meet the credit needs of the community.  The responsible federal banking regulator (in the case of the Bank, the FDIC) must conduct regular CRA examinations of insured financial institutions and assign to them a CRA rating of "outstanding," "satisfac­tory," "needs improvement" or "unsatisfactory." The Bank's current CRA rating is "satisfactory."  CRA ratings are taken into account when federal banking regulators review certain applications.

The Bank is also subject to provisions of the New York State Banking Law which impose continuing and affirmative obligations upon banking institutions organized in New York State to serve the credit needs of its local community ("NYCRA"), which are similar to those imposed by the CRA.  Pursuant to the NYCRA, a bank must file an annual NYCRA report and copies of all federal CRA reports with the NYSBD.  The NYCRA requires the NYSBD to make an annual written assessment of a bank's compliance with the NYCRA, utilizing a four-tiered rating system, and make such assessment available to the public.  The NYCRA also requires the NYSBD to consider a bank's NYCRA rating when reviewing a bank's application to engage in certain transactions.  The Bank's latest NYCRA rating received from the NYSBD was "satisfactory."

Limitations on Dividends.  The Company is a legal entity separate and distinct from the Bank.  The Company's principal source of revenue consists of dividends from the Bank.  The payment of dividends by the Bank is subject to various regulatory requirements.

Under New York State Banking Law and OTS regulations, a New York-chartered stock savings bank may declare and pay dividends out of its net profits, unless there is an impairment of capital, but approval of the Department is required if the total of all dividends declared in a calendar year would exceed the total of its net profits for that year combined with its retained net profits of the preceding two years, subject to certain adjustments.

Federal Home Loan Bank (“FHLB”) System.  The Bank is a member of the FHLB of New York, which is one of 12 regional FHLBs that assist the home financing credit function of savings institutions.  Each FHLB serves as a reserve or central bank for its members within its assigned region.  It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System.  It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB.  The Bank had $458.4 million of FHLB long-term borrowings at March 31, 2004.

            As an FHLB member, the Bank is required to purchase and maintain stock in the FHLB of New York in an amount equal to at least 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of its advances from the FHLB of New York, whichever is greater.  At March 31, 2004, the Bank had approximately $22.9 million in FHLB stock, which resulted in its compliance with this requirement.  

            The FHLBs are required to provide funds for the resolution of troubled savings institutions and to contribute to affordable housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects.  These contributions have adversely affected the level of FHLB dividends paid in the past and could continue to do so in the future.  These contributions also could have an adverse effect on the value of FHLB stock in the future.

            Federal Reserve System.  The FRB requires all depository institutions to maintain reserves against their transaction accounts (primarily checking accounts, including N.O.W. and Super N.O.W. accounts) and non-personal time deposits.  As of March 31, 2004, the Company was in compliance with applicable requirements.   However, because required reserves must be maintained in the form of vault cash or a noninterest-bearing account at a Federal Reserve Bank, the effect of this reserve requirement is to reduce an institution's earning assets.

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Recent Legislation

            Under the Gramm-Leach-Bliley Act of 1999 (“GLB Act”), all financial institutions, including the Company and the Bank, are required to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties at the customer’s request, and establish procedures and practices to protect customer data from unauthorized access.

            Under Title III of the USA PATRIOT Act, also known as the International Money Laundering Abatement and Anti-Terrorism Financing Act of 2001, all financial institutions, including the Company and the Bank, are required in general to identify their customers, adopt formal and comprehensive anti-money laundering programs, scrutinize or prohibit altogether certain transactions of special concern, and be prepared to respond to inquiries from U.S. law enforcement agencies concerning their customers and their transactions.  Additional information-sharing among financial institutions, regulators, and law enforcement authorities is encouraged by the presence of an exemption from the privacy provisions of the GLB Act for financial institutions that comply with this provision and the authorization of the Secretary of the Treasury to adopt rules to further encourage cooperation and information-sharing.  The effectiveness of a financial institution in combating money laundering activities is a factor to be considered in any application submitted by a financial institution.

            The Sarbanes-Oxley Act, signed into law July 30, 2002, addresses, among other issues, corporate governance, auditor independence and accounting standards, executive compensation, insider loans, whistleblower protection, and enhanced and timely disclosure of corporate information.  The SEC has adopted various implementing rules, and the NASD has adopted corporate governance rules that have been approved by the SEC.  The changes are intended to allow stockholders to monitor more effectively the performance of companies and management.

            Effective August 29, 2002, as directed by section 302(a) of the Sarbanes-Oxley Act, the Company’s chief executive officer and chief financial officer are each required to certify that the Company’s quarterly and annual reports do not contain any untrue statement of a material fact.  This requirement has several parts, including certification that these officers are responsible for establishing, maintaining and regularly evaluating the effectiveness of the Company’s internal controls; that they have made certain disclosures to the Company’s auditors and audit committee of the board of directors about the Company’s internal controls; and that they have included information in the Company’s quarterly and annual reports about their evaluation and whether there have been significant changes in the Company’s internal co ntrols or in other factors that could significantly affect internal controls.

Federal Taxation

            General.  The Company and the Bank are subject to federal income taxation in the same general manner as other corporations.  For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending March 31 for filing its consolidated federal income tax returns.  For further information about the Federal income tax consequences for the Company, see Note 13 of the Notes to Consolidated Financial Statements within the Company’s 2004 Annual Report to Shareholders incorporated herein by reference as Exhibit 13.

State and Local Taxation

            New York State Taxation.  The Company and the Bank report income on a combined basis utilizing the Company’s fiscal year.  New York State Franchise Tax on banking corporations is currently imposed in an amount equal to the greater of (a) 7.5% of “entire net income” allocable to New York State (b) 3% of “alternative entire net income” allocable to New York State (c) 0.01% of the average value of assets allocable to New York State or (d) nominal minimum tax.  Entire n et income is based on federal taxable income, subject to certain modifications.

            Delaware State Taxation.  As a Delaware holding company not earning income in Delaware, the Company is exempt from Delaware corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.  The tax is imposed as a percentage of the capital base of the Company with an annual maximum of $165,000.

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Executive Officers

The executive officers of the Company are elected annually and hold office until their respective successors have been elected and qualified or until death, resignation or removal by the Board of Directors.  Each executive officer of the Company is also an executive officer of the Bank.  There are no arrangements or understandings between the persons named and any other person pursuant to which such officers were selected.  

The business experience of each executive officer who is not also a Director of the Company is set forth below.

            Carl A. Florio, CPA.   Mr. Florio was appointed President & Chief Executive Officer in 1996. From 1991 to 1996, Mr. Florio served as the Company’s Chief Financial Officer. Prior to this appointment as Chief Financial Officer, Mr. Florio was a partner at the accounting firm of Pattison, Koskey, Rath & Florio.

Timothy E. Blow, CPA.  Mr. Blow became Chief Financial Officer of the Company in May 1997.  Prior to his appointment as Chief Financial Officer, Mr. Blow was a senior manager at the accounting firm of KPMG LLP.  Mr. Blow also serves as a director of Hudson City Associates, Inc. and as Secretary and Treasurer of Hudson River Funding Corp., wholly owned subsidiaries of the Bank.

Sidney D. Richter.  Appointed to Executive Vice President in 2000, Mr. Richter served as the Company’s Senior Vice President of Lending from 1993-2000.  From 1990 to 1993, Mr. Richter served as the Company's Vice President for Commercial Lending.  Mr. Richter also serves as a director of each of the Bank's wholly owned subsidiaries.  

James F. Mackerer.  Mr. Mackerer became Senior Vice President of Retail Banking of the Company in February 2001.  Prior to his appointment to Senior Vice President, Mr. Mackerer was Vice President of Commercial Lending and has been with the Company since 1993.

Michael J. Mackay.  Mr. Mackay became Senior Vice President of Operations of the Company in 2002.  From 1995 to 2002, Mr. Mackay served as the Company's Vice President of Loan Servicing.  

Item 2.            Properties

The Company conducts its business at its main office and forty-nine other banking offices.  The net book value of the Company's premises and equipment (including land, buildings and leasehold improvements and furniture, fixtures and equipment) at March 31, 2004 was $27.4 million.  The Company believes that its current facilities are adequate to meet the present and foreseeable needs of the Company and the Bank, subject to possible future expansion.

Item 3.            Legal Proceedings

The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of its business.  While the ultimate outcome of these proceedings cannot be predicted with certainty, management, after consultation with counsel representing the Company in the proceedings, does not expect that the resolution of these proceedings will have a material effect on the Company's financial condition or results of operations.

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Item 4.            Submission of Matters to a Vote of Security Holders

            None.

PART II

Item 5.            Market for Registrant's Common Equity, Related Shareholder

Matters and Issuer Purchases of Equity Securities

The inside back cover of the attached 2004 Annual Report to Shareholders is herein incorporated by reference and attached hereto as Exhibit 13.

The following table discloses information regarding the open-market purchases of HRBT stock made by the Company during the quarter ending March 31, 2004 in accordance with Rule 10b-18 under the securities Exchange Act of 1934:

(1) Shares purchased during the periods beginning January 1, 2004 and ending on March 31, 2004 were done in conjunction with the exercise of stock options under the Company’s 1998 Stock Option and Incentive Plan, as amended.

(2) In June 2003 the Company announced that its Board of Directors had approved a plan to repurchase approximately 10% of its outstanding common stock in open market purchases.  The timing, volume, and price of shares purchases under the plan are at the discretion of the Company as market and conditions warrant.  There is no expiration date for this repurchase plan.  At the current time, the Company does not intend on making any purchases under this plan as a result of its recently announced merger with First Niagara Bancorp, Inc.

Item 6.            Selected Financial Data

Page 5 of the attached 2004 Annual Report to Shareholders is herein incorporated by reference and attached hereto as Exhibit 13.

Item 7.            Management's Discussion and Analysis of Financial

Condition and Results of Operations

Pages 6 through 20 of the attached 2004 Annual Report to Shareholders are herein incorporated by reference and attached hereto as Exhibit 13.

Item 7a.          Quantitative and Qualitative Disclosures 

About Market Risk

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Pages 15 through 16 of the attached 2004 Annual Report to Shareholders are herein incorporated by reference and attached hereto as Exhibit 13.

Item 8.            Financial Statements and Supplementary Data

The following information appearing in the Company's Annual Report to Shareholders for the year ended March 31, 2004, is incorporated by reference in this Annual Report on Form 10-K and attached hereto as Exhibit 13.

Item 9.            Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure

None.

With the exception of the aforementioned information, the Company's Annual Report to Shareholders for the year ended March 31, 2004, is not deemed filed as part of this Annual Report on Form 10-K.

Item 9a.          Controls and Procedures

An evaluation of our disclosure controls and procedures (as defined in Section 13(a)-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2004, was carried out under the supervision and with the participation of the Chief Executive Officer, Chief Financial Officer and several other members of our senior management within the 90-day period preceding the filing date of this annual report.  Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

There have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the year ended March 31, 2004, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

We intend to continually review and evaluate the design and effectiveness of our disclosure controls and procedures and to improve our controls and procedures over time and to correct any deficiencies that we may discover in the future.  The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company’s business.  While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to modify our disclosure controls and procedures.

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PART III

Item 10.           Directors and Executive Officers of the Registrant

            Directors

            The Company's Board of Directors currently consists of nine members.  The Board is divided into three classes, each of which contains one‑third of the Board.  Approximately one‑third of the directors are elected annually.  Directors of the Company are generally elected to serve for a three‑year period or until their respective successors are elected and qualified.  In connection with the Company’s acquisition of Cohoes Bancorp, Harry L. Robinson was given a seat on the board for a term to expire at the annual meeting to be held in 2004.  Mr. Robinson will no longer be continuing in office.

            The table below sets forth certain information, as of the Record Date, regarding the composition of the Company's Board of Directors, including their terms of office.  It is intended that the proxies solicited on behalf of the Board of Directors (other than proxies in which the vote is withheld as to any nominee) will be voted at the Meeting FOR the election of the nominees identified below.  If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute as the Board of Directors may recommend.  At this time, the Board of Directors knows of no reason why any nominee might be unable to serve, if elected.  There are no arrangements or understandings between the nominees and any other person pursuant to whi ch the nominees were selected.

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The business experience of each director is set forth below.  All directors have held their present positions for at least the past five years, except as otherwise indicated.

            William H. (Tony) Jones.  Mr. Jones is currently Chairman of the Board of Directors of the Company and the Bank, a position he has held since March 2003.  Mr. Jones serves as President of Roe Jan Independent Publishing Co., Inc., Hillsdale, New York, a publisher of community newspapers and similar publications.  Mr. Jones serves on the Executive Committee, Audit Committee and Loan Committee and as a director of Hudson City Associates, Inc.  Mr. Jones also serves as a director of Hudson River Bank & Trust Company Foundation.

            Joseph W. Phelan.  Since 1983, Mr. Phelan has served as Chairman of Taconic Farms, Inc., Germantown, New York, a provider of laboratory animals for research.  He is also Treasurer of the Reformed Church in Germantown, New York.  Mr. Phelan serves on the Trust Committee, Audit Committee, Loan Committee and Compensation Committee.

            Harry L. Robinson.  Since April, 2001, Harry L. Robinson has been a Director of the Company.  Mr. Robinson was President and Chief Executive Officer of Cohoes Bancorp, Inc. and its subsidiary, Cohoes Savings Bank, until its acquisition by the Company in April, 2001.  Mr. Robinson serves on the Trust Committee.  Mr. Robinson will no longer serve as a director after September 28, 2004.

            Carl A. Florio.  Mr. Florio has served as President and Chief Executive Officer of the Company since its incorporation and of the Bank since 1996.  From 1993 until his appointment as President and Chief Executive Officer, Mr. Florio served as Chief Financial Officer of the Bank.  Prior to his becoming the Bank's Chief Financial Officer, Mr. Florio was a partner in the accounting firm of Pattison, Koskey, Rath & Florio.  Mr. Florio serves on the Executive Committee, Loan Committee and Trust Committee and as a Director of Hudson City Associates, Inc., a wholly-owned subsidiary of the Bank.  Mr. Florio is also a Director of the Hudson River Bank & Trust Company Foundation.

            M. Bruce Cohen.  Mr. Cohen is a certified public accountant.  From 1977 to 2000 he was employed as the managing partner of the Albany office of PricewaterhouseCoopers LLP.  Mr. Cohen serves on the Audit Committee.

            Marilyn A. Herrington.  Ms. Herrington is involved in real estate investments and development.  Ms. Herrington serves on the Nominating Committee and Compensation Committee.  Ms. Herrington also serves as a Director of Hudson River Bank & Trust Company Foundation.

            Ronald S. Tecler, DMD.  Dr. Tecler is a practicing dentist.  He has been in private practice since 1967.  He served on the boards of Mohawk Community Bank and Ambanc Holding Co., Inc. and their predecessors from 1996 until 2002.  Dr. Tecler serves on the Executive Committee.

            Anthony J. Mashuta.  Mr. Mashuta is currently the president of Cool Insuring Agency, Inc., an insurance agency.  Mr. Mashuta has held this position since 1992.  Mr. Mashuta serves on the Nominating Committee.

            Richard Koskey.  Mr. Koskey is a certified public accountant and certified financial planner.  He is the managing principal of Pattison, Koskey & Roth P.C., a regional accounting firm.  Mr. Koskey serves on the Nominating Committee.

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Meetings and Compensation of the Board of Directors and Committees and Corporate Governance Matters

            Hudson River Bancorp, Inc.  Meetings of the Company's Board of Directors are generally held on a quarterly basis.  The Board of Directors met nine times during the fiscal year ended March 31, 2004.  During fiscal 2004, no incumbent director of the Company attended fewer than 75% of the aggregate of the total number of Board meetings and the total number of meetings held by the committees of the Board of Directors on which he or she served.  Directors of the Company are not paid a fee for serving on the Company Board.

            The Board of Directors of the Company has established the Company's Executive, Audit, Loan, Trust, Nominating and Compensation Committees.  The Board of Directors has adopted written charters for the Audit Committee and the Nominating Committee.  The Board of Directors also adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees.  You may obtain a copy of these documents free of charge by writing to the Corporate Secretary of the Company, One Hudson City Centre, Hudson, New York 12534 or by calling (518) 828-4600.  In addition, the Code of Business Conduct and Ethics has been filed with the SEC as Exhibit 14 to the Company's Annual Report on Form 10-K for the year ended March 31, 2004.  The charters for the Audit Committee and the Nominating Committee are attache d as Exhibits 99.1 and 99.2, respectively, to the Company’s Annual Report on Form 10-K for the year ended March 31, 2004.

            The Board has determined that Directors Cohen, Jones, Phelan, Mashuta, Herrington, Tecler and Koskey constituting a majority of the Board members, are "independent directors," as that term is defined in the Nasdaq listing standards.  Stockholders may communicate directly with the Board of Directors by sending written communications to the Chairman of the Board.

            The Company's Executive Committee exercises the powers of the full Board of Directors between board meetings, except that this Committee does not have the authority to amend the charter or bylaws, adopt a plan of merger, consolidation, dissolution, or provide for the disposition of all or substantially all of the property and assets of the Company.  The Executive Committee is composed of Directors Florio, Tecler and Jones.  The Executive Committee met twice during the year ended March 31, 2004.

            The Audit Committee is comprised of Directors Cohen (Chairman), Jones and Phelan, all of whom are "independent directors" under the Nasdaq listing standards.  The Board of Directors has determined that Director Cohen is an "audit committee financial expert" as defined in Item 401(h) of Regulation S-K of the Securities and Exchange Commission and that all of the Audit Committee members meet the independence and financial literacy requirements under the Nasdaq listing standards.  In fiscal 2004, this Committee met five times.  This Committee is responsible for hiring, terminating and/or reappointing the Company's independent auditor and for reviewing the annual audit report prepared by our independent auditors.  The functions of the Audit Committee also include:

            •           approving non-audit and audit services to be performed by the independent auditors;

            •           reviewing and approving all related party transactions for potential conflict of interest situations;

            •           reviewing and assessing the adequacy of the Audit Committee Charter on an annual basis;

            •           reviewing significant financial information for the purpose of giving added assurance that the information is accurate and timely and that it includes all appropriate financial statement disclosures;

            •           ensuring the existence of effective accounting and internal control systems, and

            •           overseeing the entire audit function of the Company, both internal and independent.

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            The Loan Committee is responsible for reviewing and approving loans which exceed the lending authority of the Bank's lending officers.  The current members of this Committee are Directors Florio, Jones and Phelan.  This Committee met twelve times during the year ended March 31, 2004.

            The Trust Committee oversees the operations of the Trust Department of the Bank.  The current members of this Committee are Directors Phelan, Robinson and Florio.  This Committee met three times during the year ended March 31, 2004.

            The Nominating Committee is composed of Directors Koskey, Mashuta and Herrington.  The committee is primarily responsible for selecting nominees for election to the Board.  The Nominating Committee generally meets once per year to make nominations.  During the fiscal year ended March 31, 2004, the Nominating Committee met one time with respect to the selection of director nominees.  The Nominating Committee will consider nominees recommended by stockholders in accordance with the procedures in the Company's bylaws, but the Nominating Committee has not actively solicited such nominations.  Pursuant to the Company's Bylaws, nominations fo r directors by shareholders must be made in writing and delivered to the Corporate Secretary of the Company at least 90 days prior to the meeting and such written nomination must contain certain information as provided in the Company's Bylaws.

            In accordance with its charter, the Nominating Committee has the following responsibilities:

            (i)         recommend to the Board the appropriate size of the Board and assist in identifying, interviewing and recruiting candidates for the Board;

            (ii)        recommend candidates (including incumbents) for election and appointment to the Board of Directors, subject to the provisions set forth in the Company's certificate of incorporation and bylaws relating to the nomination or appointment of directors, based on the following criteria: business experience, education, integrity and reputation, independence, conflicts of interest, diversity, age, number of other directorships and commitments (including charitable obligations), tenure on the Board, attendance at Board and committee meetings, stock ownership, specialized knowledge (such as an understanding of banking, accounting, marketing, finance, regulation and public policy) and a commitment to the Company's communities and shared values, as well as overall experience in the context of the needs of the Board as a whole ;

            (iii)       review nominations submitted by stockholders, which have been addressed to the Corporate Secretary, and which comply with the requirements of the Company's certificate of incorporation and bylaws.  Nominations from stockholders will be considered and evaluated using the same criteria as all other nominations;

            (iv)       annually recommend to the Board committee assignments and committee chairs on all committees of the Board, and recommend committee members to fill vacancies on committees as necessary, and

            (v)        perform any other duties or responsibilities expressly delegated to the Committee by the Board.

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            Nominations, other than those made by the Nominating Committee, must be made pursuant to timely notice in writing to the Corporate Secretary as set forth in Section 6(c) of the Company's bylaws.  In general, to be timely, a shareholder's notice must be received by the Company not less than 90 days prior to the date of the annual meeting; however, if less than 100 days' notice of the date of the scheduled annual meeting is given by the Company, the shareholder has until the close of business on the tenth day following the day on which notice of the date of the scheduled annual meeting was made. The shareholder's notice must include the information set forth in Section 6(c) of the Company's bylaws, which includes the following:

            (i)         as to each person whom a shareholder proposes to nominate for election as a director:

1.         all information relating to the proposed nominee that is required to be disclosed in the solicitation of proxies for election as directors or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934.

            (ii)        as to the shareholder giving the notice:

1.                 name and address of the shareholder as they appear on the Company's books;

2.                 number of shares of the Company's common stock beneficially owned by the shareholder.

            The foregoing description is a summary of the Company's nominating process.  Any shareholder wishing to propose a director candidate to the Company should review and must comply in full with the procedures set forth in the Company's certificate of incorporation and bylaws, and Delaware law.

                The Compensation Committee recommends employee compensation, benefits and personnel policies to the Board of Directors, as well as salaries and cash bonus plan distributions concerning executive officers of the Company and the Bank.  The current members of this Committee are Directors Phelan and Herrington.  This Committee met one time during the year ended March 31, 2004.

            Hudson River Bank & Trust Company.  The Bank's Board of Directors consists of the same members as the Company's Board of Directors.  The Bank's Board of Directors meets monthly and may have additional special meetings.  The Board of Directors met thirteen times during the year ended March 31, 2004.  During fiscal 2004, no incumbent director of the Bank attended fewer than 75% of the aggregate of the total number of Board meetings and the total number of meetings held by the committees of the Board of Directors on which he or she served.

            Hudson River Commercial Bank.  In November 2002, Hudson River Commercial Bank officially opened for business. The Commercial Bank's Board of Directors consists of the same members as the Company's Board of Directors.  The Commercial Bank's Board of Directors meets monthly and may have additional special meetings.  The Board of Directors met twelve times during the year ended March 31, 2004.  During fiscal 2004, no incumbent director of the Bank attended fewer than 75% of the aggregate of the total number of Board meetings and the total number of meetings held by the committees of the Board of Directors on which he or she served.  Directors of the Commercial Bank are not paid a fee for serving on the Commercial Bank’s Board.

            Director Compensation.  Non-employee directors of the Bank are paid a fee of $1,500 per meeting for serving on the Board of Directors of the Bank. During fiscal 2004, members of the Executive, Loan and Audit Committees each received $600 per committee meeting attended, and members of the Trust Committee, Nominating Committee and Compensation Committee received $300 per meeting attended.

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            Executive Officers

Information concerning Executive Officers of the Company is incorporated herein by reference from Part I, Item 1 of this Annual Report on Form 10-K.

            Code of Ethics

In May 2004, the Company adopted a written Code of Ethics based upon the standards set forth under Item 406 of Regulation S-K of the Securities Exchange Act.  The Code of Ethics applies to all of the Company’s directors, officers and employees.  A copy of the Company’s Code of Ethics is being filed with the SEC as Exhibit 14 to this Annual Report on Form 10-K.  

            Compliance with Section 16(a)

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended March 31, 2004, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with.

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Item 11.  Executive Compensation

            The following table sets forth information concerning the compensation paid or granted to the Named Officers in fiscal 2004, 2003 and 2002 whose salary and bonus exceeded $100,000.  No other executive officers had compensation (salary and bonus) in excess of $100,000 in fiscal 2004.

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(1)            Includes the following allotments:

(2)           Represents the value of 9,929 shares of restricted stock granted on April 1, 2002 to Mr. Mackerer pursuant to the Company's Recognition and Retention Plan.  The shares vest ratably over an eight year period.

(3)           Represents the value of 1,500 shares of restricted stock granted on April 19, 2001 to Mr. Mackerer pursuant to the Company's Recognition and Retention Plan.  All of such shares vested on March 31, 2002.

(4)           Represents the value of 22,258 shares of restricted stock granted on April 16, 2003 to Mr. Mackay pursuant to the Company's Recognition and Retention Plan.  The shares vest ratably over an eight year period.

(5)           Represents the value of 300 shares of restricted stock granted on each of April 1, 2002 and April 19, 2001 to Mr. Mackay pursuant to the Company's Recognition and Retention Plan.  The shares vested on March 31, 2002 and March 31, 2003, respectively.

(6)           Represents stock options granted to Mr. Mackerer on April 1, 2002 pursuant to the Company's Stock Option and Incentive Plan.  The options vest ratable over a three year period.

(7)           Represents stock options granted to Mr. Mackay on April 16, 2003 pursuant to the Company's Stock Option and Incentive Plan.  The options vest ratably over a three year period.

(8)           Represents stock options granted to Mr. Mackay on each of April 1, 2002 and April 19, 2001 pursuant to the Company's Stock Option and Incentive Plan.  The options vested on March 31, 2002 and March 31, 2003, respectively.

                The following table sets forth certain information concerning the number and value of unexercised stock options held by Messrs. Florio, Richter, Blow, Mackerer and Mackay at March 31, 2004.