One on One with Ronald Hermance, Chairman & CEO Hudson City Bancorp
Tuesday, November 06, 2007
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SUSIE GHARIB: Amidst all the gloomy news about the credit crunch and sub-prime mortgage mess, there are some bright spots. Take Hudson City Bancorp for example. It's the largest savings bank in New Jersey and recently was cited for having one of the highest quality loan portfolios in the country. It's also profitable and growing. Joining us now, Ronald Hermance, Hudson's chairman and CEO. Mr. Hermance, nice to have you on the program.
RONALD HERMANCE, CHMN, & CEO, HUDSON CITY BANCORP: Thank you, Susie.
GHARIB: So how did you and your loan officers avoid the temptation of offering exotic loans, especially in the height of the whole sub-prime boom?
HERMANCE: Well, we knew it to be a risk-reward situation, Susie, and for 30 years we've underwritten loans one at a time. There didn't seem to be a reason to veer from that path, and you know, we remain focused on our market, which is the prime market.
GHARIB: Given the shakeout in the mortgage industry, do you see any opportunities now to expand or any acquisitions that you might want to make?
HERMANCE: Well, expansion de novo is certainly in our plans. This year alone, Susie, we've been able to increase our mortgage applications by 30 percent and through August, we had outstripped the entire amount of mortgages we had originated last year. So people that tell you that the mortgages are hard to get, I don't believe it.
GHARIB: Well, I was going to ask you about that. Given that home prices are down and home sales are weak, one would think that mortgage applications would also be down and it would impact your business. Why is your business still going on as business as usual?
HERMANCE: Well, it's the sector of the market we work in. It's this northeast quadrant -- Connecticut, New York and New Jersey particularly -- and by virtue of our geography, we're pretty much in a jumbo market. So far for the last three years running, people have put down 41 percent on their applications, which is well above our standard 20 percent requirement. So it seems to me like they really want to own their homes rather than just mortgage their homes.
GHARIB: Now with interest rates also coming down, what impact is that having on loan applications, whether for mortgages or refinancing?
HERMANCE: They've increased, but seasonally adjusted, the third or excuse me, the fourth and first quarter are the most difficult quarters for us to increase volume. But so far we've had no problems with that because it's the liability side of the ledger, the funding side that's also coming down, so we're seeing improved funding costs, which allows us to have plenty of inventory to take care of the demand.
GHARIB: As you look at the credit markets, what does worry you? Where are the risks?
HERMANCE: You know, the credit markets, Susie, I don't serve enough of the other needs of the credit markets. I would say unemployment is my single biggest worry. And here in the east, you know, I think we're 4.6 nationally. We're less than that on the east coast. When problems arose back in the late '80s, early '90s, it was led by unemployment. If you were not out of a job, you knew somebody that was and the consumer confidence was terribly low. That's not true nowadays.
GHARIB: OK. Let me ask you about Hudson stock. It's been taking off ever since the summer credit crunch. What risk, if any, could stall that momentum?
HERMANCE: You know, I don't know. You'd have to ask an analyst about that because I'm pretty biased about it, Susie. But our profits this year have been first quarter $0.13, second quarter $0.14 and $0.15 for the third and the analysts are predicting $0.16 for the fourth. So I'm finding it hard to see what's going to get in the way. Our operating overhead is very low. Our credit quality is very strong.
GHARIB: All right. You're one of the few companies in the financial services that has an optimistic report to make. We appreciate you coming on the program. Thank you so much.
HERMANCE: Thanks very much, Susie.
GHARIB: My guest tonight, Ronald Hermance, Hudson City's chairman and CEO.
