Hudson City Bancorp a Throwback to "the Good Old Days"

With the focus so often aimed at struggling and failing banks, it's easy to forget that there are banks that have weathered the economic storm with apparent ease.  One such bank is Hudson City Bancorp Inc., the holding company for Hudson City Savings Bank, which Forbes pronounced the "Best-Managed Bank in America" in 2007 and 2008.

In a lecture that the company's chairman and chief executive, Ronald Hermance, gave at the Chautauqua Institution last week, a PowerPoint presentation set the tone with the title slide:  "10 Straight Years of Record Results:  Our Year to Shine."  (The presentation is available here as an attachment to an 8-K the company filed last week with the Securities and Exchange Commission.)  

The company, which was founded in 1868, describes its core values as "Conservative and Efficient Service". Assuming that its numbers are correct, those claims are supported by some impressive results.

According to slide 9, the bank was founded to offer people a safe place to put their money and to fund housing needs; it makes and keeps home mortgages in its portfolio; and it relies on underwriting instead of credit scores to determine an applicant's creditworthiness.

Refreshing?  There's more.

Its assets ($7.9 billion) vastly exceed its loans ($3.7 billion). A shareholder who bought shares in the company's IPO ten years ago has reaped a 69.5 percent return on his or her investment. Comparing first -quarter performance from 1999 to the same quarter in 2005, assets increased by 167 percent and loans grew by 222 percent.  Deposits for the same period grew by 70 percent.  

Slide 22 notes that 99 percent of the company's portfolio consists of first mortgages on 1- to 4-family buildings. Hudson City requires a minimum 20 percent down payment on all mortgages, and at origination the average down payment on the portfolio is about 39 percent.

Compared to two of its peers (Huntington Bancshares Inc. and  Zions Bancorporation), its assets and market cap are higher, (slide 21) and its staffing is dramatically lower.

And while the share of conventional mortgages at least three payments past due is 4.70 percent nationally and 4.26 percent in New Jersey, the figure for Hudson City is only 1.05 percent.

Hudson City seems like a throwback to earlier, simpler times.  Slide 29 says that it still lists its the phone number for each bank branch, and its employees are instructed to focus on customer satisfaction rather than sales and production goals.  Also - amazingly - the company generally rewards employees by adding more than 40 percent of their salaries to their ESOP accounts each year.

Given those results, we're probably not the only ones who are feeling a little nostalgic for the days before subprime loans and credit default swaps.  And we're also betting that the competition for jobs at Hudson City Savings Bank just got a whole lot tougher.