Ronald Hermance Jr.

Ronald Hermance Jr. is an old-fashioned banker with time-tested ways of doing business, and he sleeps well at night knowing they are working.

Ronald Hermance Jr.

Ronald Hermance Jr.

Ronald Hermance Jr.

Age: 61

Company: Hudson City Bancorp

Year Named CEO: 2002

Number of Employees: 1,451

2008 Stock Performance: 9.0 percent

Annual Compensation: $10.6 million

Stock Options: $4.8 million

Ronald Hermance Jr. is an old-fashioned banker with time-tested ways of doing business, and he sleeps well at night knowing they are working. When so many other mortgage lenders jumped on the subprime bandwagon in recent years and began offering option-adjustable-rate and other risky mortgages, Hudson City maintained its lending standards. The Paramus, New Jersey–based bank focuses on affluent borrowers who take out jumbo mortgages and put at least 20 percent down. “We underwrite every single loan — we do full documentation, and we live with these people for the length of their loan,” Hermance says. “The idea is that we just want to do more of what we do well.” Hudson City is “really an old-fashioned thrift,” he adds.

It is now the nation’s second-largest savings and loan. The biggest, Sovereign Bancorp, was acquired by Spain’s Banco Santander in January. Washington Mutual had been the largest before federal regulators rescued it with the arranged sale of its banking operations to JPMorgan Chase & Co. in September. Hudson City has done well by sticking to its knitting and wins accolades from investors for doing so. It was the best-performing banking stock in the Standard & Poor’s 500 index in 2008, rising 9 percent for the year. Hudson City’s shares have suffered this year, however, stung by concerns over the financial sector. Early this month the stock was trading at $12.26, down 22.3 percent for the year. To reassure investors, in mid-March Hermance provided an interim performance update in which he called analysts’ estimates for the first quarter “reasonable” and reiterated that the bank had no plans to cut its quarterly dividend and would not accept support from the U.S. government. He also reported that, in the first two months of the year, Hudson City grew deposits by a record $1.26 billion, or 6.8 percent, and increased retail first-mortgage loan production by 66 percent — originating $646.9 million, up from $389.4 million a year earlier. Finally, he reported that nonperforming loans had increased to $288.6 million, or less than 1 percent of total loans, up from $217.6 million at the end of 2008, because

of increased unemployment.

“Ron Hermance is proof positive that conservative, old-fashioned business principles ultimately win in banking,” one money manager says.

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