Hudson City Bancorp CEO upbeat on 2008

By Jonathan Stempel

NEW YORK (Reuters) - Hudson City Bancorp Inc (HCBK.O: Quote, Profile, Research, Stock Buzz) Chief Executive Ronald Hermance said on Wednesday the big New Jersey savings and loan is poised for a "break-out" year in 2008, aided by a boom in refinancings and falling short-term interest rates.

"This will be as good a market for me in 2008 as in 2003, which was the last refinance (boom)," Hermance said at the Reuters Housing Summit in New York. "Yesterday in a (company) meeting, when we looked at each other, we're almost semi-giddy by saying, wait a second, we're dropping deposit rates and raising mortgage rates. When have we done that?"

Hudson City, based in Paramus, has largely skirted the U.S. housing crisis despite specializing in mortgages.

The third-largest U.S. thrift uses what it calls its strong capital base and low operating costs to attract lower-risk customers who want high-yielding deposits, and want to borrow money to take out or refinance loans for one-family, owner-occupied homes.

Though sour loans more than doubled from a year earlier, fourth-quarter profit rose 12 percent to a record $77.5 million, or 16 cents per share. Analysts on average expect the company to earn 82 cents per share this year, up from 58 cents in 2007, according to Reuters Estimates.

Shares of Hudson City were up 25 cents at $15.59 in late-afternoon trading. Through Tuesday, they had risen 11 percent in the last year, compared with a 29 percent drop in the KBW Regional Bank Index .KRX, which includes the thrift.

Hudson City said it operates 119 branches in New Jersey, southeastern New York and southwestern Connecticut, including in nine of the nation's 50 wealthiest counties.

It ended 2007 with $24.2 billion of loans and $44.4 billion of assets, and expects to become the largest banking company based in New Jersey when Toronto-Dominion Bank (TD.TO: Quote, Profile, Research, Stock Buzz) finishes buying Cherry Hill-based Commerce Bancorp Inc CBH.N next month.

1-800-WHO-AM-I-CALLING?

Hermance said Hudson City is now offering fixed rates of 6.125 percent on 30-year mortgages and 6.375 percent on 30-year "jumbo" mortgages.

He said his customers are relatively low-risk, typically putting 41 percent down to borrow for a home, and like how Hudson City holds onto their loans rather than selling them.

"It meant something to the mortgagor who would call us and say, 'I like the fact I can call someone about my escrow, or I like talking about why did this change or why did that change, and I don't have to dial 1-800-HOUSTON-TEXAS,'" Hermance said.

About 80 to 85 percent of loans Hudson City makes are fixed-rate, though it tries to buy adjustable-rate mortgages to bring its securities portfolio to a roughly 50-50 mix between fixed- and adjustable-rate loans, he said.

Hudson City got a big capital boost in 2005, raising $3.93 billion to finish its conversion into a fully public company.

One condition of the conversion was that Hudson City not agree to a takeover before June 7, 2008.  Continued...