Hudson City Savings Bank

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Hudson City Savings Bank Overview: Hudson City Savings Bank is headquartered in Paramus, NJ and has branches mainly in New Jersey, but also in nearby areas of New York and Connecticut. In 2005, Hudson City Savings Bank completed its conversion from a mutual savings bank to a stockholder-owned institution. Hudson City Savings Bank focuses entirely on lending to individuals in these areas:

  • Home mortgage loans
  • Home equity loans

Takeover by M&T; Bank: On August 27, 2012, M&T; Bank announced a $3.7 billion deal to acquire the shares of Hudson City. M&T; is a regional bank headquartered in Buffalo, New York. Warren Buffett’s Berkshire Hathaway Inc. holds roughly a 6% stake. The impetus for the merger was twofold: M&T;’s desire to enter the New Jersey market, and Hudson City’s desire to enter commercial lending.

Size: Hudson City Savings Bank reports these figures as of June 30, 2012 (except for employees, which are as of December 31, 2011):

  • Branches = 135
  • Employees = 1,486 full time, 159 part time
  • Assets = $43.6 billion
  • Deposit Accounts = 700,000

M&T; Bank, meanwhile, has 735 branches and $80.8 billion in assets.

Positives: Avoiding the financial crisis due to conservative lending policies, Hudson City Savings Bank reported record profits in 2008, $445.6 million. This was an increase of 50.6% over the results for 2007.

Forbes magazine has named Hudson City Savings Bank the best managed bank in America in both 2007 and 2008. The Wall Street Journal ranked Hudson City among the companies with the best shareholder performance in 2007. Forbes also has named Hudson City Savings Bank CEO Ronald Hermance as one of the top 10 CEOs in the U.S., based on shareholder returns relative to his compensation. Jim Cramer named Hermance banker of the year for 2007 on his Mad Money program. Hudson City also regularly ranks high in surveys of the most efficiently-run banks.

Negatives: While Hudson City Savings Bank is the largest savings bank in the U.S. by market capitalization, and among the top 50 banks in assets, it nonetheless operates in a limited geographic area and has small staffing requirements relative to its major national competitors.

Additionally, Hudson City has been hit by a wave of mortgage refinancing as interest rates have drifted downwards after the 2008 financial crisis. This has squeezed profit margins and spurred the strategic imperative to diversify into commercial lending. The bank also incurred a $1.9 billion extraordinary loss on the retirement of debt late in 2011; another consequence of lower interest rates has been an increase in the value of older bonds issued by the company that bear higher coupon rates.

The acquisition by M&T; Bank remedies these problems to a large degree. Moreover, since M&T; does not operate in Hudson City’s home market of New Jersey, there are no plans to close or consolidate branches. Instead, initial plans are that about 100 new commercial bankers will be hired to work in Hudson City branches.

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