Magazine article American Banker

Cash-Flush Hudson City Eyes Multistate Expansion

Magazine article American Banker

Cash-Flush Hudson City Eyes Multistate Expansion

Article excerpt

Eight months after opening its first out-of-state branch, Hudson City Bancorp of Jersey City is set to start adding more at a furious pace.

Flush with nearly $4 billion from a record-shattering stock sale this month, the $21.1 billion-asset company is thinking about entering or expanding in a long list of markets in Connecticut, New York, and Pennsylvania. It has also earmarked a number of New Jersey markets for growth.

It expects to open 10 to 15 branches a year for the "foreseeable future," said Ronald E. Hermance Jr., its chairman, president, and chief executive officer. "We're in the sweet spot," he said. The money from the conversion "just fuels our strategy."

Hudson City, founded as a mutual thrift in 1868, converted to a mutual holding company in July 1999, selling a 47% ownership stake to the public for $528 million.

It completed its public offering 10 days ago. In a second-step conversion, it sold the 53% ownership stake it had held as a mutual holding company, netting a whopping $3.93 billion.

That was the seventh-largest public offering in history, and the largest ever by a banking company, according to Ben A. Plotkin, the chairman and CEO of Ryan Beck & Co., which managed the sale.

In October the 147-year-old Hudson City Savings, its only bank, opened its first out-of-state branch, in Southold, N.Y., on New York's Long Island. When that branch proved successful, the company followed with plans for two more, in the New York City borough of Staten Island.

The Northeast corridor, in which Hudson City plans to expand, is one of the most competitive banking markets in the country. It has already seen significant branching by a number of companies, including Bank of America Corp. of Charlotte; Commerce Bancorp Inc. of Cherry Hill, N.J.; Webster Financial Corp. of Waterbury, Conn.; and North Fork Bancorp of Melville, N.Y.

James M. Ackor, who covers Hudson City for Royal Bank of Canada's RBC Capital Markets, said the fact that Hudson City's branch expansion follows so many others is worrying.

"I'm not 100% comfortable," he said. "The de novo activity we've seen the past five years makes your head spin. You've got branching strategies across the country that are getting bigger by the quarter."

When New Haven Savings Bank converted to public ownership last year, it changed its name to NewAlliance Bancshares Inc. and used the $1 billion it raised to simultaneously buy two banks.

When Hudson City announced in December that it planned to conduct a second-step conversion, there was some speculation among analysts and investors that it might do some deals as a way to put some of its excess capital to work quickly. Mr. Hermance, however, has made it clear that the company has nothing dramatic on its agenda. …

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