Magazine article American Banker

Hudson City Eyes Online Deposits to Finance Loans

Magazine article American Banker

Hudson City Eyes Online Deposits to Finance Loans

Article excerpt

Hudson City Bancorp Inc. in Paramus, N.J., said it plans to start an online-only deposit product to reduce its dependence on borrowings to fund loan growth.

The $39.7 billion-asset thrift company is the latest company to say that it will add an online option to attract lower-cost deposits from outside its market.

"Right now we can't grow deposits fast enough to implement our loans," said Ronald E. Hermance Jr., Hudson City's chairman, president, and chief executive officer.

Plans are still being worked out, but the company would like to roll out a product with competitive rates by yearend, the CEO said in an interview last week.

In the second quarter Hudson City's deposits rose 20% from a year earlier, to $14.2 billion. Mr. Hermance said the company generally aims for annual deposit growth of 15% to 20%.

"I would expect that through Internet sources you would be able to exceed that goal," he said. Eventually, he said, he would like deposits to make up 50% of total liabilities, compared with 42% at the end of the second quarter.

Hudson City plans to continue to open branches in its New Jersey, New York, and Connecticut markets, with most slated for Connecticut and Westchester.

It expects to have about 120 branches by yearend, compared with 93 at the beginning of 2006, and to open as many as 10 next year.

Finding a new source of deposits is important given rising borrowing costs in an adverse yield curve environment, Mr. Hermance said.

"You can't be all borrowings," he said. second-quarter borrowings rose 42% from a year earlier, to $20.7 billion, and were 52% of the company's assets.

Hudson City's loans rose 8% from the first quarter and about 29% from a year earlier, to $21.9 billion. Some of that growth came from an increase in jumbo loan purchases.

But Mr. Hermance said Hudson is very careful about the types of loans it buys from brokers. …

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