Unless you live in New Jersey, New York, or Connecticut, you may have never heard of Hudson City Savings Bank. But this week, everybody’s hearing about the 126-branch savings and loan. Why? Because the bank brought in $4 billion last year and, more importantly, is still profitable in today’s economic mess. Out of 80,000 mortgages they hold—only about 350 are more than 90 days delinquent. That’s great for Hudson City, but also for its customers, because it means they are not facing foreclosure. What’s Hudson City’s secret?

Old Fashioned Banking

Hudson City Savings Bank owes its success to simple, old fashioned banking practices. They take deposits and write sound mortgages—and not a lot in between. Hudson City doesn’t issue credit cards or business loans. They’re not a banking department store, says Hudson City’s CEO. What they do, they do well.

Hudson City doesn’t issue many exotic mortgages, and the mortgages they write are to borrowers with good credit and—typically—who put a lot of money down. On average, home buyers with Hudson City Savings Bank put 38% down. That helps Hudson City and homeowners avoid foreclosure.

An Eye on Efficiency

Another factor in Hudson City’s success is their emphasis on efficiency. A majority of accounts—high interest long term CDs—cost the bank little to issue (other than interest paid) because the customer isn’t visiting a branch very often. By limiting the services they offer, Hudson Bank is more profitable and can afford to pay depositors more and charge borrowers less.

Few Fees

Finally, Hudson Savings Bank charges far fewer fees than the average bank. Many banks derive a majority of their income from fees that customers never want to pay like late fees, overdraft fees, and transaction fees.

All of Hudson City’s banking practices add up to a play-it-safe small town fee for both customers and investors. In days filled with news of economic doom and gloom, it’s refreshing to hear that banking can can still be done right.

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