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On the Line: Hudson City Bancorp CEO Ronald Hermance

While other banks like Citigroup and Merril Lynch are writing off billions of dollar in defaulted loans, Hudson City Bancorp is reporting profits.

The regional mortgage lender’s customers are held to high standards, and that’s why Hudson City’s default rates are so low. Those solid business practices helped the company report a 12% jump in fourth-quarter earnings Wednesday.

And now the Fed has cut rates, helping the bank even more. The lower Fed funds rate boosts the margin between the interest Hudson City pays to borrow money and the interest it charges customers for loans. Chairman, CEO and President Ronald E. Hermance told Cramer today that his bank is still paying out more interest on deposits, but he’ll follow the rest of the industry down.

That Fed funds rate doesn’t have any connection with mortgages, but that didn’t stop Hudson City from lowering its mortgage prices anyway. “We wanted to show the world they’re ready to take on more,” Hermance said.

As Hudson City’s rivals struggle to find capital, Hermance is refinancing loans without trouble – 138 last week alone, he said.

So just how much in write-offs has Hudson City had?

“$105,000 last quarter,” Hermance said.

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