In the banking world, Ron Hermance was known as a skillful leader who helped build Hudson City Bancorp into a $38 billion-asset company that largely avoided the credit implosions that doomed many other banks during the financial crisis.
But in the communities of western New York, where Hermance grew up and began his banking career, he's best remembered as someone who never forgot his friends and who regularly returned to the area to lend support to local institutions. Hermance, 67, passed away on Thursday.
"Certainly, we are impressed by his meteoric rise in banking, but he always kept in contact with those friends he established here," said Greg Peterson, a lawyer at Phillips Lytle in Chautauqua, N.Y.
Hermance was born in Batavia, N.Y., about 42 miles east of Buffalo. He graduated in 1969 from St. John Fisher College in Rochester, N.Y., where he later would serve on its board of trustees. His first banking job was at Bankers Trust in Jamestown, N.Y.
It was in Jamestown that Hermance met Peterson and formed a lifelong friendship. Hermance recently served as the chairman for the 10th anniversary of the Robert H. Jackson Center in Jamestown, which Peterson helped establish and which honors the former Supreme Court Justice. Peterson asked Hermance to take the position, even though he lived in New Jersey and was busy with Hudson City.
"Ron extended himself to the community in many ways," Peterson said.
Hermance "certainly is respected and admired in the banking industry, and he grew the bank in a phenomenal way," said Stan Lundine, a former New York state lieutenant governor who was mayor of Jamestown when Hermance lived here.
Hermance clearly felt a bond to his roots in western New York, but, make no mistake, he was also an expert at bank management, said James Abbott, director of investor relations at Zions Bancorp. Specifically, he pushed Hudson City to a business model that was deemed boring in the early 2000s, but which later proved to be the correct course, Abbott said.
"For all intents and purposes, he entirely avoided subprime," said Abbott, who once covered Hudson City as an analyst at FBR Capital.
Hudson City Savings Bank was formed as a mutual bank in 1868. By the late 1990s, when Hermance joined Hudson City, the time was ripe for the bank to consider converting out of its mutual status. Hermance waited until 2005 to launch the second-step conversion, which was perfect timing, Abbott said. As a liability-sensitive bank, Hudson City could have gotten in trouble when interest rates started to rise.
"He said he was going to sit on that second-step conversion until he needed it," Abbott said.
Hermance pounced on the conversion when former Federal Reserve Chairman Alan Greenspan started to raise interest rates. "He held that very large bazooka until the time was right," Abbott said. "You can do a lot of little things wrong over the years, but if you get the big things right, you can create a lot of shareholder value."
The late executive also had a good blueprint for operating a thrift; he didn't rely too heavily on residential mortgages. "If you just had mortgage, a lot of those companies are gone: IndyMac, Washington Mutual, and others," Abbott said. "His business model was particularly tuned to protect against credit risk."
Specifically, Hudson City focused on jumbo mortgages with loan-to-value ratios ranging from 60% to 65%. That was a business model that other thrifts copied, Abbott said.
Hermance's influence was felt on the mortgage business in other ways. He was a longtime director of the Federal Home Loan Bank of New York.
"Ron was a true community banker and our cooperative benefitted, and continues to benefit, greatly from his guidance," said Jose Gonzalez, president and chief executive of the Federal Home Loan Bank of New York.
Hudson City did run afoul of regulators following the financial crisis. In 2011, regulators pushed the company to restructure its balance sheet to reduce its interest rate risk. Management reduced its high-cost borrowings and sold off mortgage-backed securities in moves that dramatically cut into its first-quarter after-tax earnings.
Hermance took a nearly six-month leave of absence from Hudson City in early 2012 to receive a bone marrow transplant after being diagnosed with a blood disorder. Two months after returning, he orchestrated the company's agreement to sell itself to M&T Bank in Buffalo. (His health was among the considerations for selling.)
That deal remains in limbo more than two years later, as M&T continues to work through compliance issues raised by regulators. Still, the companies have expressed optimism that they can close the transaction by the end of this year.
"We've long admired Ron's commitment to Hudson City's employees, customers, shareholders and communities," M&T said in a statement Friday. "Ron's western New York roots provided him with values and perspective shared by us here at M&T."
Hudson City on Friday named Denis Salamone, its chief operating officer, to succeed Hermance.