Like many corporate bosses, officials at Hubco Inc. say they owe a lot of their success to their customers. But the New Jersey company has found an unusual way to give some of the profits back.
Hubco plans to roll out a program next month offering discounts on company shares to loyal customers. Patrons of any of its three bank subsidiaries will be offered a 1% discount on shares for each year they have been a customer, up to 10%.
The $6.8 billion-asset company, based in Mahwah, outlined its plans in documents filed this month with the Securities and Exchange Commission. It will commit $1 million to the discounts, which will be capped at 100 shares per customer.
"It's our way of saying 'thank you' to all of the customers who have made us successful," said president Kenneth T. Neilson. "Hopefully, it will introduce our customers to us as an investment, and not just as a bank."
Analysts said Hubco is not the first bank to offer shares to customers at a discount, but it may be the first to tie that discount directly to loyalty.
All customers over the age of 18 who have been with one of the company's banks for at least a year will be invited to buy shares. The stock will be offered through Hubco's dividend reinvestment plan, which requires a minimum $500 investment. At a current price of around $33 a share, that would require customers to buy 16 shares to be eligible.
Interested parties would buy the shares on the open market from Hubco's transfer agent, American Stock Transfer & Trust Co. in New York. American Stock Transfer would charge buyers the discounted rate and bill Hubco for the difference.
A customer who is entitled to the maximum discount and buys 100 shares would save about $335 at the current share price. But Mr. Neilson said the reward could be substantially more, pointing out that a $100 investment in the company's stock in 1990 is now worth more than $1,700.
Mr. Neilson said he does not expect a negative reaction from current shareholders. "I think our shareholders recognize it is our customers who drive our results," he said.
"It has the potential to solidify relationships with customers, without really upsetting anyone," said Christopher J. Parker of Ryan, Beck & Co. in Livingston, N.J. "I think it is a good move."
The offer will be unveiled to the public in April, after Hubco completes the consolidation of its three subsidiaries. The company's 160 branches, spread throughout New Jersey, New York, and Connecticut, are unifying under the name Hudson United Bank. The holding company also plans to change its name to Hudson United Bancorp.
The promotion will continue until Hubco spends $1 million on discounts, which "could happen pretty quickly," Mr. Neilson said.
Hubco could subsidize up to three million shares-or 7.5% of its 39.7 million outstanding-if every customer who takes advantage claims only a 1% discount.
