New York City Thrift Takes a Stake in Neighbor It Covets

A midsize community thrift in Manhattan is staking a claim in a Queens thrift that it thinks would make a good merger partner.

BFS Bankorp has bought almost 5% of the shares in Long Island City-based Financial Bancorp, a $262 million-asset thrift with five branches in Queens and Brooklyn. BFS, parent of Bankers Federal Savings, had originally purchased 6.3% of the stock last month, but dropped down to ensure that it did not go over 5% without regulatory permission.

The move is the latest in a year in which New York City's community banking market has become rife with mergers, or talk of them.

BFS chief executive James A. Randall explained that while the thrift's officials saw Financial as a good investment, they also perceived a good match for an acquisition.

In particular, Mr. Randall noted that $621 million-asset BFS has had strong loan generation, producing a loan-to-deposit ratio of 130%. Financial, by contrast, has only 68% of its assets in loans, keeping earnings somewhat weak and depressing its market value, Mr. Randall said.

BFS reported earnings of $2.5 million in its third quarter ending June 30, a 13% increase over the year-earlier period. Its return on equity for the nine months ended in June was 21.92%. Financial, which follows the same fiscal year as BFS, earned $505,195 in its June 30 quarter, up 16%, but its nine-month ERA was just 7.34%.

"Their weakness appears to be earnings, which happens to be our particular strength," Mr. Randall said. "That would seem on the surface that we ought to have at least a conversation."

But he cautioned that while he has expressed his interest to Financial officials, BFS has not had any formal discussions with the Queens institution.

Indeed, Mr. Randall suggested that the talks could simply lead to an agreement to cooperate in loan participations or other business dealings, rather than a merger.

BFS' interest comes at a tricky time for Financial. Last week, the thrift's chief executive, Stuart G. Hoffer, resigned suddenly to "pursue other business interests," though officials did not release specifics.

He has been replaced by Frank S. Latawiec, a former senior vice president with Brooklyn-based Hamilton Federal Savings Bank, which was purchased by New York Bancorp in April 1995. Mr. Latawiec joined Financial's board at the beginning of the year.

Mr. Latawiec confirmed that he has talked with BFS "and will probably be talking in the future," but only about general business issues, "with no other goal in mind."

"My job at this point is just to put together all the options for the directors and to try to grow the bank," he said.

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