N.Y. Market Running Out of Takeover Targets

Like many bankers, Thomas S. Johnson, chairman and chief executive officer of Greenpoint Financial Corp., wants to expand his business by making acquisitions.

"There are $60 billion worth of deposits in the New York area just waiting to be consolidated," he says. "Think about how attractive that would be to a NationsBank or First Union if they were all in one place."

But Mr. Johnson, used to thinking big after his experience as a top executive at the former Chemical Banking Corp., acknowledges his vision is hindered by one not-so-small factor: There just aren't many banks or thrifts for sale.

Five years ago just about any small or midsize New York-area financial institution could be had for a song. Today most of the people who turned around these companies are reluctant to get out when business is good.

"It seems like there are a lot of buyers right now but not so many sellers," observes Kenneth Pugilisi, bank analyst at Sandler O'Neill & Partners, a firm whose investment bankers advise many small and midsize banks and thrifts.

Though the region has not been bereft of deals-Greater New York Savings Bank recently sold to Astoria Financial Corp.-bankers are likely to think twice after reviewing the region's most recent deal.

Last month New York Bancorp, a thrift based in Douglaston, N.Y., agreed to sell to North Fork Bank of Melville, N.Y., for $812 million, or an astronomical 4.8 times book value. North Fork chief executive John Adams Kanas justified the high price by explaining that the bank offered a unique opportunity to expand into the boroughs of Brooklyn and Queens.

Industry observers say New York Bancorp agreed to the deal because its controlling investors decided now was the time to cash out.

But Mr. Pugilisi said few bankers in the New York area have the traditional motivations to sell-namely aging managements or cash-strapped businesses.

Many New York institutions are thrifts that recently converted from mutual to public ownership. For example, Rosalyn Bancorp went public in January at $10 per share, Long Island Bancorp in 1994 at $11.50, and Astoria Financial Corp. in 1993 at $25.

Today, thanks to booming market for financial services stocks, Rosalyn trades at $24, Long Island is up to $45, and Astoria trades at $56. Executives at these companies usually own large amounts of stock, so they are sitting on tremendous wealth. And with their stock performing so well, few if any face pressure to boost share price by selling to another company.

Another reason consolidation has largely passed New York by is the long- standing reluctance of banks to buy thrifts-especially when the thrifts have suits against the government seeking damages over goodwill.

But recently the dealmakers on Wall Street have created securities that they think will make bank-thrift mergers more attractive.

These securities separate the share value of the thrift from the value of the thrift's goodwill suit. Though the concept has been around for some time-CalFed issued them a year ago in connection to its sale to First Nationwide Bank-investment bankers and attorneys are refining these deals.

Last month Golden State Bancorp., parent of Glendale Federal Savings Bank, issued goodwill-related securities that can be obtained tax-free.

Several New York-area thrifts, such as Dime, Astoria, and Long Island Savings Bank, have similar suits, and Credit Suisse First Boston managing director Oliver Sarkocy said he believes that banks and thrifts will be more willing to ante up for New York-area financial institutions as they learn more about the tax-free securities.

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