A N.Y. thrift on the road to recovery.

Once-ailing River Bank America appears to have dragged itself off death's doorstep.

The New Rochelle, N.Y.-based thrift has cut millions of dollars in nonperforming assets out of its books and ruthlessly slashed overhead. And, in a crucial move last month, River raised $84.5 million in an institutional offering.

"The way this thing was snapped up I felt like a June bride, awfully tired, but very happy," said Jerome R. McDougal, who became president and chief executive of the $1.5 billion-asset thrift in March 1991.

River was slammed by the nation's commercial real estate debacle. During the last four years, it lost nearly $132 million, and nonperforming assets soared to 28.8% of total assets.

Takeover Potential

But River is proving that even the ugliest institutions can have appeal. Investors like the thrift because it has a relatively new management team - an experienced real estate workout group that has reduced bad assets from a 1992 peak of $225 million - and because it could be a prime takeover candidate once its problems are solved.

"The investors are looking to the accomplishments of the past as an indicator of what can be achieved in the future," said Rock Tonkel, managing director with Friedman, Billings, Ramsey & Co. Inc., a Rosslyn, Va.-based investment banking firm that worked with Bear, Stearns & Co. to sell the securities.

In all, River sold 5.5 million shares of common stock at $9 a share, and 1.4 million in preferred stock at $25 a share. Alvin Dworman, River's largest shareholder, along with Pritzker Interests, and Odyssey Partners, a real estate venture capital firm in New York, kicked in $18 million and own 51% of the common stock.

Rebuilding Capital

The funds are being used to rebuild River's capital base - its leveraged capital ratio now stands at 7.87%, compared with the dangerously low 2.2% of a year ago - and work out more bad assets, which Mr. McDougal said stand at about 19% of total assets.

Heading the workout is Douglas P. Benach, who was a real estate developer and consultant before joining the thrift. Mr. Benach and his group are "not traditional savings bankers," Mr. McDougal said. "They are real estate people. They know their business."

Mr. McDougal said the bad loans, which are primarily commercial real estate and multifamily credits in New York and California, will be trimmed by $160 million this year, and by another $80 million in 1995.

"It is a high-quality portfolio," he said. "We don't have any properties that have to be bulldozed."

The strategy is to make more multifamily and residential loans and bend over backward to make customers happy. "We are not going to try to do any trailblazing," Mr. McDougal said.

If the bank continues to improve it could be an attractive acquisition target.

Stock Incentives

Incentives are built in for management to shape up the thrift and sell. A phantom stock plan has been set up for key employees that provides them with 200,000 performance units, or shares. Vesting would accelerate upon a change in ownership. Several key employees also stand to triple their salaries if River is acquired.

Mr. McDougal said River is making progress on other fronts besides real estate.

The thrift recently settled a tax dispute with New York City by agreeing to pay $2 million against claims of about $5.2 million. The thrift has reserves to pay the claim.

New York State, however, says River owes $4.6 million in taxes from 1985 to 1987. The thrift is fighting the claim.

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