Ridgewood Savings Bank is looking to become a more prominent player in the New York market with the dozen branches it gained by buying City and Suburban Financial Corp. in Yonkers last month.
But William C. McGarry, Ridgewood's chairman, president, and chief executive officer, said the $119 million cash acquisition — the first whole-bank one in its 86-year history — does not signal any "sea change" for the mutual thrift.
"We're not about to start on something totally different than what we have been doing," he said.
With the City and Suburban acquisition completed, Ridgewood has about $4.1 billion of assets and 35 branches in seven counties. It acquired three branches in Westchester County and two in Manhattan — both new markets for Ridgewood. It also bulked up in the Bronx by adding seven branches to the two it opened there this year.
Mr. McGarry, 56, said in an interview that he sees "a lot of opportunity" for Ridgewood to attract retail customers in those areas with its brand of "personal touch" banking. It has a major marketing initiative under way, including the first cable television spots in its history. The theme is "We treat you like family."
City and Suburban was mostly a commercial real estate lender, so Ridgewood stands to generate more business in the acquired branches as it introduces residential lending and a larger array of consumer products there, Mr. McGarry said.
"Residential lending is a forte of ours, and that's something they didn't do," he said.
City and Suburban's commercial real estate expertise also should benefit Ridgewood, but "it doesn't mean a whole new direction for us," Mr. McGarry said. "We have been growing our commercial real estate lending, but residential lending has been growing, as well."
In the first quarter Ridgewood's commercial real estate lending increased 4.6% from a year earlier, to $98.9 million, while its one- to four-family residential mortgages increased 9.2%, to $1.7 billion, according to data from the Federal Deposit Insurance Corp.
Mr. McGarry said the acquisition more than doubled Ridgewood's commercial real estate portfolio, which was about $300 million before the deal.
He also said Ridgewood is happy to remain a plain-vanilla thrift with steady, even if sometimes slow, growth. He repeatedly used the words "patience" and "prudence" in discussing its strategy. "It's not as if we have to build up the franchise for sale," Mr. McGarry said.
Ridgewood is one of the country's largest mutual thrifts, and even though it has been told that a public offering could raise up to $2 billion, Mr. McGarry insists it intends to remain a mutual.
"Mutuality is a core value of ours — always has been," he said. "We don't look to short-term profit pressures and sacrifice our long-term prospects."
Though it has dabbled in insurance and wealth management through partnerships, those fee income opportunities are not a focus, as they might be for other margin-squeezed companies, Mr. McGarry said. "We know we can't be all things to all people."
Like others in the industry, Ridgewood's profit has shrunk lately. Its first-quarter net income fell 17% from a year earlier, to $4.5 million. Its net interest margin contracted 31 basis points, to 2.6%, well under the average of 3.03% for thrifts of its size.
But its mutual status allows it to put less emphasis on quarterly results, Mr. McGarry said.
Though no analysts follow Ridgewood, Mark Fitzgibbon, the director of research at Sandler O'Neill & Partners LP, covers several publicly traded thrift companies in the New York market, including the $21.4 billion-asset Astoria Financial Corp. in Lake Success. He said he thinks the recent disruption in the mortgage market is likely to benefit thrift companies.
"This kind of environment, I think, will probably be really good for companies like Ridgewood and Astoria and some of the other more traditional kind of thrift institutions. As players like Countrywide and the giants out there in the mortgage market are forced to pull back, what's happening is that pricing is getting better on new loans," he said.
"The biggest beneficiaries of that are going to be the portfolio lenders like Astoria and like Ridgewood, who are now able to book more loan production at more attractive interest rates," Mr. Fitzgibbon said. "I think now is a time when these companies could really begin to thrive."
Mr. McGarry said Ridgewood's capital cushion gives it the strength to withstand a difficult environment and the flexibility to take advantage of strategic opportunities. Its core capital ratio was 16.5% in the first quarter, compared with 9.68% for other thrifts of its size, the FDIC data indicated. Now that the acquisition has closed, he expects the capital ratio to drop "from the 16-plus area to 13-plus."
All that capital does hurt Ridgewood's profitability ratios. Its first-quarter return on assets was 0.53%, versus 0.70% for the peer thrifts, according to the FDIC.
But Mr. McGarry said he does not consider the company overcapitalized. "It helps us control our destiny."
The cash came in handy when it entered the Bronx, he said. "Dot-by-dot de novo would be a very slow process and slow branding as well, so for some time we've looked at the possibility of an acquisition."
Ridgewood sought out City and Suburban as a potential partner. Mr. McGarry said Ridgewood identified areas in the Bronx where it wanted to put branches and noticed that City and Suburban already had branches in some of those areas. He said he then found out that City and Suburban would hit the 10-year anniversary of its S corporation status this year. (Selling before that milestone would have generated more substantial taxes for shareholders.)
Though initially expressing no interest in a deal, City and Suburban later reconsidered, Mr. McGarry said.
Now Ridgewood plans to "solidify" its Bronx and Westchester operations, and maybe expand even farther north, he said.
Ridgewood has stepped up its branching lately; it has built 10 branches in the past eight years, including five this year, he said. However, "it's a process we look at very prudently, because we plan to be around for a very long time."