Impeccably dressed and sporting a dark tan, Richard Kraemer leans back in an office armchair and lights a seven-inch Monte Cruz cigar. A thin plume of smoke streams from his lips.

The chairman and chief executive of Crossland Federal Savings has ample reason to feel satisfied.

At this time last year, criticism was rife over the Federal Deposit Insurance Corp.'s handling of Crossland, including the installation of a new management team led by Mr. Kraemer, and the thrift's sale to 45 institutional investors.

The General Accounting Office charged that giving Crossland a $1.2 billion cash infusion was not the cheapest way to save it.

Meanwhile, the Association of Bank Holding Companies screamed nationalization and accused the FDIC of giving the thrift an unfair edge against private-sector banks.

Perhaps most controversial was the decision to grant investors five years of protection against losses on Crossland's then $2.8 billion of troubled assets. (The thrift currently has about $4.5 billion of total assets).

The agreement called for the FDIC to pay 80% of losses on those assets after a $179 million reserve was eaten up.

"I think the net chargeoffs are going to be a lot more than $179 million," Arlington, Va.-based banking consultant Bert Ely said at the time. "That means the FDIC is going to be writing checks."

But now it's Mr. Kraemer's turn to smile. Since the loss-sharing agreement was put into effect in August 1993, the thrift's reserve level has never fallen below $150 million.

"Our reserve level is constantly policed and recorded," the 50-year-old chief executive says. "I don't think we'll ever use it and I hope we never have to use it."

Although second quarter results were less impressive than those of March 31, Crossland seems to have turned the corner toward good health.

Nonperforming assets and troubled debt restructurings have been cut by substantially more than half from a year ago, to $1 billion.

The bank earned $7.7 million in the second quarter, or 61 cents a share.

Though this is nowhere near the first quarter's robust $15.7 million of net income, or $1.26 a share, it is still miraculous when one thinks of the $308 million Crossland lost in the first nine months of 1991.

Mr. Kraemer isn't concerned about the thrift's lackluster second quarter: "We had a major concentration borrower default," he says. This one problem asset single-handedly boosted nonperforming assets some $33 million.

Fortunately, the amount of troubled debt restructurings fell at the same time, from $420 million to $386 million, more than compensating for the jump in nonperformers.

The two figures are reported together as one lump of "troubled assets" that Mr. Kraemer must whittle down to make Crossland more attractive to potential acquirers.

Although he protests that the bank is really not for sale, Mr. Kraemer admits that he's "not a CEO who looks to stay. We're not marketing this company, but we're realistic about the market, and it's pretty hot right now."

Mr. Kraemer can also take credit for the bank's low cost structure. Its offices on Montague Street in downtown Brooklyn are plain to the point of shabbiness.

His own office, with its imitation wood paneling, looks more like a suburban rec room than the posh inner sanctum of a chief executive who runs a $4 billion-asset bank holding company.

The company has kept expenses down and relative to its peers (Dime Bancorp, Astoria Savings Bank, and Green Point Savings Bank), it can also get a bigger earnings boost from future cost cutting.

Crossland's efficiency ratio was a whopping 72.3% at the end of the second quarter, but analysts warn that given the bank's still-burdened balance sheet, the number gives less than a true picture.

A better indicator is Crossland's low cost of deposits, which runs less than 3% while other New York thrifts are paying between 3% and 4%, according to Keefe, Bruyette & Woods Inc.

To drive expenses even lower, Crossland recently contracted its retail brokerage operations out to GE Capital's GNA Corp.

By the fourth quarter, all of the bank's computer operations will also be outsourced.

These moves are apparently aimed at cutting Crossland down to its core franchise, which mainly comprises 38 retail branches in New York and New Jersey.

More than half the branches and deposits are concentrated in Crossland's home borough of Brooklyn.

Few others are better positioned to clean up and sell Crossland then Mr. Kraemer, a Brooklyn native who cut his teeth appraising real estate deals for the Dime twenty years ago.

After running and losing, a thrift called Central Savings due to sky-high deposit rates in the early 1980s, Mr. Kraemer went on the become the CEO of Home Savings Bank, $1.6 billion-asset Brooklyn thrift, which he sold to H.F. Ahmanson for $250 million -- a sum that pleased many of his investors.

A good number of those same investors now own stakes in Crossland and came on board specifically because Mr. Kraemer was in charge.

"A lot of these investors I've known," he says. "They made money on me last time with my last company. When things are good, everybody's happy."

Needing to keep current investors smiling, Mr. Kraemer formed a bank holding company called Brooklyn Bancorp under whose symbol Crossland could trade.

"I didn't want to trade under Crossland's old name because people had lost money on that," he says. "It would be very costly to change all the names of the branches so we formed a bank holding company instead."

But investors aside, certainly no one has a greater incentive than Mr. Kraemer to sell the bank. He stands to gain more than $2 million in cash and stock if the thrift is successfully acquired.

The names of institutions that might want to buy Crossland can be read off any list of its competitors. Dime Bancorp would make a good fit, analysts and insiders agree.

It's the No. 3 franchise in Brooklyn in deposit market share, while Crossland ranks fourth.

The Dime may also need Crossland's more than $4 billion of assets to bulk itself up to s ark the interest of an out-of-state acquirer, if it decides it no longer wants to remain independent itself.

But Dime's pending acquisition of Anchor Bancorp will keep it busy for at least a year, analysts say, and they expect Crossland to get an offer sooner than that.

Green Point Savings Bank is another possible candidate. No. 2 in deposits in Brooklyn, Green Point is flush with cash since it went public earlier this year.

Astoria Savings Bank, with $6.5 billion of assets, would also make sense. But Astoria just agreed to a large acquisition in July, of $2 billion-asset Fidelity New York FSB.

Analyst Thomas Theurkauf Jr., of Keefe, Bruyette & Woods says Astoria is focusing on smaller banks now.

Republic New York Corp. and Chase Manhattan Corp. are contenders, too. Both approached the FDIC with offers for Crossland's New York assets when the thrift was in federal receivership.

Says Mr. Theurkauf: "Republic has historically had an interest in the New York thrift group and it is perceived as a savvy buyer. But H.F. Ahmanson is also possible. They have a presence here in New York which I think they'd like to build over time."

Ahmanson knows Mr. Kraemer, too. He ran both Home Savings and the Bowery Savings Bank for the country's largest thrift company after he engineered the sale of Home Savings to Ahmanson in 1990.

Regardless of who finally acquires Crossland, Mr. Theurkauf says a deal will likely be consummated after the thrift does a bulk sale of troubled assets for about $200 million or more.

"The stock has appreciated and has been trading in the range of $35.75," Mr. Theurkauf says. "We still think the takeout range will be north of $40," or between 1.5 and 1.6 times Crossland's book value of $27 a share. "And we still think the bank is likely to be acquired. It's just a matter of when."

What makes the thrift an even more enticing target is its loss-sharing agreement with the FDIC.

Any acquiring institution would inherit that insurance policy, which will continue to cover Crossland's problem assets until 1998.

Banking Consultant Ely said in an interview recently that he continues to think the FDIC will have to shell out cash to cover losses at Crossland.

"The reserve hasn't been used yet. but that doesn't mean it won't be," he warned. He maintains that when the federal agency rescued Crossland in the eighth-most-expensive bank bailout in history it "was trying to preserve a franchise that didn't deserve to be preserved."

But from his office in downtown Brooklyn, Mr. Kraemer waits for the offers to roll in. And knows the home stretch is in sight.The Battle for Brooklyn DepositsRank Institution Dollars in millions Share1 Chemical Bank $3,473 13.13%2. Green Point Savings Bank $2,192 8.29%3. Dime Savings Bank $2,188 8.27%4 Crossland Federal Savings Bank $2,148 8.12%5. Citibank $1,966 7.43%

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