Under U.S. Banker's expanded definition of banking and strictly return-oriented ranking of performance, North Fork Bancorp., based in Melville, NY, was the only top-ranked company from previous years to make it to the top this year. It's also the only traditional bank-focused solely on commercial banking-even to reach the Top 10.One glance at the numbers shows why. Last year, North Fork returned a stellar 28.% on average equity, and its average annual ROE over the past five years was 21.4%. That performance took place during a period when North Fork's assets, $12.1 billion at the end of 1999, expanded rapidly-thanks in part to a string of acquisitions in the New York metropolitan area, primarily in New York City and Long Island. North Fork's latest target, New York's Dime Bancorp, is an unwilling partner, and the two are fighting a rancorous battle in court and in the press. (See Endgame, page 80.)Whatever happens with the Dime, North Fork will certainly continue to expand in New York City, a market where CEO John Adam Kanas sees tremendous opportunity. A slew of big mergers in the 1990s turned most of the city's leading retail banks into behemoths, leaving Manhattan and many neighborhoods in Brooklyn and the Bronx "over-consolidated," as Kanas puts it."Our experience in Manhattan has been the best" of any market where North Fork does business. Deposits at the bank's four Manhattan branches, including de novos, have been growing by about 100% a year, Kanas says. "We've gone from $30 million in deposits to $400 million in two-and-a-half years." Better still, he says, is the mix of deposits in those branches: Between 50% and 60% are commercial demand deposits, on which the bank pays no interest. So North Fork's cost of funds in Manhattan is running at about 160 basis points, compared with about 450 basis points on Long Island. He wants the Manhattan deposit base to grow ten times as big within the next three years.A former schoolteacher and son of Long Island duck farmers, Kanas, 53, joined North Fork in 1971 and within a few years became president of the bank. North Fork has been among the best-performing of the 100 largest banks in U.S. Banker's rankings since it's been large enough to make the list. "Over the past four or five years, North Fork has been an extremely focused institution," says Kevin Timmons, a banking analyst at First Albany Corp.The bank is masterful at clamping down on operating expenses, which Timmons considers one of the only factors in banking that a company can truly control. According to its Dec. 31, 1999, call report, North Fork Bank's efficiency ratio dropped to an extraordinary 28.8% from 41.7%-still very low-the year before.Kanas believes that's just one reason for his success. "People always focus on this company's efficiency ratio, but the bigger part of the story is the very different mindset of the employee base," he says.What creates that different mindset? "Incentive compensation," Kanas replies, "and we try not to burden people with things that detract from sales." The bank offers monetary incentives to staff for bringing in cheap deposits, while relegating their record-keeping and administrative functions to a highly automated back office. Timmons lauds Kanas's hands-on involvement with the bank's operations, saying that the structure of the organization has played a crucial role in its success. "He keeps the layers between himself and the front lines to a minimum," he says.Personality clearly also plays a role. The analyst describes how Kanas often shows up unexpectedly in each of North Fork's 154 branches, where he asks employees whether there's anything management can do to make it easier for them to do their jobs and generate more profits. "That's not too typical," Timmons says. "I've seen CEOs who probably couldn't find a branch in a 12-branch network."That management style will undoubtedly be more difficult for Kanas to maintain as his company grows.

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