Headquartered on New York's Long Island, a notoriously expensive place to operate, North Fork Bancorp. seems an unlikely winner of the banking industry's efficiency sweepstakes.

But just a few minutes with the bank's president, chairman, and chief executive officer, John A. Kanas, reveals how the bank got its industry-leading numbers.

Mr. Kanas, a native Long Islander who has spent all 20-plus years of his banking career with Melville-based North Fork, is a single-minded businessman focused on - some might say obsessed with - increasing the bank's value to shareholders.

His forthright manner and aggressive acquisition style have rubbed more than one competitor the wrong way. But Mr. Kanas said success in the banking business requires such behavior, and he has no plan to change his ways.

"We concentrate on return on equity and improving the value of the company," he said during a recent interview in the bank's headquarters. "In the last five years, we have improved our value by getting big and making acquisitions."

Indeed, analysts said, North Fork's acquisition strategy lies at the heart of its ability to achieve a stunning efficiency ratio of 39.54. (Simply put, an efficiency ratio measures how much it costs, in cents, to generate $1 of operating income.)

The banking company, which has $4.1 billion of assets, has made a living buying neighboring institutions and squeezing costs out.

"We look at a bank we want to acquire," said Mr. Kanas, "and many times the decision as to whether or not to make the acquisition lies in our ability to reduce expenses in that company.

"I guess our assessment with respect to expenses is relatively brutal - we're very frank and very blunt about it."

That bluntness has made him something of a pariah in the Long Island banking community.

One of Mr. Kanas' favorite topics is the urgent need for consolidation on Long Island, and his opinions on this matter often do not mesh well with those of his competitors.

In recent years, North Fork has launched several hostile takeover attempts, some of which were fought off. These tactics have left some Long Island bankers wary.

"North Fork's competitors don't like (Mr. Kanas) because he's aggressive toward the consolidation," said Gary Ford, an analyst at Southeast Research Partners in Boca Raton, Fla. "Talk to people in the investment community like me, though, and they all love him."

Bankers contacted for this article agreed with Mr. Kanas' contention that the Long Island market cries out for consolidation. Yet they question whether the speed with which Mr. Kanas is trying to make this happen hurts the banking services delivered to local communities.

And they wonder whether North Fork can sustain its ruthless cost- cutting.

"In talking with my peers, there is that question of whether he can continue this," said a Long Island community banker, who spoke on condition of anonymity. "I can't see how he can continue to provide the services that a customer is looking for with that kind of efficiency for long."

Mr. Kanas said North Fork would be able to sustain its efficiency ratio because it approaches the banking business in a way that is different from most other institutions'.

The best example of the bank's break with convention lies in its compensation plans, he said. Specifically, North Fork is in the late stages of moving its staff to incentive-based pay.

"We have lots of different incentive programs, and that is probably one of the major reasons for our efficiency ratio," said Mr. Kanas.

"Probably 75% of the staff is involved in an incentive program that adds meaningfully to their pay."

In addition, about 20% of the staff rely on commissions for most of their pay, he said.

Branch managers are one group of employees being offered "meaningful" incentives. The managers are encouraged to operate the branches as mini-businesses, and their pay escalates with the profitability of their offices.

Mr. Kanas said incentive programs cannot be installed overnight.

"This is an industry not heavily populated with incentive-oriented people," he said, "so you can't just say one Jan. 1, 'Everybody goes on incentives.' "

Another reason for the low efficiency ratio is that North Fork runs its own financials through computer models it uses to identify inefficiencies and excesses in acquisition targets.

"This does two things," Mr. Kanas said: "One, it focuses us on what might be going wrong on an ongoing basis in the company. Two, I think it's a good way to focus on the fact that we know that other banks are looking at us occasionally."

Not surprisingly, Mr. Kanas is not a big proponent of technological experimentation. Instead he opts for proven technologies that can yield tangible results.

"We think that technology used to support bank employees, that enables them to provide more efficient service to customers, is the proper use of technology," Mr. Kanas said. "Our religious phrase when it comes to technology is 'Keep it simple.' "

Though the 1990s have become an era in which banks of all sizes dabble in alternative delivery strategies, North Fork is decidedly traditional.

Mr. Kanas said he opposes "taking technology and expecting it to displace labor, shoving it down the throats of customers and trying to make them push their own buttons."

The bank owns about 50 automated teller machines, but it puts them mainly in high-traffic locations that can generate fee revenue for the bank when noncustomers use them.

Mr. Kanas is a strong believer in call centers' benefits, but he said that it is most important for phone operators to be available to customers all the time.

Emerging alternative delivery systems, such as home banking, are an inevitable part of the future, Mr. Kanas said. But current demand for such services does not justify the investment and urgent energy many banks are putting into developing their systems, he said.

"What most people tend to do in this business is to overestimate to a fare-thee-well our ability to change people's buying and service habits with respect to time," he said.

"If you think that home banking - or even telephone banking - is going to change the branch system over the next five years, you're kidding yourself."

For a bank the size of North Fork, Mr. Kanas' attitude toward alternative delivery is prudent, analysts said.

"I'm not looking for North Fork to revolutionize the banking industry; NationsBank or somebody can do that," said Southeast Research's Mr. Ford.

North Fork is "doing exactly what it's supposed to be doing," he said: accelerating the industry's consolidation and keeping its costs as low as possible.

Mr. Ford said North Fork's efficiency numbers are sustainable as long as the bank continues to make in-market acquisitions.

And when the acquisitions dry up? "Then somebody buys them," Mr. Ford said bluntly. "They make a good entry point for a bank that wants to get into their market."

Though Mr. Kanas calls selling North Fork the "last alternative for increasing shareholder value," he is not daunted by takeover talk.

He said he realizes other banks eventually will look to capitalize on the consolidation work that North Fork has done. But he does not spend too much time trying to predict when that might happen because prediction is a dicey business.

"We think we've got a pretty good handle in the next six months," he said. "We've got a reasonable guess as to what's going to happen in the next 12 months. But to begin to plan out beyond three years is a little bit like using smoke and mirrors."

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