Though he is a recognized master of the mortgage business, Thomas R. Ricketts is the first to concede that he cannot control his future. In today's environment, a one-product focus is no guarantee of independence.

As chairman and president of Standard Federal Bank, Mr. Ricketts presides over one of the nation's largest and most profitable thrifts. Based in Troy, Mich., the $10 billion-asset unit, the nation's sixth largest, delivered an eye-opening 1.21% annualized return on average asset in the second quarter.

Despite that sterling performance. Standard Federal's common stock is trading at a limp 1.35 times book value. Stated another way, it is trading at a mere 8.8 multiple over its earnings of the previous 12 months.

Prime Target

Standard Federal is clearly vulnerable to an aggressive bank acquirer.

"Whether we get bought out is an open question," said an unabashedly candid Mr. Ricketts.

Through no fault of his, Standard Federal has become a focal point in an ongoing referendum on the thrift industry. Two major questions loom for healthy thrifts that are at the peak of their profitability.

Do investors dare accord high trading multiples to even healthy thrifts, given the industry's notorious volatility?

And do regional banks dare make major thrift acquisitions, given the really and rate exposure involved in such transactions? in such transactions?

Mr. Ricketts professes not to be overly concerned about the answers to those questions. He said Standard Federal's specialty will remain in demand - no matter the ownership.

"I think there is a place for a financial institution that gathers deposits and invests in housing," he said.

From a purely personal standpoint, the 62-year-old Mr. Ricketts is sitting pretty. A 36-year veteran of Standard Federal, he commands an annual salary of $715,000 and by all accounts could finish out his career at the thrift. On March 1, he was assured a golden parachute worth $2 million if his thrift gets bought out.

Worth the Price

Make no mistake, however. Experts say this is one thrift operator who has the credentials to back his compensation.

At June 30, only 0.67% of Standard Federal's assets were nonperforming. Analysts say the savings bank's 1.39% ratio of annualized operating expenses to average assets is among the lowest in the industry.

Mr. Ricketts has a simple formula for success: Focus tightly on home loan production.

He said Standard Federal has an 18% share of the mortgage origination market in metropolitan Detroit - more than his nearest three rivals combined.

Last year, Standard Federal closed 46,600 single-family mortgages worth $3.6 billion. As of June 30 of this year, closings had reached $3.9 billion, on an annualized basis.

"We want to be the dominant single-family lender," said Mr. Ricketts.

Acquisition Strategy

A further emphasis is on acquisitions. Mr. Ricketts has completed 15 takeovers over the past two decades, and is busy working on two others. Analysts who follow the company say Mr. Ricketts knows how to make his deals work.

For example, he is paying $111 million, or a healthy 1.7 times book, for Heritage Bankcorp in Taylor, Mich. Analysts don't quibble with Mr. Ricketts' projections that the deal almost immediately will be accretive to earnings per share despite the high price. Heritage, which is expected to join Standard Federal early next year, operates 45 branches and holds $930 million of assets.

"Mr. Ricketts is making accretive acquisitions, and Standard Federal's current high earnings levels should be sustainable at least through 1994," said Thomas O'Donnell, an analyst with Prudential Securities in New York.

According to First Call, the consensus earnings forecast for Standard Federal is $3.46 a share in 1993 and $3.89 a share in 1994. That compares with earnings of $3 a share in 1992. But the bright forecast does not mean Mr. Ricketts can rest easy.

Standard Federal's own history offers evidence of the inherent risks of mortgage lending operations, some experts say. The thrift eked out weak returns on assets of 0.70% in 1991 and 0.42% in 1990, showing that even well-managed mortgage shops have difficulties when they have heavy concentrations of long-term, fixed-rate investments.

Concerned that short-term rates would rise, Mr. Ricketts in the late 1980s entered into massive swap agreements, pledging fixed-rate payments from his mortgages in exchange for variable-rate payments tied to the London interbank offered rate. He ended up giving away fixed yields exceeding 10% for variable yields ranging between 3.5% and 3%.

The pretax cost of this "portfolio insurance" between 1989 and the end of this year will total a stinging $165 million, according to company reports.

Shift to Adjustables

Mr. Ricketts said he is working to lower Standard Federal's risk profile by moving to adjustable-rate mortgages and shorter maturities, building low-cost transaction deposits, and diversifying loans.

Joseph Krul, the thrift's chief financial officer, said Standard Federal's concentration of 30-year, fixed-rate mortgages and mortgage-backed securities fell to 19% from 33% of total mortgage assets during the 18 months ended June 30.

Core deposits, defined as checking, money market, and passbook accounts, climbed to 40% from 30% of total deposits during the same period, he said.

But the company's progress in diversifying its loan mix is slow. Consumer loans fell modestly to 4.5% of total assets from 5% over the 18 months ended June 30. Mr. Ricketts said home equity credits are coming off the books as consumers fold the debt into newly, refinanced mortgages.

"We are running in place," he said.

Mr. Ricketts also is restructuring Standard Federal's line of credit with the Federal Home Loan Bank of Indianapolis, laying in long-term advances that can be returned early with no penalty under certain circumstances. This gives him refinancing options if long-term rates fall further.

It remains to be seen whether Standard Federal's healthy operations and lowered risk profile elicit a bank takeover offer.

On the one hand, it is no secret that banks are paying far more attention to healthy thrifts than they once did. The punctuation mark on that trend is the recent agreement by ABN Amro Bank to pay $500 million for Cragin Financial Corp., parent of Illinois' second-largest independent thrift. The price tag equals almost two times book value.

Indeed, dealmakers say this is an ideal time for thrift operators to sell out.

"If I owned a thrift, I would be extremely interested in selling," said Charles H. Barrow, managing director of the financial institutions group at Kemper Securities in Chicago. "Spreads are the widest they've been in years, and balance sheets and income statements look as good as they are ever going to look."

Risky Venture

From a buyer's perspective, however. the challenges of acquiring a thrift of Standard Federal's size are great - especially for a commercial bank.

Richard Kneipper, a partner in the Dallas offices of Jones. Day, Reavis & Pogue, noted that most regional banks are hesitant about loading up on realty after years of fixing their own problems. Even when the assets in question are quality home mortgages and mortgage-backed securities, he said, caution is the byword.

At June 30, Standard Federal held $2.9 billion of mortgage-backed securities, equaling 32% of its total assets. It held another $5 billion of mortgage loans, representing 51% of total assets. That's an 83% asset concentration in realty-related credits.

But Mr. Ricketts doesn't waste time worrying about being acquired.

Scouting Expeditions

Instead, he vows to stay on the acquisition trail himself, saying he is scouting in Chicago, northern Indiana, Ohio, and Michigan.

"We think our systems are very transferable, and that we can dominate mortgage markets in other areas," he said.

As for Standard Federal serving as a proxy for the state of the home-mortgage business, Mr. Ricketts is clear-eyed.

"The whole thing falls apart if we don't make money," he said.

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