Hometown Banker In The Big City

Joe Ficalora has quietly built a collection of seven banks into the nation's No. 3 thrift

If you're talking big bank mergers, Joseph R. Ficalora has been around the block. The intersection of Roosevelt Avenue and Main Street in Flushing, to be exact. It's the third-busiest pedestrian crossing in New York City -- busier even than Times Square. Within a five-block radius, 35 bank branches once competed with Queens County Savings Bank, one of the seven banks Ficalora runs. One by one, rivals such as Chemical Bank, Manufacturers Hanover, and Dime Savings were swallowed up by even bigger banks. Their names disappeared and branches closed. Disgruntled customers flocked to Ficalora's bank, which built a bigger share of neighborhood deposits than all of its competitors combined.

As the pace of bank mergers quickens, Ficalora is looking for more of the same. "We are better positioned than at any time in our history to expand market share," brags the 57-year-old president and chief executive of New York Community Bancorp. "We are part of the community and a much better contender to win mom and pop's business."

Like politics, all retail banking is local, and Ficalora has mastered the art in the hottest consumer-banking market in the country -- Manhattan and New York's outer boroughs. He has built the bank into the nation's third-largest thrift, with more than $23 billion in assets, vs. just $1.9 billion three years ago. Unlike the behemoths Ficalora competes against, which are quick to rebrand branches, he preserves the identity of each bank he buys to capitalize on local loyalties that sometimes stretch back for generations. In January, for example, he resurrected the Roosevelt Savings Bank name in Brooklyn after buying branches from a competitor that had retired the moniker six years ago.

While rivals often pay steep premiums to buy growth, Ficalora just won't pay any. Once he buys a bank, he imposes strict cost controls. The result: His overhead expenses are less than half of those at the 25 largest U.S. banks, according to SNL Financial, a Charlottesville (Va.) researcher. It costs NYCB just 24 cents to gather $1 of customer deposits, vs. an average of 55 cents for big money-center banks.

Other thrifts that reveled in the booming mortgage-refinance business may face problems once rates rise. But Ficalora has tried to insulate NYCB from such swings. For starters, he lends an average of only 60% of the value of a property. And he makes loans almost exclusively to owners of Manhattan's skyscape of apartment buildings, a $75 billion rent market which -- thanks to the large number of rent-controlled and rent-stabilized units with tenants who are loath to leave -- create a stable cash flow even in tough times.


NYCB's Strategy has delivered sparkling results. SNL has rated it as the top performer among U.S. thrifts every year since the firm started ranking them five years ago. Earnings jumped 41% last year, fueled in part by record loan originations. Analysts say the bank has "pristine credit quality." It has just reported its 37th consecutive quarter without dipping into its loan loss reserves. Meantime, quarterly cash dividends have jumped 75-fold since 1994, to 84 cents.

Since the bank's initial public offering a decade ago, its stock has soared. Split nine times, including a 4-for-3 split on Feb. 17, the shares have returned an annual 53% since 1999, vs. 8% return at Citigroup (C ), one of the best-performing money-center banks. NYCB said it would buy back 5 million shares this year, after purchasing 11.3 million in 2003. NYCB shares, which trade on the New York Stock Exchange, hit a Mar. 1 high of $35.60. Analysts are hard-pressed to find any fault with NYCB. Says Peter J. Winter, a bank analyst with Advest Inc.: "Ficalora runs one of the most profitable and efficient thrifts in the industry."

He has succeeded in doing that while operating a seven-day banking week, a decade before the biggest thrift, Seattle's Washington Mutual Inc. (WM ), expanded to the East Coast or New Jersey's Commerce Bancorp Inc. (CBH ) jumped the Hudson River. At his bank, the savings passbook -- available in designer covers -- is alive and well.

Like the bank he runs, Ficalora is a product of his neighborhood. A grandson of Sicilian immigrants, he was raised in blue-collar Corona, near LaGuardia Airport. He met his future wife, Alice DelloJoio, at Newtown High School, where his younger brother, John, is now principal. In a classic tale of climbing the career ladder one rung at a time, he began as a teller at age 18 with the 145-year-old Queens County Savings Bank. In 1965, the year after the World's Fair built the landmark Unisphere in his neighborhood, bank teller was "just a job that happened to be better than working at the drugstore or the grocery store," says Ficalora. He intended to be a psychologist, but a three-year stint in Vietnam as a psychiatric counselor for the U.S. Army changed his mind. After three decades with the same Queens bank, he ultimately became CEO. And though selling by insiders at other banks has steadily increased this year as their stocks soared, Ficalora has never sold a single share during his career. His approximate 1% stake is now worth about $80 million.


Historically, the bank has fueled growth in shareholder value through its dominant role in financing Manhattan apartment-building owners. Because of laws enacted during World War II, rents on roughly 1 million apartments are regulated. Owners get reliable rent streams (Manhattan vacancy rates average only 3.9% vs. 6.6% nationwide), says Allen H. Tischler, a Moody's Investors Service (MCO ) analyst. For example, only one-fifth of the units in the 96-year-old Belnord on Manhattan's Upper West Side, on which NYCB holds a mortgage, are leased at market rates. Rents range from $860 to $26,000 a month -- the expensive suites providing icing on the cake during boom times. Says Ficalora: "These loans are long-term investments; we don't sell them to the secondary market."

Three acquisitions have driven NYCB'S exponential growth of late. A deal to buy Long Island-based Roslyn Savings Bank in a stock swap, which doubled assets, is classic Ficalora. Two months after the Oct. 31 deal closed, NYCB revised its earnings per share upward by 28%. Haven Bancorp Inc. of Westbury, also on Long Island, and Staten Island's Richmond County Savings Bank, acquired in November, 2000, and July, 2001, respectively, also quickly added an additional 20% to earnings as well as increased deposit share and geographic reach. Says Advest's Winter: "It is extremely unique in the banking industry to see a deal flow so quickly to earnings."

Citi and J.P. Morgan Chase & Co. (JPM ) execs should be so lucky. They may have the tony Park Avenue offices. But adjacent to a strip mall 30 miles away, Ficalora has the loyal customers they covet.

By Mara Der Hovanesian in New York

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