FAST TRACK: Leading a community bank to regional powerhouse

After nearly 15 years as chief executive of Independence Community Bank Corp. in Brooklyn, N.Y., Charles J. Hamm confidently predicts that his business will continue to rapidly grow.

“I expect in 10 years we’ll be a $10 billion to $15 billion commercial bank,” he says.

Not everything will remain the same, though. As of next year, realizing that dream will be someone else’s job. Mr. Hamm recently announced his retirement.

It will be up to his successor to steer the bank that Mr. Hamm has transformed from an also-ran, mutually owned institution to the New York area’s seventh-largest, now publicly owned thrift, with assets of nearly $7 billion – four times that of a decade ago.

Analysts say that Independence has the momentum and is on the right course to succeed.

“I would argue that Independence is well positioned for long-term growth,” says James Ackor, analyst with Tucker Anthony Capital Markets in Portland, Me.

By some measures, expanding the bank will be no cake walk. The new CEO will face a number of challenges. While Independence has outperformed many of its peers in expanding loan orginations, it has lagged others, including New York’s Queens County Bancorp Inc. and Richmond County Financial Corp., in maintaining profit margins.

Industrywide, analysts say, return on average assets is generally 1% to 1.5%, while return on average equity is between 10% and 20%. Independence’s figures in those categories – 0.9% and 7.6%, respectively, as of Sept. 30 – are less than stellar.

Strategic conversion

For Mr. Hamm, who is staying on as chairman, the top priority for Independence’s next CEO will be to continue its conversion to a commercial bank, a move intended to broaden its base in the market.

Currently, about two-thirds of its loan portfolio is in multifamily apartment mortgages, and only about 30% is in commercial loans.

He suggests it will maintain the recently sharpened focus on northern New Jersey, the region’s most rapidly growing area.

Founded in 1850 in Brooklyn, Independence in recent years has moved into Queens, Long Island, Staten Island and New Jersey.

Working in mostly mature markets with little population growth, Independence has expanded mainly through acquisitions. It bought Bay Ridge Bancorp and its six Brooklyn branches in 1995 and First Nationwide Bank, with another five branches, in 1996.

To fund more acquisitions, Independence raised $760 million by going public in 1998.

That war chest fueled its expansion into New Jersey, where in the past two years it acquired Broad National Bancorporation and Statewide Financial Corp.

It now has 65 branches and profits of $15.7 million for the quarter ended Sept. 30 versus $13 million for the same quarter a year ago. Its stock was trading at nearly $15 per share last week, up from around $10 a year ago.

CNS