Emigrant Savings Bank

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Emigrant Savings Bank

5 East 42nd Street
New York, New York 10017
Telephone: (212) 850-4000
Toll Free: (888) 364-4726
Fax: (212) 850-4870
Web site: http://www.emigrant.com

Wholly Owned Subsidiary of Emigrant Bancorp Inc.
1850 as Emigrant Industrial Savings Bank
Employees: 1,279
Total Assets: $9.73 billion (2002)
NAIC: 522110 Commercial Banking; 522291 Consumer Lending; 522310 Mortgage and Other Loan Brokers; 551111 Offices of Bank Holding Companies

Emigrant Savings Bank is a savings bank chartered by the state of New York. In addition to providing its customers with a full range of traditional banking products, Emigrant offers life insurance, residential mortgages, commercial real estate loans, and business loans. Emigrant Online is the name of its webbased banking and bill-payment service. The bank is a subsidiary of a holding company, Emigrant Bancorp Inc.

Founding, Survival, and Growth: 18501970

The Irish Emigrant Society was founded in 1841 to aid immigrants to New York City from the Emerald Isle. At this time the average immigrant was arriving with only the equivalent of $8, and these newcomers were immediately set upon by boarding-house "runners" who steered them to dilapidated lodgings where they were charged excessive rates for rooms and baggage storage. The steady stream of Irish newcomers swelled to a torrent with the famine that followed the failure of the potato crop in 1846. Through its account with the Bank of Ireland, the Irish Emigrant Society sold bills of exchange which the immigrants bought with their wages to send home to their hard-pressed relatives, who remitted them for cash. This service forestalled swindlers who sold fraudulent drafts to immigrants.

With the support of Irish-born John Hughes, New York's first archbishop, 18 members of the society contributed $200 each to found the Emigrant Industrial Savings Bank in 1850. The bank opened for business at 51 Chambers Street, a squat clapboard building in downtown Manhattan. By the end of the year, the Emigrant Bank had nearly 300 customers, and by 1857, it was the city's seventh largest savings bank, with assets of $1.37 million. Bank deposits were invested in mortgage loans, with the first, at 7 percent, to a man who borrowed $6,000 in 1851 to buy three houses on a street corner of the Lower East Side. In 1852 the bank loaned Archbishop Hughes money to buy lots on a Fifth Avenue sitethen far uptownwhere St. Patrick's Cathedral now stands. Five years later, Emigrant bought shares offered by the Central Park Commission for the public park that bears this name.

Opening an account at the Emigrant Industrial Savings Bank was no easy task. To assure security, and often to compensate for the illiteracy of their clients, bank officers filled out responses to a lengthy questionnaire that included much personal information. The contents of these questionnaires are now stored in the New York Public Library. Since 80 percent of all early clients were Irish, these records are especially useful to Irish-Americans researching family history.

By keeping about half of its assets invested in government bonds and Treasury notes, the Emigrant Industrial Savings Bank avoided the ruin that beset many financial institutions and businesses in the second half of the 19th century. By 1900 it had more than $57 million in assets, and by 1925, with $290 million in assets, it was the largest savings bank in the United States. The original headquarters had been replaced and, since 1912, the Chambers Street site housed a 17-story building in the Beaux Arts style. The bank established its first branch in 1925, next to Grand Central Station in midtown Manhattan, which had replaced lower Manhattan as the commercial heart of the city. This branch moved to an East 42nd Street site close to Fifth Avenue in 1932. By this time the deposits of the midtown branch came to nearly one-third of the bank's total deposits of more than $400 million.

For a so-called thrift institution, Emigrant Industrial Savings Bank had unusual advice to offer during the Depression. In 1931 it urged its depositors to draw upon surplus savings for what a bank officer called "judicious spending" in order to spark a business revival by stimulating retail trade. This executive noted that the bank had received what he described to the New York Times as a "tide of commendation" from newspapers, firms, and individuals in every part of the nation during the three weeks since it issued its advice. He conceded, however, that bank deposits had continued to exceed withdrawals during this period.

Other banks were soon to receive so many withdrawal demands from depositors acting in a state of panic that they were unable to meet their commitments and had to suspend business or close for good. Conservatively managed Emigrant had no such problem. Although it failed to keep pace with the growth of some other savings banks, its assets more than doubled between 1925 and 1950. Emigrant opened another branch, in Manhattan's garment district, in 1953. In 1967 the bank dropped "Industrial" from its name and opened a midtown branch at Third Avenue and East 45th Street. Two years later, Emigrant moved its headquarters to a new 27-story building at 5 East 42nd Street. This also became the new location of its 42nd Street branch. The Chambers Street branch moved to nearby 281 Broadway at this time.

Major Changes: 197090

Emigrant Savings Bank was a survivor of the numerous mergers that characterized savings banks in the metropolitan New York area during the late 20th century. In 1970 Emigrant acquired the Queens-based City Savings and Loan Association. Nine years later it acquired Prudential Savings Bank, making it the fourth largest mutual savings bank in the state of New York and the fifth largest in the United States. The number of its offices in the city and Long Island now reached 32.

With their heavy investments in mortgage securities, U.S. savings banks found themselves badly squeezed by the high inflation of the 1970s and early 1980s. Depositors demanded, and received, interest rates far above what the banks were earning on their mortgage and bond investments. Emigrant lost $230 million between 1980 and 1984. In June 1982 a state official told a congressional committee that Emigrant, with assets of $3.1 billion, was in danger of failure by the end of the year if it did not receive federal assistance. Emigrant subsequently was one of several mutual savings banks allowed to issue net-worth certificates that then were purchased by the Federal Deposit Insurance Corp., which in turn issued promissory notes to the assisted institution. In mid-1985 Emigrant held $90 million in such certificates and would otherwise have had a negative net worth of $60.7 million.

Emigrant emerged from its difficulties at the end of 1986 by converting from a mutual to a stock savings bank, with the entire stock issued to real estate developers Seymour and Paul Milstein, who agreed to provide $90 million to the institution through their firm Milstein Properties Inc. Among the Milstein holdings in Manhattan were the Biltmore, Milford Plaza, and Roosevelt hotels, plus three large apartment buildings near Lincoln Center with a total of 1,964 units. For their money the Milsteins received a concern with 27 offices, 500,000 depositors, 70,000 borrowers, assets of $3.6 billionand an operating profit, thanks to a turnaround in interest rates. The Milsteins agreed not to violate federal and state laws intended to prevent property developers from using thrift institutions to finance their own projects at favorable rates.

"Plain-Vanilla" Bank: 19902003

Many investment bankers expected the Milsteins to sell Emigrant for a quick profit. When they did not do so, the speculation was that the subsequent slump in the regional economy was making it hard for them to find a buyer. Another theory was that they were holding the institution to help their children establish careers in banking. In any case, the Milsteins invested another $50 million in the bank. Over the next five years Emigrant earned at least $30 million each year while, by contrast, savings banks as a group averaged a negative return on assets during this period. Emigrant's formula for success was to avoid construction loans, which turned sour during the 199091 recession. It also avoided junk bonds, speculative cooperative and condominium conversions, and highly leveraged transactions, choosing to remain what Emigrant Chairman and CEO Raymond V. O'Brien, Jr., called a "plain vanilla savings bank." Nonperforming loansmostly mortgages for one- to four-family residencescame to only 2 percent in 1991.

In 1992 Emigrant, in a major expansion move, acquired troubled Dollar Dry Dock Bank for $34.9 million, thereby doubling its assets. Emigrant gained 20 branches by the purchase, some of which it sold, and some 1,200 employees, many of whom were dismissed. Dollar Dry Dock had fallen into trouble by making bad loans in commercial real estate. Its branches had been redesigned in the mid-1980s as one-stop providers of banking products, securities, insurance, foreign exchange, and even travel services, but O'Brien indicated that, like Emigrant's own branches, they would in future do little more than take deposits and underwrite residential mortgage loans. Emigrant did not make news again until 1999, when it established a $150 million fund, Emigrant Capital, to invest in emerging companies that typically do not qualify for bank loans. In 2001 the banksomewhat belatedlyintroduced Emigrant Online, a free service enabling its customers to check their balances and statements by computer, transfer funds between accounts, make loan payments, and communicate with the bank through e-mail.

Company Perspectives:

In addition to providing our customers with the full range of traditional banking products, we offer life insurance, residential mortgages, commercial real estate loans and business loans. Our banking and bill payment service, Emigrant Online, continues to reflect our commitment to meet the ever-evolving needs of our customers.

Of greater interest was the rift between Paul and Seymour Milstein that developed after the latter's son, Philip, was named president and chief executive officer of the bank and its holding company in 1993. According to a 2000 article by Alan Kline and Veronica Agosta of American Banker, a bank officer told this trade daily that at least six companies had considered acquiring Emigrant during the past few years, "and they were all turned back by the idea of the Milsteins being on their boards. They are constantly fighting. They are untrusted."

Paul Milstein, along with his sons Howard and Edward, filed an unsuccessful lawsuit in 2000 seeking to remove Philip Milstein from his positions. The lawsuit contended that Howard Milstein had been appointed co-chief executive soon after 1993 but that Philip had undercut Howard's authority by refusing to call meetings that involved him and had not called a shareholders' meeting since 1996 in order to prevent a vote that might oust him. They also alleged that Philip Milstein had refused to consider converting Emigrant to a subchapter S corporation unless the shareholders agreed to make him president for life. They contended that such a conversion would have saved Emigrant about $50 million a year in federal taxes after banks and thrift institutions became eligible for such status in 1997, maintaining, "In essence, Philip Milstein has hijacked Emigrant and is holding the institution hostage to his demand for absolute and permanent control of Emigrant." Seymour Milstein died in 2001. The two branches of the family settled their feud in 2003. They agreed that Emigrant would be run by both until Paul's family bought out the interests of Seymour's family. The bank was valued at nearly $2 billion, and the Milsteins reportedly held 91 percent of the stock when Seymour died.

Emigrant Savings Bank, in 2002, had 12 branches in Manhattan, five in Brooklyn, five in Queens, three in the Bronx, eight on Long Island, and three in Westchester County. Its assets at the end of 2002 totaled $9.73 billion and its deposits, $5.05 billion. Its net income came to $114.22 million in 2002. Subsidiaries of the bank were engaged in activities such as offering residential and commercial mortgage loans and loans collateralized by multifamily and mixed-use properties, and financing for various business assets, focusing on equipment such as vehicles, aircraft, and construction and manufacturing equipment. A financial services agency of the bank was providing investment products (such as mutual funds) and life insurance.

Emigrant's primary deposit products were checking, savings, and term-certificate accounts, and its primary lending products were residential mortgage, commercial, and installment loans. It also offered personal loans, installment loans, safety deposit boxes, and credit cards. Most loans were secured by specific items of collateral, including business assets, consumer assets, and real estate. Commercial loans were expected to be repaid from cash flow from operations of businesses. Real-estate loans were secured by both residential and commercial real estate. Other financial instruments, which potentially represented concentrations of credit risk, included deposit accounts in other financial institutions and federal funds sold.

Key Dates:

Establishment of Emigrant Industrial Savings Bank to serve Irish immigrants.
Manhattan-based Emigrant has grown into the largest savings bank in the United States.
Assets have doubled since 1925.
Emigrant drops "Industrial" from its name.
The bank moves its headquarters uptown to 42nd Street.
Acquisitions have made Emigrant the fifth largest U.S. mutual savings bank.
Emigrant is acquired by real estate developers Seymour and Paul Milstein.
Emigrant acquires financially troubled Dollar Dry Dock Bank.
The two branches of the Milsteins agree to settle their family feud.

Principal Subsidiaries

American Property Financing, Inc.; Emigrant Business Credit Corp.; Emigrant Capital; Emigrant Funding Corp.; Emigrant Mortgage Company, Inc.

Principal Competitors

Apple Bank for Savings; Flushing Savings Bank; GreenPoint Bank; Independence Community Bank; Ridgewood Savings Bank.

Further Reading

Bagli, Charles V., "Wealthy Real Estate Family Settles Decade-Long Feud," New York Times, April 16, 2003, p. D3.

Basch, Mark, "Three NY Savings Banks Are About to Lose Their Liferaft," American Banker, September 6, 1985, pp. 3, 7.

Bennett, Robert A., "Warning Issued on 2 Big Banks," New York Times, June 8, 1982, pp. D1, D11.

Berg, Eric N., "Developers Acquire Emigrant Bank," New York Times, January 5, 1987, pp. D1, D6.

"Depositors Heed Advice on Spending," New York Times, September 8, 1931, p. 44.

"Emigrant Makes It Happen for Two Aspiring Bankers," Newsday, March 2, 1987, Part 3, p. 5.

Kline, Alan, "N.Y.'s Emigrant Starting Capital Fund for Financing Small-Business Ventures," American Banker, August 6, 1999, p. 5.

Kline, Alan, and Veronica Agosta, "Family Feud at N.Y.'s Emigrant," American Banker, May 2, 2000, pp. 1, 7.

McNatt, Robert, "Thriftiest Thrives in Trying Bank Time," Crain's New York Business, March 2, 1992, pp. 1, 25.

"New Banking Quarters Ready," New York Times, November 13, 1932, Sec. 1011, p. 1.

Pristin, Terry, "Seymour Milstein, City Real Estate Magnate, Dies at 81," New York Times, October 31, 2001, p. A20.

Roosevelt, Phil, "Emigrant: Cautious Lender, Bold Acquirer," American Banker, March 20, 1992, pp 1, 14.

Roth, Andrew, "Emigrant: A Newcomer to Web Banking," American Banker, July 20, 2001, p. 18.

Song, Sora, "A Rich History, Community Banker, July 2000, pp. 16+.

Robert Halasz