Territory Served At June 30, 1962, the Bank operated 47 banking offices in Nassau and Suffolk Counties, Long Island. As a result of changes last year in New York State law with respect to branch banking, the Bank is expanding its banking operations into New York City. In the fall of 1963, the first two New York City offices, which are presently under construction, will be opened. One will be located at Hanover Square in the financial district and the other will be located in the midtown area, on Madison Avenue at 48th Street. The opening of these offices in New York City will allow the Bank for the first time to act as transfer agent and to perform related financial functions for corporations listed on the New York Stock Exchange, and will place the Bank in a better position to handle the accounts of national corporations having executive offices in New York City. Business The Bank is engaged in a general banking business which includes all of the usual deposit functions of commercial banking as well as individual, business, installment and mortgage loans. It endeavors to key its services to the specific requirements of its area, offering over 100 different customer services. Particular emphasis is placed on loan activities and income from this source represents a greater proportion of total income than in the case of most commercial banks. The Bank's loan departments include business loans, personal loans, small business loans, mortgage loans and equipment loans. The Bank evaluates each loan request on the basis of the ability, integrity and potential financial success of the borrower as well as on traditional financial considerations. The Bank has pioneered a number of banking services. It was the first bank to provide marine financing for Long Island boat owners. In 1950, a Small Business Loan Department was established to meet the special needs of an area characterized by numerous relatively small enterprises. The Bank also originated Charge Account Banking, which enables buyers to make purchases at any one of many retail stores and receive only a single statement at the end of each month, with the Bank handling most of the paper work and crediting each merchant's account, thereby enabling him to avoid tying up his working capital in accounts receivable. Charge Account Banking has since been adopted by some of the nation's largest banks. Regulation The Bank is a member of the Federal Reserve System, and deposits are insured by the Federal Deposit Insurance Corporation to the extent provided by law. As a national bank, the Bank is subject to examination by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Board of Governors of the Federal Reserve System. Competition The Bank encounters keen competition from the more than 40 banks in Nassau and Suffolk Counties and also from the New York City banks which solicit business in Long Island. Under the same amendments to the New York State banking law which made it possible for the Bank to expand into New York City, New York City banks may now open branch offices in Nassau County. When the Bank commences operations in New York City, it will be in competition with the many large and well established banks there. Expansion of Nassau and Suffolk Counties The population of Nassau County has increased from 673,000 in 1950 to 1,346,000 in 1961. During the same period, the population of Suffolk County has grown from 276,000 to 739,000. This combined population of over 2,085,000 is larger than that of many states and per capita income in the area is among the highest in the country. About 80% of the families in the two counties own their homes. The growth in population has been accompanied by substantial gains in industrial employment and commercial development. The aircraft, electronics, construction, engineering, chemical, precision machinery, scientific equipment and publishing industries are some examples of the wide range of activities in the area. While the aircraft industry has traditionally accounted for a substantial portion of manufacturing employment, hundreds of other firms have moved into Long Island in recent years, and employment in commercial and service activities has also expanded markedly. As a result, aircraft manufacturing presently accounts for less than 10% of Long Island's total employment. About two-thirds of the labor force of Nassau and Suffolk Counties is locally employed compared with less than one-half so employed at the end of World War II. Retail sales in Nassau and Suffolk Counties are approaching a $21⁄2 billion annual rate. Many large shopping centers, containing branches of the leading New York City department stores, supermarkets, variety chains and specialty shops, have been established in recent years. With Suffolk County still sparsely settled and more than three times as large as Nassau County, future growth prospects there also appear promising. Management Policies Management policies have been directed to (1) expansion of facilities; (2) development of sound loan policies; (3) introduction of new banking practices; (4) vigorous promotional programs; and (5) strict attention to efficient operating procedures. Through the acquisition of other banks, the opening of new branches and modernization of existing facilities, the Bank has established a large network of appropriately decorated offices at locations it considers favorable with display windows and ample parking facilities. Drive-in banking accommodations are provided at many of its offices. The management emphasizes efficient operation. The Bank's management staff in relation to total personnel and resources is small as compared to many commercial banks, and modest executive and central administrative offices contribute to low overhead costs. Simplified procedures, monthly departmental budgets, regular measurement and control of personnel productivity and application of electronic data processing where desirable have all contributed to the Bank's efficiency and profits. Litigation The Bank is a party defendant in various legal proceedings including among others: (i) suits by a former borrowing group claiming damages in the total approximate amount of $3,000,000; (ii) proceedings by a trustee in bankruptcy claiming preferential payments made to the Bank in the approximate amount of $162,000; and (iii) a proceeding by a trustee in bankruptcy to compel a turn over of certain securities previously replevied by the Bank having an approximate value of $390,000. In the opinion of trial counsel for the Bank good and meritorious defenses exist as to the claims made against the Bank. Arthur T. Roth Paul E. Prosswimmer Patrick J. Clifford William B. Lewis, Jr. Harold V. Gleason John Sadlik James G. Smith Patrick J. Clifford John J. Gibson Sidney S. Hein Leo Laibach (a) Randall J. LeBoeuf, Jr. Herbert Mirschel Paul E. Prosswimmer Arthur T. Roth Robert Simon William J. Sullivan (b) Philip P. Weisberg OFFICERS Chairman of the Board and Chief Executive President Executive Vice President Administrative Vice President and Cashier Senior Vice President Senior Vice President Senior Vice President Vice President and Comptroller BOARD OF DIRECTORS Executive Vice President Vice President and General Counsel of Hein, Bradie, Waters & Klein, Attorneys LeBoeuf, Lamb & Leiby, Attorneys Vice President for Business and Finance of President Chairman of the Board and Chief Executive Retired President of Liberty Aircraft Sullivan, Scholly and Thorp, Attorneys (a) Mr. Laibach received $4,200 for real estate committee appraisal fees in 1961. (b) The law firm of Sullivan, Scholly and Thorp received $31,370 in 1961 as a retainer and for miscellaneous legal services. STAFF The Bank employs approximately 1,250 persons. Employee pension, profit-sharing, group life, educational and other benefits are provided. CAPITALIZATION The capital funds of the Bank as of June 30, 1962, and as adjusted to reflect the transfer and lease of properties on August 30, 1962 and the proposed sale of 200,000 shares of $100 par value Preferred Stock are shown below: 4.60% Cumulative Preferred Stock, $100 par value, 200,000 shares... Common Stock, par value $5 per share, 3,519,000 shares... Surplus Undivided Profits Total Capital Funds...... Reserve for Possible Loan Losses... (a) Reflects the transaction described below under "Transfer and Lease Transaction with Affiliated Corporation". Based on the above adjusted capitalization, the book value of the Common Stock of the Bank would be $17.86 per share excluding the reserve for possible loan losses and $22.32 per share including such reserve. Transfer and Lease Transaction with Affiliated Corporation On August 30, 1962, the Bank concluded a financing transaction pursuant to which the Bank transferred 17 of its banking properties to an affiliated corporation (whose stock the Bank has an option to purchase at any time) and received therefor a cash consideration which, net of expenses, represented a gain of approximately $5,900,000 to the Bank. Of such gain, $3,000,000 was added to surplus and the balance to undivided profits. The affiliated corporation borrowed $15,861,000 from institutional investors secured by a mortgage on the properties, the lien of which is subject and subordinate to the Bank's lease of the properties. The Bank has leased back the properties from the affiliated corporation for a term of 25 years, at annual rental payments (in addition to all taxes and other expenses incident to maintenance and operation) equal to the amortization and interest requirements of the loans (approximately $1,000,000 per year), with 10 five-year renewal options at reduced rentals, and the right under certain conditions to repurchase properties and to make pro-rata payments of the mortgage debt. At the request of the Bank, the Commissioner of Internal Revenue has ruled that the substance of the transaction is a financing by the Bank and that in practical effect, for Federal tax purposes, the Bank will continue to be considered the owner of the properties. The aggregate annual rental presently payable by the Bank under leases of properties, other than those referred to above, is approximately $200,000. |