idb 2013 annual report
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AnnualReport
2013
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We have dedicated ourselves to the success of our clients
by providing quality service and diligent, personalized care,
by offering innovative products and services that meet diverse financial needs,
and by developing close, personal relationships with our clients over many generations
all part of our time-honored tradition since our founding.
Because at IDB,
it s personal.
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Annual Report 2013IDB Bank
Infrastructure
30 Risk Management
32 Treasury
34 Information Technology& Operations
37 Accounting
38 Office of General Counsel
39 Compliance
40 Internal Audit
Subsidiaries
42 IDB Capital Corp.
43 Discount Bank Latin America
Table of Contents
Leadership5 Introduction
7 Report of the Boardof Directors
11 Financials
Services
14 U.S. Private Banking
17 International PrivateBanking
19 Lending Division
Corporate Lending
Factoring
Commercial Real Estate
Lending Asset-Based Lending
25 Southern California
27 South Florida
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5 Introduction
7 Report of the Board of Directors
11 Financials
Leadership
IDB New Yorks Main Office on Fifth Avenue
Manhattan, 1962
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Annual Report 2013IDB Bank
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Leadership
Introduction
Ehud ArnonPresident and Chief Executive Officer
Michael GoldsteinChairman of the Board
Introduction
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Annual Report 2013IDB Bank
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Bank voluntarily performed the mandated
federal stress test applicable for the top
30 banks in the country and came out
number six. Its more than just meeting
legal obligations; its about doing what is
right to maintain a sound, viable business,
with a steady income stream, high capital
ratios and credit quality.
In todays competitive landscape, we also
must be sure we operate as cost-efficiently
as possible, so we are streamlining and
automating processes to lower costs and
improve efficiencies, while maintaining
or strengthening our ability to serve our
customers.
With our conservative, long-term approach,
new products and highly personalized
service, as well as a loyal and dedicatedstaff, we believe we are well positioned
in 2014 for growth in almost every area
of the Bank. We will continue to provide
our customers with the financial security
they expect in a still-uncertain world.
Whether you are looking for a trusted
banking relationship or youre already a
customer who knows how we do business,
we invite you to share in our success, and
explore new ways to achieve your personal
or business financial goals.
Thank you,
In 2013, IDB Banks parent bank, IDB Ltd.
explored the sale of the Bank which led
to an extensive due diligence process
in the second half of the year. With the
improvement in our parent companys
capital structure, the decision was made
not to sell IDB Bank.
The Banks financial results were negatively
affected by the one-time expense related
to the potential sale of DBLA. IDB Bank
recorded a one-time tax provision and
other adjustments in the amount of
$31.8 million related to income earned
in Uruguay over the past 30 years that
had not been repatriated.
Nevertheless, our ability to carry out
a conservative lending and investment
strategy, incorporate systems innovations,and maintain long-standing personal
relationships with our customers has
proven to be a successful combination
at a time when the U.S. is just starting
to come out of a challenging economic
environment with historically low-interest
rates combined with stringent regulatory
demands.
Throughout the last year, we experienced
the largest loan portfolio growth in our
history, including dramatic increases in
our newest areas of activity, financing for
healthcare and not-for-profit institutions.
Our U.S. Private Banking Division continued
to show double-digit growth in 2013, adding
many new relationships to our portfolio.
Managing the investment portfolios of
our international clients has also been
a solid growth area.
At the same time, we continue to expand
our suite of financial servicesfrom
providing new annuity products to adding
new features to our top-of-the-line cash
management serviceswhile always
looking for and implementing ways to
strengthen the personal relationships
we enjoy with our clients.
This ongoing effort is what our motto, Its
personal, is all about. In short, we know
our private banking and commercial clients,
we know their families, and we expect
to understand and remain responsive to
their needs. This is what differentiates us
from our competition, and what allowed
us to continue servicing and retaining
our customer relationships throughout
the economic crisis and beyond.
Investing in the future, however, is not only
about increasing the number of products
and services we offer, but also improving
our infrastructure and providing convenient
and easy-to-use tools, so customers can
access information, monitor activities
and make transactions whenever they
want. These enhancements range from
robust online capabilities to opening a
new Brooklyn branch, our fourth in the
New York/New Jersey area, with more
on the way.
Responding effectively to regulatory changes
is another challengeand a cornerstone
of our business. In 2013, we continued to
meet or exceed the standards of the Dodd-
Frank Wall Street Reform and Consumer
Protection Act and our own high standards
of accountability and compliance. In fact,
though not required by regulation, the
Ehud Arnon
Michael Goldstein
2013 was a year of significant challenges for the Bank, due largely to the potential sale of
IDB Bank and its Uruguayan subsidiary Discount Bank Latin America (DBLA) by our parent company,
IDB Ltd. As a result, in 2013, IDB Bank incurred an associated one-time tax provision related to the
potential sale of DBLA. However, with the support of our customers and loyal employees, we maintainedour business as usual approach, which allowed us to achieve our 2013 goals, with minimal disruption.
Leadership Introduction
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Annual Report 2013IDB Bank
Report of theBoard of Directors
Orit AlsterHead of Corporate Banking,Israel Discount Bank Limited
Darcy E. BradburyPartner,D.E. Shaw & Co.
Reuven SpiegelPresident and Chief Executive Officer,Israel Discount Bank Limited
Maurice H. Hartigan IIRetired President & CEO,The Risk Management Association
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LeadershipReport of theBoard of Directors
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Annual Report 2013IDB Bank
Theresa BischoffPartner,RC Consulting, LLC
Michael GoldsteinChairman of the Board,Israel Discount Bank of New York
Gil KurtzCertified Public Accountant(Israel)
Ehud Arnon
President and Chief Executive Officer,Israel Discount Bank of New York
IDB Bank is led by a team
of esteemed business professionals
who are dedicated to the success
of the Bank and its customers.
LeadershipReport of theBoard of Directors
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LeadershipReport of theBoard of Directors
IN 2013, WECONTINUED TOEXPAND OURPRODUCT OFFERINGS,SERVICES AND ONLINECAPABILITIES TO
MAKE SURE OURCUSTOMERSHAVE THE TOOLSTHEY NEEDTO
SUCCEED.
Annual Report 2013IDB Bank
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Annual Report 2013IDB Bank
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More and more, our customers are
coming to see us as a one-stop shop
for all of their financial needs.
In U.S. Private Banking, total deposits
topped $1.3 billion last year, which affirms
the success of our carefully coordinated
expansion strategy to substantiallyincrease our U.S. deposit base. As part
of this expansion, we added a new private
banking branch in Brooklyn and we will
offer insurance products to our private
banking customers in 2014.
Our Corporate Lending business grew by
13%. Our newest markets; not-for-profit
and healthcare institutions, are creating
new revenue streams and giving us a
chance to give back to our communities.
Additionally, our real estate business tookadvantage of a rebounding market with
a creative, customer-oriented approach.
International Private Banking remains a
cornerstone of IDBs business model. Our
Global Portfolio Management services for
our international customers are growing
and gaining increasing acceptance. And
international products, such as Global
Portfolio Strategies (GPS) and Sun
Life annuities have provided significant
income growth.
In our Latin America operation, DBLA,
loans and deposits grew by 9% in 2013.
Domestic Uruguayan deposits grew at
a rate of 6% while deposits from non-
Uruguayan residents grew at a rate of
17%. This growth comes at a time when
Uruguay, our base in Latin America, has
enjoyed political stability and minimal
impact from an economic downturn in
some of the neighboring countries.
Meanwhile, IDBs branches in California
and Florida are experiencing steady growth,
and reaping the benefits of the new
products and services weve added to our
domestic capabilities, including interest
rate swaps and annuities through IDB
Capital Corp, our broker-dealer business.
In fact, a stronger product base in IDB
Capital will be marketed more aggressively
in 2014, thanks to a new sales initiative
focused on client opportunities in both
Latin America and the U.S.
With so much positive activity in 2013, we
expect to achieve solid growth in 2014,
though we remain somewhat cautious
in light of still-low interest rates and
the restrictive regulatory climate that
affects all banks.
IDB has shown that its well equipped to
manage these challenges by offering our
customers new products, ever-improving
services and, of course, a clear-headedapproach to banking and customer
relationships. With this foundation, we
look to the future with optimism and
enthusiasm.
LeadershipReport of theBoard of Directors
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Annual Report 2013IDB Bank
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Leadership Financials
Financials Discount Bancorp, Inc., and SubsidiariesIDB Bank and Subsidiaries
AssetsCash and Due from Banks $69, 829 $69,829
Interest-Bearing Deposits with Banks 196,185 196,185
Trading Account Assets, at market 14,547 14,547
Available-for-Sale Investment Securities, at market 2,370,689 2,367,729
Held-to-Maturity Investment Securities (market value $933,957) 943,733 943,733
Federal Home Loan Bank Stock, at cost 13,349 13,349
INVESTMENT SECURITIES 3,342,318 3,339,358
Loans, net of unearned income 4,513,153 4,513,153
Less: Allowance for Loan Losses (64,880) (64,880)
LOANS, NET 4,448,273 4,448,273
Premises and Equipment, net 20,743 20,225Accrued Interest and Accounts Receivable 38,340 38,332
Bank-owned Life Insurance 172,313 172,313
Other Assets 106,777 106,635
Assets of Discontinued Operations 1,208,935 1,208,935
Total Assets $9,603,713 $9,600,085
LiabilitiesDeposits
Domestic Offices
Noninterest-Bearing $739,055 $743,654
Interest-Bearing 4,908,729 4,985,589
Foreign Offices
Noninterest-Bearing
Interest-Bearing 826,225 826,225
Total Deposits 6,474,009 6,555,468
Securities Sold under Repurchase Agreements 1,046,575 1,046,575
Borrowed Funds 54,963 54,963
Total Borrowings 1,101,538 1,101,538
Accounts Payable, Accrued Expenses and Other Liabilit ies 101,143 101,008
Liabilities of Discontinued Operations 1,132,614 1,132,614
Total Liabilities $8,809,304 $8,890,628
Stockholders EquityCommon Stock $5,000 $75,259
Surplus 94,652 24,393
Retained Earnings 757,866 672,734
Accumulated Other Comprehensive Loss, net of tax (63,109) (62,929)
Total Stockholders Equity $794,409 $709,457
Total Liabilities and Stockholders Equity $9,603,713 $9,600,085
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Annual Report 2013IDB Bank
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(Dollars in thousands)AS OF DEC. 31, 2013
Capital Ratios (%)LEVERAGE RATIO 8.71% 7.85%
TIER 1 RISK-BASED CAPITAL RATIO 12.89% 11.61%
TOTAL RISK-BASED CAPITAL RATIO 13.90% 12.62%
Condensed Consolidated Statement of IncomeINTEREST & DIVIDEND INCOME
Loans and Deposits with Banks $147,617 $147,516
Investment Securities and Trading Account Assets 78,588 78,507
Total Interest and Dividend Income 226,205 226,023
INTEREST EXPENSE
Deposits 38,744 39,004
Borrowed Funds and Others 49,127 49,127
Total Interest Expense 87,871 88,131
Net Interest & Dividend Income 138,334 137,892
PROVISION FOR LOAN LOSSES 12,637 12,637
Net Interest Income, after provision for loan losses 125,697 125,255
NON-INTEREST INCOME
Commissions and Fees 38,451 38,451
Other Noninterest Income 16,378 16,378
Total Noninterest Income 54,829 54,829
NONINTEREST EXPENSE
Salaries and Employee Benefits 73,538 73,538
Occupancy, Equipment and Other Expenses 57,229 57,145
Total Noninterest Expense 130,767 130,683
Net Income before Income Taxes 49,759 49,401
Income Tax Expense 38,696 38,561
Loss from Discontinued Operations 1,720 1,720
Net Income $9,343 $9,120
Consolidated Statement of Comprehensive IncomeNET INCOME $9,343 $9,120
Net change in available for sale securities, net of taxes (37,793) (37,709)
Net unrealized gain on cash flow hedge, net of taxes 888 888
Funded status of pension and post retirement benefits, net of taxes 8,536 8,536
Comprehensive Income $(19,026) $(19,165)
Leadership Financials
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Services
14 U.S. Private Banking
17 International Private Banking
19 Lending Division
Corporate Lending
Factoring
Commercial Real Estate Lending Asset-Based Lending
25 Southern California
27 South Florida
Eleanor Roosevelt at the opening
ceremony of the first U.S. Branch
New York, 1962
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Annual Report 2013IDB Bank
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Throughout 2013, our Private
Banking Wealth Advisors worked
very closely with our clients
recommending strategies to
build wealth and preserve assetsduring a challenging economic
environment. As a result, our
clients, and the Bank, have
prospered.
Private banking deposits grew in 2013 to
$1.3 billion as we continued to add new
clients. Our very high personal service
levels and our high Tier 1 Risk Based
Capital Ratio continue to assist in our client
acquisition efforts. We project continued
substantial growth in deposits in 2014.
In addition to increasing deposits in 2013,
our managed equity portfolio exceeded
our benchmark index returns by over 200
basis points, thanks to a careful asset
allocation strategy that utilizes high-quality
stocks. Our managed bond portfolios also
exceeded their fixed income benchmark
based on our strategy of keeping shorter
bond durations and asset quality high. In
each case, our first priority is protecting
our clients interest through our non-
proprietary structure.
Essentially, IDBs strength comes from
strong liquidity and capital ratios, top qualityloan and investment portfolios, and a long
history of profitability. Complementing
this strength is our refusal to invest in
any asset that does not meet our high
standards.
For nearly five decades, we have earned
the trust and confidence of our clients by
following a conservative, sound banking
U.S. PrivateBanking
Services Private Banking
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IDB Bank
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IDBS STRENGTHCOMES FROM
STRONG LIQUIDITYAND CAPITALRATIOS AND ALONG HISTORY OF
PROFITABILITY.
JAMES LOGATTOExecutive Vice President,U.S. Private Banking
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Annual Report 2013IDB BankServices Private Banking
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Services Private Banking
philosophy, and by providing outstanding
advisory services, which include Investment
Management & Trust (IM&T), Custom
Lending, Cash Management, and Foreign
Exchange.
Perhaps our most important asset is our
team of skilled bankers who deepen theirpartnerships with our existing clients,
while continually building new and
productive relationships. This is a time-
honored tradition of highly individualized
attentionuncommon in the industry
todayand a key reason why we continue
to attract new private banking clients
who maintain multiple accounts.
To further extend our reach with our
personalized approach, we continue to
open private banking branches in selectedmarkets, hosted by highly professional
private banking teams. In addition to
IDB branches in Staten Island (2010),
Short Hills, New Jersey (2012), and now
Brooklyn (2013), we plan to expand into
Long Island and Westchester County over
the next couple of years.
Our strategy of a careful expansion in the
New York metro area outside of Manhattan
has enabled us to open new markets for
our banking products and Investment
Management services. While not retail
in nature, these branches are located
in office buildings and typically require
appointments to meet the privacy needs
of our clients.
Meanwhile, we also continue to invest intechnology and people to strengthen our
ability to forge close personal relationships
with our clients and to provide faster
access to account information and analysis.
We built this business by developing teams
of very experienced bankers who give our
clients a great deal of personal attention.
We listen, we collaborate and we advise,
explains James LoGatto, Executive Vice
President, U.S. Private Banking. Other
banks say they provide the experienceand personal touch, but not like we do.
With the added exposure of our new
private banking branch offices, ambitious
service standards and sound solutions
for deposits, loans and investments, we
will continue providing clients compelling
reasons to build a future with IDB.
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InternationalPrivate Banking
A hallmark of our services is our growing Global Portfolio Strategies (GPS) investment
advisory group, which customizes a wide range of investment opportunities to
meet our clients needs. Along with GPS, we offer our cl ients a variety of products,
including Personal and Business Accounts, Time Deposits, Foreign Currency Timeand Demand Deposits and Structured Time Deposits.
With a deep understanding of both U.S. and global financial markets, we pride
ourselves on our sensitivity to the individual requirements of the non-U.S., non-
resident client, says Executive Vice President Chaya Rub. In fact, each Private
Banking officer is assigned specific accounts in order to develop solid, trusting
relationships, and often travels internationally to maintain continuous personal
contact with customers, while our New York-based regional management team
supervises administrative functions.
As a result of our personal attention, the number of our international banking
customers continues to increase as we strengthen our relationships with our loyallong-term clients. Our clients appreciate the level of stability we provide through
our low-risk, conservative financial strategies, Ms. Rub explains.
Our personalized approach has not changed over the years, even with the advancements
in technology, which allow banks the option to service clients remotely, Ms. Rub
adds. We believe its important for our officers to meet in person with our cl ients,
speak their language and understand their culture. Thats how we do business,
and its a big reason for our success.
International Private Banking
remains a cornerstone of IDBs
business model since its founding,serving the needs of customers
around the world, with a strong
presence in Latin America and Israel.
2013 proved to be another good
year, with solid growth in assets and
income, as we continue to expand
and improve on the private banking
services we offer.
ServicesInternationalPrivate Banking
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ServicesInternationalPrivate Banking
WE BELIEVE ITSIMPORTANT FOROUR OFFICERS TOMEET IN PERSONWITH OUR CLIENTS,SPEAK THEIR
LANGUAGE ANDUNDERSTANDTHEIR CULTURE.
CHAYA RUBExecutive Vice President,
International Private Banking
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Services Corporate Lending
The Lending Division achieved 13 percent growth in 2013, with
corporate lending, factoring, commercial real estate and asset-based
lending all contributing significantly despite an economy that was
slowly coming out of the recession.
Were doing well because we stayed the
course, supported our clients and never
stopped lending, explains Chief Lending
Officer Lissa Baum. We are a go-to bank.
Among the highlights for the year has
been the growth of the non-profit and
healthcare group, which IDB launched
in late 2012. By making a commitment
to meeting the lending needs of socialservice agencies, medical institutions, and
charitable and educational organizations,
we have become a major player in this
sector, while giving something back to
our community, says Ms. Baum.
Other highlights and growth areas
include our real estate business, which
took advantage of a rebounding market
with a creative, customer-oriented
approach, and our trademark financing
business, a unique core specialty based
on lending against brands and licenses
in such categories as footwear, apparel
and accessories.
The Lending Division and U.S. Private
Banking also continued to work together
efficiently. In fact, more than $50 million
in new lending in New York came fromprivate banking referrals. We work as a
team for our clients, making sure theyre
getting the feedback and attention they
deserve, says Ms. Baum. This is one
reason why the Lending Division is putting
lenders in our private banking offices
around the tri-state area.
We listen to our clients and find out what
they want and then we do whatever it
takes to get it for them, she explains.
We want every area of the Bank to be
successful, not just our area. All have
equal importance when were meeting
client needs, from foreign exchange to
international letters of credit.
Its a flexible, small bank approach.
And customers know they can call IDBs
decision makers directlywhether its thepresident of the Bank, the chief lending
officer or a private banker. Our clients
have enough to worry about with their
businesses, Ms. Baum says But we make
sure they dont have to worry about their
bank when theyre partnering with us.
With an improving economy in 2014, the
Lending Division expects to build on its
success and take it to even greater heights.
LendingDivision
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WERE DOINGWELL BECAUSE WESTAYED THE COURSE,
SUPPORTED OURCLIENTS ANDNEVER STOPPEDLENDING.
LISSA BAUMExecutive Vice President,Chief Lending Officer
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Services Corporate Lending
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IDB Factors specializes in designing
innovative factoring and financing packages
that help our clients manage their accounts
receivable more effectively. Our teams of
account executives all have over 20 years
of market experience, which gives them
a unique ability to understand the varied
industries our clients serve. In 2013, IDBFactors loans grew over 50%. Typical
clients have annual sales that range from
$10 million to well over $100 million.
By monitoring a clients daily collateral
position, we can keep them advised of any
issues and improve the collection cycle.
This close monitoring normally enables
factors to make more aggressive loans than
a typical bank. Like the factoring industry
as a whole, our client portfolio was once
almost exclusively apparel manufacturers
and importers. But today, because of
our flexibility in meeting client needs,
we have diversified into such industries
as home furnishings, food and beverage,
and accessories, as well as some service
sectors. This diversity gives us greater
range and more opportunities for growth.
Our clients stay with us because they
appreciate the high level of service we
provide, says Louis Barone, who heads IDB
Factors. Most companies need to leverage
their accounts receivable and inventory
for working capital, and thats our strong
suit. We have the ability and resources to
understand our clients businesses and
develop not only a comfort level with them
but a strong working relationship.
Factoring
Our teams have
over 20 years ofmarket experience,which gives thema unique abilityto understand the
varied industries ourclients serve.
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Services Corporate Lending
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Services Corporate Lending
We continue to
think outside thebox to help ourclients reach theirfinancial goalsand improve their
overall customerexperience.
CommercialReal Estate
In 2013, IDBs Commercial Real Estate
business reinvigorated its relationship-driven business model by expanding in
some new areas and growing existing,
long-term relationships. The result was
a group portfolio growth of 26%, which
was well ahead of plan.
Our niche is lending against income-
producing properties where we are typically
the first mortgage lender, offering a full
spectrum of short- and long-term loans
at competitive fixed or variable rates.
Principal products include term loans,bridge loans, lines and letters of credit
financing for a wide range of investment
property types, including facilities for
acquisition and adaptive re-use.
In 2013, the real estate group also
established a joint program with the
Banks Israeli desk, which enabled IDB
to originate larger loans in conjunction
with other Israeli non-bank institutions.
Other new avenues include a new
program providing competitive financingof multi-family properties.
These kinds of entrepreneurial ventures
are a slight twist on our conservative
credit culture, says Sten Sandlund, who
finished his first full year as head of the
real estate group. Very few competitors
have the relationships we have and the
value we offerexecution excellence and
reliability. We continue to think outside
the box to help our clients reach their
financial goals and improve their overallcustomer experience.
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Annual Report 2013IDB Bank
Asset-Based
Lending
In good or bad times,
we have a legacy of going
overboard to help our clients,
and thats a tremendous
foundation on which to continue
building our asset-based
lending business.
With its new leader, Eric Serenkin, IDBs Asset Based Lending
Group has a well-rounded ABL expert at the helm who knows
the industry and the network of companies and referral sources
to help generate new growth.
Through asset-based lending, businesses with insufficient
liquidity can leverage the value of their assets, including
accounts receivable, inventory and even intellectual property,
to access working and growth capital, which can give themflexibility and ease the pressure on day-to-day operations. IDB
can also act as an agent in syndication transactions.
I havent met a client who doesnt love IDB, he says. In good
or bad times, we have a legacy of going overboard to help
our clients, and thats a tremendous foundation on which to
continue building our asset-based lending business. Were
approaching the new year with great enthusiasm.
Services Corporate Lending
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Services Southern California
Southern
California
With a focus on a 75-mile radius of downtown
Los Angeles, but a reach that extends well
beyond the city, we have a strong track
record of financing properties such as
shopping centers, retail and industrialspace, skilled nursing homes, medical and
office buildings and multi-unit residential
properties, while also expanding in the
manufacturing and finance industries.
Revenue from trade services, foreign
exchange and interest rate swaps also grew
substantially. In addition, we significantly
increased our IDB Capital assets and
nearly doubled our business in Investment
Management & Trust Services (IM&T).
We enjoyed success from our new sales
initiatives, says Yoav Peled, Executive Vice
President, and we improved morale and
decreased expenses through reorganizing
our operations.
An impetus for our strong growth has been
the economy. In Southern California, weve
come out of the recession and have seen
considerable recovery and job creation,which helped us generate new business
in commercial real estate and increase
demand for commercial and industrial
loans, Mr. Peled explains. We expect
the same for 2014.
In this climate, the competition from
other institutions can be fierce, which
can impact profitability. So we not only
must be vigilant about costs, but we
must also continue to strengthen our
competitive advantagesnamely the
personal relationships, flexibility and
speed of service that our customers cant
get at other banks, says Mr. Peled. No
one comes close to being as responsive
as we are.
IDB Bank branches in Southern California enjoyed
a robust year in 2013, with a solid 11 percent
increase in new loans, including strong gains incommercial real estate, followed by commercial
and industrial loans.
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WEVE COMEOUT OF THERECESSION ANDHAVE SEENCONSIDERABLERECOVERY AND
JOB CREATION,
WHICH HELPED USGENERATE NEWBUSINESS.
YOAV PELEDExecutive Vice President,
Southern California
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Services South Florida Annual Report 2013IDB Bank
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SouthFlorida
Growth in commercial real estate and IDB
Capital assets were particularly strong.
Clients also continued to take advantage
of our interest rate swap and Letters of
Credit services.
South Florida is a vibrant market for us,
says Moise Hillel, Executive Vice President.
People love it here all year round, so its
become a destination for new business
and young professionals with families. Its
no longer just a vacation spot.
With this economic renaissance, many
competitors have opened branches
throughout Dade County. The challenge
is to continually find new ways to attract
new clients and build strong, trusting
relationships, says Mr. Hillel. IDB
has an incredible history of providing
individualized customer service, which
we will continue and strengthen to set
ourselves apart.
IDBs South Florida Division
enjoyed significant growth in
2013 due to the economic recovery
in the region, our efforts to
increase direct relationships with
new customers, and our strong
position as a gateway to existing
clients in Latin America.
In 2014, the goal is to continue building
direct private banking relationships,
balance the risk exposure between
corporate lending and commercial real
estate, and develop business in asset-
based lending, annuities, and non-profit
and healthcare financing.
We provide our domestic and international
clients with a sense of security and sound
professional advice for both banking and
wealth management, and we are uniquely
positioned to serve South American clients,
says Mr. Hillel. We do not use a call
center; its all about direct relationshipsand developing a customer experience
that meets their needs.
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Services South Florida
PEOPLE LOVEIT HEREALLYEAR ROUND, SO
ITS BECOME ADESTINATION FORNEW BUSINESSAND YOUNGPROFESSIONALSWITH FAMILIES.
MOISE HILLELExecutive Vice President,
South Florida
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30 Risk Management
32 Treasury
34 Information Technology & Operations
37 Accounting
38 Office of the General Counsel39 Compliance
40 Internal Audit
Infrastructure
IDB Bank, Original Manhattan Branch
New York, 1962
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Annual Report 2013IDB Bank
30
Infrastructure Risk Management
RiskManagement
In 2013, a great deal of focus was on
meeting the requirements of Basel III
(the global regulatory standard on bank
capital adequacy) the applicable provisions
of the Dodd-Frank Act in the U.S. with
respect to capital planning.
All of the new requirements are designed
to ensure that banks are adequately
capitalized and we are happy to report
that IDB Bank meets the highest
designation possible which is Well
Capitalized status, says Adam Barsky,
Executive Vice President and Chief Risk
Officer. The Bank performs exceptionally
well under the new stress testing
requirements, he adds. The result of
these tests should give our customers
great comfort in knowing that we are a
best-in-class institution with sound risk
management practices.
The risk management team also supports
our various business units in their growth
plans and the launch of new products and
services by providing risk assessments
and due diligence to ensure proper
operational controls are in place and
that the new activities are consistent
with the Banks risk appetite. We alsowant to assure that the Bank maintains
its high standards when it comes to
asset quality and that we minimize our
risk of loss. IDB Bank is proud to report
that its asset quality as measured by the
ratio of non-performing assets to total
assets was 0 .67 % in 2013. Our asset
quality is much higher than that of our
peers and this measurement proves it,
says Mr. Barsky.
Looking ahead, the group continues toincorporate advanced methods to manage
risk, including a new asset and liability
model which will assist in the management
of interest rate and liquidity risk as well
as a new credit risk model. These tools
will enable the Bank incorporate a more
quantitative approach to analyzing data
and allow management to make better
informed decisions which ultimately
serves the best interests of our customers.
IDBs Risk Management team assesses the Banksrisk as a whole, including market and credit risk,
as well as operational risk and compliance with
regulatory requirements.
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Annual Report 2013IDB Bank
31
OUR TEAMPROVIDES RISKASSESSMENTS ANDDUE DILIGENCE TOENSURE PROPEROPERATIONAL
CONTROLSARE INPLACE.
ADAM BARSKYExecutive Vice President,
Chief Risk Officer
Infrastructure Risk Management
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Annual Report 2013IDB Bank
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Annual Report 2013IDB Bank
Treasury
We also took advantage of the relatively
low rates by refinancing part of our
wholesale borrowings, which brought
down costs just before rates picked up.
We also are seeing a greater opportunityin helping customers manage foreign
currency exchange, for businesses with
payables or receivables in foreign currency,
or for those who simply need to transfer
funds internationally or want to hedge
their foreign exchange exposure.
One clear area of growth is our interest-rate
derivatives business, which we launched
in 2012. Clients are increasingly interested
in hedging their revolving credit lines and
loans. We offer interest rate swaps that
can be thoroughly customized to match
a desired start date, amortization, and
payment frequency. With such flexibilityand protection against interest rate
exposure, clients can swap a fixed rate
loan into a floating rate if rates are low,
or swap a floating rate loan into a fixed
rate if rates go higher.
To analyze our treasury function more
effectively, we launched a new risk and
performance management system that
will help the department manage a more
complex balance sheet and loan portfolio
by modeling customer behavior, economic
valuation, interest rate scenarios and
other variables.
If longer term interest rates continue to
rise, as expected, we will be in a much
better position to reinvest in higher yielding
fixed income products, primarily mortgage
backed securities, which should help
drive the Banks income growth, says
David Cohen, Executive Vice President
and Treasurer.
Interest rates remained low in the first half of 2013
but spiked up in the second half. This helped to
increase yields of our fixed income portfolio and
generated more income than initially expected.
Infrastructure Treasury
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Infrastructure Treasury
WE OFFER
INTEREST RATESWAPS THAT CANBE THOROUGHLYCUSTOMIZED.
DAVID COHENExecutive Vice President,Treasury
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Annual Report 2013IDB Bank
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Operations &InformationTechnology
This approach has enabled IDB to rapidly introduce new cash
management and investment management and trust services.
Soon, using the same innovative approach, we will be introducing
new custody management and insurance products. This innovative
approach identifies industry-leading service providers withinspecific banking segments. IDB leverages the expertise of these
leading organizations to quickly deliver sophisticated banking
solutions to our customers.
We dont need to look any further than IDBs advanced cash
management platform, IDB Access, as a model for successful
approach. IDB Access grew considerably in 2013, increasing
its client base by 12%, thanks to the ease of managing and
controlling payment functionsincluding remote deposit,
payment options, fraud protection, and security tools.
With IDB Access, customers can customize the level of access
and set transfer limits for each user on all types of transfers,
including ACH, wire transfers and transfers between IDB
accounts. And with a new feature called Positive Pay, customers
can control disbursements more effectively because they receiveimmediate notification on checks cleared, thereby eliminating
the risk of overdrawn funds.
We offer a highly competitive set of cash management features
that new and existing clients in our corporate lending and
private banking businesses find attractive, says Linda Weber,
Senior Vice President.
By partnering with these industry leaders, IDB has aligned itself
with experts in these banking segments. These organizations
Over the past few years, IDB has taken aninnovative approach to introducing new banking
products and services for our customers.
InfrastructureOperations &Information Technology
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WE HAVE WORKEDSTEADILYON SYSTEMUPGRADES ANDENHANCEMENTSWHERE INFORMATIONSECURITY AND DATA
PRIVACY IS CRITICAL.
ROBERT PLANTEExecutive Vice President,
Operations & Information Technology
InfrastructureOperations &Information Technology
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Annual Report 2013IDB Bank
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InfrastructureOperations &Information Technology
not only deliver the leading-edge solutions
of today, but also invest over time to retain
their established leadership positions.
This implementation approach deliverssophisticated products and services for
IDB in a fraction of the time and cost of
internally building and implementing them.
SPEED AND ACCURACY
We understand the need for speed and
accuracy in processing international
business transactions, including the
efficient processing of import and export
documentation around the world, such
as letters of credit and collection and
payment orders.
For example, our Letter of Credit Automated
Customer Initiation System, a secure
and personalized Internet-based system,
connects our clients computers directly
with our Letter of Credit Department,
making issuing and amending Letters of
Credit faster, easier and more accurate
than ever before.
To expedite payment requests, we use asophisticated electronic payment system
that provides instantaneous contact with
a broad network of both local and global
correspondent banks around the world,
so each incoming and outgoing payment
order is promptly and accurately processed.
A cornerstone of our activi ty is to assure
that all of our customers instructions are
executed with speed and efficiency while
having zero tolerance for any operational
loss.
INFORMATION TECHNOLOGY ANDDATA SECURITY
As IDBs services become increasinglyautomated, both computer- and Internet-
based, we are highly focused on making
sure our offerings are not only easy to use
for our customers but also as commercially
secure as possible. Throughout 2013, we
have worked steadily on system upgrades
and enhancements where information
security and data privacy is criticalfor
everything from loan, treasury, custody and
deposit operations to payment systems
and cash management.
Today, many of the Banks products,
services, and business processes are
IT-based, so IT is really at the heart of
our operations, says Robert Plante,
Executive Vice President. By automating
workflow and customer transactions,
we can eliminate paper, streamline
processes and greatly reduce potential
errors. A key part of this improvement
effort is digital archiving, so bankers and
customers can access needed information
quickly and easily.
Our challenge is to connect and integrate
various banking technologies to create
continuity from capturing data to processing
to archiving, explains Mr. Plante. In
2013, we have been able to implement
end-to-end workflows, which consolidate
and centralize the Banks back-office
and eliminate redundancies.
In 2014 and beyond, as continual digitization
improves operating efficiencies, we willfocus even more resources on workflow
automation, quantitative analytics, cyber
security and mobile technologies.
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Infrastructure Accounting
Accounting
Working closely with all areas of the
Bank, members of the accounting team
understand intimately how the Bank
performs relative to most of our peers.
In 2013, the challenge of succeeding in a
slowly improving but still low-interest rate
environment was paramount, as well as
addressing new federal regulatory policies
that can, at times, be confusing and
unclear, says Thomas Kehrer, ExecutiveVice President and Chief Financial Officer.
The Feds quantitative easing policies
have unintended consequences on bank
income, namely net interest rate margin
compression, not just for us but for the
industry as a whole, he explains.
Nevertheless, our loan portfolio enjoyed a
good year of growth, ending the year with
an all-time-high loan balance of $4.7 billion,
up from $4.2 billion the year before, says
Mr. Kehrer. And we have entered the new
year with a stronger team to seek out and
realize cross-marketing opportunities in
a number of areas including real estate.
Expanded cash management and private
banking offerings and capabilities are also
spurring improvements in non-interest
income, which help to offset the netinterest margin compression.
With this kind of balance, we remain
confident that we will continue to succeed,
especially as the U.S. economy gets
stronger, says Mr. Kehrer. Our track
record proves that, compared to many of
our peers, our tried and true conservative
investment strategy is still the way to go.
In a challenging economic environment, the Accounting
Department plays a key role, not only in reporting on IDBs
financial performance but also identifying opportunities to
minimize expenses and enhance revenues.
THOMAS KEHRERExecutive Vice President,
Chief Financial Officer
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Annual Report 2013IDB Bank
38
Office of theGeneral Counsel
IDB Bank Annual Report 2013IDB Bank
Office ofthe GeneralCounsel
The Office of General Counsel also monitors applicable regulations, reviews contracts,
manages litigation, provides legal advice, and is responsible for the Banks corporate
governance practices.
We are here to respond to the changing needs of the Bank explains General
Counsel Leslie Case. One issue were working on with Treasury and Accounting
is the Volcker Rule, part of the Dodd-Frank Act that restricts U.S. banks from
making certain kinds of proprietary investments. Its our job to understand these
regulations, advise and protect the interests of the Bank, and to work with our
colleagues so they understand all of the ramifications, Ms. Case says. We are
here to protect IDBs integrity.
To fulfill its mission, the Office of General Counsel works closely with all areas of
the Bank, from corporate lending and private banking to human resources and
operations management. Our lawyers and staff do all they can to connect with
colleagues in these departments and to understand and address their concerns
while providing sound legal advice, says Ms. Case.
With five attorneys and five support staff, the Office of
General Counsel provides legal support to, and oversight
of, all areas of the Bank.
LESLIE CASEGeneral Counsel &Corporate Secretary
Infrastructure
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Annual Report 2013IDB Bank
39
Infrastructure Compliance
ANDR BURRELLExecutive Vice President,Chief Compliance Officer
Compliance
Our first priority, of course, is to make sure this organization
functions effectively within the laws, rules and regulations that
govern our industry, says Andr Burrell, Executive Vice President
and Chief Compliance Officer. But we also want to allow ourbusiness lines to flourish, he adds, so we listen carefully to
their concerns and make sure we all understand how business
can be done profitably within the regulatory environment. We
want to help guarantee the stability of the bank.
With a staff of 22, this work requires teamwork within the
department and with the banks business units and regulators.
We have a strong working relationship with regulators, says Mr.
Burrell. They know were open and honest and that they can
call on us at anytime. We even try to think ahead and provide
the information they need before its requested. This shows
them that compliance is part of our culture.
Working closely with all business units and functions
of IDB, the Compliance Department focuses on
making sure the bank adheres properly to all
applicable laws and regulations, including, most
recently, the complex Dodd-Frank Act.
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IDB Bank Annual Report 2013IDB BankInternal Audit
RONNI SILVERExecutive Vice President,
Chief Internal Auditor
InternalAudit
Thats why our Internal Audit Department
teams work tirelessly to make sure were
operating with the best data evaluation
and process controls possible, while
working closely with people across the
Bank to stay on top of new initiatives
and activities.
Over the past four years, the department
has expanded its process testing andanalytical capabilities, such that the
extensive use of data analytics is now part
of each audit it performs. By effectively
leveraging data analysis technology, the
department tries to look at bank activities
with a fresh eye.
If you audit the same way every year,
youre only going to see the same
things, says Executive Vice President
and Chief Internal Auditor Ronni Silver.
We always look across the organization
to try to see things differently and gain
new perspectives.
Our senior management wants to get it
right, Ms. Silver explains. Working closely
with legal, compliance, accounting and
risk management, we make sure the Bank
has the right procedures to address the
risks in all of our businesses. We may bebehind the scenes, but clients should rest
assured that auditing is a collaborative,
cross-functional effort that we take very
seriously. We have a passion for what we
do, and I think it shows in our results.
Evaluating all operational
controls for risk management
and regulatory compliance is
one of the most critical activities
for any bank.
Infrastructure
40
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The original vault at IDB New York
New York, 1962
42 IDB Capital Corp.
43 Discount Bank Latin America
Subsidiaries
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Subsidiaries IDB Capital Corp.
IDBCapitalCorp.
In 2013, we achieved our revenue goals from international sources. We also helped
the Bank select a new securities processing platform designed to expand our services
and improve client service, including improved performance reporting. With the new
system, we will also be able to conduct enhanced diagnostics for existing portfoliosto ensure that client asset allocations are appropriate and to offer products across
the entire organization. says IDB Capital President Matt Rozzi.
IDB Capital also brought onboard a new wealth management advisor in 2013. His
role is to offer service to private clients in New York and he has been working with
our U.S. Private Banking and Lending units to focus on adding value to existing
domestic client relationships, explains Mr. Rozzi.
The advisor is also representing the products for other areas of the Bank, most
importantly Investment Management & Trust. With this cohesive system up and
running and our professional staff primed for growth, we are reinventing how we
do wealth management and were more confident than ever in our ability to competeand seize new opportunities in 2014, says Mr. Rozzi.
IDB Capitalis a full-service broker-dealer and a
wholly owned subsidiary of IDB Bank. We offer a
broad array of wealth management services to our
international and domestic private banking clients,
including investment management, retirement
services, and individual & business planning
strategies.
MATT ROZZIPresident,IDB Capital Corp.
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Annual Report 2013IDB Bank
43
Discount BankLatin America
DiscountBank LatinAmerica
Operating as a commercial bank for more
than half a century, DBLA has become the
bank of choice for personalized private
banking, commercial and consumer
loans, and payroll processing for many
corporations.
During 2013, we continued to focus on
growing deposits as well as commercial and
consumer loans. Both loans and deposit
balances increased by approximately 9%
during the year, with deposits from non-
residents growing by 14%. This growth
comes at a time when Uruguay is enjoying
political stability and has been minimally
affected by the economic difficulties of
several neighboring countries. As a result,
the economy has been growing at rates
higher than the historic average, with
GDP increasing by 4.00% in 2013.
With 16 branches13 in Montevideo, the
nations capital; two in the resort town
of Punta del Este; and one in Colonia,
Discount Bank Latin America
(DBLA), a wholly owned
subsidiary of IDB, is one of
the most trusted financial
institutions in Uruguay.
near the Argentine borderthe Bank
is steadily expanding. We opened a new
branch in the area of Tres Cruces, in
response to high demand from existing
and potential customers. Our branch
in Punta del Este was also relocated
to a new dedicated building, so we can
offer enhanced services for our growing
clientele.
To improve our service to customers, we
upgraded our main phone system in 2013,
as well as continuously upgrading our
online banking services so that customers
can better manage their finances from
their home or office.
As part of our ongoing efforts to develop
new channels of interaction, we will
offer specialized services to small and
medium-size companies, and to our
young-adult customers. In early 2014,
Jorge Perez will retire as DBLA CEO,
and will be replaced by Mauricio Pelta.
JORGE PEREZPresident,
Discount Bank Latin America
Subsidiaries
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Annual Report 2013IDB Bank
Main Office
511 Fifth Avenue
New York, NY 10017
Tel: (212) 551-8500
Branch Offices201 Edward Curry Avenue, Suite 204
Staten Island, NY 10314
Tel: (718) 698-4892
9401 Wilshire Boulevard, Suite 600
Beverly Hills, CA 90212
Tel: (310) 860-6320
P. O. Box 694GT
George Town
Grand Cayman, Cayman Islands*
400 Avenue U
Brooklyn, New York, NY 11223
Tel: (718) 382-4987
888 South Figueroa Street, Suite 550
Los Angeles, CA 90017
Tel: (213) 861-6440
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Tel: (973) 379-8699
Harbour Centre
18851 NE 29th Avenue, Suite 600
Aventura, FL 33180
Tel: (305) 682-3700
Subsidiary Bank Other Subsidiaries
Discount Bank Latin America
Rincn 390
Montevideo, Uruguay
IDB Capital Corp.**
511 Fifth Avenue
New York, NY 10017
IDB Real Estate Holdings, Inc.
511 Fifth Avenue,
New York, NY 10017
IDBNY Realty (Delaware), Inc.
1105 North Market Street, Suite 1446
Wilmington, DE 19899
IDB Leasing, Inc.
511 Fifth Avenue,
New York, NY 10017
IDB Realty, LLC
511 Fifth Avenue
New York, NY 10017
IDB-HK Ltd.
Level 28 Three Pacific Place 1
Queens Road East
Hong Kong
Representative Offices
Peru:Amador Merino Reyna 295, of. 701San Isidro, Lima, Peru
Tel: (511) 421-8384
Uruguay:General Venancio Flores 431Colonia del Sacramento, CP 70000
Colonia, Uruguay
Tel: (598) 4522-1123
World Trade Center
Luis Alberto de Herrera 1248
Torre B Piso 4, of. 409
Montevideo, Uruguay
Tel: (5982) 622-2257
Israel: Ofek House8 HaManofim Street, 3rd Floor
P.O.Box 12406
Herzliya Pituach, 46733 Israel
Tel: (972) 9-773-7400
Mexico: Av. Homero 1804, of. 202
Colonia Polanco, 11560Mexico, D.F., Mexico
Tel: (5255) 5395-0634
Chile: Av. Vitacura 2771 of. 804
Las Condes, Santiago, ChileTel: (562) 236-5600
*Non-FDIC insured branch**Member FINRA/SIPC
IDB Bank is a registered service mark of Israel Discount Bank of New Yorkand a wholly-owned subsidiary of Discount Bancorp, Inc. Member FDIC.Other Discount Bancorp, Inc. subsidiaries: DB Properties, Inc.
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