Apple Bank for Savings

122 East 42nd Street
New York, New York 10017
U.S.A.
Telephone: (212) 224-6400
Toll Free: (800) 722-6888
Fax: (212) 224-6580
Web site: http://www.theapplebank.com

Wholly Owned Subsidiary of Apple Bancorp Inc.
Incorporated: 1863 as Harlem Savings Bank
Employees: 760
Total Assets: $5.93 billion (2002)
NAIC: 522110 Commercial Banking; 522291 Consumer Lending; 522310 Mortgage and Other Loan Brokers; 551111 Offices of Bank Holding Companies

Apple Bank for Savings is a state-chartered savings bank that is the fifth largest of its kind in the state of New York. It offers the usual retail products and services to its customers in the metropolitan New York City area and continues its traditional emphasis on mortgage lending for home residences and to finance multifamily buildings as well.

Harlem Savings Bank: 1863–1983

Originally a Dutch farming settlement, Harlem was still only a village in northern Manhattan in 1863, when a group of local merchants opened a community-based mutual savings bank: that is, a bank owned by its own depositors. The Harlem Savings Bank began its existence at a small storefront location at 1948 Third Avenue, between East 125th and 126th streets. In 1869 it moved to a building of its own construction at Third Avenue and East 124th Street. By mid-1876 the bank had 5,074 depositors. Harlem Savings Bank was a midsized Manhattan savings bank at the beginning of 1900, with 32,108 accounts and deposits of $9.2 million. In 1908 it completed, at a cost of $350,000, a larger building on 125th Street—Harlem's main street—just west of Lexington Avenue. Although seemingly sound, the bank experienced panic withdrawals in 1900 and 1907. No depositor was shortchanged, yet lines ran for blocks as customers feared that the bank might fail in the wake of the demise of less stable thrift institutions.

Harlem became part of New York City in 1873. The imminent arrival of three elevated railway lines soon set off a boom in which speculators bought and resold land to builders—financed by commercial banks, thrift institutions, and insurance companies—who put up brownstones, tenements, and apartment houses. Immigrant Jews prosperous enough to escape the Lower East Side began moving into central Harlem in the 1890s, while immigrant Italians settled in adjacent East Harlem. But excessive construction led to a collapse of real estate values in 1904–05. Financial institutions ceased to make loans to Harlem speculators and building loan companies. Many foreclosed on their mortgages. Realtors found a new market in the rapidly expanding African American population, and whites began moving out of the area. Harlem was by far the largest African American neighborhood in the United States by the end of the 1920s, when Harlem Savings Bank ranked 22nd in size among U.S. mutual savings banks. It weathered the Great Depression without incident and, on the last day of 1932, during the depths of the economic crisis, absorbed the Commonwealth Savings Bank, which had two offices in the Washington Heights neighborhood north of West Harlem. This acquisition brought its totals to 101,052 accounts and $84.82 million in deposits at the end of 1933.

Harlem Savings Bank was active in foreclosure auction sales during the 1930s. The properties were typically four- or five-story walk-up tenements in northern Manhattan and the Bronx. One exception was its 1937 foreclosure of the 15-story Hotel Emerson on the Upper West Side, which it quickly resold. Harlem Savings Bank also held a $600,000 mortgage on Sydenham Hospital in 1950, when the financially strapped Harlem institution was taken over by the city.

Harlem Savings Bank opened branches in the Washington Heights and Inwood neighborhoods of northern Manhattan in 1939 and 1940, respectively. By 1958 it also had a branch on East 42nd Street in midtown Manhattan. The post-World War II exodus of the middle class to the suburbs impelled the bank to reach out to other parts of the metropolitan area. It opened a branch in Manhasset, Long Island, in 1966 and moved its headquarters from Harlem to the 42nd Street branch by 1968. During the 1970s it added a branch on the flourishing Upper East Side, at 81st Street and First Avenue. By contrast, although the Harlem branch still had some 10,000 accounts in 1978, more money was being withdrawn than deposited. During the energy crisis of the early 1970s many residential property owners in northern Manhattan and the Bronx found their unregulated maintenance costs outstripping their regulated rental collections and simply abandoned their tenements rather than pay their bills, leaving Harlem Savings Bank holding nonperforming assets. Over the next few years, the bank amortized the bad mortgage loans, built up its capital, and accumulated cash.

On the one hand, Harlem, Washington Heights, and Inwood activists and politicians charged financial institutions that had served their communities with redlining: labeling low-income and minority neighborhoods as bad risks for loans and declining to issue mortgages in these areas. As late as 1993 Ralph Nader's public interest group accused the bank and four other mortgage lenders in the city with racial redlining—in effect drawing a no-loan red line around areas with a minority population of 75 percent or more. On the other hand, the Harlem Savings Bank's very name had the power to provoke racial hostility. When the bank was building a branch in Massapequa, Long Island, in 1978, the plate-glass windows had to be replaced seven times after they were shattered by bricks. The message, concluded Jerome Mc-Dougal, chairman and chief executive of the bank, in an article for Across the Board, "was that the name Harlem Savings Bank was unwelcome in the suburbs, where it was unfairly associated with drugs, crime, and general deterioration." Although Harlem had an investment in its existing name, it was the smallest savings bank still headquartered in Manhattan and, according to Mc-Dougal, "demographic studies of our own depositors [indicated] that we would be a dead institution by the year 2000, when most of our customers would have passed away."

The name change to Apple Bank for Savings—evoking New York City's reputation as "The Big Apple"—was suggested by a small consulting firm, Selame Design, and championed by McDougal, who pushed it through in 1983 despite some feeling that the name was not dignified compared to the names of other banking companies and would be a liability in seeking large corporate accounts. However, the institution saw its future as a retail bank with younger customers and new, deregulated financial services. Selame Design developed the new logo, a bright red apple with a brown stem and green leaf, and a slogan: "We're good for you." Within the first month of the name change, Apple Bank gained 4,943 new accounts—three times the normal rate—and $116 million in deposits, compared to a loss of $26 million during the corresponding period in 1982.

Expanding in the 1980s

The high inflation of the 1970s and early 1980s caused great strain among thrift institutions, which typically had put their money in mortgages and long-term bonds yielding lower interest rates than those they now had to pay out in order to retain their depositors. But Harlem Savings Bank—soon to be Apple—was in better financial shape than many of the other 36 savings banks in New York City. It ranked 25th, with nine branches—including two on Long Island—146,000 depositors, and $843 million in assets, when, in December 1981, the Federal Deposit Insurance Corp. (FDIC) provided about $160 million so that it could acquire larger but deficit-ridden Central Savings Bank. Harlem thereby gained seven more branches, including three on Long Island (and a landmarked bank building on Manhattan's Upper West Side that resembled a Florentine palazzo).

Two years after changing its name, Apple Bank converted from a mutual savings bank to a stock-issuing public institution, selling 4.6 million shares for a total of $53.5 million. The following year, it acquired Eastern Savings Bank of Scarsdale, New York, which was operating three or four branches in the Bronx, two on Long Island, and two in Westchester County, north of the city. It added a branch in the Westchester County seat of White Plains in 1987. Apple Bank now ranked 17th among the New York metropolitan area's thrift institutions, with assets of $2.7 billion.

Apple Bank began deviating in the 1980s from the traditional role of savings bank: conservative investments in residential mortgages, corporate bonds, and Treasury investments. Commercial loans, virtually zero in 1985, rose to $313.5 million in 1988—10.5 percent of its loan portfolio. Many of these loans were made to small and midsized businesses on Long Island, where Apple had nine of its 28 branches. In 1989 the bank added five more retail offices on Long Island when it acquired Sag Harbor Savings Bank for $29.5 million. Cooperativeapartment loans also grew rapidly, reaching $385.2 million, and credit card loans reached $67.9 million.

Apple Bank also established a foreign-trade desk to provide letters of credit, document clearing, and currency transactions for customers doing business abroad, and an acceptance corporation to offer loans, through a network of dealers and service companies, for the purchase of automobiles and recreational vehicles; the leasing of cars, boats, and equipment, and shelter-product loans. This unit, Apple Acceptance Corp., also offered various commercial products to the dealers, such as floor-plan financing, dealership mortgages, and working capital loans. For the retail client, a customer-service initiative included the training of both frontline and support personnel. Members of a family program were assigned to a personal family banker and were offered free checking, reduced rates on loans, rebates on credit card interest charges, and refunds on mortgage application fees, plus assistance from a team of experts with regard to savings, investment, credit, and life insurance.

Company Perspectives:

Apple continues its commitment to serving the people and businesses in our local communities.

Retrenchment in the 1990s

Stanley Stahl, a prominent New York City real estate investor and for years Apple Bank's largest depositor and leading customer, began buying the bank's stock in 1986 and had bought enough shares by the spring of 1989 to hold a 15 percent stake in the company. Over the next six months he doubled his stake. Apple's alarmed management, fearing a takeover, adopted a "poison-pill" defense in November 1989 that was intended to make it ruinous for Stahl to buy more stock. Stahl had once been good friends with McDougal, but in March 1990 he attempted a hostile takeover of the bank, offering $38 a share for another 46 percent of the stock. Since the book value of the bank was more than $56 a share, management thought it could block Stahl, but share prices dropped in the summer of 1990 as a national economic recession took hold. Stahl won the bank in October 1990, converted it into a private company, fired Mc-Dougal, and moved headquarters to the high-rise office building he owned at 277 Park Avenue.

Under the new chief executive, William J. Laraia, Apple Bank reduced its commercial and industrial lending portfolio from $422.7 million at the end of 1990 to $232.4 million in mid-1992. "Commercial lending is a business that thrifts have not been in, and we didn't have the critical mass," Laraia explained to Robert McNatt of Crain's New York Business. "In keeping with Mr. Stahl's business philosophy, we focused attention and capital resources on the activities the bank knew well and in which it could prudently grow." The bank also sold Apple Acceptance Corp. and decided to stop issuing credit card loans. Apple was now primarily in the business of financing real estate, with a special emphasis on commercial real estate and multifamily housing. Its residential mortgage portfolio remained sound despite the recession, with 14 of its 33 branches forming the heart of Apple's home-lending activities. The commercial portfolio had been weakened by the bad economy, however; some $200 million of the $1 billion on its books in commercial real estate was in bad loans and repossessed real estate.

Apple Bank lost $49.4 million in 1991 but was profitable in 1992 after cutting operating expenses by one-fifth, reducing staff by one-third, and installing more rigorous credit controls. By late 1993 it had reduced its nonperforming loans to about 3.5 percent of total assets and was seeking to increase its number of mortgage loans. "We're considering introducing satellite mortgage offices, possibly six in the coming year," Alan Shamoon, the bank president, told Miriam Leuchter of Crain's New York Business. "We also haven't fully exploited bringing in residential products through correspondents, such as brokers and lawyers." The bank's total assets reached $4.47 billion and its net income, $56.2 million. Shamoon succeeded Laraia as chief executive in 1994.

By 1997 banks in New York City were loosening their purse strings in a hot real estate market, offering innovative mortgage-loan packages, some of which, like combining a mortgage with a home equity loan, allowed lower down payments than the usual 20 percent. Brokers mentioned Dime Savings Bank and the Apple Bank of Savings as especially active in the mortgage market. In the worst case—if the buyer could not repay the loan—lenders like Apple were confident that they could recover their investment because residences were selling so well.

At the end of 2002 Apple Bank for Savings had $5.93 billion in assets, $5.2 billion in deposits, and net income of $58 million for the year. Of the bank's 47 branches, 31 were in New York City: 12 in Manhattan, 13 in Brooklyn, four in the Bronx, and two in Queens. There were another 14 on Long Island, and two in Westchester County, including the former Eastern Savings headquarters in Scarsdale, now also the site of the bank's data center.

Key Dates:

1863:

Founding of Harlem Savings Bank in the northern Manhattan community of Harlem.

1932:

Harlem Savings acquires Community Savings Bank, adding two branches.

1966:

The bank expands to the suburbs, opening a Long Island branch.

1981:

Harlem Savings acquires the troubled Central Savings Bank.

1983:

Harlem Savings Bank changes its name to the Apple Bank for Savings.

1985:

Apple Bank converts to a public stockholding savings bank.

1990:

Stanley Stahl acquires Apple and converts it to a privately held bank.

1992:

Apple Bank withdraws from commercial lending after serious losses.

Principal Subsidiaries

ABS Associates of New York, Inc.

Principal Competitors

Emigrant Savings Bank; Flushing Savings Bank; GreenPoint Bank; Independence Community Bank; Ridgewood Savings Bank.

Further Reading

Alson, Amy, "Apple Merger Adds to Suburb Expansion," Crain's New York Business, June 30, 1986, p. 2.

"Apple Bank for Savings," Wall Street Transcript, December 1, 1986.

Basch, Mark, "Making Room for Growth," American Banker, August 20, 1985, pp. 12, 14.

Bennett, Robert A., "Central Bank Is Merged," New York Times, December 5, 1981, pp. 31, 35.

——, "Lesson Plan for the Savings Industry," New York Times, August 7, 1988, Sec. 3, pp. F1, F6.

"Harlem Savings Bank Panic Continues," New York Times, December 14, 1900, p. 3.

Manning, James Hilton, A Century of American Savings Banks, New York: B.F. Buck & Co., vol. 2, 1917.

McDougal, Jerome, "Banking a Name Change," Across the Board, January 1987, pp. 55–56.

——, "Name Change Polishes Image for N.Y. Thrift," Bank Marketing, February 1987, pp. 18–19.

"Nader Group Cites 'Redlining' in Study of Lenders," New York Times, August 13, 1993, p. D2.

Osofsky, Gilbert, Harlem: The Making of a Ghetto, New York: Harper & Row, 2nd ed., 1971.

Rozibon, Tracie, "Banks, Flush, Getting Eager to Lend," New York Times, February 28, 1997, p. B6.

Selame, Elinor, "Image Counts," Management Review, February 1985, p. 43.

"Two Uptown Savings Banks Combine," New York Times, January 1, 1933, Sec. 2, p. 7.

—Robert Halasz