Long Island Bancorp, Inc. Business Information, Profile, and History
Melville, New York 11747
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History of Long Island Bancorp, Inc.
Long Island Bancorp, Inc. is the holding company for The Long Island Savings Bank, FSB, which converted from a mutual to a stock form of organization in 1994. The Long Island Savings Bank was one of the ten largest thrift institutions in the New York metropolitan area in the early 1990s and ranked second in deposits in Long Island's Suffolk County in 1994. In 1995 it had 36 full-service bank offices: 19 in Suffolk County, 11 in Nassau County, and 6 in Queens County (New York City's borough of Queens). The bank also operated 16 regional leading centers along the eastern seaboard.
19th Century Beginnings
The bank was founded as the Long Island City Savings Bank in 1876. Long Island City, which was incorporated as a municipality in 1870 and became the county seat of Queens in 1872, was larger than the present-day neighborhood of that name; it took in all of Queens's East River shoreline and included the communities of Astoria, Steinway, Ravenswood, Sunnyside, and Hunter's Point. Even so, Long Island City had only about 20,000 residents in 1876. It was still rural except along the riverfront. Here the southern part was filling with factories, and the northern part held a number of large suburban homes. Long Island City could only be reached from New York City (which then consisted of Manhattan and the southern Bronx) by ferry.
The Long Island City Savings Bank opened its doors in a building on Jackson Avenue and Third Street in Hunter's Point. Its first president, Sylvester Gray, owned a nearby refrigeration factory and was politically well connected, having served as chairman of the local board of education and as excise commissioner. J. Harry Smedley, superintendent of a nearby lard-oil factory, was the bank's secretary and served in that post for 36 years. Long Island Savings was a mutual savings bank, owned by its depositors. Since there was no commercial bank in the area, a special act of the state legislature gave it permission to establish a checking department, but this act was soon repealed.
The first years of the Long Island Savings Bank were difficult ones. Smedley later recalled that in addition to serving as secretary, he was also the bank's cashier, bookkeeper, janitor, and office boy. Because of the small salary he also took a job with the Standard Oil Co., which gave him leave for the two hours a day that the bank was open. About 1885, however, John H. Thiry, another member of the board of education, initiated the idea of teaching children thrift by having them establish bank accounts. A special legislative act authorized teachers to collect pupils' savings and turn them over to the principal, who opened an account as trustee for the children. By 1925 the bank had 22,000 children, attending 27 schools, as depositors.
The school children of Long Island City were credited by Smedley with saving the bank, however unwittingly. In 1883 total deposits, from 705 accounts, came to only $51,300. Ten years later, when the Long Island City Savings Bank was still one of only two banks in western Queens, the number of its accounts had grown to 6,232, with deposits totaling $553,846. The last decade of the 19th century also saw other significant changes. The bank moved to a new Jackson Avenue building in 1893. William J. Burnett, a physician, succeeded Gray as president in 1896, and Queens became a borough of New York City in 1898. The Long Island Savings Bank made many mortgage loans to homeowners and was described in a book published during this period as "the poor man's best friend" in Long Island City. At the end of 1902 the bank had 8,157 accounts and deposits of $2.35 million.
Continued Growth to Mid-Century
The next great event in Queens history was the opening of the Queensboro Bridge, linking Long Island City to midtown Manhattan, in 1909. Three years later the bank moved its quarters to the Queens Court Plaza building by the bridge, using wagons to haul millions of dollars in cash and securities to the new offices during the Labor Day holiday lull. In 1920 the bank moved into its own building on Bridge Plaza North. A branch was opened in Astoria the following year.
By 1928 the Long Island Savings Bank had 64,874 depositors and deposits of $51.7 million. Its earnings that year came to nearly $3 million. Of its assets, $35.3 million was held in bonds and mortgages. With not only the bridge but railway and rapid transit service reaching western Queens from Manhattan, the area grew quickly in population. Around 1920 most Long Island City lots could be purchased for between $3,000 and $5,000, compared with $8,000 to $15,000 in the Bronx and Brooklyn. Real estate investment jumped from $35 million in 1920 to $157 million in 1924. With more than 1,600 factories, Long Island City also had become one of the largest manufacturing centers in the United States.
Savings banks weathered the Great Depression better than commercial banks or fellow thrift institutions like savings and loan associations. Commercial banks were at greater risk than thrifts because of their high proportion of demand deposits. Savings banks had substantially higher reserves than savings and loans, made shorter-term loans, and had portfolios with lower loan-to-value ratios. The Long Island Savings Bank never had annual net earnings in this decade below the $195,827 recorded in 1935. With $63.2 million in deposits in 1939, it ranked 27th among U.S. savings banks. There were 102,525 depositors at the end of 1940.
Expansion Eastward into Suburbia in the 1950s
The Long Island City Savings Bank added a Jackson Heights branch in 1948 and in 1951 had assets of $179 million and more than 112,000 depositors. More than $1 million was in children's accounts. A Rego Park branch was opened in 1956. At the end of 1960 the bank had $329.3 million in deposits from 193,479 depositors and net earnings of $1.7 million for the year. By this time the bank, like many of its customers, was looking eastward to suburbia. It opened a branch in the Nassau County community of Syosset in 1962 and changed its name from the Long Island City Savings Bank to the Long Island Savings Bank in 1966.
In 1970 the Long Island Savings Bank had assets of $690.3 million and deposits of $632 million, with 184,113 depositors at the end of the year. During the 1970s the bank opened branches in Astoria, Flushing, Long Island City, and Whitestone in Queens, Huntington, Merrick, and Seaford in Nassau County, and West Islip in Suffolk County. In 1976, its centennial year, the bank moved its headquarters from Long Island City to Syosset.
The 1980s: Growth by Acquisition
The Long Island Savings Bank had nearly $1.2 billion in assets in 1980. By the end of 1982 it was the largest savings bank on Long Island, and the following year it switched from a state to a federal charter. In 1983 the bank acquired, with federal aid, a troubled thrift institution, Suffolk County Federal Savings and Loan Association, which had 36 offices and $2.7 billion in assets. It was made a subsidiary and renamed the Long Island Savings Bank of Centereach.
The Long Island Savings Bank added, in 1986, another ailing thrift institution, the Flushing Federal Savings & Loan Association. In agreeing to acquire this institution, which had eight offices and $467.5 million in assets but a negative net worth of $7 million, the bank received a commitment of $60.8 million in assistance from the Federal Savings and Loan Insurance Corp. Long Island Savings, with $5.2 billion in assets and 55 branches, now was the seventh largest mutual savings bank in New York. It slimmed down again, however, in 1993, when it sold branches with deposits of about $950 million to Home Savings of America for an undisclosed sum.
A Broader Range of Products andServices in the 1990s
In 1990 the bank established the Long Island Savings Agency ("LISA") as a wholly owned service corporation to offer nontraditional, fee-based products to its customers. At first LISA sold single-premium deferred-annuity products. It was expanded in 1993 to offer a broader range of financial products and services, including an expanded line of annuities and other investment products, by marketing a line of mutual funds with a variety of investment objectives.
Ranking seventh among lenders on Long Island in 1994, the Long Island Savings Bank was seeking to enter the top three by turning as many depositors as possible into borrowers and increasing its purchases of new loans from other lenders. The bank was buying loans on a wholesale or correspondent basis in New Jersey and Connecticut as well as New York. Its methods of getting the word out to potential retail customers included targeted mailings, advertising on radio and television, and a prospective point-of-sale lending program in the offices of real estate agents.
The Long Island Savings Bank converted from mutual ownership--ownership by its depositors&mdashø a stock form of ownership in December 1993. The restructuring involved the creation of a Delaware-incorporated holding company, Long Island Bancorp, Inc., with the bank as its subsidiary. Long Island Bancorp completed a common stock offering in April 1994, raising $296.9 million in net proceeds by selling 26.8 million shares of stock at $11.50 per share. Long Island Bancorp then purchased all of the capital stock of the Long Island Savings Bank for $164 million. Traded on the Nasdaq stock market, Long Island Bancorp shares rose almost immediately after issue and closed at $24.50 a share at the end of 1995.
The bank's principal business continued to be attracting deposits from the general public and investing these deposits and other funds primarily in single-family, owner-occupied residential mortgage loans. It was also investing, however, in higher-yielding mortgage-backed and asset-backed securities and, to a lesser extent, in multifamily residential mortgage loans, commercial loans, consumer loans, and other marketable securities. The bank's main sources of funds, in addition to deposits, were borrowings under reverse repurchase agreements and principal and interest payments on loans and mortgage-backed securities. It was also offering investments, life insurance, homeowners' insurance, mortgage life insurance, and other products. In 1995 the bank introduced its first credit card program, featuring Visa and MasterCard with low introductory rates and no annual fees.
During fiscal year 1995 Long Island Bancorp acquired the lending operations of Entrust Financial Corp. and Developer's Mortgage Corp. The acquisitions of these mortgage bankers enabled the bank to open retail offices in Pennsylvania, Delaware, Maryland, Virginia, and Georgia as well as New York, New Jersey, and Connecticut. As a result, the bank closed more than $1 billion in mortgage loans in fiscal 1995, compared with $435 million in fiscal 1994. The bank also had correspondent loan agreements with select mortgage bankers originating loans throughout the United States.
At the end of 1995 Long Island Bancorp had assets of $4.93 billion and deposits of $3.6 billion. Of its net loan portfolio of $2.1 billion, one-to-four-family real estate loans formed 81 percent of the total in fiscal 1995 and all real estate loans accounted for 94 percent of the total. Nonperforming loans came to $63.8 million, or 1.2 percent of total assets. Net income was $43.5 million in fiscal 1995. Management and employees held about 13 percent of Long Island Bancorp's shares.
Long Island Savings Bank moved its executive offices in 1988 from Syosset to a building on a 682,000-square-foot plot in Melville. This property had a book value of $46.1 million in 1995, when Long Island Bancorp owned 24 and leased 12 of its branches. Its regional lending centers were being leased.
Principal Subsidiaries: Long Island Savings Agency; Long Island Savings Bank, FSB; Mortgage Headquarters Inc.
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