Staten Island Bancorp, Inc.

1810–1997

Staten Island Bancorp, Inc. is a holding company that was created in 1997 to facilitate the conversion of the Staten Island Savings Bank from a federally chartered mutual savings bank to a federally chartered stock savings bank. For most of its history, dating back to its original charter in 1864, the Staten Island Savings Bank served a limited community. It was not until 1995 that the bank ventured beyond the shores of Staten Island to do business in Brooklyn. Staten Island Bancorp, through its subsidiary SI Bank & Trust, now operates several branches in New Jersey and looks to make further inroads into that market. The bank also has expanded into other areas of the country through the mortgage business. Its subsidiary, Ivy Mortgage, has offices in 25 states. Another subsidiary, American Construction Lending Services, Inc. (ACLS), offers residential construction loans throughout the United States. Nevertheless, Staten Island Bancorp remains committed to the community-oriented approach that made the Staten Island Savings Bank so successful.

Origins in the Early 1800s

The origins of Staten Island Bancorp reach back to the savings bank movement that began in Europe in the second half of the 18th century when small savings organizations were formed in Germany and Switzerland for the benefit of the working class, who were able to earn a higher return on their money by pooling together their small deposits. Although its depositors could withdraw money only upon reaching a certain age, making the plans akin to a pension, these early organizations became a model for British social thinkers who wanted to eradicate poverty. Rather than reward idleness through the giving of alms, the upper classes in England preferred to create savings and annuity plans that they hoped would promote the virtues of thrift, industry, and sobriety. The first self-sustaining savings bank was founded in Scotland in 1810, and the concept spread with such evangelical zeal that by 1818 there were 465 savings banks in the British Isles.

It was inevitable that the mutual savings bank movement would reach the United States. The first New York mutual began operations in 1819, again fortified by the belief that thrift among the laboring class would cure any number of social ills&mdash well as keep down taxes. By the Civil War there would be 25 mutual savings banks in Manhattan, Brooklyn, and Queens. In the beginning, mutuals were open several hours a week only, and many shared offices with insurance companies and commercial banks (where many of the mutuals deposited their funds). With the passing years, however, mutual savings banks operated less like organs of charity and more like regular businesses. Hours were expanded greatly and full-time managers were hired. Mutuals began to advertise in the newspapers, and they raised interest rates to lure away customers from their competitors. Mutual savings banks that had been created to serve workers now eagerly accepted deposits from businessmen. The Civil War only served to accelerate the transition from part-time, quasi-charitable activity to highly competitive industry.

Charter for Staten Island Savings Bank in 1864

Deposits at the end of the first year totaled only $13,957.

1864–1996

Compared with Manhattan and Brooklyn, Staten Island was rustic, with no financial institutions of any kind. Even when it became one of the five boroughs that would be consolidated together in 1898 to form 'Greater New York,' Staten Island would for decades remain essentially a rural enclave. It was in this sequestered environment, albeit in the shadow of Manhattan, that the Staten Island Savings Bank was chartered by a special Act of the State Legislature on April 7, 1864 (it would not begin actual operations until June 1867). Local leaders, headed by Francis George Shaw, founded the bank in the spirit of forwarding the public good, as had the earlier mutuals. Like its predecessors, Staten Island Savings Bank also started small. It conducted its business in a single room that was furnished by the bank's trustees, who would not be reimbursed for the expense for several years. Deposits at the end of the first year totaled only $13,957.

The Staten Savings Bank grew slowly but steadily over the years. In 1892 it moved to a new location and began to rent more and more rooms, until 1923 when the bank purchased the building and two adjoining properties, and built a new office that today continues to house a branch office. When its new home was completed in 1925 the assets of the Staten Island Savings Bank neared $15 million. The first branch office opened in 1929, followed by another in 1937, at which point assets reached $21,500,000. By 1950 the amount had more than doubled, reaching $47,333,000, as more branch offices began to open to serve the expanding population of Staten Island. In 1961 the assets of the Staten Island Savings Bank topped the $100 million mark. By 1973 the bank had added two more branches and its assets had grown to $277 million. The bank exceeded the $500 million level in 1980.

In 1983 the Staten Island Savings Bank merged with the Richmond Country Federal Savings and Loan Association, the oldest such institution on the island, thus adding three more offices, which allowed the bank to cover nearly all of Staten Island. To provide service to the fast growing community of New Springville, the bank opened its 13th branch office in 1989, and by now its assets had grown to $836 million. Named to lead the Staten Island Savings Bank into a new era was Harry P. Doherty, who became president and chief operating officer in 1989. A year later he would be named chairman and CEO. Doherty began working at the bank in the mid-1960s after serving in the Marines. A management trainee, he first gained experience in the internal audit department, where he worked for several years before becoming chief auditor. He then transferred into finance, became a cashier, and rose to the level of senior VP cashier before being named to head the bank.

In 1990 a further consolidation of the traditional local banking community took place with the dissolution of the Nassau Federal Savings and Loan Association, which allowed Staten Island Savings Bank to acquire three more branches. Two of the offices originally had contained the Edgewater Savings and Loan Association, and the third had been the office of Prudential Savings and Loan. Edgewater and Prudential were among the island's oldest financial institutions. With the addition of these branches, Staten Island Savings Bank topped $1 billion in assets.

In the world of mutuals, Staten Island Savings Bank was a true success story. Although the philanthropic nature of its origins had long since given way to the realities of business, the bank was able to remain true to its community-oriented vision yet still prosper. The same could not be said for other mutuals, which began to suffer in the 1970s from rising interest rates. Committed to long-term, low-yielding mortgages, many mutuals lacked the flexibility to adapt to such adverse economic conditions. By the mid-1990s, mutuals were becoming a dying breed. At the end of 1972 there had been 1,817 federally chartered mutual savings banks; by the end of 1996 only 653 would remain.

1994–1999

Many mutuals converted to a stock form of ownership. Instead of being owned by the community through its customers, converted mutuals now would have to answer to shareholders, with the result that a longer-term approach would give way to a quarterly results-oriented approach, and sometimes the interests of customers and shareholders would be at odds. Staten Island Savings Bank, operating in a community with growth that was limited by its shoreline, tried to expand its business and hedge its bets against the volatility of interest rates by offering commercial services. It enjoyed limited success, mostly because its main competitor, Gateway State Bank, was doing a better job. When Doherty learned in late 1994 that Gateway had hired an investment banker and might be available for purchase, he approached his board about acquiring the commercial bank. Although no mutual bank had ever bought a stock institution, the board was willing to move forward. The New York State Banking Department initially dismissed the idea, only to conclude a short time later that there was nothing in the state statutes to prevent such a transaction. By March 1995 the Staten Island Savings Bank had completed a definitive agreement to purchase Gateway, and by August the $58 million deal was completed. The Staten Island Savings Bank, therefore, added $320 million in assets, bringing its total to $1.7 billion. The deal also brought with it five offices and a Trust Department that gave Staten Island entry into a new line of business. A branch office in Bay Ridge, Brooklyn, just across the Verrazona Bridge, became the bank's first location off Staten Island. Although the bank's business model was changing to accommodate both consumers and business customers, Doherty insisted at the time that the Staten Island Savings Bank would remain a mutual.

Formation of Staten Island Bancorp in 1997

A year after acquiring Gateway, Doherty announced that the Staten Island Savings bank was converting to a stock institution. To accomplish the conversion, a holding company named Staten Island Bancorp (SIB) was incorporated in Delaware. In December 1997 an initial public offering of stock was made, and Staten Island Bancorp began trading on the New York Stock exchange.

With the money raised from the public offering, SIB began to expand and diversify its business. It formed a mortgage company subsidiary (SIBMC) in 1998 to purchase the Ivy Mortgage Corp., based in Branchburg, New Jersey, with a network of branch offices and correspondents in 21 states. SIBMC elected to continue operating under the Ivy Mortgage name. Also in 1998, SIB created the SIB Investment Corporation (SIBIC) for the purpose of managing certain investments of the bank. It then created the Staten Island Funding Corporation for the purpose of establishing a real estate investment trust that would be run as a wholly owned subsidiary of SIBIC.

Early in 1999 SIB formed American Construction Lending Services, Inc. (ACLS) after being approached by experienced lenders in the residential construction loan business who were looking to create a start-up. ACLS would lend money to builders, who would in turn transfer a new home to the owner. ACLS would then sell the loan in the marketplace. The venture would in effect give SIB the ability to generate higher-yielding, short-term loans in a rapidly growing segment of the residential construction lending business.

1999–2001

Later in 1999 SIB acquired First State Bancorp, Inc. and First State Bank, a New Jersey commercial bank worth $374 million with six branches serving Monmouth and Ocean Counties. The deal was an important step for SIB, not only to reach westward into New Jersey but to grow its traditional business: deposits. The possibilities were limited for further growth on Staten Island (and to a lesser extent, Brooklyn). Most activity would simply be a shifting of accounts from one bank to another. Certain parts of New Jersey, however, offered true growth potential.

Five years removed from the Gateway State Bank transaction, SIB had undergone so many changes, both in product lines and geographic markets, that management felt it was time to change the name of its banking subsidiary, Staten Island Savings Bank. The words 'savings bank' was too limiting, and the association with Staten Island meant little to New Jersey customers. A compromise was found in the name SI Bank & Trust, which more accurately described the business while retaining some name recognition for its Staten Island customers.

SIB continued its efforts at diversification in January 2000 when it formed SIB Financial Services to sell life insurance. In October 2000 SI Bank & Trust signed an agreement to purchase four New Jersey branches from Unity Bancorp. Three were located in Union County and one in Middlesex County. The deal brought the total number of New Jersey branches to ten. Doherty also announced the bank's intention to open another three facilities in New Jersey in the near future.

With assets standing at $5 billion (as of June 2000), its business far more diversified than when it had been strictly a mutual savings bank, and a geographic reach that now extended nationwide, SIB entered 2001 poised for continued growth, yet harboring some concerns. Doherty told the Wall Street Corporate Reporter in an October 2000 interview, 'The biggest challenge ahead of SIB is execution, which is paramount. If we trip and fall in any of the areas where we are trying to execute strategies for expansion into Brooklyn and New Jersey or are unable to find marriages with other institutions, we won't have the ability to expand our base and grow the balance sheet. We need to be able to duplicate what we are doing successfully on Staten Island in our new markets in both Brooklyn and New Jersey and that is just what we are doing.'