Annual Report

Annual Report
1
About Bank Leumi USA
18
Financial Highlights & Management Analysis
2
Chairman and CEO’s Letter
20
Consolidated Statements of Financial Condition
4
U.S. & International Commercial Banking
8
U.S. & International Private Banking
21Consolidated Statements of Net Income
and Comprehensive Income
10
Leumi Investment Services Inc.
22
Board of Directors & Senior Management
12
Information Technology and Service & Delivery
23
Governance
14
The U.S. Economy in 2013
24
Leumi Group Locations
16
The Israeli Economy in 2013
Bank Leumi USA is a FDIC-insured full-service
commercial bank that has been operating in the
U.S. for over half a century. With offices located
in New York, California, Florida, Illinois and a
representative office in Israel, we’re a local bank
with international clout. We offer commercial and
private clients access to a complete range of global
banking solutions, including securities and insurance
products offered through Leumi Investment
Services Inc., our broker-dealer subsidiary.
A commitment to building strong and lasting
relationships defines how we do business. We offer
the high level of service you would expect from a local
community bank along with the industry knowledge
and capabilities available in a money center bank.
Our size allows us to be nimble, providing our clients
the benefit of faster decision making and access to all
levels of management. With our international heritage,
our products and services are tailored to help clients
navigate the complicated and dynamic global economic
environment. And as the largest subsidiary of the Leumi
Group, Israel’s leading bank, we provide unparalleled
access to Israeli-generated products and research for
our private banking clients and strong foreign exchange
and trade finance capabilities for our commercial
banking clients.
personally involved with every part of serving our clients,
from understanding your business to finding creative
solutions for reaching your financial goals. Our people—
their in-depth knowledge, commitment to excellence and
care—are what make us special.
The Leumi Group has been characterized as a
driving force behind Israel’s economic and industrial
development since the bank’s establishment in
1902. Today, it serves as a gateway for investors and
businesses in Israel and worldwide, with total assets
under management exceeding $315 billion and
shareholders’ equity of $7.7 billion. Its global presence
spans across 15 countries with 326 branches and offices
in major world financial centers as well as a broad
network of correspondent banks.
As a Bank Leumi USA client, you partner with a talented
group of professionals who pride themselves on being
BA NK LEUMI US A 1
David Brodet
Chairman of the Board
Avner Mendelson
President and
Chief Executive Officer
DEAR SHAREHOLDERS, CLIENTS AND EMPLOYEES
As we look back on 2013, we remember it as the year
we laid the groundwork for the largest investment and
capabilities upgrade program that Bank Leumi USA has
ever embarked upon, despite the challenges we faced
in meeting our financial growth and profitability targets.
This multiyear program is designed to upgrade our
core technology and operations environment, to
define clearer roles and responsibilities throughout
our organization and to streamline key processes.
Bank Leumi USA will be transformed into an even
better bank for clients and employees, who will
begin to enjoy our new state-of-the-art technology
platform and applications by early 2015. We thank
our shareholders and the Board of Directors for their
vision, patience and long-term commitment towards
fashioning Bank Leumi USA into a profitable growth
engine for the Leumi Group.
We are carrying out this transformation with a clear
vision and purpose. Our goal is to truly become a
relationship-driven boutique bank that enjoys longlasting relationships with its commercial and private
banking clients by providing personalized services that
are tailored and professionally delivered to meet our
2 BA NK LEUMI US A
“Our dedicated professionals are the face of
Bank Leumi USA and make the greatest impact
on our organization.”
clients’ specific needs. We will achieve this by building an
efficient, agile and technologically advanced platform,
and by empowering and continuously developing our
devoted and talented professionals.
Transformation is essential to the future of both our
commercial and private banking businesses. We
experienced great success in 2013 as we grew our
relationship-driven business in the niche markets that
serve as growth engines for commercial banking. At the
same time, we continued to identify and penetrate new
sectors. Similarly, through our commitment to develop
a leading private banking platform, clients benefited
from a newly upgraded offering of value-added research,
product and trading capabilities through our brokerdealer subsidiary, Leumi Investment Services Inc. In 2014
we will continue to improve our value proposition for
both commercial and private banking clients.
Our dedicated professionals are the face of Bank
Leumi USA and make the greatest impact on our
organization. We will continue to invest in our employees
by offering opportunities for professional growth and
development as well as actively seeking high-caliber,
talented individuals who share our values—Passion,
Accountability, Care, Excellence and Integrity—to join us
in our journey.
Last year was also a year of transition in our leadership.
We thank Itzhak Eyal, who retired in September from the
role of President and CEO, for his vision and leadership
in the past three years. We would like to also extend
our appreciation to our retiring board members,
Donald S. Howard, Malcolm Hoenlein and Robert K.
Lifton, who served on our board for 19, 14 and 21 years,
respectively. We are grateful for their dedicated service
to Bank Leumi USA and wish them all the best. At the
same time, we are pleased to welcome several new
board members including Daniel Tsiddon, Deputy CEO
of the Leumi Group; Gideon Altman, former Head of
the Commercial Division of the Leumi Group; Simon B.
Jawitz, Senior Managing Director of Sierra Real Estate;
and Charles D. Johnston, the former President of
Morgan Stanley Smith Barney.
We are convinced that the unprecedented investments
in our business and our people will allow us to fulfill our
vision and deliver continued value to our shareholders,
clients and employees.
Thank you for your ongoing support. We invite you to
visit us at our newly renovated corporate headquarters
at 579 Fifth Avenue in New York.
Wishing you success in 2014.
David Brodet
Chairman of the Board
Avner Mendelson
President and
Chief Executive Officer
BA NK LEUMI US A 3
U.S. & INTERNATIONAL COMMERCIAL BANKING
A relationship-driven, boutique commercial
bank, Bank Leumi USA operates with a client-first
focus and a commitment to the highest level of
professionalism. Our bankers are trusted advisors
to their clients, are knowledgeable about their
business needs and provide tailored solutions
to meet their goals. Coupled with their deep
industry and banking expertise, our relationship
managers structure creative solutions and offer
competitive terms for banking products that
are customized for their clients’ businesses.
4 BA NK LEUMI US A
RELATIONSHIP MANAGERS AND INDUSTRY EXPERTS
Located in New York, California, Florida and Illinois, our
teams serve middle market companies. As experienced
relationship managers and industry experts, they have
an understanding of the economics of the industries in
which our clients operate and are able to match loan
and collateral requirements with the ebbs and flows of
each industry. We offer a full array of lending products
that cater to our clients’ needs including term loans,
revolving lines of credit and letters of credit.
Leumi Commercial Banking serves many industries
with a specific focus on:
•
Commercial & Industrial: For over 50 years, our
relationship-driven approach and industry expertise
in sectors like apparel and wholesale have allowed
us to build our book of business while maintaining
a strong and disciplined credit culture. In addition
to the apparel and wholesale sectors, we also cover
companies in manufacturing, commodity and
service industries.
•
Real Estate: We specialize in financing multifamily,
retail, office, shopping centers and mixed-use
properties, and, in New York, construction projects
and properties that are being repositioned.
•
Healthcare: Riding the growth in demand for senior
care services and due to our industry expertise, we
are well positioned to continue building our banking
services to the senior care industry. Known for our
proficient underwriting and our focus on fostering
long-term relationships, we have expanded our
business to all the markets in which Bank Leumi USA
participates.
• I nternational Banking & Technology: Anchored
by an experienced team of bankers who work with
Israeli companies doing business in the U.S., and
as the only Israeli-affiliated bank with an office in
Silicon Valley, we specialize in helping Israeli-related
technology startups at all stages succeed in the U.S.
We offer strong networks in the U.S. and in Israel
as well as a full banking platform for technology
companies, including lines of credit for growth-stage
startups and currency conversion and hedging
solutions for Israeli–U.S. companies.
PAUL LETOURNEAU
FIRST SENIOR VICE PRESIDENT, ILLINOIS
When Paul hires a new employee for Bank Leumi
USA, he does everything to ensure their success.
“I believe in mentoring and coaching. We make sure
new hires have adequate training. We help them
build relationships and make sure they have the
support needed to be successful with their new
clients. If you start people off on the right foot,
the reward will be their future growth.”
Paul brings that same care to his client relationships.
One example is the strong growth in client
relationships. “We have been serving the senior care
living industry for 30 years. Our teams here and
across the U.S. have extensive expertise and add
unique value for clients. We stay on top of industry
trends so we can continue to provide unparalleled
service to this vital business.”
BA NK LEUMI US A 5
U.S. & INTERNATIONAL COMMERCIAL BANKING
WORKING WITH A BANK OUR SIZE
Because we are a boutique bank, our senior management
team is actively involved with business and credit
decisions. Their ongoing review of the business and
firsthand knowledge of many of our clients provide a
competitive edge. This enhances our decision-making
process by giving us the insight needed to respond
quickly to our clients’ needs.
TREASURY SOLUTIONS
Cash Management Services
Bank Leumi USA provides expertise and tools to help
companies manage cash flows, control risk, maximize
working capital and integrate banking and treasury
activities. Through Leumi Online, clients can access
accurate, up-to-date financial information, enabling
them to accelerate receivables, leverage liquidity and
enhance overall productivity. The result is improved
cash flow, convenient access to account information and
more effective control of treasury operations. We also
offer customers the ability to hold foreign currencies
or foreign currency–denominated investments, which
they can see on Leumi Online. Additionally, customers
can use Leumi Online to send international wire transfers
denominated in U.S. Dollars or in foreign currency.
Foreign Exchange
Companies that do business outside of the U.S. can
benefit from the foreign exchange services we offer.
With knowledgeable experts and a dealing room capable
of handling all major tradable currencies, Bank Leumi USA
can find solutions that satisfy most companies’ needs.
Once we understand a client’s overseas business, we work
with them to develop currency and hedging strategies that
minimize currency risk and maximize returns.
Trade Finance
We serve as expert advisors to clients who need
international banking services to facilitate transactions
across national borders. We offer a full range of trade
finance products, such as standard and specialized
standby and commercial letters of credit, bankers’
acceptances, and documentary collections, for both
importers and exporters. Leumi Global Link, our webbased service, connects clients directly to our international
trade finance system, where they may apply for letters
of credit, view current balances, process collection
transactions and acceptances, and do much more. This
valuable tool enables clients to facilitate transactions with
speed, accuracy and efficiency.
Equipment Financing
Through our wholly owned subsidiary, Bank Leumi
Leasing Corporation, Bank Leumi USA originates and
arranges equipment financing for middle market
and investment grade clients. We maintain an active
syndication desk participating in third-party leasing
transactions. Our offerings include term loans, capital
leases, vendor programs, finance leases, equipment
loans, portfolio acquisitions, rent-discounting programs
and synthetic lease structures.
COMMERCIAL BANKING TEAM
Hilla Eran-Zick
Senior Executive Vice President
Deputy Chief Executive Officer
Shlomo Mosseri
First Senior Vice President
Deputy Chief Lending Officer
Joseph Sciarillo
Executive Vice President
Real Estate Lending
6 BA NK LEUMI US A
Steven Caligor
First Senior Vice President
New York Commercial Banking
President – Bank Leumi
Leasing Corporation
Stefanie Handsman
First Senior Vice President
Treasury Services
Ofer Koren
First Senior Vice President
California
Paul Letourneau
First Senior Vice President
Illinois
Eric Halpern
Senior Vice President
Middle Market Lending
Akiva Segal
First Senior Vice President
Florida
Ignatius Marotta
Senior Vice President
Middle Market Lending
Jeffrey Carstens
Senior Vice President
Middle Market Lending
Eitan Sapir
Senior Vice President
International &
Technology Banking
Christopher Gregg
Senior Vice President
New York Real Estate Lending
MARINA DAVELMAN
VICE PRESIDENT, COMMERCIAL BANKING
Marina’s expertise in the wholesale and apparel
industries helps our commercial banking clients grow
their businesses. “Our clients are not just a transaction
to us. We understand the unique needs of startups and
other businesses and know their business cycles. Our
personalized focus provides a foundation on which to
build their success.”
Marina is making a difference not only to her customers’
businesses, but to Bank Leumi USA as well. “I have
opportunities here that I did not have at a larger
institution. I do many of the same things I did before, but
here they get noticed. I am excited about the possibilities
I see ahead of me.”
“We understand the unique needs of our clients and
know their business cycles. Our personalized focus
provides a foundation on which to build their success.”
NOAM KATZ
VICE PRESIDENT, COMMERCIAL BANKING
Noam was accepted into the Bank’s Credit Training
Program in 2007. Since then he has worked as a
commercial lender in our International Lending business
and managed our Corporate Finance department.
Today, Noam works with the Deputy CEO to manage the
transformation taking place within commercial banking
to personalize our client service.
“There are intangibles here for employees that you do
not get elsewhere. There is a real sense of family and
an appreciation for individual contributions. We are
focused on becoming even more client centric, which
is a critical success factor for a bank. I believe our best
days are ahead of us and there are many opportunities
for those who want to seize them.”
BA NK LEUMI US A 7
U.S. & INTERNATIONAL PRIVATE BANKING
At Bank Leumi USA, we work hard to build and
maintain long-term relationships with our clients
throughout the U.S. and abroad.
Here, you find multiple generations among our private
banking clients. Each family member is treated like a
member of our family, with a dedicated private banker
designing a portfolio based on each individual’s goals
and risk tolerance. At Bank Leumi USA you will find
a significant crossover with our commercial banking
clients, who know the kind of personalized, relationshipdriven service we provide.
THE STANDARD FOR MEETING OUR CLIENTS’
FINANCIAL OBJECTIVES
Our primary focus is to ensure that the financial
objectives of our private banking clients are met through
a variety of innovative products and services. What sets
us apart is our bankers, who are the heart and soul of
private banking. They earn the status of trusted advisor
every day as they work closely with our clients to provide
objective, carefully considered guidance.
NAVIGATING DYNAMIC FINANCIAL MARKETS
The year 2013 brought exciting changes to our brokerdealer subsidiary, Leumi Investment Service Inc., to help
our clients better navigate today’s dynamic financial
markets. We work closely with our colleagues in Europe
and Israel to fulfill the international investing portion of
our clients’ asset allocations.
IN THE U.S. AND ABROAD
Our relationship with the Leumi Group, Israel’s leading
bank, provides our private banking clients unparalleled
access to Israeli-generated products and research. Our
exceptional banking capabilities, investment expertise
and Leumi Group strength all contribute to our wealth
management success.
We will continue to evolve as our clients’ needs evolve,
but we will always remain committed to maintaining
deeply personal relationships with each of our clients.
PRIVATE BANKING TEAM
Chaim Fromowitz
Executive Vice President
Head of Private Banking
8 BA NK LEUMI US A
Mason Salit
First Senior Vice President
U.S. Private Banking
Alex Klein
First Senior Vice President
International Private Banking
MASON SALIT
FIRST SENIOR VICE PRESIDENT, U.S. PRIVATE BANKING
Mason joined in 2014 to lead the U.S. Private Banking
division. “I know that I made the right decision in joining
Bank Leumi USA. It is a unique place with a caring culture
and passionate people who put integrity and client
service above all else. This is a great organization with
many opportunities to better leverage our strengths and
to deliver more value to our employees and clients.
Our focus is on holistic wealth management, and
success is achieved when we work with our clients as
strategic partners. It is about providing the best solutions
for our clients, which is why we serve families generation
after generation.”
“Bank Leumi USA is a unique place with a caring culture
and passionate people who put integrity and client
service above all else.”
NICOLAS BOGDANOWICZ
FIRST VICE PRESIDENT, INTERNATIONAL PRIVATE BANKING
Nico has been with Leumi for 16 years in Argentina,
New York and now in Aventura, Florida. “We are
relationship driven. I know my clients, their children
and their extended families. I speak with them on a
regular basis and they know I am always here for them.
I make it a point to understand their risk tolerance and
individual needs.
“When you choose a private banker, it is like choosing
a doctor: they may all offer the same medicine, but you
want to go to the one who you believe really cares about
your well-being.
I am proud to wear the colors of my Leumi team.”
BA NK LEUMI US A 9
LEUMI INVESTMENT SERVICES INC.
Bank Leumi USA’s broker-dealer subsidiary, Leumi
Investment Services Inc. (LISI), provides a boutique
targeted offering to private banking clients who
seek a firm with a unique perspective on global
financial markets. Our private bankers strive to
implement tailored solutions based on individual
client needs while leveraging our global footprint
to provide optimal investment opportunities.
10 BA NK LEUMI US A
CLIENT FOCUS
Complex markets require a deeper understanding of
the interplay between individual client needs and the
investing opportunities available. To navigate these
challenges, we present clients with our best ideas from
across the globe and monitor their portfolios to ensure
they are positioned to meet their goals. We provide a
level of service that exceeds client expectations.
INVESTMENT SOLUTIONS
Our clients look to us for diverse solutions—from
conservative to aggressive, tactical to strategic, dynamic
to static, and income producing to tax efficient.
For investors who prefer making their own investment
decisions, our trading desk offers a range of global fixed
income securities, including government, corporate and
municipal bonds, as well as innovative investments, such
as notes linked to market indices and currencies.
Through our investment advisory platform, Leumi
Advisor, we connect clients to a suite of world-class
asset managers offering services across disciplines
and strategies. Clients select from a variety of mutual
funds and exchange-traded products, ranging from
conservative to aggressive growth.
BUSINESS AND ESTATE PLANNING SOLUTIONS
Business owners have unique financial considerations,
including intergenerational transfers, charitable giving
and succession planning. Our solutions include key
person insurance and qualified/nonqualified retirement
plan. LISI offers fixed and variable annuities that allow
clients to deposit money periodically and accumulate
tax-deferred earnings. For non-U.S. clients, LISI offers
universal investment plans with long-term growth
potential through a trust formed on clients’ behalf.
LEUMI INVESTMENT SERVICES INC. TEAM
Ian Bernstein
President
IAN BERNSTEIN
PRESIDENT, LEUMI INVESTMENT SERVICES INC.
After 30 years at a large institution, Ian wanted to be
at a bank where he could make a more meaningful
contribution. “I was looking for an organization
where employees care about each other and are
treated with respect. All that, and more, is found
here. It’s a roll-up-your-sleeves-and-get-it-done
kind of place. For me, that is part of the fun. I find
being involved in so many different things both
challenging and intellectually stimulating.”
Ian leads an initiative to grow and enhance the
bank’s broker-dealer capabilities. “Traditionally,
we focused on helping our private banking clients
holistically manage their investments. Now, we
want to layer increased access to the Bank’s
considerable intellectual capital to help guide their
investment choices. If clients choose to invest in
any of Israel’s many exciting opportunities such as
technology, healthcare or startups, we want to be
the firm providing access to those and many other
Israeli investments.”
Joseph Colleran
Senior Vice President
Head of Fixed Income Trading
Daniel Bernzweig
Senior Vice President
Head of Sales Trading
and Content
LISI is a member of FINRA / SIPC. Products offered through LISI are
not FDIC Insured, have no bank guarantee, and may lose value.
BA NK LEUMI US A 11
INFORMATION TECHNOLOGY AND SERVICE & DELIVERY
The Information Technology and Service & Delivery
division of Bank Leumi USA is a key driver in the
success and future growth of the Bank.
The transformation of our operations began in 2013 with
a detailed review of our business processes as part of the
effort to identify opportunities to better serve our clients.
The findings that arose from those sessions are driving the
exciting project currently underway to transform the back
office “backbone” of our business. Service & Delivery, the
new name for Operations, emphasizes our commitment
to establishing new best practices across the Bank and
delivering the highest level of quality service.
ADDING “HIGH TECH” TO “HIGH TOUCH”
FOR IMPROVED CLIENT EXPERIENCE
Technology changes as rapidly as global economic
markets, touching everything from monetary transactions
to regulatory requirements to client relationships.
With this in mind, we have embarked on a journey to
modernize our systems as part of this transformation.
Technology enhancements will improve the quality of our
client relationships, building upon the deep, one-on-one
interactions that differentiate us from our competitors.
High tech will be added to our high touch. Some
changes, such as an improved online experience, will
be immediately visible to our clients. Others may be less
visible but equally as valuable, such as the introduction
of tools for our employees that will free up more of their
time to focus on client relationships.
While technology is the enabler of the transformation, our
employees are the key to its successful implementation.
Committed to this transformation, they are working
together across regions and business units to improve
our efficiencies and effectiveness.
MORE, BETTER, FASTER
More, better, faster, proactive, focused, nimble—these
are keywords for this transformation, enhancing
and improving the quality of our client relationships.
Whether the changes are externally or internally
focused, the end goal is to improve the Bank Leumi USA
experience for all of our clients.
INFORMATION TECHNOLOGY AND SERVICE & DELIVERY TEAM
Michael Fegan
Executive Vice President
Chief Operations and
Technology Officer
Mark La Penta
Senior Vice President
Head of Information
Technology
Steven Schieffelin
First Senior Vice President
Senior Business Solution
Architect
Tammy Alvarez
Senior Vice President
Co-Head of Service & Delivery
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Douglas Malich
First Vice President
Co-Head of Service & Delivery
Malinda Robey
First Vice President
Head of IT Project
Management Office
Christopher Walsh
First Vice President
Head of Information Security
LILLIAN ORTIZ
VICE PRESIDENT, MONEY TRANSFER
Lillian has been with the bank 27 years and points to “our
personal client relationships” as the differentiating factor
between Bank Leumi USA and other financial institutions.
“Here, a client can always directly reach a banker who
knows them. When we open an account, we work to
establish and maintain a close relationship.”
Lillian also appreciates the cooperation and camaraderie
among Bank Leumi USA employees. “We are similar to a
community where employees know one another. Hard
work is appreciated and recognized. Management cares
about employees professionally and personally; respect
among colleagues is key.”
“At Bank Leumi USA a client can always directly reach a
banker who knows them. When we open an account,
we work to establish and maintain a close relationship.”
MARK LA PENTA
SENIOR VICE PRESIDENT, INFORMATION TECHNOLOGY
Mark joined in 2013 and is excited to be part of the
Bank’s IT operating model transformation. “The
scope of this project is impressive and addresses the
technological enablement of business processes. For our
clients this means faster response time and deployment
of new products and services, which supports our goal of
continuously enhancing the client experience.”
Coming from a big bank, Mark sees personal advantages
to being at Bank Leumi USA. “I have the opportunity
to get my hands on everything. What I do has a direct
correlation to the strategy and tactics of the Bank. With
less bureaucracy we move more quickly, keeping our
focus on enhancing client relationships and contributing
to our ongoing success.”
BA NK LEUMI US A 13
THE U.S. ECONOMY IN 2013
The U.S. economy was incredibly resilient in 2013
despite numerous headwinds. U.S. Real Gross
Domestic Product expanded at an annualized rate
of 2.7% versus 2.0% in the prior year. This modest
acceleration came even after federal spending
sequestration, a sixteen-day government shutdown
and a stubborn labor market threatened to derail
the recovery.
14 BA NK LEUMI US A
The Federal Reserve (“Fed”) remained the pervasive
theme in 2013, as it continued to inject liquidity into the
financial markets with its Large Scale Asset Purchase
program, also known as QE3. The Fed’s balance sheet
ended the year over $4 trillion. Since September 2012,
the Fed has purchased $85 billion of U.S. Treasury and
Agency MBS per month, which represents a substantial
portion of recent issuance. In May, the Fed hinted that
it could begin to trim the size of the purchase program,
causing bond investors to head for cover and yields on
U.S. Treasury bonds to spike. The yield on 10-year U.S.
Treasury notes nearly doubled in four months, from
1.60% in May 2013 to 3.00% in September 2013. But
it was not until December that the Fed announced a
modest $10 billion per month reduction in purchases.
The market expects the Fed, under newly appointed
Chair Janet Yellen, to continue to decrease the pace
of purchases by $10 billion per meeting, unless
the economy weakens in 2014. This would end the
purchase program in late 2014 and leave the Fed with
a $4.4 trillion balance sheet.
The nation’s labor market remains mixed, notwithstanding
extraordinary monetary accommodation. The
unemployment rate fell from 7.9% to 6.7%, which is the
lowest in five years. However, as the unemployment rate
decreased, the average number of jobs added slowed
in the second half of the year, suggesting that more
people were dropping out of the labor force. In fact, the
percentage of Americans working or actively seeking a job
is 62.8%, a 35-year low.
an agreement on the budget, the debt ceiling and
healthcare. The result was the first federal government
shutdown in 17 years. Ultimately, a U.S. debt default was
avoided, but not before an estimated 0.6% was trimmed
from GDP growth for the third quarter.
Surprisingly, this environment provided a banner year
for risk assets. Equity markets generated outsized
returns as the Dow Jones Industrial Average rallied 29%,
the S&P 500 advanced 32% and the NASDAQ soared 40%.
Conversely, the credit risk-free 10-year U.S. Treasury
Note lost 3.35% and investment grade bonds lost 1.45%.
Gold investors, who either thought the economy would
relapse into recession or that inflation would ignite, took
a beating as the yellow metal lost 28% and, in doing so,
broke a 12-year winning streak.
In all, green shoots emerged during 2013, but the
recovery remains fragile as headwinds persist and
growth remains muted. The economy was able to
withstand a great deal of adversity in 2013, but a
question that remains for 2014 is: How will the economy
respond to the tapering of monetary stimulus? The
consensus forecast of economists expects Real GDP to
expand by 2.9% and for unemployment to fall to 6.5%
in 2014, which suggests moderate acceleration with less
fiscal drag compared to 2013.
Household net worth rose to record highs as a surging
stock market, a steady recovery in home prices and
record low interest rates all contributed to the bottom
line. The availability of credit loosened as U.S. household
debt expanded to the highest level since Q1 2011.
However, real household median income has not
experienced any meaningful growth and remains at
levels equivalent to the mid-1990s.
In Washington, fiscal policy continued to act as a drag
on the economy. The year began with jitters about
a “fiscal cliff,” where automatic across-the-board
spending cuts and tax increases went into effect. The
debate culminated nine months later, when President
Obama and congressional leaders failed to come to
BA NK LEUMI US A 15
THE ISRAELI ECONOMY IN 2013
Israel, an OECD member, has continued to maintain
its growth gap well above the OECD average in spite
of the slowdown of economic expansion in 2013.
Israel has clearly been outpacing the OECD since 2004.
16 BA NK LEUMI US A
In 2013, Israel’s Gross Domestic Product (GDP) grew
by 3.3% (the growth rate is in real terms) as compared
to 3.4% in 2012 and 4.6% in 2011. The slowdown of
economic activity expansion of the Israeli economy was
evident in slower export growth and a major slowdown
of investments in non-residential capital such as
machinery and equipment.
Natural gas fields discovered off Israel’s coast have
brightened Israel’s energy security outlook. The
‘Leviathan’ field was one of the world’s largest offshore
natural gas finds this past decade, and production from
the ‘Tamar’ field is expected to meet all of Israel’s natural
gas demand and started production in early 2013.
THE SOVEREIGN CREDIT RATING
Following the ongoing improvement in the Israeli
economy in previous years, the country’s credit rating
was increased by the various credit rating agencies in
late 2007 and in early 2008. In September 2011 Israel’s
credit rating was further increased to A+ by Standard
and Poor’s.
FISCAL POLICY
The government’s deficit in 2013 is expected to be about
3.1% of GDP, compared to a target of 4.3% of GDP. The
lower than expected deficit is attributed to higher tax
rates and also a series of one-off events that contributed
to state tax revenues. In addition, government spending
in 2013 is expected to be less than what is allowed by the
budget framework limits. Israel’s fiscal path is subject to
an explicit feedback rule with a target of a government
debt to GDP ratio of 50% of GDP, and with a 2013
year-end debt ratio of about 66% of GDP.
The consumer price index is expected to have risen
by 1.8–2.3% in 2013, which is well within the official
price stability target of 1–3%. A look at the primary
components of the CPI change shows that the housing
item is still a major contributor to inflation, in addition
to food and household maintenance costs, which have
contributed to the rise of the price index in 2013.
PERFORMANCE OF TEL-AVIV STOCK EXCHANGE
TRADED SHARES
Prices on the Israeli stock market were relatively stable
during the first eight months of 2013. Since late August
2013 and through the end of the year, the Tel-Aviv stock
indexes have risen. This recovery of the Tel-Aviv market
seems to be related to a further interest cut by the Central
Bank in late September 2013, a decline in geopolitical
uncertainty, and an improvement in the market
perception of global economic risks that have subsided.
During 2013, the Israeli TA-25 index of blue chip shares
rose by 12%, and the TA-100 index of the most actively
traded shares rose by 15%. The daily volume of trading
rose in 2013 by 10% compared to 2012 to a daily
average of NIS 1.2bn. In 2013, the index of small cap
stocks experienced larger rises than that of the TA-25
index of 38.9%.
The sectors that experienced relatively high price
increases in 2013 compared to the average (the TA-100)
included insurance, real estate and construction, oil and
gas exploration, and trade and services. Against this
background the Tel-Aviv Stock Exchange indices reached
record high levels. Initial public offering activity was
resumed after several years of very low activity.
THE EXCHANGE RATE, INFLATION AND MONETARY POLICY
The exchange rate of the shekel appreciated during
2013 to NIS 3.61: US$1 on average from NIS 3.86: US$1
on average in 2012. The strengthening of the shekel
seems to have been related to the return to a current
account surplus in 2013 along with strong foreign direct
investment inflows to Israel.
BA NK LEUMI US A 17
FINANCIAL HIGHLIGHTS & MANAGEMENT ANALYSIS
Net Income for the year was $11.0 million, compared
to $24.5 million in 2012, and can be attributed to lower
net interest income after provision for loan losses, a
decrease in gains on sales of securities and an increase
in other expenses. Assets as of December 31, 2013
were $5.2 billion compared to $5.4 billion in 2012. The
provision for Loan Losses was $10.8 million at December
31, 2013, compared to $6.8 million at December 31, 2012.
Assets under management increased in 2013 to
$8.6 billion from $8.5 billion in 2012.
As of December 31, 2013, Bank Leumi USA had
$5.2 billion in total assets and a capital base of
$547 million in shareholders’ equity. Capital ratios
continue to be strong and exceed regulatory
requirements. The bank enjoys favorable liquidity, with
cash placements and marketable securities representing
24% of total assets as of December 31, 2013.
FINANCIAL HIGHLIGHTS OF 2013
2013 2012
Net Income
$
Total Assets
Shareholders’ Equity
Return on Equity
11,049
5,191,130
547,131
2.54%
24,531
5,365,312
540,501
5.20%
Total Loans
$3,723,907
Total Deposits
4,422,028
Total Securities
711,788
Noninterest Income
42,485
Assets Under Management 8,555,553
3,759,032
4,546,493
698,012
49,400
8,481,027
(dollar
amounts
in thousands)
CAPITAL RATIOS
Total Capital
Tier 1 Capital
Leverage Capital
18 BA NK LEUMI US A
14.54%
11.70%
9.94%
14.47%
11.56%
9.32%
Shareholders’ Equity
Total equity increased to $547 million as of December 31,
2013 from $541 million as of December 31, 2012.
Return on Equity
Return on equity was 2.54%.
Total Loans
As the Bank continues to implement its strategic
initiatives and focus on key industries, its loan portfolio
composition resulted in a slight decrease year over year.
Total Deposits
Total deposits declined by $124 million, or 2.7%, in 2013.
Credit Quality
The allowance for credit losses totaled $46 million at
year-end 2013, representing 1.24% of total loans and
is 0.47 times the level of nonaccrual loans. Nonaccrual
loans at year-end 2013 were $99 million compared to
$81 million at year-end 2012.
Noninterest Income
In 2013, total noninterest income was $42 million, a 14%
decrease from the 2012 total of $49 million, mainly due
to a decrease in gains on sales of securities.
Net Interest Income
Net interest for 2013 was $136 million compared to
$133 million in 2012. Interest expense as a percentage
of total interest income declined to 14.8% in 2013,
compared to 19.3% in 2012.
Capital Strength
Total shareholders’ equity at December 31, 2013 was
$547 million, representing 10.54% of year-end assets. This
favorably compares to $541 million at December 31, 2012,
representing 10.07% of year- end assets. At year-end 2013,
Bank Leumi USA’s Tier 1 capital ratio was 11.70%, its total
capital ratio was 14.54% and its leverage ratio was 9.94%.
Capital ratios continue to be strong and exceed regulatory
requirements.
LOANS BY INDUSTRY
(in millions) A
s of December 31, 2013
Real Estate
Services, Professional & Health
Miscellaneous
Textile & Apparel
Holding Companies
Diamond & Jewelry
Wholesale & Import
Financing Industry
Entertainment
Manufacturing
Retail
1,173
534
505
290
245
231
203
196
125
125
108
LOANS BY
INDUSTRY
BA NK LEUMI US A 19
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
2013 2012
516,339 $
4,098
675,834
35,954
3,677,643
35,940
245,322
5,191,130
$
683,069
4,201
540,853
157,159
3,705,460
21,535
253,035
5,365,312
1,062,679
$
3,359,349
4,422,028
35,000
- 90,000
96,971
4,643,999
$
1,082,650
3,463,843
4,546,493
55,000
15,000
90,000
118,318
4,824,811
Capital Stock – $10 Par Value:
Authorized, 15,000,000 Shares
Outstanding, 12,939,107 Shares
$
129,391
$
Additional Paid-In Capital
150,668
Retained Carnings
291,381
Accumulated Other Comprehensive Loss
(24,309)
Total Shareholders’ Equity
547,131
Total Liabilities and Shareholders’ Equity
$ 5,191,130
$
129,391
150,668
280,332
(19,890)
540,501
5,365,312
Years Ended December 31
(dollar amounts in thousands)
ASSETS
Cash and Due from Banks
$
Time Deposits with Banks
Available for Sale Securities
Trading Securities
Loans, Net
Bank Premises and Equipment (net)
Other Assets
Total Assets
$
LIABILITIES
Noninterest-Bearing Deposits
$
Interest-Bearing Deposits
Total Deposits
Borrowings from Federal Home Loan Bank
Securities Sold Under Repurchase Agreements
Long-Term Debt
Other Liabilities
Total Liabilities $
SHAREHOLDERS’ EQUITY
20 BA NK LEUMI US A
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME
2013
2012
148,072
$
9,795 1,394
159,261
$
151,217
11,815
1,998
165,030
Interest on Deposits
$
Interest – Other
Total Interest Expense
$
20,340
$
3,308
23,648 $
28,284
3,678
31,962
Net Interest Income
Less: Provision for Loan Losses
Net Interest Income After Provision for Loan Losses
$
135,613
10,838 124,775
$
133,068
6,770
126,298
25,040
$
10,437
1,376
1,582
194 3,856
42,485
$
23,383
9,390
1,927
(3,481)
7,828
10,353
49,400
Salaries
$
50,133
$
Employee Benefits
20,644
Occupancy
15,210
Professional Services
13,943
Equipment
12,007
Data Processing
8,161 Other
27,945
Total Noninterest Expense
$
148,043 $
Income Before Income Taxes
19,217 Income Tax Expense
8,168 Net Income
$
11,049 $
52,676
21,246
13,233
14,414
9,818
7,719
18,287
137,393
38,305
13,774
24,531
Years Ended December 31
(dollar amounts in thousands)
INTEREST INCOME
Interest on Loans
$
Interest on Securities
Interest on Time Deposits with Banks
Total Interest Income
$
INTEREST EXPENSE
NONINTEREST INCOME
Commissions
$
Fees
Cash Surrender Value of Bank Owned Life Insurance Gain (Loss) on Trading Derivatives, Net
Gain on Available for Sale Securities, Net
Other, Net
Total Noninterest Income
$
NONINTEREST EXPENSE
OTHER COMPREHENSIVE GAIN (LOSS)
Unrealized Actuarial Gains on Pension and Other
Post-Retirement Benefits, Net of Tax
$
Unrealized (Losses) on Securities
Comprehensive Income
$
7,242
$
(11,661)
6,630
$
1,423
(336)
25,618
BA NK LEUMI US A 21
BOARD OF DIRECTORS & SENIOR MANAGEMENT
SENIOR MANAGEMENT
AVNER MENDELSON
President and
Chief Executive Officer
HILLA ERAN-ZICK
Senior Executive Vice
President and Deputy
Chief Executive Officer
NISAN BLUM
Executive Vice President
Chief Internal Auditor
DAFNA DOTHAN
Executive Vice President
Chief Risk Officer
MICHAEL FEGAN
Executive Vice President
Chief Technology and
Operations Officer
CHAIM FROMOWITZ
Executive Vice President
Head of Private Banking
ROBERT R. GIORDANO
Executive Vice President
Chief Investment Officer
JOHN P. MCGANN
Executive Vice President
Chief Administrative Officer
JEREMIAH T. MURNANE III
Executive Vice President
Chief Compliance Officer
JOHN SANFRATELLO
Executive Vice President
Controller
JOSEPH A. SCIARILLO
Executive Vice President
Real Estate Lending
STEVEN CALIGOR
First Senior Vice President
New York Commercial Banking
President Bank Leumi Leasing
Corporation
KATE ETINGER
First Senior Vice President
Head of Human Resources
WENDI G. GLASSMAN
First Senior Vice President
General Counsel
Corporate Secretary
MICHAELA KLEIN
First Senior Vice President
Chief Credit Risk Officer
Risk Management
SHLOMO MOSSERI
First Senior Vice President
Deputy Chief Lending Officer
YAIR GROSSMAN
Senior Vice President
Head of PMO
BOARD OF DIRECTORS
Back row, from left:
Front row, from left:
CHARLES D. JOHNSTON
Former President
Morgan Stanley Smith Barney
ROBERT M. BUTCHER
Business Consultant
Chairman of the Risk Management
& Investment Committee
ROBERT K. LIFTON
Chairman and CEO
Medis Technologies Ltd.
SIMON B. JAWITZ
Senior Managing Director
Sierra Real Estate
THEODORE P. GLUECK
President
Eastwood Associates, Inc.
Chairman of the Loan Committee
AVNER MENDELSON
President and Chief Executive Officer
DAVID BRODET
Chairman of the Board
Leumi Group
Bank Leumi USA
GAIL HOFFMAN
Treasurer
Columbia University
STEVEN LAVIN, ESQ.
Lavin & Waldon, P.C.
Chairman of Executive, Compliance
& Strategy Committees
ZEEV NAHARI
Business Consultant
Former CFO and Deputy CEO
Leumi Group
MICHAEL URKOWITZ
Business Consultant
Former Executive Vice President
J.P. Morgan Chase
Chairman of the Audit & Information
Technology Committees
Not pictured:
PROF. DANIEL TSIDDON
Deputy CEO
Leumi Group
GIDEON ALTMAN
Head of Loan Division
Leumi Group
GOVERNANCE
The Board of Directors of Bank Leumi USA has
adopted and adheres to corporate governance
practices that it believes are sound, comply with
applicable law and represent best practices.
Bank Leumi USA is not a public company; however,
following enactment of the Sarbanes-Oxley Act
of 2002, the Board and management enhanced
bank policies and procedures to meet many of the
standards set by the Act and its implementing rules.
The Board of Directors consists of thirteen members,
nine of whom are independent of management of
the Bank under applicable law. In 2012, the Board
of Directors appointed Steven Lavin, a director
independent of management, as lead director. In this
capacity, Mr. Lavin has additional corporate governance
responsibilities. Shareholders and other interested
parties may communicate with the lead director or
the non-management directors as a group by sending
communications to the principal office of Bank Leumi
USA in care of the Corporate Secretary.
The Board of Directors has five standing committees:
Executive, Audit, Compliance, Risk Management
and Investment and Loan. In addition, the Executive
Committee has two subcommittees: Strategy and
Information Technology. In 2013, the Executive
Committee met five times, the Audit Committee five
times, the Compliance Committee four times, the Risk
Management and Investment Committee five times and
the Loan Committee nineteen times. The Information
Technology and Strategy subcommittees each met six
times. The Board of Directors met seven times.
The Audit Committee has four members. The Board
has determined they (1) are “outside directors,” (2) have
banking or related financial management expertise, and
(3) are financially literate, as required by applicable FDIC
rules and regulations. The Audit Committee members
are Robert M. Butcher, Gail Hoffman, Steven Lavin
and Michael Urkowitz. At least one of the members,
Mr. Robert Butcher, qualifies as an “audit committee
financial expert” under SEC criteria.
The Audit Committee operates pursuant to a charter,
last approved in December 2013. The charter gives
the Audit Committee the authority and responsibility
for the appointment, retention, compensation and
oversight of the Bank’s independent auditors. The
Committee pre-approves all audit and non-audit
services to be performed by the independent auditors.
The Audit Committee appointed Ernst & Young
LLP as the independent auditors of the Bank after
reviewing the firm’s performance and independence
from management.
The Bank has a Code of Ethics, last approved by the
Board of Directors in May 2013. It is applicable to
all directors, officers and employees. It is a code of
conduct that expresses the Bank’s commitment to
promoting (1) honest and ethical conduct; (2) full, fair,
accurate and timely reporting; (3) compliance with all
applicable laws, rules and regulations by all directors,
officers and employees of the Bank; and (4) the prompt
internal reporting of violations of the Code of Ethics in
accordance with procedures set forth in the Code of
Ethics. The Code of Ethics may be viewed on the Bank’s
website at www.leumiusa.com.
BA NK LEUMI US A 2 3
LEUMI GROUP LOCATIONS
NORTH AMERICA
UNITED STATES
Bank Leumi USA
New York
Headquarters
579 Fifth Avenue
New York, NY 10017
Tel: 1.917.542.2343
1.800.892.5430
E-mail: contactus@leumiusa.com
www.leumiusa.com
U.S & International
Commercial Banking
579 Fifth Avenue
New York, NY 10017
Tel: 1.917.542.2343
U.S. Private Banking
579 Fifth Avenue
New York, NY 10017
Tel: 1.212.626.1001
International Private Banking
One Turnberry Place
19495 Biscayne Blvd., Suite 500
Aventura, FL 33180
Tel: 1.305.918.6960
California
Leumi Investment Services Inc.
562 Fifth Avenue
New York, NY 10036
Tel: 1.212.407.4345
Silicon Valley
2000 University Ave., Suite 605
Palo Alto, CA 94303
Tel: 1.650.289.2400
Bank Leumi Leasing
Corporation
579 Fifth Avenue
New York, NY 10017
Tel: 1.212.626.1230
New York Agency
562 Fifth Avenue
New York, NY 10036
Tel: 1.212.626.1355
Los Angeles
555 W. Fifth St., 33rd Floor
Los Angeles, CA 90013
Tel: 1.213.452.8600
CANADA
Bank Leumi le-Israel B.M.
Québec
Montréal
1 Westmount Square, Suite 400
Montréal, Québec H3Z 2P9
Tel: 1.514.931.4457
E-mail: bllmtl@bellnet.ca
Illinois
Chicago
One N. LaSalle St., Suite 200
Chicago, IL 60602
Tel: 1.312.419.4040
Florida
Aventura
One Turnberry Place
19495 Biscayne Blvd., Suite 500
Aventura, FL 33180
Tel: 1.305.918.6960
EUROPE
ISRAEL
Bank Leumi le-Israel B.M.
Tel Aviv
Headquarters
24–32 Yehuda Halevi Street
Tel Aviv 65546
Tel: 972.3.514.8111
http://english.leumi.co.il
Leumi Private Banking Division
35 Yehuda Halevi Street
Tel Aviv 65546
Tel: 972.3.514.3313
E-mail: private@bll.co.il
Leumi Private Banking Centers
for International Clients
Tel Aviv
Dizengoff Top Tower, 17th Floor
55 Dizengoff Street
Tel Aviv 64332
Tel: 972.3.621.7333
Dizengoff Top Tower, 23rd Floor
55 Dizengoff Street
Tel Aviv 64332
Tel: 972.3.621.7444
Jerusalem
19 King David Street
Jerusalem 94101
Tel: 972.2.620.1811
Leumi Subsidiaries
Leumi Representative Offices
Leumi Partners Ltd.
5 Azrieli Center (Square Tower)
36th Floor
Tel Aviv 67025
Tel: 972.3.514.1212
www.leumipartners.com
Leumi USA
Representative Office
Ackerstein Towers
11 Hamenofim Street
P.O. Box 2148
Herzliya Pituach, Israel 46120
Tel: 972.9.971.5632
E-mail:
yaron.benhorin@leumiusa.com
The Bank Leumi le-Israel
Trust Company Ltd.
8 Rothschild Boulevard
Tel Aviv 66881
Tel: 972.3.517.0777
Leumi Switzerland
Representative Office
Beit Nolton, 14 Shenkar Street
P.O.B. 2134, Herzliya Pituach
46120
Tel: 972.9.955.9571
E-mail: afichman@leumi.ch
Leumi Luxembourg
Representative Office
9 Yehuda Halevi Street
Tel Aviv 6513515
Tel: 972.774.3283
E-mail: repininfo@leumi.lu
24 BA NK LEUMI US A
EUROPE (CONT.)
UNITED KINGDOM
Bank Leumi (UK) plc
London
20 Stratford Place
London W1C 1BG
Tel: 44.20.7907.8000
E-mail: info@bankleumi.co.uk
www.bankleumi.co.uk
Bank Leumi UK is authorized by the
Prudential Conduct Authority and
regulated by The Financial Conduct
Authority and the Prudential
Regulation Authority.
North of England
Representative
Mr. Steve Cooper
5 Carrwood Park
Selby Road, Leeds
West Yorkshire LS15 4LG
Tel: 44.7771.522.907
E-mail: scopper@bankleumi.co.uk
Channel Islands Subsidiaries
Bank Leumi (Jersey) Limited
P.O. Box 510, 2 Hill Street
St. Helier, Jersey JE4 5TR
Channel Islands
Tel: 44.1534.702.525
E-mail: info@leumijersey.com
www.leumijersey.com
Bank Leumi (Jersey) Limited is
regulated by The Jersey Financial
Services Commission.
Leumi Overseas Trust
Corporation Ltd.
P.O. Box 510, 2 Hill Street
St. Helier, Jersey JE4 5TR
Channel Islands
Tel: 44.1534.702.500
E-mail: info@leumijersey.com
www.leumijersey.com
Leumi Overseas Trust Corporation
Limited is regulated by The Jersey
Financial Services Commission.
Leumi ABL Limited
Pacific House, 126 Dyke Road
Brighton
East Sussex BN1 3TE
Tel: 44.1273.716.200
E-mail: enquiries@leumiabl.co.uk
www.leumiabl.co.uk
SWITZERLAND
ROMANIA
Leumi Private Bank Ltd.
Bank Leumi Romania S.A.
Zürich Head Office
Dianastrasse 5, CH-8022 Zurich
Tel: 41.58.207.9111
E-mail: infozh@leumi.ch
www.leumi.ch
Head Office
B-dul Aviatorilor nr. 45, Sector 1
Bucharest
Tel: 40.21.206.7075
E-mail: office@leumi.ro
www.leumi.ro
Geneva
1 rue de la Tour-de-I’Ile, CH-1211
Geneva
Tel: 41.58.207.3555
E-mail: infoge@leumi.ch
LUXEMBOURG
Bank Leumi (Luxembourg) S.A.
Head Office
6D, Route de Trèves
L-2633 Senningerberg
Luxembourg
Tel: 352.346.390
E-mail: bleulux@pt.lu
www.bankleumi.lu
LATIN AMERICA
URUGUAY
Leumi (Latin America) S.A.
CONCEPT/DESIGN: SUKA, NY / SUKACREATIVE.COM
Montevideo
Edificio World Trade Center
Luis A. de Herrera 1248
Torre A, Piso 10, Montevideo
Tel: 598.2.628.5838
E-mail: recepcion@leumi.com.uy
www.leumi.com.uy
Punta del Este
Avenida Gorlero, Calle 28
Edif. Torre de las Américas
Local 006, Punta del Este
Tel: 598.42.444.303
E-mail: punta@leumi.com.uy
ASIA
CHINA
Bank Leumi Shanghai
Shanghai
Aurora Building F/11, Unit 1115
99 Fucheng Road
Pudong New Area
Shanghai 200120m
Tel: +86.21.6058.9213
E-mail: eyal.shimoni@bankleumi.co.il
eyal.shimoni@bankleumi.cn
MEXICO
Bank Leumi le-Israel B.M.
Mexico City
Fuente de Pirámides 1-305
Lomas de Tecamachalco
53950 Naucalpan
Edo. de México
Tel: 52.555.294.6155
E-mail: bllmexico@prodigy.net.mx
©2014 Bank Leumi USA