Emigrant Finally Finds a Buyer for N.Y. Branches

The family that owns Emigrant Savings Bank has finally found a buyer for a batch of branches and deposits that the capital-hungry New York franchise has been shopping for about six months.

Apple Bank for Savings in Manhasset, N.Y., has agreed to acquire 30 branches and $3.2 billion in deposits from Emigrant's parent company, New York Private Bank & Trust, which real estate mogul Howard Milstein and his family have controlled since 1986.

Financial terms of the deal, which is expected to close during the fourth quarter, were not disclosed, though the Milsteins had been seeking a deposit premium of 5% to 10% for the parts of Emigrant it put up for sale as it pares down following big chargeoffs on real estate and business loans in 2009 and 2010, sources say.

Emigrant said in a press release Friday that it intends to hold $8.5 billion in deposits at its flagship branch in Manhattan, one branch in Westchester and its two online banks.

The sale also excludes Emigrant's mortgage and commercial real estate operations, the bank said.

The deal was a "natural evolution" for Emigrant that reflects the "changing landscape for deposit and lending operations," Howard Milstein, the bank's chairman and president, said in the press release.

Milstein declined through a publicist to comment beyond the release. A spokeswoman for Apple Bank also declined to comment.

The Milsteins had hired Barclays Capital early in the year to run a sales process in which potential suitors could bid on the $12 billion-asset bank's 35 New York-area branches or roughly $6 billion in online deposits.

The family's lofty pricing expectations and the depressed value of deposits in a low interest rate environment made the branches a tough sell, sources say. Investors Bancorp (ISBC) in Short Hills, N.J. and People's United Financial Group (PBCT) in Bridgeport, Conn., were among the local regional banks that looked at the branches and passed, sources said.

Investors instead opted in June to pay $135 million in cash for the 13-branch Marathon Banking in Astoria, which is being sold by the Greek banking conglomerate Piraeus Bank. Investors agreed to pay a deposit premium of 5.8% in that deal that, if applied to the Emigrant branch sale, would set an estimated market value of $186 million.

Emigrant's capital troubles made headlines in May when a House panel approved a bill that would allow the bank to avoid higher capital standards imposed by the Dodd-Frank Act.

Emigrant is the only bank that would benefit from a change proposed by the House Financial Services Committee that would prevent banks that had $15 billion in assets as of Dec. 31, 2009, from counting as trust preferred securities as Tier 1 capital. The bill would push back that date by three months, allowing Emigrant, the country's largest private bank, to avoid the restriction.

Emigrant had a nonperforming asset ratio of more than 5% and Tier 1 ratio of 23.48% at March 31, according to data from the Federal Deposit Insurance Corp.

Apple Bank, which is the operating unit of Apple Financial Holdings, has 50 branches in the New York area and $8.4 billion in deposits.

The branch sale makes sense for the acquirer; buying the Emigrant branches would more than double the bank's presence in Manhattan and the Bronx, where it has a combined 15 branches, according to data from the Federal Reserve Board.

Apple may also be able to save money by closing any overlapping branches.

Apple's status as a private institution also means that it does not have answer tough questions from investors about how and why it is buying deposits in the current environment.