IDB 2013 Annual Report

8/11/2019 IDB 2013 Annual Report

1/45

AnnualReport

2013


2/45

We have dedicated ourselves to the success of our clients

by providing quality service and diligent, personalized care,

by offering innovative products and services that meet diverse financial needs,

and by developing close, personal relationships with our clients over many generations

all part of our time-honored tradition since our founding.

Because at IDB,

it s personal.

2


3/45

Annual Report 2013IDB Bank

Infrastructure

30 Risk Management

32 Treasury

34 Information Technology& Operations

37 Accounting

38 Office of General Counsel

39 Compliance

40 Internal Audit

Subsidiaries

42 IDB Capital Corp.

43 Discount Bank Latin America

Table of Contents

Leadership5 Introduction

7 Report of the Boardof Directors

11 Financials

Services

14 U.S. Private Banking

17 International PrivateBanking

19 Lending Division

Corporate Lending

Factoring

Commercial Real Estate

Lending Asset-Based Lending

25 Southern California

27 South Florida

3


4/45

5 Introduction

7 Report of the Board of Directors

11 Financials

Leadership

IDB New Yorks Main Office on Fifth Avenue

Manhattan, 1962


5/45


5

Leadership

Introduction

Ehud ArnonPresident and Chief Executive Officer

Michael GoldsteinChairman of the Board

Introduction


6/45


6

Bank voluntarily performed the mandated

federal stress test applicable for the top

30 banks in the country and came out

number six. Its more than just meeting

legal obligations; its about doing what is

right to maintain a sound, viable business,

with a steady income stream, high capital

ratios and credit quality.

In todays competitive landscape, we also

must be sure we operate as cost-efficiently

as possible, so we are streamlining and

automating processes to lower costs and

improve efficiencies, while maintaining

or strengthening our ability to serve our

customers.

With our conservative, long-term approach,

new products and highly personalized

service, as well as a loyal and dedicatedstaff, we believe we are well positioned

in 2014 for growth in almost every area

of the Bank. We will continue to provide

our customers with the financial security

they expect in a still-uncertain world.

Whether you are looking for a trusted

banking relationship or youre already a

customer who knows how we do business,

we invite you to share in our success, and

explore new ways to achieve your personal

or business financial goals.

Thank you,

In 2013, IDB Banks parent bank, IDB Ltd.

explored the sale of the Bank which led

to an extensive due diligence process

in the second half of the year. With the

improvement in our parent companys

capital structure, the decision was made

not to sell IDB Bank.

The Banks financial results were negatively

affected by the one-time expense related

to the potential sale of DBLA. IDB Bank

recorded a one-time tax provision and

other adjustments in the amount of

$31.8 million related to income earned

in Uruguay over the past 30 years that

had not been repatriated.

Nevertheless, our ability to carry out

a conservative lending and investment

strategy, incorporate systems innovations,and maintain long-standing personal

relationships with our customers has

proven to be a successful combination

at a time when the U.S. is just starting

to come out of a challenging economic

environment with historically low-interest

rates combined with stringent regulatory

demands.

Throughout the last year, we experienced

the largest loan portfolio growth in our

history, including dramatic increases in

our newest areas of activity, financing for

healthcare and not-for-profit institutions.

Our U.S. Private Banking Division continued

to show double-digit growth in 2013, adding

many new relationships to our portfolio.

Managing the investment portfolios of

our international clients has also been

a solid growth area.

At the same time, we continue to expand

our suite of financial servicesfrom

providing new annuity products to adding

new features to our top-of-the-line cash

management serviceswhile always

looking for and implementing ways to

strengthen the personal relationships

we enjoy with our clients.

This ongoing effort is what our motto, Its

personal, is all about. In short, we know

our private banking and commercial clients,

we know their families, and we expect

to understand and remain responsive to

their needs. This is what differentiates us

from our competition, and what allowed

us to continue servicing and retaining

our customer relationships throughout

the economic crisis and beyond.

Investing in the future, however, is not only

about increasing the number of products

and services we offer, but also improving

our infrastructure and providing convenient

and easy-to-use tools, so customers can

access information, monitor activities

and make transactions whenever they

want. These enhancements range from

robust online capabilities to opening a

new Brooklyn branch, our fourth in the

New York/New Jersey area, with more

on the way.

Responding effectively to regulatory changes

is another challengeand a cornerstone

of our business. In 2013, we continued to

meet or exceed the standards of the Dodd-

Frank Wall Street Reform and Consumer

Protection Act and our own high standards

of accountability and compliance. In fact,

though not required by regulation, the

Ehud Arnon

Michael Goldstein

2013 was a year of significant challenges for the Bank, due largely to the potential sale of

IDB Bank and its Uruguayan subsidiary Discount Bank Latin America (DBLA) by our parent company,

IDB Ltd. As a result, in 2013, IDB Bank incurred an associated one-time tax provision related to the

potential sale of DBLA. However, with the support of our customers and loyal employees, we maintainedour business as usual approach, which allowed us to achieve our 2013 goals, with minimal disruption.

Leadership Introduction


7/45


Report of theBoard of Directors

Orit AlsterHead of Corporate Banking,Israel Discount Bank Limited

Darcy E. BradburyPartner,D.E. Shaw & Co.

Reuven SpiegelPresident and Chief Executive Officer,Israel Discount Bank Limited

Maurice H. Hartigan IIRetired President & CEO,The Risk Management Association

7

LeadershipReport of theBoard of Directors


8/45


Theresa BischoffPartner,RC Consulting, LLC

Michael GoldsteinChairman of the Board,Israel Discount Bank of New York

Gil KurtzCertified Public Accountant(Israel)

Ehud Arnon

President and Chief Executive Officer,Israel Discount Bank of New York

IDB Bank is led by a team

of esteemed business professionals

who are dedicated to the success

of the Bank and its customers.


8


9/45


IN 2013, WECONTINUED TOEXPAND OURPRODUCT OFFERINGS,SERVICES AND ONLINECAPABILITIES TO

MAKE SURE OURCUSTOMERSHAVE THE TOOLSTHEY NEEDTO

SUCCEED.


9


10/45


10

More and more, our customers are

coming to see us as a one-stop shop

for all of their financial needs.

In U.S. Private Banking, total deposits

topped $1.3 billion last year, which affirms

the success of our carefully coordinated

expansion strategy to substantiallyincrease our U.S. deposit base. As part

of this expansion, we added a new private

banking branch in Brooklyn and we will

offer insurance products to our private

banking customers in 2014.

Our Corporate Lending business grew by

13%. Our newest markets; not-for-profit

and healthcare institutions, are creating

new revenue streams and giving us a

chance to give back to our communities.

Additionally, our real estate business tookadvantage of a rebounding market with

a creative, customer-oriented approach.

International Private Banking remains a

cornerstone of IDBs business model. Our

Global Portfolio Management services for

our international customers are growing

and gaining increasing acceptance. And

international products, such as Global

Portfolio Strategies (GPS) and Sun

Life annuities have provided significant

income growth.

In our Latin America operation, DBLA,

loans and deposits grew by 9% in 2013.

Domestic Uruguayan deposits grew at

a rate of 6% while deposits from non-

Uruguayan residents grew at a rate of

17%. This growth comes at a time when

Uruguay, our base in Latin America, has

enjoyed political stability and minimal

impact from an economic downturn in

some of the neighboring countries.

Meanwhile, IDBs branches in California

and Florida are experiencing steady growth,

and reaping the benefits of the new

products and services weve added to our

domestic capabilities, including interest

rate swaps and annuities through IDB

Capital Corp, our broker-dealer business.

In fact, a stronger product base in IDB

Capital will be marketed more aggressively

in 2014, thanks to a new sales initiative

focused on client opportunities in both

Latin America and the U.S.

With so much positive activity in 2013, we

expect to achieve solid growth in 2014,

though we remain somewhat cautious

in light of still-low interest rates and

the restrictive regulatory climate that

affects all banks.

IDB has shown that its well equipped to

manage these challenges by offering our

customers new products, ever-improving

services and, of course, a clear-headedapproach to banking and customer

relationships. With this foundation, we

look to the future with optimism and

enthusiasm.



11/45


11

Leadership Financials

Financials Discount Bancorp, Inc., and SubsidiariesIDB Bank and Subsidiaries

AssetsCash and Due from Banks $69, 829 $69,829

Interest-Bearing Deposits with Banks 196,185 196,185

Trading Account Assets, at market 14,547 14,547

Available-for-Sale Investment Securities, at market 2,370,689 2,367,729

Held-to-Maturity Investment Securities (market value $933,957) 943,733 943,733

Federal Home Loan Bank Stock, at cost 13,349 13,349

INVESTMENT SECURITIES 3,342,318 3,339,358

Loans, net of unearned income 4,513,153 4,513,153

Less: Allowance for Loan Losses (64,880) (64,880)

LOANS, NET 4,448,273 4,448,273

Premises and Equipment, net 20,743 20,225Accrued Interest and Accounts Receivable 38,340 38,332

Bank-owned Life Insurance 172,313 172,313

Other Assets 106,777 106,635

Assets of Discontinued Operations 1,208,935 1,208,935

Total Assets $9,603,713 $9,600,085

LiabilitiesDeposits

Domestic Offices

Noninterest-Bearing $739,055 $743,654

Interest-Bearing 4,908,729 4,985,589

Foreign Offices

Noninterest-Bearing

Interest-Bearing 826,225 826,225

Total Deposits 6,474,009 6,555,468

Securities Sold under Repurchase Agreements 1,046,575 1,046,575

Borrowed Funds 54,963 54,963

Total Borrowings 1,101,538 1,101,538

Accounts Payable, Accrued Expenses and Other Liabilit ies 101,143 101,008

Liabilities of Discontinued Operations 1,132,614 1,132,614

Total Liabilities $8,809,304 $8,890,628

Stockholders EquityCommon Stock $5,000 $75,259

Surplus 94,652 24,393

Retained Earnings 757,866 672,734

Accumulated Other Comprehensive Loss, net of tax (63,109) (62,929)

Total Stockholders Equity $794,409 $709,457

Total Liabilities and Stockholders Equity $9,603,713 $9,600,085


12/45


12

(Dollars in thousands)AS OF DEC. 31, 2013

Capital Ratios (%)LEVERAGE RATIO 8.71% 7.85%

TIER 1 RISK-BASED CAPITAL RATIO 12.89% 11.61%

TOTAL RISK-BASED CAPITAL RATIO 13.90% 12.62%

Condensed Consolidated Statement of IncomeINTEREST & DIVIDEND INCOME

Loans and Deposits with Banks $147,617 $147,516

Investment Securities and Trading Account Assets 78,588 78,507

Total Interest and Dividend Income 226,205 226,023

INTEREST EXPENSE

Deposits 38,744 39,004

Borrowed Funds and Others 49,127 49,127

Total Interest Expense 87,871 88,131

Net Interest & Dividend Income 138,334 137,892

PROVISION FOR LOAN LOSSES 12,637 12,637

Net Interest Income, after provision for loan losses 125,697 125,255

NON-INTEREST INCOME

Commissions and Fees 38,451 38,451

Other Noninterest Income 16,378 16,378

Total Noninterest Income 54,829 54,829

NONINTEREST EXPENSE

Salaries and Employee Benefits 73,538 73,538

Occupancy, Equipment and Other Expenses 57,229 57,145

Total Noninterest Expense 130,767 130,683

Net Income before Income Taxes 49,759 49,401

Income Tax Expense 38,696 38,561

Loss from Discontinued Operations 1,720 1,720

Net Income $9,343 $9,120

Consolidated Statement of Comprehensive IncomeNET INCOME $9,343 $9,120

Net change in available for sale securities, net of taxes (37,793) (37,709)

Net unrealized gain on cash flow hedge, net of taxes 888 888

Funded status of pension and post retirement benefits, net of taxes 8,536 8,536

Comprehensive Income $(19,026) $(19,165)

Leadership Financials


13/45

Services

14 U.S. Private Banking

17 International Private Banking

19 Lending Division

Corporate Lending

Factoring

Commercial Real Estate Lending Asset-Based Lending

25 Southern California

27 South Florida

Eleanor Roosevelt at the opening

ceremony of the first U.S. Branch

New York, 1962


14/45


14

Throughout 2013, our Private

Banking Wealth Advisors worked

very closely with our clients

recommending strategies to

build wealth and preserve assetsduring a challenging economic

environment. As a result, our

clients, and the Bank, have

prospered.

Private banking deposits grew in 2013 to

$1.3 billion as we continued to add new

clients. Our very high personal service

levels and our high Tier 1 Risk Based

Capital Ratio continue to assist in our client

acquisition efforts. We project continued

substantial growth in deposits in 2014.

In addition to increasing deposits in 2013,

our managed equity portfolio exceeded

our benchmark index returns by over 200

basis points, thanks to a careful asset

allocation strategy that utilizes high-quality

stocks. Our managed bond portfolios also

exceeded their fixed income benchmark

based on our strategy of keeping shorter

bond durations and asset quality high. In

each case, our first priority is protecting

our clients interest through our non-

proprietary structure.

Essentially, IDBs strength comes from

strong liquidity and capital ratios, top qualityloan and investment portfolios, and a long

history of profitability. Complementing

this strength is our refusal to invest in

any asset that does not meet our high

standards.

For nearly five decades, we have earned

the trust and confidence of our clients by

following a conservative, sound banking

U.S. PrivateBanking

Services Private Banking


15/45

IDB Bank

15

IDBS STRENGTHCOMES FROM

STRONG LIQUIDITYAND CAPITALRATIOS AND ALONG HISTORY OF

PROFITABILITY.

JAMES LOGATTOExecutive Vice President,U.S. Private Banking

15

Annual Report 2013IDB BankServices Private Banking


16/45

Services Private Banking

philosophy, and by providing outstanding

advisory services, which include Investment

Management & Trust (IM&T), Custom

Lending, Cash Management, and Foreign

Exchange.

Perhaps our most important asset is our

team of skilled bankers who deepen theirpartnerships with our existing clients,

while continually building new and

productive relationships. This is a time-

honored tradition of highly individualized

attentionuncommon in the industry

todayand a key reason why we continue

to attract new private banking clients

who maintain multiple accounts.

To further extend our reach with our

personalized approach, we continue to

open private banking branches in selectedmarkets, hosted by highly professional

private banking teams. In addition to

IDB branches in Staten Island (2010),

Short Hills, New Jersey (2012), and now

Brooklyn (2013), we plan to expand into

Long Island and Westchester County over

the next couple of years.

Our strategy of a careful expansion in the

New York metro area outside of Manhattan

has enabled us to open new markets for

our banking products and Investment

Management services. While not retail

in nature, these branches are located

in office buildings and typically require

appointments to meet the privacy needs

of our clients.

Meanwhile, we also continue to invest intechnology and people to strengthen our

ability to forge close personal relationships

with our clients and to provide faster

access to account information and analysis.

We built this business by developing teams

of very experienced bankers who give our

clients a great deal of personal attention.

We listen, we collaborate and we advise,

explains James LoGatto, Executive Vice

President, U.S. Private Banking. Other

banks say they provide the experienceand personal touch, but not like we do.

With the added exposure of our new

private banking branch offices, ambitious

service standards and sound solutions

for deposits, loans and investments, we

will continue providing clients compelling

reasons to build a future with IDB.


16


17/45


17

InternationalPrivate Banking

A hallmark of our services is our growing Global Portfolio Strategies (GPS) investment

advisory group, which customizes a wide range of investment opportunities to

meet our clients needs. Along with GPS, we offer our cl ients a variety of products,

including Personal and Business Accounts, Time Deposits, Foreign Currency Timeand Demand Deposits and Structured Time Deposits.

With a deep understanding of both U.S. and global financial markets, we pride

ourselves on our sensitivity to the individual requirements of the non-U.S., non-

resident client, says Executive Vice President Chaya Rub. In fact, each Private

Banking officer is assigned specific accounts in order to develop solid, trusting

relationships, and often travels internationally to maintain continuous personal

contact with customers, while our New York-based regional management team

supervises administrative functions.

As a result of our personal attention, the number of our international banking

customers continues to increase as we strengthen our relationships with our loyallong-term clients. Our clients appreciate the level of stability we provide through

our low-risk, conservative financial strategies, Ms. Rub explains.

Our personalized approach has not changed over the years, even with the advancements

in technology, which allow banks the option to service clients remotely, Ms. Rub

adds. We believe its important for our officers to meet in person with our cl ients,

speak their language and understand their culture. Thats how we do business,

and its a big reason for our success.

International Private Banking

remains a cornerstone of IDBs

business model since its founding,serving the needs of customers

around the world, with a strong

presence in Latin America and Israel.

2013 proved to be another good

year, with solid growth in assets and

income, as we continue to expand

and improve on the private banking

services we offer.

ServicesInternationalPrivate Banking


18/45

ServicesInternationalPrivate Banking

WE BELIEVE ITSIMPORTANT FOROUR OFFICERS TOMEET IN PERSONWITH OUR CLIENTS,SPEAK THEIR

LANGUAGE ANDUNDERSTANDTHEIR CULTURE.

CHAYA RUBExecutive Vice President,

International Private Banking


18


19/45


19

Services Corporate Lending

The Lending Division achieved 13 percent growth in 2013, with

corporate lending, factoring, commercial real estate and asset-based

lending all contributing significantly despite an economy that was

slowly coming out of the recession.

Were doing well because we stayed the

course, supported our clients and never

stopped lending, explains Chief Lending

Officer Lissa Baum. We are a go-to bank.

Among the highlights for the year has

been the growth of the non-profit and

healthcare group, which IDB launched

in late 2012. By making a commitment

to meeting the lending needs of socialservice agencies, medical institutions, and

charitable and educational organizations,

we have become a major player in this

sector, while giving something back to

our community, says Ms. Baum.

Other highlights and growth areas

include our real estate business, which

took advantage of a rebounding market

with a creative, customer-oriented

approach, and our trademark financing

business, a unique core specialty based

on lending against brands and licenses

in such categories as footwear, apparel

and accessories.

The Lending Division and U.S. Private

Banking also continued to work together

efficiently. In fact, more than $50 million

in new lending in New York came fromprivate banking referrals. We work as a

team for our clients, making sure theyre

getting the feedback and attention they

deserve, says Ms. Baum. This is one

reason why the Lending Division is putting

lenders in our private banking offices

around the tri-state area.

We listen to our clients and find out what

they want and then we do whatever it

takes to get it for them, she explains.

We want every area of the Bank to be

successful, not just our area. All have

equal importance when were meeting

client needs, from foreign exchange to

international letters of credit.

Its a flexible, small bank approach.

And customers know they can call IDBs

decision makers directlywhether its thepresident of the Bank, the chief lending

officer or a private banker. Our clients

have enough to worry about with their

businesses, Ms. Baum says But we make

sure they dont have to worry about their

bank when theyre partnering with us.

With an improving economy in 2014, the

Lending Division expects to build on its

success and take it to even greater heights.

LendingDivision


20/45

WERE DOINGWELL BECAUSE WESTAYED THE COURSE,

SUPPORTED OURCLIENTS ANDNEVER STOPPEDLENDING.

LISSA BAUMExecutive Vice President,Chief Lending Officer


20



21/45


22/45

IDB Factors specializes in designing

innovative factoring and financing packages

that help our clients manage their accounts

receivable more effectively. Our teams of

account executives all have over 20 years

of market experience, which gives them

a unique ability to understand the varied

industries our clients serve. In 2013, IDBFactors loans grew over 50%. Typical

clients have annual sales that range from

$10 million to well over $100 million.

By monitoring a clients daily collateral

position, we can keep them advised of any

issues and improve the collection cycle.

This close monitoring normally enables

factors to make more aggressive loans than

a typical bank. Like the factoring industry

as a whole, our client portfolio was once

almost exclusively apparel manufacturers

and importers. But today, because of

our flexibility in meeting client needs,

we have diversified into such industries

as home furnishings, food and beverage,

and accessories, as well as some service

sectors. This diversity gives us greater

range and more opportunities for growth.

Our clients stay with us because they

appreciate the high level of service we

provide, says Louis Barone, who heads IDB

Factors. Most companies need to leverage

their accounts receivable and inventory

for working capital, and thats our strong

suit. We have the ability and resources to

understand our clients businesses and

develop not only a comfort level with them

but a strong working relationship.

Factoring

Our teams have

over 20 years ofmarket experience,which gives thema unique abilityto understand the

varied industries ourclients serve.


22



23/45


We continue to

think outside thebox to help ourclients reach theirfinancial goalsand improve their

overall customerexperience.

CommercialReal Estate

In 2013, IDBs Commercial Real Estate

business reinvigorated its relationship-driven business model by expanding in

some new areas and growing existing,

long-term relationships. The result was

a group portfolio growth of 26%, which

was well ahead of plan.

Our niche is lending against income-

producing properties where we are typically

the first mortgage lender, offering a full

spectrum of short- and long-term loans

at competitive fixed or variable rates.

Principal products include term loans,bridge loans, lines and letters of credit

financing for a wide range of investment

property types, including facilities for

acquisition and adaptive re-use.

In 2013, the real estate group also

established a joint program with the

Banks Israeli desk, which enabled IDB

to originate larger loans in conjunction

with other Israeli non-bank institutions.

Other new avenues include a new

program providing competitive financingof multi-family properties.

These kinds of entrepreneurial ventures

are a slight twist on our conservative

credit culture, says Sten Sandlund, who

finished his first full year as head of the

real estate group. Very few competitors

have the relationships we have and the

value we offerexecution excellence and

reliability. We continue to think outside

the box to help our clients reach their

financial goals and improve their overallcustomer experience.


23


24/45


Asset-Based

Lending

In good or bad times,

we have a legacy of going

overboard to help our clients,

and thats a tremendous

foundation on which to continue

building our asset-based

lending business.

With its new leader, Eric Serenkin, IDBs Asset Based Lending

Group has a well-rounded ABL expert at the helm who knows

the industry and the network of companies and referral sources

to help generate new growth.

Through asset-based lending, businesses with insufficient

liquidity can leverage the value of their assets, including

accounts receivable, inventory and even intellectual property,

to access working and growth capital, which can give themflexibility and ease the pressure on day-to-day operations. IDB

can also act as an agent in syndication transactions.

I havent met a client who doesnt love IDB, he says. In good

or bad times, we have a legacy of going overboard to help

our clients, and thats a tremendous foundation on which to

continue building our asset-based lending business. Were

approaching the new year with great enthusiasm.


24


25/45


25

Services Southern California

Southern

California

With a focus on a 75-mile radius of downtown

Los Angeles, but a reach that extends well

beyond the city, we have a strong track

record of financing properties such as

shopping centers, retail and industrialspace, skilled nursing homes, medical and

office buildings and multi-unit residential

properties, while also expanding in the

manufacturing and finance industries.

Revenue from trade services, foreign

exchange and interest rate swaps also grew

substantially. In addition, we significantly

increased our IDB Capital assets and

nearly doubled our business in Investment

Management & Trust Services (IM&T).

We enjoyed success from our new sales

initiatives, says Yoav Peled, Executive Vice

President, and we improved morale and

decreased expenses through reorganizing

our operations.

An impetus for our strong growth has been

the economy. In Southern California, weve

come out of the recession and have seen

considerable recovery and job creation,which helped us generate new business

in commercial real estate and increase

demand for commercial and industrial

loans, Mr. Peled explains. We expect

the same for 2014.

In this climate, the competition from

other institutions can be fierce, which

can impact profitability. So we not only

must be vigilant about costs, but we

must also continue to strengthen our

competitive advantagesnamely the

personal relationships, flexibility and

speed of service that our customers cant

get at other banks, says Mr. Peled. No

one comes close to being as responsive

as we are.

IDB Bank branches in Southern California enjoyed

a robust year in 2013, with a solid 11 percent

increase in new loans, including strong gains incommercial real estate, followed by commercial

and industrial loans.


26/45


26

WEVE COMEOUT OF THERECESSION ANDHAVE SEENCONSIDERABLERECOVERY AND

JOB CREATION,

WHICH HELPED USGENERATE NEWBUSINESS.

YOAV PELEDExecutive Vice President,

Southern California

Services Southern California


27/45

Services South Florida Annual Report 2013IDB Bank

27

SouthFlorida

Growth in commercial real estate and IDB

Capital assets were particularly strong.

Clients also continued to take advantage

of our interest rate swap and Letters of

Credit services.

South Florida is a vibrant market for us,

says Moise Hillel, Executive Vice President.

People love it here all year round, so its

become a destination for new business

and young professionals with families. Its

no longer just a vacation spot.

With this economic renaissance, many

competitors have opened branches

throughout Dade County. The challenge

is to continually find new ways to attract

new clients and build strong, trusting

relationships, says Mr. Hillel. IDB

has an incredible history of providing

individualized customer service, which

we will continue and strengthen to set

ourselves apart.

IDBs South Florida Division

enjoyed significant growth in

2013 due to the economic recovery

in the region, our efforts to

increase direct relationships with

new customers, and our strong

position as a gateway to existing

clients in Latin America.

In 2014, the goal is to continue building

direct private banking relationships,

balance the risk exposure between

corporate lending and commercial real

estate, and develop business in asset-

based lending, annuities, and non-profit

and healthcare financing.

We provide our domestic and international

clients with a sense of security and sound

professional advice for both banking and

wealth management, and we are uniquely

positioned to serve South American clients,

says Mr. Hillel. We do not use a call

center; its all about direct relationshipsand developing a customer experience

that meets their needs.


28/45

Services South Florida

PEOPLE LOVEIT HEREALLYEAR ROUND, SO

ITS BECOME ADESTINATION FORNEW BUSINESSAND YOUNGPROFESSIONALSWITH FAMILIES.

MOISE HILLELExecutive Vice President,

South Florida


28


29/45

30 Risk Management

32 Treasury

34 Information Technology & Operations

37 Accounting

38 Office of the General Counsel39 Compliance

40 Internal Audit

Infrastructure

IDB Bank, Original Manhattan Branch

New York, 1962


30/45


30

Infrastructure Risk Management

RiskManagement

In 2013, a great deal of focus was on

meeting the requirements of Basel III

(the global regulatory standard on bank

capital adequacy) the applicable provisions

of the Dodd-Frank Act in the U.S. with

respect to capital planning.

All of the new requirements are designed

to ensure that banks are adequately

capitalized and we are happy to report

that IDB Bank meets the highest

designation possible which is Well

Capitalized status, says Adam Barsky,

Executive Vice President and Chief Risk

Officer. The Bank performs exceptionally

well under the new stress testing

requirements, he adds. The result of

these tests should give our customers

great comfort in knowing that we are a

best-in-class institution with sound risk

management practices.

The risk management team also supports

our various business units in their growth

plans and the launch of new products and

services by providing risk assessments

and due diligence to ensure proper

operational controls are in place and

that the new activities are consistent

with the Banks risk appetite. We alsowant to assure that the Bank maintains

its high standards when it comes to

asset quality and that we minimize our

risk of loss. IDB Bank is proud to report

that its asset quality as measured by the

ratio of non-performing assets to total

assets was 0 .67 % in 2013. Our asset

quality is much higher than that of our

peers and this measurement proves it,

says Mr. Barsky.

Looking ahead, the group continues toincorporate advanced methods to manage

risk, including a new asset and liability

model which will assist in the management

of interest rate and liquidity risk as well

as a new credit risk model. These tools

will enable the Bank incorporate a more

quantitative approach to analyzing data

and allow management to make better

informed decisions which ultimately

serves the best interests of our customers.

IDBs Risk Management team assesses the Banksrisk as a whole, including market and credit risk,

as well as operational risk and compliance with

regulatory requirements.


31/45


31

OUR TEAMPROVIDES RISKASSESSMENTS ANDDUE DILIGENCE TOENSURE PROPEROPERATIONAL

CONTROLSARE INPLACE.

ADAM BARSKYExecutive Vice President,

Chief Risk Officer

Infrastructure Risk Management


32/45


32


Treasury

We also took advantage of the relatively

low rates by refinancing part of our

wholesale borrowings, which brought

down costs just before rates picked up.

We also are seeing a greater opportunityin helping customers manage foreign

currency exchange, for businesses with

payables or receivables in foreign currency,

or for those who simply need to transfer

funds internationally or want to hedge

their foreign exchange exposure.

One clear area of growth is our interest-rate

derivatives business, which we launched

in 2012. Clients are increasingly interested

in hedging their revolving credit lines and

loans. We offer interest rate swaps that

can be thoroughly customized to match

a desired start date, amortization, and

payment frequency. With such flexibilityand protection against interest rate

exposure, clients can swap a fixed rate

loan into a floating rate if rates are low,

or swap a floating rate loan into a fixed

rate if rates go higher.

To analyze our treasury function more

effectively, we launched a new risk and

performance management system that

will help the department manage a more

complex balance sheet and loan portfolio

by modeling customer behavior, economic

valuation, interest rate scenarios and

other variables.

If longer term interest rates continue to

rise, as expected, we will be in a much

better position to reinvest in higher yielding

fixed income products, primarily mortgage

backed securities, which should help

drive the Banks income growth, says

David Cohen, Executive Vice President

and Treasurer.

Interest rates remained low in the first half of 2013

but spiked up in the second half. This helped to

increase yields of our fixed income portfolio and

generated more income than initially expected.

Infrastructure Treasury


33/45

Infrastructure Treasury

WE OFFER

INTEREST RATESWAPS THAT CANBE THOROUGHLYCUSTOMIZED.

DAVID COHENExecutive Vice President,Treasury


33


34/45


34

Operations &InformationTechnology

This approach has enabled IDB to rapidly introduce new cash

management and investment management and trust services.

Soon, using the same innovative approach, we will be introducing

new custody management and insurance products. This innovative

approach identifies industry-leading service providers withinspecific banking segments. IDB leverages the expertise of these

leading organizations to quickly deliver sophisticated banking

solutions to our customers.

We dont need to look any further than IDBs advanced cash

management platform, IDB Access, as a model for successful

approach. IDB Access grew considerably in 2013, increasing

its client base by 12%, thanks to the ease of managing and

controlling payment functionsincluding remote deposit,

payment options, fraud protection, and security tools.

With IDB Access, customers can customize the level of access

and set transfer limits for each user on all types of transfers,

including ACH, wire transfers and transfers between IDB

accounts. And with a new feature called Positive Pay, customers

can control disbursements more effectively because they receiveimmediate notification on checks cleared, thereby eliminating

the risk of overdrawn funds.

We offer a highly competitive set of cash management features

that new and existing clients in our corporate lending and

private banking businesses find attractive, says Linda Weber,

Senior Vice President.

By partnering with these industry leaders, IDB has aligned itself

with experts in these banking segments. These organizations

Over the past few years, IDB has taken aninnovative approach to introducing new banking

products and services for our customers.

InfrastructureOperations &Information Technology


35/45

WE HAVE WORKEDSTEADILYON SYSTEMUPGRADES ANDENHANCEMENTSWHERE INFORMATIONSECURITY AND DATA

PRIVACY IS CRITICAL.

ROBERT PLANTEExecutive Vice President,

Operations & Information Technology



35


36/45


36


not only deliver the leading-edge solutions

of today, but also invest over time to retain

their established leadership positions.

This implementation approach deliverssophisticated products and services for

IDB in a fraction of the time and cost of

internally building and implementing them.

SPEED AND ACCURACY

We understand the need for speed and

accuracy in processing international

business transactions, including the

efficient processing of import and export

documentation around the world, such

as letters of credit and collection and

payment orders.

For example, our Letter of Credit Automated

Customer Initiation System, a secure

and personalized Internet-based system,

connects our clients computers directly

with our Letter of Credit Department,

making issuing and amending Letters of

Credit faster, easier and more accurate

than ever before.

To expedite payment requests, we use asophisticated electronic payment system

that provides instantaneous contact with

a broad network of both local and global

correspondent banks around the world,

so each incoming and outgoing payment

order is promptly and accurately processed.

A cornerstone of our activi ty is to assure

that all of our customers instructions are

executed with speed and efficiency while

having zero tolerance for any operational

loss.

INFORMATION TECHNOLOGY ANDDATA SECURITY

As IDBs services become increasinglyautomated, both computer- and Internet-

based, we are highly focused on making

sure our offerings are not only easy to use

for our customers but also as commercially

secure as possible. Throughout 2013, we

have worked steadily on system upgrades

and enhancements where information

security and data privacy is criticalfor

everything from loan, treasury, custody and

deposit operations to payment systems

and cash management.

Today, many of the Banks products,

services, and business processes are

IT-based, so IT is really at the heart of

our operations, says Robert Plante,

Executive Vice President. By automating

workflow and customer transactions,

we can eliminate paper, streamline

processes and greatly reduce potential

errors. A key part of this improvement

effort is digital archiving, so bankers and

customers can access needed information

quickly and easily.

Our challenge is to connect and integrate

various banking technologies to create

continuity from capturing data to processing

to archiving, explains Mr. Plante. In

2013, we have been able to implement

end-to-end workflows, which consolidate

and centralize the Banks back-office

and eliminate redundancies.

In 2014 and beyond, as continual digitization

improves operating efficiencies, we willfocus even more resources on workflow

automation, quantitative analytics, cyber

security and mobile technologies.


37/45

Infrastructure Accounting

Accounting

Working closely with all areas of the

Bank, members of the accounting team

understand intimately how the Bank

performs relative to most of our peers.

In 2013, the challenge of succeeding in a

slowly improving but still low-interest rate

environment was paramount, as well as

addressing new federal regulatory policies

that can, at times, be confusing and

unclear, says Thomas Kehrer, ExecutiveVice President and Chief Financial Officer.

The Feds quantitative easing policies

have unintended consequences on bank

income, namely net interest rate margin

compression, not just for us but for the

industry as a whole, he explains.

Nevertheless, our loan portfolio enjoyed a

good year of growth, ending the year with

an all-time-high loan balance of $4.7 billion,

up from $4.2 billion the year before, says

Mr. Kehrer. And we have entered the new

year with a stronger team to seek out and

realize cross-marketing opportunities in

a number of areas including real estate.

Expanded cash management and private

banking offerings and capabilities are also

spurring improvements in non-interest

income, which help to offset the netinterest margin compression.

With this kind of balance, we remain

confident that we will continue to succeed,

especially as the U.S. economy gets

stronger, says Mr. Kehrer. Our track

record proves that, compared to many of

our peers, our tried and true conservative

investment strategy is still the way to go.

In a challenging economic environment, the Accounting

Department plays a key role, not only in reporting on IDBs

financial performance but also identifying opportunities to

minimize expenses and enhance revenues.

THOMAS KEHRERExecutive Vice President,

Chief Financial Officer


37


38/45


38

Office of theGeneral Counsel

IDB Bank Annual Report 2013IDB Bank

Office ofthe GeneralCounsel

The Office of General Counsel also monitors applicable regulations, reviews contracts,

manages litigation, provides legal advice, and is responsible for the Banks corporate

governance practices.

We are here to respond to the changing needs of the Bank explains General

Counsel Leslie Case. One issue were working on with Treasury and Accounting

is the Volcker Rule, part of the Dodd-Frank Act that restricts U.S. banks from

making certain kinds of proprietary investments. Its our job to understand these

regulations, advise and protect the interests of the Bank, and to work with our

colleagues so they understand all of the ramifications, Ms. Case says. We are

here to protect IDBs integrity.

To fulfill its mission, the Office of General Counsel works closely with all areas of

the Bank, from corporate lending and private banking to human resources and

operations management. Our lawyers and staff do all they can to connect with

colleagues in these departments and to understand and address their concerns

while providing sound legal advice, says Ms. Case.

With five attorneys and five support staff, the Office of

General Counsel provides legal support to, and oversight

of, all areas of the Bank.

LESLIE CASEGeneral Counsel &Corporate Secretary

Infrastructure


39/45


39

Infrastructure Compliance

ANDR BURRELLExecutive Vice President,Chief Compliance Officer

Compliance

Our first priority, of course, is to make sure this organization

functions effectively within the laws, rules and regulations that

govern our industry, says Andr Burrell, Executive Vice President

and Chief Compliance Officer. But we also want to allow ourbusiness lines to flourish, he adds, so we listen carefully to

their concerns and make sure we all understand how business

can be done profitably within the regulatory environment. We

want to help guarantee the stability of the bank.

With a staff of 22, this work requires teamwork within the

department and with the banks business units and regulators.

We have a strong working relationship with regulators, says Mr.

Burrell. They know were open and honest and that they can

call on us at anytime. We even try to think ahead and provide

the information they need before its requested. This shows

them that compliance is part of our culture.

Working closely with all business units and functions

of IDB, the Compliance Department focuses on

making sure the bank adheres properly to all

applicable laws and regulations, including, most

recently, the complex Dodd-Frank Act.


40/45

IDB Bank Annual Report 2013IDB BankInternal Audit

RONNI SILVERExecutive Vice President,

Chief Internal Auditor

InternalAudit

Thats why our Internal Audit Department

teams work tirelessly to make sure were

operating with the best data evaluation

and process controls possible, while

working closely with people across the

Bank to stay on top of new initiatives

and activities.

Over the past four years, the department

has expanded its process testing andanalytical capabilities, such that the

extensive use of data analytics is now part

of each audit it performs. By effectively

leveraging data analysis technology, the

department tries to look at bank activities

with a fresh eye.

If you audit the same way every year,

youre only going to see the same

things, says Executive Vice President

and Chief Internal Auditor Ronni Silver.

We always look across the organization

to try to see things differently and gain

new perspectives.

Our senior management wants to get it

right, Ms. Silver explains. Working closely

with legal, compliance, accounting and

risk management, we make sure the Bank

has the right procedures to address the

risks in all of our businesses. We may bebehind the scenes, but clients should rest

assured that auditing is a collaborative,

cross-functional effort that we take very

seriously. We have a passion for what we

do, and I think it shows in our results.

Evaluating all operational

controls for risk management

and regulatory compliance is

one of the most critical activities

for any bank.

Infrastructure

40


41/45

The original vault at IDB New York

New York, 1962

42 IDB Capital Corp.

43 Discount Bank Latin America

Subsidiaries


42/45

Subsidiaries IDB Capital Corp.

IDBCapitalCorp.

In 2013, we achieved our revenue goals from international sources. We also helped

the Bank select a new securities processing platform designed to expand our services

and improve client service, including improved performance reporting. With the new

system, we will also be able to conduct enhanced diagnostics for existing portfoliosto ensure that client asset allocations are appropriate and to offer products across

the entire organization. says IDB Capital President Matt Rozzi.

IDB Capital also brought onboard a new wealth management advisor in 2013. His

role is to offer service to private clients in New York and he has been working with

our U.S. Private Banking and Lending units to focus on adding value to existing

domestic client relationships, explains Mr. Rozzi.

The advisor is also representing the products for other areas of the Bank, most

importantly Investment Management & Trust. With this cohesive system up and

running and our professional staff primed for growth, we are reinventing how we

do wealth management and were more confident than ever in our ability to competeand seize new opportunities in 2014, says Mr. Rozzi.

IDB Capitalis a full-service broker-dealer and a

wholly owned subsidiary of IDB Bank. We offer a

broad array of wealth management services to our

international and domestic private banking clients,

including investment management, retirement

services, and individual & business planning

strategies.

MATT ROZZIPresident,IDB Capital Corp.


42


43/45


43

Discount BankLatin America

DiscountBank LatinAmerica

Operating as a commercial bank for more

than half a century, DBLA has become the

bank of choice for personalized private

banking, commercial and consumer

loans, and payroll processing for many

corporations.

During 2013, we continued to focus on

growing deposits as well as commercial and

consumer loans. Both loans and deposit

balances increased by approximately 9%

during the year, with deposits from non-

residents growing by 14%. This growth

comes at a time when Uruguay is enjoying

political stability and has been minimally

affected by the economic difficulties of

several neighboring countries. As a result,

the economy has been growing at rates

higher than the historic average, with

GDP increasing by 4.00% in 2013.

With 16 branches13 in Montevideo, the

nations capital; two in the resort town

of Punta del Este; and one in Colonia,

Discount Bank Latin America

(DBLA), a wholly owned

subsidiary of IDB, is one of

the most trusted financial

institutions in Uruguay.

near the Argentine borderthe Bank

is steadily expanding. We opened a new

branch in the area of Tres Cruces, in

response to high demand from existing

and potential customers. Our branch

in Punta del Este was also relocated

to a new dedicated building, so we can

offer enhanced services for our growing

clientele.

To improve our service to customers, we

upgraded our main phone system in 2013,

as well as continuously upgrading our

online banking services so that customers

can better manage their finances from

their home or office.

As part of our ongoing efforts to develop

new channels of interaction, we will

offer specialized services to small and

medium-size companies, and to our

young-adult customers. In early 2014,

Jorge Perez will retire as DBLA CEO,

and will be replaced by Mauricio Pelta.

JORGE PEREZPresident,


Subsidiaries


44/45


Main Office

511 Fifth Avenue

New York, NY 10017

Tel: (212) 551-8500

Branch Offices201 Edward Curry Avenue, Suite 204

Staten Island, NY 10314

Tel: (718) 698-4892

9401 Wilshire Boulevard, Suite 600

Beverly Hills, CA 90212

Tel: (310) 860-6320

P. O. Box 694GT

George Town

Grand Cayman, Cayman Islands*

400 Avenue U

Brooklyn, New York, NY 11223

Tel: (718) 382-4987

888 South Figueroa Street, Suite 550

Los Angeles, CA 90017

Tel: (213) 861-6440

150 John F. Kennedy Parkway

Short Hills, NJ 07078

Tel: (973) 379-8699

Harbour Centre

18851 NE 29th Avenue, Suite 600

Aventura, FL 33180

Tel: (305) 682-3700

Subsidiary Bank Other Subsidiaries


Rincn 390

Montevideo, Uruguay

IDB Capital Corp.**

511 Fifth Avenue

New York, NY 10017

IDB Real Estate Holdings, Inc.

511 Fifth Avenue,

New York, NY 10017

IDBNY Realty (Delaware), Inc.

1105 North Market Street, Suite 1446

Wilmington, DE 19899

IDB Leasing, Inc.

511 Fifth Avenue,

New York, NY 10017

IDB Realty, LLC

511 Fifth Avenue

New York, NY 10017

IDB-HK Ltd.

Level 28 Three Pacific Place 1

Queens Road East

Hong Kong

Representative Offices

Peru:Amador Merino Reyna 295, of. 701San Isidro, Lima, Peru

Tel: (511) 421-8384

Uruguay:General Venancio Flores 431Colonia del Sacramento, CP 70000

Colonia, Uruguay

Tel: (598) 4522-1123

World Trade Center

Luis Alberto de Herrera 1248

Torre B Piso 4, of. 409

Montevideo, Uruguay

Tel: (5982) 622-2257

Israel: Ofek House8 HaManofim Street, 3rd Floor

P.O.Box 12406

Herzliya Pituach, 46733 Israel

Tel: (972) 9-773-7400

Mexico: Av. Homero 1804, of. 202

Colonia Polanco, 11560Mexico, D.F., Mexico

Tel: (5255) 5395-0634

Chile: Av. Vitacura 2771 of. 804

Las Condes, Santiago, ChileTel: (562) 236-5600

*Non-FDIC insured branch**Member FINRA/SIPC

IDB Bank is a registered service mark of Israel Discount Bank of New Yorkand a wholly-owned subsidiary of Discount Bancorp, Inc. Member FDIC.Other Discount Bancorp, Inc. subsidiaries: DB Properties, Inc.


45/45

IDB 2013 Annual Report

Documents

Transcript of IDB 2013 Annual Report