As Connecticut cut red tape for the formation of new banks, one of the newest in Fairfield County sold a large stake just months after coming under federal scrutiny for its capital ratios.
This summer, the Connecticut General Assembly gave the Connecticut Department of Banking the power to approve new banks on an expedited basis, hoping to help investors pool capital rapidly to acquire troubled banks nationally and turn them around.
Earlier this month, New York-based Alcar L.L.C. disclosed plans to spend $15 million to acquire a major stake in Darien Rowayton Bank, founded only in 2006 and building a $4 million headquarters on Darien”™s main retail strip.
Last spring, the Federal Deposit Insurance Corp. issued a 25-page cease-and-desist order over what it termed were “unsafe or unsound banking practices,” including being inadequately capitalized, operating without an adequate loan-review program and failing to properly account for charge offs on troubled loans it has made.
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Darien Rowayton Bank agreed to the order without admitting that it operated in an unsound manner. At the time, the FDIC gave the bank two months to come up with a capital plan. The agency also asked the bank to spell out the qualifications of senior bank officers and indicate whether it plans to hire any experienced banking personnel with requisite abilities.
Darien Rowayton Bank is led by John Bowes, who previously was CEO of Chrysler Capital Corp. and subsequently of a U.S. lending affiliate of Credit Lyonnais.
The company”™s founding and current board members and advisors include CEOs, owners or senior executives of a range of local businesses, from collectibles giant MBI Inc. of Norwalk to clothier Darien Sport Shop.
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Last October, as the extent of the banking crisis became clear, Bowes published an open letter touting the bank”™s deposit gains in part from customers leaving the largest banks doing business in the area.
Bowes said the bank”™s lending portfolio remains largely solid today, with just a single, shared problem loan on the books.
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As of March, Darien Rowayton Bank had $93 million in deposits and $80 million in loans outstanding, most on residential properties, for total assets valued at $117 million.
“We are pleased that the bank has been able to raise a significant amount of capital in a difficult economic environment,” Bowes said in a statement. “This new capital will allow us to play an expanded role in supporting the local economy.”
Alcar, Darien Rowayton”™s prospective buyer, is led by Gary Lieberman, a one-time Bear Stearns manager who is founder of New York City-based West Side Advisors L.L.C.
The companies first disclosed in June they were negotiating a buyout; in May, Alcar was sued for $300,000 by the nascent Idaho First Bank after a $7 million investment deal broke apart.
While Waterbury-based Webster Financial Corp. accepted a $400 million bailout from the federal government last year, Connecticut banks have largely muddled through the recession without outside assistance.
Bank of Fairfield, another new bank locally owned by New Canaan-based BNC Financial Group Inc., lost nearly $1 million in the first half of 2009, after accumulating $26 million in deposits through June 30 while issuing nearly $20 million in loans. But the company”™s other subsidiary, Bank of New Canaan, allowed it to absorb the loss and push forward in wealthy Fairfield County.
“The economic crisis has been extremely hard on the financial industry, and it has revealed the sustainability of a company”™s business model,” Jay Forgotson, CEO of BNC, said in a statement. “So far, the multibank model of our organization has passed the business model test. In spite of continued financial unrest, we remain optimistic.”
(The story contains two corrections from a previous posting.)
