The Bank of Southern Connecticut, which is based in New Haven, opened in October of 2001 and is now worth about $45 million in assets.
Despite its relatively small size, stagnant economy and highly competitive market, Connecticut has continued to support the creation and growth of de novo banks, and now boasts the second-highest number of new banks in the nation.
“I’ve been told that you should never try to compete with a hometown bank because you’re going to lose. But when that bank is bought and sold, get in there quickly,” said Lindsey Pinkham, senior vice president and secretary for the Connecticut Banking Association. “A lot of people like banking with a hometown bank. It’s convenient, you know the people and it’s small.”
Pinkham believes that competition is good for the banking industry and that technology makes it a bit easier to open a new bank.
“[But] it’s not easy,” he said. “A lot of work goes into putting these things together – the organizational process, the time and money spent. Plus, people don’t give you money to start up easily.”
Pinkham noted that Connecticut has the highest number of de novo banks in the Northeast, and nationwide is second only to Florida.
“There have been 22 banks that have been started since Jan. 1, 1995. Of those, 11 are true community banks. The other 11 are specialty banks, or trust companies formed by insurance companies to do specific things,” said Pinkham. “We’ve got three or so more banks getting organized, and a rumor or two a week that there’s another one on the way.”
Despite an economy that has been sagging for quite some time, banks in Connecticut continually spring up, setting their sights on filling a niche left after larger banks have acquired the smaller, community-based banks.
“I think that a bank would not be funded by the shareholders, and the minimum stock would not be sold if investors didn’t feel that the economy was healthy enough to support a bank and there was a need that other banks were not meeting,” said Sheldon Pollock, president of Cheshire-based Apple Valley Bank and Trust Co.
“In light of the current conditions it may be more difficult, but not impossible, to form a new bank. The Connecticut economy is strong but there’s a consensus that it’s not robust. There doesn’t seem to be a lot of business expansion, but there are pockets where there is growth,” said Pollock. Much of the activity that banks are seeing lately, he noted, has been refinancing due to low interest rates as opposed to venture-based loans.
Apple Valley Bank started in 2001 and has since become a $40 million bank, catering to communities in Central Connecticut such as Cheshire and Southington.
“Cheshire never had a hometown bank, and Southington didn’t have one either as a result of mergers,” said Pollock. “This is not to criticize larger banks. On the contrary, they’re often very good banks, but sometime the focus of a larger bank is different, especially in respect to commercial loans. Particularly, small-business owners want to go into local banks and discuss their banking needs with people they know and that are rooted in the community.”
‘Long Tradition’
Elsewhere in the state, young banks are eager to expand.
The Bank of Southern Connecticut, which is based in New Haven, opened in October of 2001 and is now worth about $45 million in assets. It boasts more than 300 business customers at its two branches and will be opening a new branch next week in New Haven.
“We’re working our way up the shoreline to Rhode Island,” said Michael Ciaburri, president and chief operating officer of the bank. “It may take us five years to accomplish, but that’s the plan.”
Ciaburri’s father, Joe, was the former president and chief executive officer of the bank, working to initially raise $11.7 million in August of 2001.
“I think it’s en vogue to start a bank,” said the younger Ciaburri.
He cited a time in the 1980s and 1990s during which several mergers and acquisitions occurred, as well as several bank failures.
“The good small banks sold out and the bad small banks failed. With all mergers the larger players dominated the landscape. Most of them were very big banks and the small-business person has a difficult time dealing with that size bank. In local communities, ex-large bankers are getting in to start up their own shop,” said Ciaburri.
He said many bankers of that breed, including his father, search out areas where a community bank is missing. One such area is New London County, on which Bank of Southern Connecticut has set its sights.
The bank’s holding company, Southern Connecticut Bankcorp, is set to open a separate bank called the Bank of Southeastern Connecticut. Ciaburri said the Mashantucket Pequots, the American Indian owners of Foxwoods Resort Casino, have expressed interest in a partnership to found the new bank.
Southern Connecticut Bankcorp plans to file an application within the next few months and hopes to open early next year.
“We’ll fill in branches from Branford to New London. Our holding company will be worth half a billion dollars in the next five years,” said Ciaburri. “Today it’s a small bank, but talk to me in a couple of years.”
Ciaburri said he doesn’t see raising capital as an obstacle to his bank’s progress, remarking that investors see a local bank as a safe haven for their money.
“We’re not some multi-national company where you don’t know where your money is being spent. We’re reinvesting the money in New Haven,” he said.
“Competition is fierce; banking business in Connecticut is very competitive. What separates us from the larger players is that we don’t have bureaucracy. My dad and I run the bank, people can get in to see us very easily and we make decisions quickly,” said Ciaburri. “Every bank’s money is the same color: green. We’re going to get somebody’s business because we can turn around loan requests very quickly. We make loans in record time.”
Pollock said, “There is no banking market in the country that is easy. Wherever you go there are numerous competitors, so you have to distinguish yourself with service. Bank products really aren’t that different, so you need to offer the kind of service that people want.”
In Central Connecticut, Meriden-based Castle Bank and Trust Co. has been quietly operating since 1996, slowly gaining approximately $70 million in assets.
“Our story is probably not much different than most communities where there is a perceived opportunity because of changes in financial services and the fact that smaller community banks have been either merged out of existence or failed,” said Larry McGoldrick, president, chairman, and chief executive officer of Castle Bank.
When he was younger, he noted, Meriden had nine hometown banks based within its boundaries, but in 1996 there were none
“Bigger banks kept raising the bar as far as the size of credits and companies they gave personal services to. Smaller businesses still needed counsel and assistance, and that’s our approach: to take the best of the old world of banking and tie it in with state-of-the-art technology,” said McGoldrick.
The trick is, he said, to make the bank a resource to small businesses while remaining a profitable venture for shareholders.
McGoldrick said a peer network has been set up among the chief executive officers of de novo banks, each looking to the other for advice on how to make the banks work.
“I certainly went to other banks that started up prior to starting Castle,” he said. “Simsbury Bank and Trust, First City Bank and Maritime Bank had already started in the mid-1990s and I picked the brains of those CEOs. Once we got started, I found I became the pickee.”
Today, a group comprised of chief executive officers of start-up banks meets once a month to discuss issues and relate to each other.
“There is a long tradition of community banking in Connecticut, and a number of close-knit towns,” said Alan Chicchetti, deputy banking commissioner at the Connecticut Department of Banking. “Business people and professionals always perceive a need for local hometown banking [that’s] present as a niche or option for banking within a community. A lot of executives will sell out after awhile and some of them go back and start up yet another bank and serve as CEO, and I think there’s a lot to be said for that.”
