A Willimantic-based bank has been chosen to acquire the remaining assets of the troubled Circle Trust Co. of Darien. The Savings Institute Bank & Trust Co. will acquire Circle Trust’s trust services and wealth management trust line of business through assignment of all applicable custodial and trust agreements, according to the state Department of Banking. The acquisition is pending the approval of the Connecticut Superior Court.

“The department is happy to announce this agreement between the receiver and the Savings Institute,” said James Heckman, spokesman for the Connecticut Department of Banking, in a prepared statement. “The agency is encouraged that The Savings Institute will be able to complete this agreement in a prompt and orderly manner.”

The Circle Trust Co. was placed into regulatory receivership in September, when Banking Commissioner John P. Burke filed a petition with the court because the institution’s capital had fallen below the $2 million minimum required by Connecticut law. The bank had been under scrutiny since 2003. It made efforts to recapitalize, but could not recover.

‘A Captive Piece’

Since the Department of Banking was named the receiver of the bank, it has been selling it off piece by piece. First was the October appointment of Fiduciary Counselors of Washington, D.C., to manage Circle Trust’s Trust Advisors Stable Value Plus Fund. According to the Department of Banking’s Web site, Fiduciary Counselors has filed a voluntary petition for the fund under Chapter 11 of the U.S. Bankruptcy Code. According to the fiduciary, the bankruptcy proceeding provides the best vehicle for protecting the interests of the investors in and creditors of the fund through an orderly and equitable process for resolving outstanding issues.

Then, earlier this month, the Department of Banking announced that MG Colorado Holdings has agreed to acquire assets relating to Circle Trust’s third-party administrator business. MG Colorado Holdings will acquire all third-party administrator custodial and trust businesses through assignments of all applicable custodial and trust agreements from the third-party administrators. That agreement also must still be approved by the state Superior Court.

After Circle Trust Co. was placed into receivership, the Department of Banking decided it was worth more if it was sold in pieces rather than in one chunk, according to John Carusone, president of the Bank Analysis Center in Hartford, which was hired by the DOB as its financial advisor. The institutions that acquired the pieces did so for several reasons.

“To expand the product line, to add to an existing product line by attaching a captive piece of business,” Carusone said.

Earlier this year, the Department of Banking concluded an investigation of Circle Trust Co.’s former president and chairman and their handling of mutual funds. Questions arose concerning former President and Chief Operating Officer Michelle Montano’s and former Chairman and Chief Executive Officer Louis P. Celentano’s facilitation of market timing of mutual funds. According to the documents, “Mutual funds are meant to be long-term investments; however, traders try to trade in and out of funds in order to take advantage of inefficiencies in the way the funds set their net asset values. This practice is known as market timing and, if done effectively, it captures an arbitrage profit.”

The two were given an order to cease and desist, a notice of intent to fine and a notice of right to a hearing.

The Savings Institute was incorporated by an act of the Connecticut Legislature on May 30, 1842. The Willimantic bank offers personal and business financial services, including insurance, trust and investment services through its 15 branch offices located throughout eastern Connecticut.

When Circle Trust Co. was placed into receivership it was headed by President and Chief Executive Officer Douglas Graham, who came onboard two years ago to try to save the ailing company.

“There was some ill-advised investment activity that basically left Â… issues,” Graham said in an interview in October.

The team has been working with the regulators ever since. The institution’s clients have been strong, but are working with Circle Trust under relatively short-term contracts, according to Graham.

“The clients have a fair bit of freedom and we’re helping them go where they want to go,” he said.