Two Connecticut de novo banks have another few months to put the finishing touches on their institutions. The state Department of Banking last week granted extensions to Higher One Bank and Darien Rowayton Bank, giving both more time to officially open their doors.

The organizers of Darien Rowayton Bank began their campaign to start a bank early last year, but it has taken longer than expected, according to Chairman John Bowes. The Department of Banking granted the bank its first temporary certificate of authority, which gives a bank permission to complete the final steps of organization, in August of last year. Bowes said he’d expected the 18-month certificate would give the organizers enough time to get the bank running, but the capital raise took longer than anticipated, and came with some surprises.

“[The regulatory process] together with the capital raise was the most challenging,” he noted.

The bank closed the offering in September after successfully raising the $13 million that was sought. But instead of the money coming from a small group of large investors, as Bowes expected, it came from a group of 300-plus small investors. Although a surprise, Bowes said he ultimately was pleased with the group.

“It’s a different profile of our investor [than we expected],” he said.

But the high number of investors means the bank likely will have a higher number of initial clients. Many of the investors are also merchants, Bowes said.

The bank, which plans to take the rather unusual tactic of offering financial planning, wealth management services and traditional banking services from the time it opens, also experienced some holdups with the Federal Deposit Insurance Corp. Organizers submitted their application to the FDIC after finishing the capital raise. The approval process usually takes 120 days, so Bowes assumed the bank’s original temporary certificate of authority would still be in effect, but the FDIC requested more information, so the application was not accepted until Nov. 10.

Bowes said he expects the bank’s insurance to come through in mid-March, so the bank’s headquarters in Darien and a branch in Rowayton should open in late March or early April.

The main office will be in a temporary space, a storefront at 979 Post Road in Darien. But organizers will construct a new building next store, and when that is done it will become the bank’s permanent location. They also are building a new home for the Rowayton branch, which should open shortly after the main office.

There has been a good buzz about the new bank in Darien and Rowayton, Bowes said.

“I think people are anxious to see it open,” he noted. “We’re anxious to get started.”

Organizers are hoping the unique combination of services will provide for the affluent residents in Darien and surrounding areas. During the planning process, the organizers did a local survey that found interest in the idea and identified communities around Darien and Norwalk, such as New Canaan and North Stamford, as a secondary market.

Small banks don’t offer the services that Darien Rowayton Bank would, and most big banks don’t do it well, Bowes said. That was part of the reason he came up with the idea.

Bowes has a background in financial services, but this is the first time he has worked on a bank project. He is a former chief executive officer of the Chrysler Capital Corp. and also created the Lyon Credit Corp. for the French bank Credit Lyonnais. Lyon Credit Corp. was later sold. Since mid-2002, Bowes has been working full-time on the start-up of Darien Rowayton Bank.

A Complicated Process

The process to open a new bank is complicated. Along with the application to the Department of Banking, the state requires organizers of new banks to fund a feasibility study, a three-year financial forecast and a business plan, according to the Connecticut Department of Banking’s Web site. The state then holds a public hearing before a panel consisting of the banking commissioner, the treasurer and the comptroller. The bank is approved if the panel decides the bank serves the interest of the public, meets conditions in the locality where the bank is proposed, affords a reasonable promise that the bank will operate successfully and that the proposed directors have the experience to perform their duties. After gaining state approval, the organizers have to apply to the Federal Deposit Insurance Corp. for insurance.

The application with the FDIC is also proving a headache for New Haven-based Higher One, a company that provides identification cards that double as debit cards for college students and faculty members around the country. The company has a Texas-based bank as a partner, but hopes to open its own bank in the near future. Last week’s extension to the bank’s temporary certificate of authority was its third.

“Really the holdup is the FDIC now,” said Mark Volchek, one of the founders of the company.

Organizers filed the application with the FDIC last year, but the agency has not yet acted on it. Because it will not be a traditional bank, the approval process is much more complicated than that associated with a traditional bank.

“[The application has] been sort of stuck in the bureaucracy down there,” Volchek said.

The new extension is good until June 30, 2006. Volcheck said he hopes the bank will be open by then.

But in the meantime, Higher One has been growing. The company has become the leading provider of campus card-based banking, and has added more colleges to its roster, along with increased security.

The company’s plans to open its own bank were on hold for years due to its comfortable partnership with Houston-based Horizon Capital Bank. But in 2004, Higher One’s executives decided to accelerate the process of getting a charter in Connecticut, and their timing was impeccable. A San Antonio bank holding company, Cullen/Frost Bankers, announced last spring it was acquiring Horizon Capital Bank.

Higher One has maintained a partnership with the Frost Bank, which acquired Horizon Capital. But executives are still hopeful they can soon open their own bank.