New Haven Independent

Chandler Howard, who was hired to launch the (tentatively titled) First City Bank by the new year, instead left to start a new job this month as CEO of Middletown-based Liberty Bank.

So now the directors of New Haven’s community bank have hired a search firm to look for a new president. It’s the same headhunter, Ron Evans, whose agency originally found Howard, one of the state’s most experienced African-American bankers.

Howard left just as First City prepared to submit its final application to the State Banking Department to form a charter and open its doors by Jan. 1. Now the application’s on hold while the search proceeds.

Click here to read an earlier Independent interview with Howard about his plans for the New Haven community bank.

“He took us to the promised land, but he’s not crossing the river,” said Bob Solomon, a key director of First City Fund, the not-for-profit parent company forming the new bank.

He and other directors interviewed expressed disappointment, but no anger or criticism, about Howard’s departure. They said Howard did a great job putting together the application and the business plan for the new bank, which, on the model of community banks like Chicago’s South Shore, will exist to spur development in poorer neighborhoods by lending to home-purchasers and small-business owners who otherwise might have a harder time finding credit.

“Chandler got an opportunity that, in consideration of what’s best for his family, he couldn’t walk away from,” said Mayor John DeStefano, another First City director. “The financial package [from Liberty] outweighed the excitement of working with the start-up.”

First City was in the process of interviewing candidates for a chief financial officer and a chief lending officer. That process is now on hold pending the hiring of a new CEO. The same goes for the process of locating the first neighborhood branch location for the new bank.

DeStefano predicted that the bank would still open some time in 2008, but obviously not by the originally envisioned Jan. 1.

Chandler Howard started his new job in Middletown on Monday. “It was a very, very difficult decision to make the transition,” he said Tuesday. “I really did want to see the [New Haven] bank through to it s grand opening. But in life these opportunities only come along once in a while. Usually, they’re not at opportune times. The opportunity at Liberty Bank was just perfect for me personally, as well as professionally.”

He called the New Haven bank’s future “very solid. We did a tremendous amount of infrastructure work to get prepared for our provisional charter,” including market feasibility studies, a business plan, and applications to the State Banking Department, Federal Reserve Bank, and the FDIC.

Asked for a comment about the project’s future, Banking Department spokesman James Heckman replied, “These are all issues we can’t comment upon at this time.”

Community Lenders

Banks like South Shore and the fledgling New Haven cousin stand in stark contrast to subprime lenders and other out-of-state for-profit “predatory” lenders to whom lower-income or black or Hispanic borrowers often turn. Loans larded with balloon payments or excessive fees are at the heart of a mortgage crisis currently tearing at the entire national economy, and beginning to show signs of destabilizing New Haven neighborhoods.

Community-development banks also aim to fill gaps left behind by regional for-profit banks that, according to critics, redline minority or low-income neighborhoods.

That latter issue propelled the formation of New Haven’s new bank. The city’s last significant local mutual bank, New Haven Savings, was taken public and converted to a more conventional regional bank called NewAlliance. Activists and politicians, led by local unions and Mayor John DeStefano, protested the conversion. Unprecedented public hearings led to an equally unprecedented compromise strucky by state regulators: NewAlliance had to contribute millions to a not-for-profit (First City) to create, in effect, a competitor, which would focus on local lending.

Unlike traditional banks, community development banks have a dual mission: To make enough money to stay in business and grow, of course; but also to revive the economic fortunes of redlined or otherwise left-behind urban or rural communities. Their investors don’t expect them to earn the same rates of return as more traditional lenders.

Moving Forward

“We have some candidates that look very attractive” to replace Howard at the First City helm, said Mark Sklarz, the board’s chairman. “This is an incredibly exciting opportunity for the city. For those of us [involved in launching the bank], it is as potentially gratifying and exhilarating” as any volunteer community project they’ve worked on in New Haven.

Its anticipated opening will coincide with what analysts are predicting will be the time when the current foreclosure crisis hits cities like New Haven the hardest, when many variable-rate mortgages that began with low interest rates suddenly zoom to rates well beyond homeowners’ ability to pay. Already the number of local foreclosures has climbed. Some 1,150 New Haven homes are currently in various states of foreclosure, according to RealtyTrac, an online marketplace for foreclosure properties. The number of legal proceedings filed against residential homeowners jumped 85.1 percent, from 121 in the second quarter of 2006 to 224 in the second quarter of 2007, according to The Warren Group.

Empower New Haven has begun programs aimed at helping subprime borrowers keep their homes. Mayor DeStefano said that, in addition to helping First City get off the ground, he plans to have City Hall launch programs this coming year to help people facing foreclosure. Rather than bailing people out or offering “band-aids” for their financial predicaments, DeStefano said he’d like to see the city effort find realistic alternate sources of credit to cope with balloon payments.

First City Bank (or whatever it ends up being called) will start with at least $13 million in capital. That means it will be able to make up to $100 million available in loans to New Haven home-buyers and small-business owners.