Paul Bass Photo
BSC President John H. Howland.
The name on the sign will survive, but three dozen local jobs may not as The Bank of Southern Connecticut becomes part of a larger lender to the north.
The New Haven-based bank’s parent company, Southern Connecticut Bancorp, is being purchased by Naugatuck Valley Financial Corp., parent company of Naugatuck Valley Savings & Loan, in a deal announced Tuesday.
That means that the city’s last locally owned bank, for now, will become yet another outpost of an out-of-town financial corporation.
The previous local bank to go regional, New Haven Savings, became NewAlliance in a 2004 demutualization.
Local banks are considered more in touch with and perhaps more likely to lend to community homeowners and businesses. This year a new New Haven community development bank is expected to open, tentatively entitled First Community Bank.
Meanwhile, the boards of Bank of Southern Connecticut and Naugatuck Valley Financial have signed a “definitive agreement” under which BSC would be sold to the Naugatuck bank’s holding company, Naugatuck Valley Financial Corp., for $7.25 a share, or a total of about $19.5 million.
Under the deal, NVFC would also go public, converting from a mutual holding company to a stock corporation.
NVFC’s depositors and the federal Office of Thrift Supervision still need to approve the deal. If they do, the sale is expected to take place in the fall. It would add BSC’s $137.9 million in assets to NVFC’s current $542.3 million.
NVC President and CEO John Roman said Tuesday that he plans to retain the BSC name on the four New Haven area branches.
“We feel it’s a strong market adjacent to our existing market area,” Roman said.
NVFC has 130 employees and branches in eight Naugatuck Valley communities, including Shelton, Derby, and Seymour. BSC has employees and branches on Church Street and Amity Road in New Haven, plus two others, in Branford and North Haven. It has about 36 employees for now.
Roman was asked those 36 people will still work for the company after the sale.
“We’re assessing that right now,” he replied.
One New Haven employee who will not be sticking around is BSC’s president, John H. Howland (pictured above). Eliminating his post was part of the deal, he said in an interview in his office facing Church Street a block from the Green.
“It’s one of the ways you make the company more attractive to a buyer,” Howland said — eliminating a top $200,000 salary.
Pressure To Sell
Howland, a 44-year-old former investment banker, has worked at the New Haven bank since 2005. He’s run it since founder Joe Ciaburri retired in 2007.
Ciaburri, a longtime city banker, started BSC in 2001 at 215 Church St., one door down from the former Bank of New Haven, which he founded in 1979 (then sold to Citizens Bank). New Haven had 15 hometown banks back then.
BSC focused on small business. It struggled financially, went through two management changes. It lost about $100,000 last year, and wrote down $2 million in loans, according to Howland.
“Profitability has been a challenge for us,” he said.
Pressure to sell came from a Parsippany, N.J. investor named Lawrence B. Seidman.
Seidman bought 6.52 percent of BSC’s common stock in 2007. He’s known for purchasing shares of struggling banks and seeking to sell them at a profit. That was his strategy with BSC.
Seidman signaled that intention publicly when he bought the stock. In a filing with the federal Securities and Exchange Commission, Seidman wrote of plans to “attempt to meet with the Board of Directors of the Issuer and the Issuer’s management to review ways to maximize shareholder value. The review includes conducting a comprehensive review and analysis of the value that could be achieved as an independent institution versus its value from a sale to a larger institution or a converting mutual institution. After his meeting with the Issuer’s representatives Mr. Seidman will evaluate the position taken by the Issuer to determine his next course of action. Mr. Seidman is hopeful that the Board is receptive to an open discussion of all the available options.”
BSC’s employees learned about the pending sale — and their uncertain futures — on Monday.
“I’ve enjoyed it very much,” Howland said of his time at BSC.
He said he hasn’t started looking for a new job. “I don’t what the future holds for me,” he said. “When I came in to this job, I thought it was be a three to five-year job.” That was in September, 2005 — five years from when the current deal is supposed to be completed.
Avoiding a New Alliance Repeat
NVFC, meanwhile, is undertaking the multi-step process of not just buying a another bank, but going public. That proved to be a drawn-out process when mutual New Haven Savings converted to shareholder-owned New Alliance in 2004 — a process marked by fraud.
In such conversions, depositors have a chance to make quick money. They get to buy stock first before the bank goes public — and that stock usually leaps in price the first day of the public offering.
So investors try to place deposits in banks that plan to convert, in order to qualify for those early purchases. Other investors look for bank depositors and offer to front them cash to buy stock — in return for splitting the profits when they quickly sell the stock after the public offering. That’s illegal. The federal government prosecuted a slew of cases involving such sales in the New Alliance deal.
NVFC chief Roman was asked Tuesday what steps his bank is taking to avoid such transactions.
“We’ve had a policy not to accept large deposits from out of state for a long time,” he replied.
And as for investors looking for star buyers when the conversion nears?
“I’m sure our proxy solicitors and our investment bankers will protect us from that,” he said.
Perhaps a new chapter to what has been an ongoing sad chapter in Connecticut Banking. This bank has had constant regulatory issues ..l. Shareholders lost money, many Sr Bank officers careers were harmed so they can never hold top positions in banks again. ...