After failing to win Federal Reserve Board approval of its application to open a bank in New London, Conn., Southern Connecticut Bancorp Inc. has withdrawn the bid and decided to open a branch there instead.
Michael M. Ciaburri, Southern Connecticut's president and chief operating officer, said Wednesday that the Fed's explanation for not approving the application was that it was not sure the New Haven company could afford to operate multiple banks. Southern Connecticut was founded in 2000 and has just $87 million of assets. It is the parent of Bank of Southern Connecticut.
The company had received approvals from the Connecticut Department of Banking and the Federal Deposit Insurance Corp.
But the central bank "just kept throwing wrinkle after wrinkle at us, and after a while it just got to be too much," Mr. Ciaburri said. "They would give us a laundry list of things to do, and after we'd finished that, they would say, 'Guess what? We've got some more things for you to do.' "
Mr. Ciaburri sounds anything but dejected. Though his business plan had called for chartering banks in selected markets throughout the state, he said he is confident the company can be just as successful opening branches.
The New London branch will have its own name, Bank of Southeastern Connecticut, and an advisory board of local businesspeople. It will be a Bank of Southern Connecticut division with its own president, who will have considerable decision-making authority, Mr. Ciaburri said.
Future branches will be structured the same way, he added.
The revised setup will give the New London branch, which Southern Connecticut expects to open in February, all the trappings of a start-up bank without the extra expense, Mr. Ciaburri said.
"As a small bank holding company, it is somewhat cost-prohibitive to operate a separate de novo institution," he said. "You have to pay double for everything." Joseph V. Ciaburri, Michael Ciaburri's father and Southern Connecticut's chairman and chief executive, said in a Dec. 21 press release that the company could ultimately save as much as $400,000 by scotching its plan to charter a bank in New London.
Southern Connecticut was attracted to New London by an economic revival that began in the late 1990s. Since then the drugmaker Pfizer Inc. moved its research division and 2,000 high-paying jobs to New London, and two large Native-American-owned casinos are just outside the city limits.
John Carusone, the president and CEO of Bank Analysis Center, a Hartford consulting firm, called New London a "very desirable, underbanked market."
Southern Connecticut had little choice but to abandon its start-up plans when it became clear that the Fed would not bless its business model, Mr. Carusone said.
"I think they recognized that they had taken the application as far as they could," he said. "You have to respect your regulators."
Southern Connecticut lost $158,000 through the first nine months of 2005, due in no small part to the effort put into the New London application, Michael Ciaburri said. In addition to attorney and consulting fees, it leased a building at 215 Church Street.
He added that Bank of Southern Connecticut, which has more than 800 small-business customers, is profitable.
