Because its previous strategy of lending to insurance agencies around the country produced nothing but losses, a small Indiana thrift is taking a different tack.
The $37.7 million-asset Assurance Partners Bank has agreed to sell a controlling stake to an investment group headed by Stuart McFarland, a former Fannie Mae and GE Capital Mortgage Services executive. Mr. McFarland and his group plan to give the Carmel thrift its first retail operations by opening branches in Indianapolis and the Maryland suburbs of Washington.
Mr. McFarland, currently the managing partner at the Washington merchant bank Federal City Capital Advisors LLC, is slated to become the chairman and chief executive officer of Assurance Partners and its holding company, Assurance Partners Bancorp, as soon as the sale closes this month.
He did not say how much his group, which includes about 15 individual investors, is paying, or precisely how large a stake it is buying, but he did say it had agreed to inject $10 million of capital into the money-losing thrift.
Assurance Partners Bank has lost $4.45 million since it opened in June 2000, including $640,000 last year, according to the Federal Deposit Insurance Corp. Even so, Mr. McFarland said in an interview Monday that his group jumped at the chance to acquire the thrift after learning its management was looking for investors.
"We were attracted to this company because of the unique" insurance operations, Mr. McFarland said. "We see a lot of very exciting potential in adding community banking to it."
Both suburban Maryland and Indianapolis are attractive markets for an up-and-coming community bank, he said.
"Suburban Maryland and the I-270 corridor are experiencing unprecedented growth, and Boone and Hamilton counties in the Indianapolis area are excellent in terms of economic growth, household formation, and jobs," he said. "We expect to open at least one branch in both Maryland and Indianapolis within a year of closing the deal."
Montgomery County, in the heart of the Maryland region Mr. McFarland is eyeing, is one of the nation's wealthiest counties, with a median household income of over $71,000 a year, compared with the national median of $42,000. The population of both Boone and Hamilton counties grew more than 20% between 1990 and 2000.
Assurance Partners Bank is currently owned by members of the National Association of Mutual Insurance Companies, an Indianapolis trade group that represents more than 1,400 mutually owned insurance companies. The insurers envisioned a thrift that would offer tailor-made products to the thousands of agencies that marketed their policies.
But Chuck Chamness, the group's president and the chairman of Assurance Partners Bancorp, said Monday that the plan has not worked well in practice.
"We've spent four years working at it, but I think it is safe to say our focus has been too narrow," he said. "Part of our refocus has been looking for a partner that would give us access to new capital and leadership."
Neither the trade group nor the insurers that founded Assurance Partners are walking away from it. As part of the deal, Namic has agreed to purchase a minority stake in the thrift, and most of the insurers have agreed to take shares in it in lieu of cash.
"We offered them the choice of stock or cash, and 60% chose stock," Mr. Chamness said.
Assurance Partners Bank would keep its name following the sale, but the holding company would be merged into Federal City Bancorp Inc., the company created by Mr. McFarland's investor group, he said.
Mr. Chamness would get a seat on the Federal City board.
