The Connecticut Department of Banking approved the New Haven Savings Bank’s (NHSB) plan to convert from a depositor-owned mutual savings bank to a shareholder-owned public company on Jan. 25. The bank’s conversion now requires approval from the Federal Deposit Insurance Corporation (FDIC) as the final step towards the conversion process.
“We are pleased to have reached this regulatory milestone,” NHSB President Peyton R. Patterson said in a press release Monday.
Additionally, the bank — which will be called New Alliance Bank — announced the allocation of $25 million towards a fund dedicated to housing and other community development initiatives. The contribution is part of the $49 million the bank has already dedicated to a charitable foundation it will establish with proceeds from its $860 million stock offering. City officials have announced the possibility of using the fund to create an independent bank that would provide loans to low and moderate income residents in the Greater New Haven area, after a three year designated waiting period.
Over the last several months, NHSB has faced strong opposition from community members for neglecting to hold a depositor vote on the conversion, as well as for its generous compensation packages distributed to the board of directors. Additionally, community leaders have criticized the bank for discriminatory lending practices.
NHSB spokesperson Paul McCraven said the bank has been considering public feedback and meeting with Mayor John Destefano Jr., Attorney General Richard Blumenthal LAW ’73, and other state delegations to work out a plan appropriate for the “long-term needs of the community.”
“From our standpoint we are hoping that after three years, New Alliance will be meeting the needs of the whole community, so that a special purpose bank is not needed,” McCraven said, adding that the board of directors of the fund would decide whether or not such a bank would be created.
Bill Meyerson, spokesperson for the Connecticut Center for a New Economy, said while the community bank’s lending initiatives are acceptable, he is more concerned with the “bigger issue” regarding the lack of accountability of the bank’s board of directors.
“Their refusal to allow depositors to vote on a conversion deal is a clear demonstration of their refusal to be accountable to the community,” he said.
Meyerson said NHSB’s decision to request a waiver of depositor vote from the FDIC last November was unnecessary. He added that recent changes to the conversion plan limiting the compensation packages of board members did not reassure him of their accountability.
“All they’ve done is they’ve delayed their windfall for a year,” he said.
After the announcement of the conversion approval Monday, a group of 800 NHSB depositors signed a petition for a boycott of the bank until it conducted a depositor vote.
Towanna Marks, a depositor at NHSB for 25 years who is also participating in a class action complaint for an injunction against the conversion, said she will definitely participate in the boycott. She said the bank’s recent revisions to its original plan and the estabilishment of the community lending fund did not change her opinion.
“They should have been considering their depositors and they just over-sited them,” Marks said, adding that she would also like to see a change in their lending practices.
McCraven said the bank appropriately addressed the concerns of New Haven residents and bank depositors , and hopes opposition from the community will subside.
“We hope the community will rally behind the bank,” he said.
NHSB announced plans to convert to a public company and to acquire Connecticut Bancshares Inc. and Alliance Bancorp of New England in July 2003.