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No Ordinary Joe
Ciaburri returns with a niche commercial bank all New Haven's own
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Business New Haven
10/29/2001
By: BNH
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In 1979, Joseph Ciaburri founded the Bank of New Haven (since purchased by Citizens Bank). In the late 1980s, he started the Connecticut Bank of Commerce. Now, on October 1, Ciaburri opened the doors of the Bank of Southern Connecticut- a niche commercial bank targeted at small local businesses.
Why did you decide to found a bank at a time like this?
In talking with the state's Department of Banking in late 1999, they mentioned that the six major cities in Connecticut did not have hometown banks. Actually, one does: Stamford has a hometown bank called Patriots Bank. But if you look at New Haven, Hartford, Bridgeport, Waterbury and New London, none of them had a hometown commercial bank. And [the Department of Banking] was encouraging groups to organize hometown commercial banks in those cities.
What about your personal motivation?
Well, I did it once before [having founded the Bank of New Haven in 1979] and felt that I could put it together again.
What are the regulatory requirements for starting a commercial bank?
To start a commercial bank in Connecticut now by statute you must raise $5 million, minimum - back in 1979 it was $2 million - you must show that there is a need, you must have good, solid management and an excellent board of directors - an entrepreneurial type of directors.
How much were you able to raise?
We raised $11.6 million in 17-day period, despite the soft economy and a tough stock market.
How did you accomplish that?
A hometown commercial bank is different from most kinds of enterprises that people invest in in the stock market. It has its own separate niche, and therefore you don't really have to be concerned with the market - with what the local bank stock does. It obviously is affected by the marketplace and by the local economy, but time always tells if the bank hits a profitability level and services the needs of the local economy.
Were most of your investors people who you know?
Yes. There are a lot of people who invest in a small, locally owned bank who don't have a share of stock in anything else.
Who do you expect your customers to be?
The customers are companies that range from almost zero in [annual] sales to almost $20 million to $25 million. It's a part of the marketplace that the big banks don't really have much of an interest in servicing, and when they do it's a very impersonal kind of thing. Then, of course, we also cater to the executives of those companies…
So-called private banking?
Sort of private banking, but beyond that. We would take any kind of business if we could help the greater New Haven economy.
How do you view the overall commercial market in south-central Connecticut?
Excellent. I think it's in a growth pattern; I think in it's been in a growth pattern for the last four to five years and it continues to move forward. I think the growth pattern is better now in New Haven than when I started in '79. The competition now in the banking world is much less than it was in '79, because [then] there [were no fewer] than 15 hometown banks in greater New Haven - there were eight commercial and seven mutual. So it's a whole different game, because the big banks play the game of numbers and they're not interested in helping the small-business [person]. And as you know, the U.S. has been built on small business.
What industries do you see driving that growth in this market?
Greater New Haven? It's partially technology, but it's just about every sector of the local economy that seems to be moving ahead. Manufacturing isn't as booming as you would like it to be - lots of companies moved out of greater New Haven - but maybe with the help of a new commercial bank that might change. At least, we'll help it.
How do you view the banking market in Connecticut and New England overall? Are we in for continued consolidation, or will the pendulum begin to swing back in the opposite direction?
Interestingly enough, I have some statistics here that I just got from one of the investment firms that shows that in 1985 there were more than 14,000 U.S. commercial banks; today there are 8,375. In savings banks there were 3,623 - they're down to 1,613. So there has been consolidation. But in the last three years, there has been an increase again in the number of commercial and savings banks throughout the country, so I guess the need for those banks is evident. Because of that [people] are starting commercial banks again because there is that niche that needs to be covered in the local and state economy.
Can you quantify that?
[The state banking department is] predicting that [the number of] commercial banks will probably go back to 10,000 [from 8,375] over the next four years.
What is your bank's selling proposition? Why would, say, a $1 million company bank with you instead of someone else?
Well, the first thing is that when you call our bank, number one, you don't get an answering machine - you get a real voice on the other side of the phone. You are able to make appointments with the chairman [Ciaburri] and with the president, with the senior people. That doesn't happen, obviously, with a big bank. So you're not a number; you're not just a person they're going to do a 'score' on to see if you earn $700,000 and are entitled to the loan or if you earn $680,000 and are not entitled to the loan. That extra 20 points is somebody's background and somebody's ability to move their company ahead. So it's not just a score out of Philadelphia, or out of Charlotte, or out of Boston. It's more than score. Decisions are pretty much made on an impersonal basis at a big bank; at a bank of our type, they're made on a personal basis. That's what the big difference is. So if Business New Haven needs something special, it can go to a bank of our type it can get what it needs without having to go through layers and layers of people in various offices.
Well, as a small business, we started with a small bank - which got bought by a bigger bank, which got bought by an even bigger bank.
We had one interesting experience the other day: A small-business man in greater New Haven had a line of credit with a big bank that has an office locally [which] once was a local bank. He had a line of credit of $75,000, and the other day - lo and behold - he received in the mail a credit card from MBNA with the ability to have a line of credit of $75,000 at 12.9 percent. He then called the bank and said, 'What's this all about?' And they said, 'Your $75,000 loan is too small for our bank.' So they sold it to MBNA, which gave this gentleman a credit card - at 12.9 percent. So those are the kinds of things that are happening to the small local businessman, who doesn't get the help that he really should.
How do you view your growth potential in financial terms?
We had to produce target numbers for growth and profitability for the [state's] banking department as part of our application for the charter. We would hope to [be profitable] by the third quarter of [2002], and that's possible because we did start with $11.6 in capital, which is more than double than [the state requirement]. That gives you the ability to be more competitive earlier on because you're stronger and can make a larger loan.
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