Tuesday, March 9, 2010

Despite prominent leaders, Irvine firm's bank fails: Finding PC Banking Models

March 6, 2010 | 7:30 am

E. Scott Reckard, Los Angeles Times


Regulators late Friday shut down Waterfield Bank of Germantown, Md., a thrift operated from Irvine that had helped big companies, insurers and organizations such as AARP and the American Medical Assn. offer savings accounts, CDs and other banking products under the clients' names.

A team of prominent financial figures, including an honor roll of California bankers, had teamed up with the wealthy Waterfield family in an attempt to use the small savings and loan as a vehicle to expand the private-label banking services offered by its parent company, Affinity FinancialCorp. in Irvine.

Affinity is part of the Waterfield family's private businesses, operated as Waterfield Group. A call seeking comment from its Irvine offices wasn't returned Friday afternoon.

Statements issued by regulators about the shutdown don't make clear what went wrong with the business plan. The U.S. Office of Thrift Supervision said the bank was critically undercapitalized, with a negative net worth and no "viable prospect" of returning to profitability or raising capital.

Directors of the bank or its parent companies included Joseph Wender, a longtime partner at Goldman, Sachs & Co.; Eugene Fife, a former Goldman general partner; Robert Albertson, chief strategist at bank research firm Sandler O'Neill; private investor John M. Eggemeyer, chairman of PacWest Bancorp, which acquired failed California banks in November 2008 and August 2009; Robert T. Barnum, a private investor who helped run American Savings Bank when it was owned by a group run by Texas investor Robert M. Bass; Timothy Chrisman, a former bank executive and consultant who is chairman of the Federal Home Loan Bank of San Francisco; and Howard Gould, vice chairman of Irvine bank consulting firm Carpenter & Co. who was California commissioner of financial institutions in 2004 and 2005.

Clients of Affinity's private-label services included the International Assn. of Fire Fighters, AARP Financial Inc., the AMA, the Air Force Assn., BMW, GE Capital and the International Brotherhood of Teamsters, according to Waterfield Group's website.

Most of the so-called affinity banking was conducted over the Internet, through portals on the clients' websites offering savings accounts, certificates of deposit, ATM cards and other services, a Federal Deposit Insurance Corp. spokesman said.

The FDIC spokesman, David Barr, said the agency planned to mail checks immediately to holders of CDs and retirement accounts. Holders of other accounts will have a month to transfer funds to another bank before the FDIC mails them checks, he said.

Waterfield Bank, which began operations in June 2000 as Assurance Partners Bank, had one branch and 34 employees, with total assets of $155.6 million and retail deposits of $156.2 million, regulators said.

Also Friday, regulators closed one bank each in Florida, Illinois and Utah, bringing the number of bank failures this year to 26.

-- E. Scott Reckard