InsurBanc — a federal savings bank founded by the Independent Insurance Agents & Brokers of America and insurer W.R. Berkley Corp. a dozen years ago — has joined Connecticut Community Bank N.A., based in Westport, Conn., effective April 1.
Under the merger deal, the Farmington, Conn.-based InsurBanc becomes a division of Connecticut Community Bank, with InsurBanc CEO David Tralka becoming CEO of Connecticut Community Bank. Connecticut Community Bank has assumed the deposits of InsurBanc and acquired substantially all of InsurBanc’s assets including loans, investments and cash.
In an April 8 filing with the Securities and Exchange Commission, W.R. Berkley Corp. offered details on its involvement in InsurBanc and why it decided to divest. The filing shows that prior to the transaction, InsurBanc had been 83 percent indirectly owned by W.R. Berkley Corp.
Meanwhile, Connecticut Community Bank is indirectly controlled by W.R. Berkley’s CEO William R. Berkley. He serves as chairman of the board for Associated Community Bancorp Inc., which is Connecticut Community Bank’s sole shareholder, and also as chairman of the board for Connecticut Community Bank. He also currently owns 75.5 percent of Associated Community Bancorp.
In its filing, W.R. Berkley Corp. said InsurBanc was formed in 2001 to serve the banking needs of independent agents. With InsurBanc’s formation, W.R. Berkley became “a grandfathered thrift holding company” subject to only limited oversight by the Office of Thrift Supervision.
However, the company said, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the Federal Reserve Bank assumed regulatory authority and W.R. Berkley became a “savings and loan holding company” subject to significantly enhanced regulation.
As a savings and loan holding company, W.R. Berkley said, it would have become subject to certain prior notification requirements and restrictions on dividends, stock repurchases, distributions, transactions with affiliates and compensation plans and additional requirements.
W.R. Berkley said in its SEC filing that in order to avoid adverse consequences of such enhanced regulations, the company decided to divest its banking operations so that it could deregister as a savings and loan holding company.
W.R. Berkley’s aggregate investment in InsurBanc prior to the closing of the deal was $22 million. W.R. Berkley said that pursuant to the transaction, the company became the sole owner of $15.5 million in cash and securities that it expects to realize upon the liquidation of Peyton Street, the direct owner of InsurBanc.
W.R. Berkley is currently in the final process of deregistering as a savings and loan holding company; once this process is completed, it will no longer be subject to oversight by the Federal Reserve Bank.
Connecticut Community Bank CEO Tralka also told Insurance Journal that W.R. Berkley Corp. will continue to be a small stakeholder in the combined enterprise. IIABA will continue to be a minority stakeholder in InsurBanc after the transaction.
CEO Tralka said InsurBanc’s asset size has been approximately $180 million. Following the merger, the combined entity of Connecticut Community Bank and InsurBanc has more than $515 million in assets.
Currently, InsurBanc offers banking services to more than 200 independent agencies and brokerages across the country.
Tralka said there were additional strategic and regulatory reasons for this deal.
Combining with a larger institution gives InsurBanc more resources to assist its core customer base of independent agencies. There have been “a lot of changes in the regulatory environment, which makes it difficult for small banks to grow,” he said.
“The message for the agent community is a very positive one. The vision of InsurBanc won’t be changing,” Tralka said. “The bank will now have access to more resources to bring to our customer base and make larger loans for the agents.”
InsurBanc employs approximately 20 staff members at its Farmington, Conn., office. They will continue to work from the same location as members of the InsurBanc division of Connecticut Community Bank. InsurBanc said this should be a seamless transition for InsurBanc customers. The bank will have the same people and customers will have the same phone numbers to call and the same access to the services with additional resources.
Bob Rusbuldt, IIABA president and CEO, said InsurBanc’s new structure will strengthen its ability to serve the independent agency system by providing an attractive source of additional capital to lend to agencies across the country, along with offering additional beneficial resources to agents and their businesses.
“InsurBanc is better positioned now to serve the growing banking needs of our members and their clients,” Rusbuldt said.
(Young Ha is the East Coast editor of Insurance Journal.)