Dutch firm sees Suburban as way to bailout

November 18, 2008|By Andrea K. Walker | Andrea K. Walker,andrea.walker@baltsun.com

Dutch insurer Aegon NV is exploring a bid to buy the troubled Suburban Federal Savings Bank in Crofton as a way of becoming eligible for money from the federal bank bailout plan.

The insurance giant, with North American headquarters in Baltimore, was among four insurance companies that applied Friday to the federal Office of Thrift Supervision to become owners of a savings institution as a way to get funding from the Treasury's Troubled Asset Relief Program. OTS officials confirmed Aegon's interest in Suburban.

Suburban Federal, a half-century-old family-owned bank, has been looking for capital as it tries to rebound from a spate of soured loans. At the end of the third quarter, the bank had $29.2 million in bad loans on its books and $8.3 million in capital, according to a financial statement filed with the Federal Deposit Insurance Corp.

The Office of Thrift Supervision issued a cease-and-desist order in March to stop the bank from writing land, development and construction loans without the agency's approval.

Suburban has seven branches and about $354 million in assets.

An Aegon spokesman said the insurance company, which operates the Transamerica and Monumental life insurance companies in the United States, is not looking to become heavily involved in the banking business. Instead, owning a thrift is a way for the company to shore up its access to cash during the continuing worldwide economic crisis. Insurance companies that own thrifts are eligible for a piece of the $250 billion the federal government is using to help cash-strapped financial institutions.

"We're not interested in going around and buying thrifts all over the United States," Aegon spokesman Gregory W. Tucker said. "This is part of our overall strategy to ensure we have the strongest capital position we can in this environment."

The company took an investment worth $3.7 billion from the Dutch government last month as it suffered losses because of the financial meltdown.

Robert L. Morrison Jr., president of Suburban Federal, didn't return calls yesterday, but in a Nov. 7 interview, he said the bank was looking at strategic alternatives to raise capital. He did not provide details.

"Like all banks across the country, everybody is looking at options to increase our capital," Morrison said. "And we are engaged in that."

The Office of Thrift Supervision said in the spring that Suburban Federal had engaged in unsafe and unsound banking practices that resulted in excessive risk to its finances.

The bank was accused of issuing loans without verifying income or assets, among other things. The problems were mainly in the bank's development, construction and land loans.

Morrison said in the interview that the bank his grandfather started 53 years ago was in no danger.

"Certainly we will come out of the [cease-and-desist], and we're in full compliance," Morrison said.

Tucker said a possible acquisition of Suburban is in the "very preliminary stages." He said Aegon has not submitted an offer to buy Suburban or come up with a price tag. He said it is still unclear whether Aegon would be eligible for the federal assistance.

"We're looking at the program to see if we're eligible for it," Tucker said. "Maybe we will, or maybe we're not. We think it's prudent in this environment to pursue all avenues."

He said Aegon chose Suburban because of its location.

"Obviously, the fact that we have a large Maryland presence would have factored into us considering this one," Tucker said.

Tucker said it is unclear how Suburban Federal's financial problems might play into the deal. He was unsure when federal regulators would make a decision on whether to allow an acquisition but said Aegon would have to own a thrift by the end of the year to qualify for financial assistance.

Morrison said this month that the thrift has complied with requirements from the thrift supervision office, including reducing the risky loans by 50 percent.

Morrison said the bank's problems came with the decline in the housing market. He said both developers and individual homeowners defaulted on loans.

He said the bank is an institution with many loyal, local customers.

"We like being a community bank," he said. "We like to serve the people in our neighborhood and do the same thing we've been doing for years."

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