A Connecticut bank company bought troubled Smithtown Bancorp, owner of Bank of Smithtown, Thursday for about $60 million, putting an end to a decline that has the bank under three consent orders from different regulators as it struggled to cope with bad loans.
Also Thursday, Smithtown, whose headquarters are in Hauppauge, announced it lost $29.2 million in the second quarter alone, bringing its losses for the year so far to $43 million.
The bank's new owner is People's United Financial Inc. of Bridgeport, holding company for People's United Bank. It has $22 billion in assets and about 300 branches from Maine to Westchester County. People's also bought RiverBank in Massachusetts Thursday for $96 million.
Smithtown's 30 branches and $2.3 billion in assets make sense for People's because it extends the company's reach into the New York area, said Peter Goulding, vice president for investor relations. Long Island is much like the area People's already serves in Fairfield County, Conn., he said.
People's is prepared to absorb Smithtown's continued bad loans, Goulding said, anticipating about 10.5 percent of its $1.9 billion in loans will fail over the next five years. But with $2.3 billion in excess capital, Goulding said, People's can easily handle that and make more acquisitions.
Meanwhile, regulatory actions against the bank will disappear with the acquisition, he said. "They really eliminated a very risky situation," Goulding said of regulators.
Smithtown branches probably will be renamed by the end of the year, he said, ending the Bank of Smithtown name's 100-year existence. Smithtown shareholders still need to approve the deal, which should earn them about $4 a share. Smithtown's stock closed down 8 cents at $3.79 Thursday.
"We are pleased to join the People's United family and look forward to continue serving our communities with the strength of a very well-capitalized $22 billion financial institution behind us," Smithtown chairman and chief executive Brad Rock said in a statement.
Rock, the former chairman of the American Bankers Association, could not be reached for further comment Thursday.