FDIC shuts down Affinity-owned thrift in Maryland
Despite support from an honor roll of prominent California banking experts, a savings and loan owned and operated by an Irvine company has been shut down by regulators, who said it was critically undercapitalized.
Waterfield Bank of Germantown, Md., purchased in 2008 by Affinity Financial Corp. of Irvine, was closed Friday after suffering heavy losses on mortgages it had made before the acquisition.
Unable to find a buyer, the Federal Deposit Insurance Corp. said it would liquidate the failed institution at a loss of $51 million to the bank insurance fund.
In closing the bank Friday, its chief regulator, the U.S. Office of Thrift Supervision, said there was no “viable prospect” of returning it to profitability or raising capital.
But people involved with Affinity and the bank said the biggest problem was regulators’ discomfort with its unusual Internet-based business model. This involved taking deposits indirectly through the websites of so-called affinity groups -- big companies, insurers and associations -- including automaker BMW, the advocacy group AARP and the American Medical Assn.
The FDIC regarded the affinity-group deposits as a less-stable source of funding than deposits from core customers of the bank. The bank had $156.4 million in deposits.
The differences between the bank and its regulators proved so great that when the wealthy Waterfield family, Affinity’s majority owners, offered to recapitalize the failing bank with funds from a family trust, the regulators rejected the offer, according to two people with personal knowledge of the situation. These people spoke on condition of anonymity because they have other dealings with bank regulators and feared offending them.
Officials at the FDIC, which is charged with minimizing losses to the deposit insurance fund, did not respond to requests for comment. The OTS declined to comment.
Brothers J. Randall Waterfield and Richard R. Waterfield, the co-founders, co-chairmen and co-chief executives of Affinity, couldn’t be reached for comment.
Affinity has spent more than a decade helping big companies, insurers and organizations offer banking products under their own names. The deposits were then funneled to larger banks, with Affinity charging a fee for its services.
A team of well-known financial figures had teamed up with the Waterfields to use the thrift as a vehicle for this private-label service.
Initial directors of the bank or its parent firms included former Goldman, Sachs & Co. executives Joseph Wender and Eugene Fife; Robert Albertson, chief strategist at bank research firm Sandler O’Neill; 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 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. and a former state commissioner of financial institutions.
Eggemeyer said he and other non-Waterfield directors of Affinity left the company last year after a disagreement over the direction of the operation. He said he had no knowledge of recent events at the bank.
