NY-area bank facing risky real estate loan allegations acquired for $60M

By David Jones | July 16, 2010 12:00PM

Troubled community lender Smithtown Bancorp has entered a deal to be
acquired by People’s United Financial of Bridgeport, Conn. for $60
million in cash and stock, or $4 per share.

The Happauge, N.Y.-based parent of Bank of Smithtown, which
has 29 branches on Long Island and one in Manhattan, was the largest
independent commercial bank in Long Island, with $2.43 billion in
assets and $1.87 billion in deposits.

“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,” Brad
Rock, chairman and chief executive of Smithtown, said in a statement.

As The Real Deal previously reported, Smithtown entered into a
consent order with state and federal regulators in January over its
high concentration of commercial real estate loans. In February, the
lender was sued by shareholders for allegedly hiding information about risky construction and real estate loans.

Just last month, six units at Manhattan condo M127, at 127
Madison Avenue, were auctioned off after the developer defaulted on the
loan. Smithtown filed suit to foreclose on $9 million in debt.

Bank
of Smithtown shareholders will receive $30 million in cash and 2.1
million shares of People’s United stock when the deal closes. The
merger is subject to the approval of government regulators and
Smithtown shareholders. Smithtown shares closed at $3.79 a share
yesterday.

In addition to the Smithtown acquisition, People’s United also acquired
North Andover, Mass.-based LSB, the parent company of RiverBank, in an
all-cash deal valued at $96 million. LSB, as of March 31, had assets of
$807 million, deposits of $504 million and seven branches in the
greater Boston area and southern New Hampshire.

Morgan Stanley acted as financial advisor in the deals.