LAWRENCE — Veritas Bank, once hailed as critical to the success of the Latino community's efforts to help redevelop the city, has all but dissolved.
Pedro Arce, president and CEO of the bank, said more than $13 million was returned to 200 investors over the last couple of weeks, signaling an end to the effort to open a community-based bank in Lawrence.
"What's hurting us is the economy," Arce said. "It's not a good time to raise capital. That's what we have against us now."
Arce began the effort in 2006, working for free for the first three months and dumping $90,000 of his own capital into the project. Using about $1 million in seed money invested by the bank's board of directors, Arce then went on the payroll and worked to get the bank the various state and federal approvals needed to open.
He said the bank directors sought $10 million from investors, and were successful in raising more than $13 million by March of this year, including $6 million from Dan and Shawnet Thibeault of Framingham. Another $6 million came from various local and non-local investors. In addition, there were $1.7 million in pledges to invest.
The FDIC, the federal regulatory agency overseeing the nation's banks, decided not to renew the bank's application earlier this year, telling bank organizers they would have to submit a new, updated application, something the directors decided against. The FDIC told the board a new application could take six months to two years before it got approval.
Arce said the FDIC has two main priorities: keeping banks from shutting down and shutting down banks. Third on their list, he said, is helping small community banks to open.
The board, upon hearing of the FDIC decision, decided to "take the summer off," Arce said, and think about what to do next.
"I'm not so much disappointed but frustrated because it's so vague. 'No' is not a bad answer," Arce said of the FDIC's ruling. "At least if they had said 'no' we would have known where to go and what to do next."
Arce said investors are willing to reinvest and the bank at 486 Essex St. has the support of the community. Tomorrow, board members and Arce will meet with the state banking commissioner to review their options.
The Eagle-Tribune was unsuccessful in reaching several members of the board of directors, who invested $1 million of their own money in running the enterprise. That money likely will not be reimbursed, Arce said.
"Only the investors who bought stock got their money back," he said.
Arce said he is not giving up his dream of opening a community bank in the city.
"We're not giving up. To give up now makes no sense. We're all in a holding pattern on what to do next," he said.
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