When serving the wealthy, style and image are key. So when Palm Beach-based Lydian Private Bank expanded to Tampa in 2006, it threw an elite party at the ornate Tampa Theatre, complete with live white-faced statues of ancient figures and robed maidens serving champagne.
No fool when pursuing those with at least $10 million to invest, the federally chartered savings bank named itself for good reason after the ancient Greek city state of Lydia, which invented the use of coins for trade. Lydian's plush and well upholstered branch on Tampa's Franklin Street is run by area veteran banker-to-the-well-heeled and relentless socialite Cary Putrino.
In good economic times, this is all as it should be when wooing clients with deep pockets. Unfortunately, these are not such times. Beneath the Lydian veneer is a seriously struggling bank under pressure by federal regulators to raise new capital. In September, the bank signed a cease-and-desist order from regulators saying the bank must stop its poor lending and accounting practices and bolster its thin capital.
New quarterly ratings from Bauer Financial that assess the health of banks from five stars (best health) to zero stars (seriously weak) just demoted Lydian from two stars to zero stars. It's a category many banks cannot escape, especially in the wake of the Great Recession. Investors are wary of giving a wheezing bank more money, especially when regulators are pushing many of the nation's zero-star banks (Florida has 46 of them) into the hands of stronger ones.
In the first three months of this year, the latest quarter available, Lydian lost $23.4 million. Lydian executives in Palm Beach and Tampa declined to talk to me directly, sending me instead to a Miami public relations firm that, in turn, sent me this statement on behalf of Lydian:
"Lydian Private Bank has an investor base that is participating in a capital raise ranging from $90 (million) to $150 million. These investors remain fully engaged as they continue to work diligently with the bank to be in a position to close the transaction during the third quarter of this year."
I wish Lydian well. But I've read similar statements issued by zero-star banks for years.
It's curious that a boutique bank, whose sole mission is to make rich people its clients by promising them sophisticated money management, finds itself in need of an enormous investor bailout to avoid government seizure or sale.
The home page of Lydian's website features a large, long-billed fish seizing a lesser fish in its mouth. A quotation characterizes the bank's bend-over-backward attitude for wealthy clients. It says: "The answer is 'yes.' What's your question?"
The site credits Lydian's success to its top management's "bold leadership and highly qualified, seasoned, professional staff."
But Lydian wasn't always Lydian.
The bank started in the 1990s under the name VirtualBank back when Internet fever was high. News reports say former Miami Dolphins quarterback Dan Marino and ex-WorldCom chief Bernie Ebbers (now in prison for fraud) were both early investors. When VirtualBank lost its cachet, it morphed into Lydian Bank with a new mission to help millionaires.
Its latest goal? Survival.
Robert Trigaux can be reached at firstname.lastname@example.org.