Darien Rowayton Bank was recently featured in Debtwire, a service that provides “real-time intelligence, analysis and data on distressed debt, leveraged finance and asset-backed markets.”
Darien Rowayton Bank, a community bank in Connecticut, has been quietly refinancing student loans online, building up a USD 600m proprietary portfolio, according to Aryea Aranoff, chief operating officer. The lender specializes in refinancing high credit quality education loans, and is interested in moving into other loan types for that demographic, Aranoff told Debtwire ABS.
The small bank’s presence at Lendit’s marketplace lending conference in New York this week came in contrast to the largely anti-bank sentiment and rallying cry to “disrupt” traditional finance channels that has surrounded the online and marketplace lending conversation.
“We see ourselves as a response to that line of thought,” Aranoff said. As a small financing unit within a larger financial institution, DRB benefits from the nimbleness and streamlined operations many of its startup competitors share. And yet as a bank, DRB is regulated by the FDIC and others and is familiar with the regulatory and compliance culture that may eventually impact the rest of the online lending sector down the road, Aranoff added.
DRB has lent about USD 600m since entering the space 1.5 years ago, and has sold off about a third of that to fixed-income asset managers, banks and insurance companies. As a bank that can fund itself inexpensively through deposits, DRB’s capital costs are less than 1%.
Borrowers have credit scores in the 700s and come from all 50 states. A 5-year, fixed-APR loan ranges from 3.5% to 4.75%, while a variable-APR loan with the same term ranges from 1.9% to 3.71%, according to DRB documents. The lender also offers 10-, 15- and 20-year terms at a high end of 6.25% for a 20-year, fixed-APR loan.
About half of DRB’s borrowers are graduates of health care programs such as medical school and half are graduates of law, MBA and engineering programs. DRB also refinances Parent Plus loans.
Despite being an outlier in startup territory, DRB was by no means the banking sector’s lone representation at Lendit on 13–15 April. Anecdotally, attendees said representatives from many of the major banks were there to discuss a variety of opportunities, including investing, potential partnerships, M&A and technology. A handful of banks have also been providing warehouse financing for platforms in various stages of growth.
“I think the death of banks has been largely exaggerated in this world,” Kathryn Petralia, COO at online business lender Kabbage, said at a panel covering short term small business financing. “I think I’d rather work with the banks than against them.”