New Bank in Town

The recent boom in community banks could mean better lending options for you.

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An increase in newly chartered community banks is providing entrepreneurs with an alternative to banking with the big guys.


In the past seven years, more than 1,000 of these new institutions, known as de novo banks, have opened their doors, the Federal Deposit Insurance Corp. reports. Last year saw the startup of 191 new banks, the most since 2000. Top states for new-bank openings include Arizona, California, Florida, Georgia, North Carolina, South Carolina, Texas and Washington.


Baby banks are springing up where managers see opportunities to offer personal touches to customers--particularly entrepreneurs--disgruntled by a recent wave of bank mergers, says Robert Turicchi, a de novo bank expert for the American Bankers Association.


This was the case with the Bank of Santa Clarita, which opened with nearly $14 million in assets in 2004. Located in the growing northwest corner of Los Angeles County, the region lost its only locally based bank in a 2002 merger.


The Bank of Santa Clarita has made $97 million in loans since, mostly to entrepreneurs, says president and CEO James Hicken. With modest assets, community banks can't serve corporate giants, so they prefer entrepreneurial businesses. He says businesspeople enjoy meeting directly with loan decision-makers, whereas chain-bank branches often ship applications to far-off headquarters.


"We visit the customer," Hicken says. "We're into character. That's different from the major banks, where it's all based on numbers and credit scores."


Some new banks specialize in particular industries. At Pioneer Bank in Dripping Springs, Texas, which opened in May with $9 million in assets, president and CEO Jeff Wilkinson says their small-business mix is weighted toward custom builders and commercial real estate loans, in keeping with the building boom in the Austin suburb.

The forecast for more new banks is good: FDIC chief economist Richard Brown says that unless the economy tumbles into recession, he expects the trend to continue.

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