STARTING
A NEW BANK - HOW TO BEGIN
Recognize the need:
A recent wave of mergers and acquisitions
has left banks under the control of national institutions or out of
town banks. Also, some community banks which have been in the community
for a long time take local families and small businesses for granted.
These older community banks forget what it means to listen to their
customers and help them meet their financial needs and achieve their
financial goals.
A new community bank has to earn the trust of local
customers and attract dedicated employees who will provide personal service.
This is done best by professional, local bankers who live and work in
the market area of the new bank. The organizing directors of the new
bank are the small business owners and professionals who also live and
work in the new bank’s market area. They play an extremely important
role in the success of the new bank.
By getting involved as an organizing director you not
only assure the best available banking options for yourself and your
business but also for your community. The new community bank will channel
most of its loans to the neighborhoods where its customers live and work,
supporting and strengthening the local community.
Your new community bank will have the ability to make
fast loan decisions when necessary and will put an emphasis on personal
circumstances, character, and relationship history. You will no longer
be just a number on a credit scoring model!
Get Involved!
Be part of a growing, dynamic force in the life
of your community!
Understand Our Role
The purpose of this outline is to detail our service
to you and the other organizers in assisting you to obtain a charter
for a proposed new state chartered, non-member (of the Federal Reserve
Bank), FDIC insured, community (commercial) bank. We can also assist
with the formation of a new bank holding company. We also work with groups
to form National banks; the process is basically the same, just different
regulators.
The scope of our services to your group will include
(in addition to the application itself):
- Meet with organizers to form the necessary organizational
structure
- Select an attorney to incorporate the bank, prepare
the offering circular, stock prospectus, and serve as the bank’s
legal counsel
- Select a correspondent bank or banks to assist with
loans for the organizational expenses, lines of credit for the officers
and directors, handle cash letters, and generally provide services
for an independent bank
- Co-ordinate all meetings and negotiations with the
bank regulatory authorities, both state and federal
- Prepare a comprehensive feasibility study (required
by the regulators)
- Recruit any necessary key senior bank officers (this
will be a separate contract)
- Work with the organizers to select an efficient floor
plan, architect and builder for the bank
- Assist the senior officers to develop basic bank
policies and procedures
APPLICATION CONTENTS
1. Overview:
a. Bank’s business and any special market niche,
including products market, services, and any non traditional activities
b. Issues about the permissibility of the proposal
c. Offering materials (prospectus)
d. Articles of Incorporation
e. By Laws
f. Business Plan
2. Management and Board:
a. List of organizers, proposed directors, senior
executive officers
b. Oath of Directors
c. Director’s qualifications and experience
d. Board committees and members
e. Plans for director education and training
f. Duties, responsibilities, qualifications and experience
of each proposed senior officer
g. Potential management interlocking relationships
h. Potential conflicts of interest
i. Description of any transaction, professional fee
or contract involving the bank, the holding company, or its affiliates,
as well as any organizer, director, senior officer or 10% or more shareholder,
and other insiders.
j. Disclose professional services or goods with respect
to organizational expenses and bank premises and fixed assets.
k. Describe all stock benefit plans and stock-based
compensation plans for senior officers, organizers, directors and other
insiders.
3. Capital:
a. Provide the number of authorized shares, number
of shares to be issued, par value, voting rights, convertibility features,
liquidation rights, and the projected sales price per share.
b. Discuss the adequacy of the proposed capital structure.
c. List all known subscribers to the stock.
d. List recipients and amounts of any fees or commissions.
4. Convenience and Needs of the Community:
a. Market Characteristics
b. Community Reinvestment Act (CRA) Plan
5. Premises and Fixed Assets:
a. Physical description of the permanent premises
b. Provide name of seller, cost of the land, and construction
cost.
c. If temporary quarters are planned, provide a description
(copy of lease and other associated expenses).
d. Fixed asset expenditures
e. Description of the security program and security
devices
f. If branches are to be established, or main office
relocated within the first three years, describe in detail.
g. Indicate any effect the establishment of the proposed
main office or branch site may have on any building, structure, site
or object eligible for listing in the National Register of Historic
Places.
6. Information Systems:
a. State whether the Bank plans to market its products
and services via electronic means or the Internet.
b. Outline the proposed information systems architecture.
c. Provide lists or descriptions of the primary systems
and flowcharts as it relates to products and services.
d. Estimate the start-up budget for the information
systems.
7. Other Information:
a. List all functions that will be outsourced to third
parties, identify the parties and any affiliations or relationships
with organizers. Provide a copy of the proposed agreement when available.
b. List all planned expenses related to the organization
of the institution and include the name of recipient, type of service
and amount.
c. Provide a copy of management’s policies for
loans, investments, liquidity, funds management, interest rate risk,
and other relevant policies.
YOUR INVESTMENT
Your investment and our fee for working with you is
calculated based on several factors:
- Do you plan on establishing a holding company at
the same time?
- Do you plan on a national bank, or a state bank?
- Do you need recruiting assistance?
Our fees are on a retainer basis and one-half of the
fee is payable upon signing of the consulting agreement, and prior to
beginning any work. Thereafter, fees will be billed and submitted along
with progress reports. Final payment will be due when the application
in final form is presented to the regulators for their approval.
