Heard On The Street

Collectively, the record for the capital acquisition programs of de novo banks across the country is getting mixed reviews at best. Some have succeeded, but others have not. It seems that most are having difficulty to some degree or another meeting their targeted capital goals. Those having difficulty have now resorted to lowering their expectations and are being forced to accept raising only the minimum amount required in their public offering. Soon the battle cry of "just get open at any cost" begins to displace rational thinking. Yet the time necessary to complete the offering and the inherent cost associated with such a delay continue to increase. This of course, in turn, continues to strain both the group's enthusiasm and its funding mechanism.

Current economic conditions or the recent dot-com debacle cannot totally be blamed for banks failing to reach their capital targets. More often than not the fault lies in a poor business plan and in some cases with the leadership of bankers who do not have the level of expertise necessary to produce results on this scale, but rather are just "looking for a job." Further, organizers, in general, can not or do not accurately assess the magnitude of the task. The likelihood of successfully raising $5, $10, or $15 million and the allocation of resources necessary to reach that goal in a reasonable period of time demands a well planned and executed capital program.

On the West Coast there are a fair number of banks that have not been able to fully capitalize or are suffering through an extended period of uncertainty. The Puget Sound Business Journal recently reported that in the State of Washington alone, there are five banks currently experiencing difficulty in raising their capital.

In California there are similar problems. Organizers of Ecomm National Bank lost upwards of $1 million of their organizational funds and finally withdrew their application. Pacific Commerce Bank N.A. also withdrew its application. Harbor National Bank could not raise a dime through a secondary offering, and several significant shareholders finally facilitated a merger by selling their holdings. Horizon Bank's president was not able to find a solution for raising the banks capital effectively so plans B C and D did not materialize. Sadly as the Thousand Oaks market, 101 Ventura corridor could use a strong community bank.

The capital acquisition challenge is only not confined to the western portion of the country. In the east, de novo groups in New York, Maryland, New Jersey and Massachusetts find themselves experiencing similar difficulties. The groups that will succeed are only those that are quick to realize what is required to complete the task and will then embrace the proven strategies necessary to succeed.