Chapter 3: Starting a New Bank
Laurence Pettit Starting a new community bank can be one of the most interesting and educational endeavors an entrepreneurial group can try. This phase is an adventure, where the outcomes of your eﬀorts are not fully predictable as you might have expected in a regulated industry. The venture, after all, is a small business with most of the risks that come with small ﬁrms. The startup group needs to be able to respond quickly to opportunities and problems, make decisions on the move, and most of all have the patience and energy to survive the process. The successful bank start-up leads to the establishment of an economic force in the community. The outcome of that investment in the community bank might be viewed as a long-lived asset with consistent growth opportunities or a strategic investment with a take-out through merger. Once established, the community bank is a highly desirable small business venture. What is diﬀerent from other small business start-ups is the regulated environment of the banking industry. The banking system in the US is generally characterized as a “dual” system with charters being granted by both national and state authorities. For both historic and practical reasons, the process for chartering a new institution diﬀers in signiﬁcant ways. The initial capital required for a new bank, the methods by which that capital is raised, and the composition of the board of directors may all diﬀer signiﬁcantly when comparing state and national charter requirements. The...
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