New banks begin sprouting in L.A. County.

Big Taiwanese bank files to open L.A. operation

After a couple of years when nary a new bank opened in California, start-up banks once again appear to be sprouting up in L.A. County and across the state.

In 1992 and 1993, not one state-chartered bank opened in California. And as of Jan. 1, 1994, not a single new-bank application was pending at the state regulator's office.

In the 18 months since then, however, two new state-chartered banks have opened in California - including EverTrust Bank in the City of Industry, which held its grand opening in June 1995.

The other bank that opened is Citizens Bank of Nevada County, headquartered in Nevada City, Calif., which had its grand opening in February 1995.

In addition, the state Banking Department has given three more banks approval to open, and has accepted applications for another two new banks.

"It looks like the trend is moving upward, and the number of filings is up," said Stan Paulus, chief bank examiner for the state Banking Department.

In addition to the uptick in actual filings, "we get calls all the time from people who ask, 'What does it take to open a bank?'" Paulus said.

Those inquiring about starting banks are being motivated by the same basic perception, he said. "They feel there is a need not being served by the banks in their area," Paulus said.

Also, they may have concluded that, with the recession over, banks are profitable ventures to launch, Paulus said.

One of the largest banks in Taiwan - Taipei-based First Commercial Bank - plans to open a bank in Los Angeles called FCB Taiwan California Bank, said Patrick Fields, a lawyer with the L.A. office of law firm Graham & James who is representing the bank.

"The basic reason is (First Commercial Bank officials) see an opportunity to make money in serving the local community," he said.

First Commercial Bank had long operated a branch office in Los Angeles, but just recently decided to open a separate California state-chartered bank. FCB Taiwan California Bank is being planned as a separate L.A.-based corporation and subsidiary of First Commercial Bank of Taiwan, Fields explained.

Vote of confidence

In California, branch offices of foreign banks are precluded from participating in a number of banking activities, including accepting many types of deposits.

"You can view it (opening a new bank) as a vote of confidence in the L.A. economy," he added. "One of the things that sparks the L.A. economy is international trade, and that is something that this (new) bank will seek to service."

The state Banking Department approved the new bank in May, but "the opening date is still uncertain," Fields said.

He added that the bank will likely be of "considerable size," compared to other new banks. But he declined to specify the amount of capital the bank would start out with, or what its first-year goal would be for asset size.

Gene Rich, president and chief executive officer of the newly proposed Bank of Lakewood, said he hopes to start with about $4 million in capital and build the bank to about $56 million in assets within the first few years.

A group of business people in Lakewood has decided that 1995 is a good time to open a community bank, Rich said.

That group - which includes Lakewood real estate broker Woody Smith and Lakewood restaurateur Ron Piazza - got approval in June from the state Banking Department to open the bank.

Rich said the group plans to raise the start-up capital for the Bank of Lakewood through a stock offering, and he is currently putting together a prospectus.

The core group of business people, which includes Smith and Piazza, is expected to buy the stock, as well as other people in the community, Rich said. The minimum investment is $2,500, he noted.

The group hopes to issue the stock offering in the fourth quarter of 1995 and open the bank for business in the first quarter of 1996, he said.

Rich said he anticipates about 200 Lakewood-area business people and residents will buy the stock, resulting in the desired $4 million in proceeds.

Directors' ownership

It is anticipated that the board of directors, which is to include Piazza and Smith, would as a group own 20 to 25 percent of the bank's stock, Rich said. In many bank start-ups, the board of directors as a group owns more than 50 percent of the stock, he noted.

"This is really going to be a community-based and community-owned bank," he said.

Barry Rubens, president of California Research Corp., a Santa Monica-based bank consulting firm, said: "There will always be a need for a community bank."

Rubens and his former partner, Sal Serrantino, were involved in starting up "some 80 community banks" in California in the 1980s, he said.

Back in those days, "we were busy running all over the place and meeting with groups (wanting to start banks) and (banking) regulators and helping them get started," he said.

"But since the mid-1980s, I haven't seen much activity, until recently," he said.

Rubens said the banking industry consolidation of the 1990s may have created pent-up demand for new, community banks.

Since Jan. 1, 1990, about 90 banks in the state have either closed or merged with other banks, Rubens said. And another 20 banks are currently in talks to merge, he said.

"I know that a lot of areas have had mergers and consolidation," he said. "And because of that, there are now a lot of communities that don't have a community bank. I was just contacted yesterday by someone, a lawyer who wanted to start a bank."