In April 2008, as the "credit crunch" was becoming a "financial meltdown" and Bear Stearns had just collapsed on Wall Street, a new bank quietly opened in the St. Louis suburbs.
The timing appeared to be all wrong. Signs of distress were everywhere. And there was no celebration that first day at Parkside Financial Bank & Trust, situated on the first floor of a Clayton office tower. Too much to do — from opening new accounts to reassuring worried shareholders.
"It was a little nerve-wracking," bank CEO Jim Wagner said.
But now, more than a year later, no regrets.
"It turned out to be a good time to open a bank," Wagner said.
"Fabulous time," corrected his brother, bank president Matthew Wagner.
The struggles of the nation’s banking sector have received plenty of attention — and bailouts — in this Great Recession. Already, 64 banks in the United States have failed this year, the most since 1992. But some new players are seeing opportunity in the chaos.
Last year, in the grips of the banking crisis, 89 new banks opened nationwide, according to the Federal Deposit Insurance Corp. That is a drop of nearly half from the go-go, good times of 2007. And 2009 is going even more slowly: 20 banks so far, on pace for just 35 all year.
"It’s tailed off dramatically," said Bob Turicchi, a new bank consultant with the American Bankers Association. "Who is going to purchase stock in a brand-new bank in this environment?"
But if they can find funding, some of those new banks — called de novo institutions, new banking charters that are not subsidiaries or branches of current banks — are reporting good times.
Parkside, which raised $21 million before opening, now has 165 clients, $130 million in assets and $100 million in loans, Jim Wagner said. No loans are past due, according to the FDIC.
"To be able to say that in this market is just unusual," said Jim Wagner, 44.
LEARN FROM MISTAKES
New banks might lack name recognition and multiple branches, but they also do not have ledgers full of soured real estate and auto loans. They have learned from the lending mistakes of the recent past. Turicchi said he suspected few new banks would make commercial loans backed only by real estate — a common and costly problem in the boom years. And with the Federal Reserve Bank offering funds at rates approaching zero, new loans promise a good return.
"It is quite an opportunity to not have the pressures of your existing portfolio going bad," Matthew Wagner, 37, said.
Parkside is not your typical bank. No giant bank vault, just a hidden safe. No ATM or drive-through lanes. Bank tellers sit at desks, not counters. The bank does not dream of being the next Bank of America, although people can walk in and open an account fast cash advance. Parkside is aimed at a niche: commercial banking for privately held companies, and wealth management for what is termed "the mid-tier millionaire," people with a net worth of $5 million to $50 million.
(When the Wagners and a partner left jobs at other banks to start a new bank, they decided on the name Providian Bank. Just a few months before opening day, they got a letter telling them the name Providian, a now-defunct bank, was still registered. In a rush, they held an internal name-that-bank contest. And Parkside was born.)
COMPLICATED PROCESS
Opening a new bank is not a simple process, even in the best of times. It can take months. Success is not guaranteed. State and federal regulators pick apart applications for bank charters and set strict requirements for FDIC backing on consumer deposits. Turicchi said he had recently heard of banks’ withdrawing applications because shareholders had backed out. That could help explain why so few banks are seeking new charters this year.
In Missouri, not a single new charter application is in the pipeline, state regulators said. In Illinois, three banks have pending charter applications — all in the Chicago area — and one new bank opened in April: Burr Ridge Bank and Trust, which lists former sports star Bo Jackson on its board, is situated in the Chicago suburbs.
Parkside was one of just two new banks in Missouri last year.
The other was Springfield First Community Bank — which managed to open at an even worse time than Parkside.
In just the one month between getting its charter and the bank’s first day of business late last October, the stock market crashed. The government had seized Fannie Mae and Freddie Mac. Lehman Brothers and Washington Mutual had vanished. AIG was teetering. The government had just set up TARP to infuse banks with cash.
And then Springfield First opened in two plain modular units where a motel once stood in Springfield.
"Our timing, as it turned out," said bank CEO Brian Straughan, "couldn’t have been much better for us."
All 22 employees at the start-up bank used to work at Signature Bank, a Springfield-based company that was bought by an out-of-state bank in 2006. Straughan said the desire to again work at a locally managed institution led to the establishment of the new bank.
Springfield First is full-service bank, offering the familiar mix of free checking, senior checking and commercial lines of credit. It is expected to move into new offices in October. The bank now has $135 million in assets — and, with just nine months in business, no bad loans.
"We’re cooking right along," Straughan said.
It’s an assessment many established banks would love to share.
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