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How to start up your own bank

December 22, 1998|By JULIE E. GREENE

Got $2 million?

If the answer is yes, you too could start up a bank.

Last year 188 new banks were formed in the United States, said David Barr, spokesman for the Federal Deposit Insurance Corp.

In the first nine months of 1998, 115 new banks have formed, Barr said.

A group of local investors is trying to raise at least $5 million to start a new bank to serve Washington County, said John S. Mazzocchi Jr., president of the proposed bank.

In order to buy shares of common stock for the proposed bank, investors must have a net worth of more than $1 million, according to the Nov. 30 offering circular for the proposed bank.

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Or prospective shareholders must have an annual individual income of more than $200,000 during 1996, 1997 and 1998, or more than $300,000 of annual joint income with a spouse for those years, according to the circular.

Mazzocchi said he has about 55 people interested in investing a total of $4.5 million in the proposed bank so far.

Most of the interested parties, about 40, are considering buying $100,000 or more worth of stock, Mazzocchi said. The minimum amount a prospective stockholder could buy is $10,000 worth, at $20 per share, he said.

Mazzocchi wants $5 million to $7.5 million to start up the bank.

A bank can be started with as little as $2 million and a business plan, Barr said.

The group needs to secure a charter, which usually comes from a state authority, Barr said. The federal comptroller of the currency handles charters for national banks and the Federal Reserve Board manages charters for bank holding companies, he said.

When the investors apply to the FDIC for deposit insurance they must provide full financial backgrounds for the investors, Barr said.

The FDIC also will investigate to see if any of the investors have a criminal background.

Depending on the crime, the FDIC might require a specific individual not be a partner or not be involved in the daily management of the bank, Barr said.

If the crime was a college prank, the individual will probably be cleared, but drug charges or a breach of trust could pose a problem in getting approval, he said.

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