Group wants to open new bank in county

December 22, 1998|By JULIE E. GREENE

A group of local investors wants to open the first new bank in Washington County in about 20 years.

The bank, which doesn't have a name yet, would focus on serving small businesses, the president of the proposed bank said Monday.

"I think the general consensus is there's a niche here that is underserved, primarily the small businesses - the real small borrower," said John S. Mazzocchi Jr.

So far there are about 55 people interested in investing a total of $4.5 million in the bank, Mazzocchi said. He refused to name any of the interested parties.


No money has been pledged or contracts signed yet.

Mazzocchi said he wants a minimum of $5 million to start the bank, which would serve Washington County.

He said he hopes in January to start collecting the money, which would go into escrow so the interest could be used for startup costs.

Once the money has been collected it would take 90 to 120 days to get approval from the Maryland Department of Financial Regulation for a charter and from the Federal Deposit Insurance Corp. for deposit insurance, he said.

Mazzocchi said he wants to open the bank this summer and expects to hear about approval before July 30, the termination deadline outlined in the offering circular for the investment.

If the group doesn't get charter approval from the state by July 30, the investors will get their money back, Mazzocchi said. He said he doubts there would be any interest to distribute to the investors because it will be spent on legal fees and other costs.

While creating a bank to focus on loans for small businesses is riskier than banks that focus on large commercial customers, it can be done, Mazzocchi said.

"Traditional banks tend to focus more on 'A credits' - companies that have a long track record of profitability and meet criteria for good credit. Quite often the small businesses don't meet all that requisite criteria," Mazzocchi said.

If the group is successful, their bank would help local small businesses get loans for starting up, expanding or relocating, he said.

The bank also could appeal to some people for personal loans, checking accounts and savings accounts because it would be the only one in the county that is locally owned, Mazzocchi said.

Washington County National Bank was the last local bank taken over by a firm outside Washington County when American Trust of Cumberland, Md., took it over in May 1997.

Antietam Bank was the last local bank started, in the mid-1970s, bank officials said. Its two branches have had several owners since then, the latest being Farmers & Merchants Bank and Trust.

Investors starting up community banks is a recent trend because the bigger banks have been gobbling up smaller banks in consolidations, said David Barr, FDIC spokesman.

"The perception is that big banks don't serve the community, so you're getting a lot of small banks chartered," Barr said.

"They could be going for that niche of playing to that fact that 'We're local, we live here, we work here, our decisions are not made 3,000 miles away,'" Barr said.

In fact, the offering for the proposed bank states the bank "will seek to operate as a community bank alternative to the super-regional financial institutions which dominate" the market area.

F&M President Bill Reuter said it can be very difficult to open a new bank in a small market.

"We don't have a population that's growing by leaps and bounds," Reuter said. A startup bank has lots of challenges, even with a strong leader and in a market that is growing, Reuter said.

Those challenges include the cost of technology, which is expensive to keep up with these days, Reuter said.

But Roxanne Emmerich, a consultant in the banking industry, said a new bank can do well in a competitive market area that isn't experiencing much growth, if it has aggressive leaders. Emmerich is president of The Emmerich Group Inc., a Minneapolis firm that helps banks with marketing, customer service and employee motivation.

"Most banks are so ineffective at marketing and handling customers effectively. If a bank does a fair job of that, it can knock the cover off the ball," Emmerich said.

Another reason more banks are opening is because the mergers have resulted in out-of-work bankers who, knowing banking, start their own banks, Barr said.

Mazzocchi said that's not the case here.

He said he resigned from Maryland Permanent Bank in Owings Mills, Md., to pursue his own interests. From 1992 to 1996 he worked at Hagerstown Trust, where he said he was head of the commercial lending group.

Mazzocchi, of Hagerstown, said he's not employed now because he's focusing on getting the bank started.

Investors prefer to open the bank's first office in Hagerstown, but need to find a site that will accommodate a drive through, he said.

The bank would employ 10 to 12 full-time workers by the end of its first year in operation, according to the offering.

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