FACT: Acquisitions of state-chartered community banks by nationally-chartered regional banks have swept through Florida following conducive changes in federal and state legislation passed in the mid-1990s. Other states caught in the rising interstate banking whirlwind include New Jersey, North Carolina and Texas.

FACT: An estimated 85 to 92 percent of Florida deposits are controlled by out-of-state banks, ranking it one of the highest in the country.

FACT: Between June 1998 and June 1999, 21 of 24 applications for Florida state bank charters were for start-up "de novo" banks. Lee and Collier counties have become home to five new community banks in just 18 months. An equal number have been swallowed by bigger banks. Few of the community banks currently operating here existed five years ago.

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When a community bank builds up to attract attention by expansion-oriented regional banks, it may reward its shareholders by selling to the highest bidder. Results are three-fold. Experienced community bank executives who like their independence reorganize into entrepreneurial management teams. Substantial capital lies heavy in the hands of former bank stockholders who like to invest in their local community. As many as 10 percent of customers netted in the acquisition shop for a new banking relationship.

Add in the fact that Southwest Florida's marketplace continues to expand at a record pace. Then consider that pulling in just one to two percent of Southwest Florida's healthy $10 billion in deposits, or between $100 and $200 million, is enough to found the success of a new bank. Toss in today's regulatory trends, which favor bank applications strong in capitalization and management over historic criteria of community convenience and need. And you see the irresistible incentive.

Southwest Florida offers the perfect setting for community bank start-ups.

Community Bank Location Date Opened

Old Florida Bank Fort Myers September 1998

Bonita Springs March 1999

First Community Bank Fort Myers March 1999

Citizens National Bank Naples August 1999

First Florida Bank Naples August 1999

Marine National Bank Naples October 1999

Carving a Niche

A new community bank can open in as little as 5 to 18 months, according to Richard Hunt of Kendrick, Pierce & Co. in Tampa, an investment banking and financial advisory firm to the financial services industry. "Provided the economy cooperates, it can reach its stride and become profitable within 18 months of opening," says Hunt. "As an investment, it will reach its point of maximum attractiveness seven years from inception."

Hunt observes that two to three-year old banks used to sell at two to three times book value. Given today's typical 7- to 10-year "success" timeframe, they might sell for anywhere from just over one to five times book value. Thus, possibilities exist to glean a nice return on a relatively steady investment.

But today's marketplace is substantially different from years past. "Bank officers and investors who started and built a bank 20 years ago will find differences this time around," says Art Simon, Director of the Division of Banking with the Florida Department of Banking and Finance.

He explains that while 1980s legislation allowed limited reciprocal banking across state lines, 1990s laws have now opened the way for full interstate banking. Regional banks have lost little time leveraging mergers and acquisitions to establish a foothold in Florida. They have centralized bank headquarters as a hub for multistate branches and changed the economics of banking services delivery. Too, they have developed innovative arrays of products and services. Interstate banks are now in a position to be highly efficient, tough competitors in Southwest Florida.

"Community banks cannot succeed by going toe to toe with the big players," says Simon. "Rather, they will benefit most by finding and filling a niche not being well served."

All five local community bank chiefs interviewed identified "Relationship Banking" as that winning niche. Small business accounts and loans figure heavily in the success equation. Consumer accounts and mortgages are emphasized more by some community banks than others. The common denominator in attracting new business seems to be customers' overriding desire for a first-name "make good things happen fast" relationship with a hometown banker they know and trust.

Working the Niche

"Great creativity will be required to capitalize on surging business opportunities on today's more level playing field," says Hunt. "Community banks must come up with tools that strengthen them competitively and make them different from the big banks, trust companies, brokerages and credit unions."

Southwest Florida's community banks plan to meet the mounting challenge by trading on a tradition of personalized banking updated by technology. Most industry experts predict that on-line banking eventually will become as common as automatic tellers, and at least one bank interviewed is moving toward the ideal of paperless banking. Some community bankers foresee themselves allied with insurance companies, financial investment firms and trust and estate planners as a conduit for extending their reach of products and services. Community banks routinely partner with larger banks in providing loans greater than $1.5 to $2.0 million.

VIP customer networking remains the local banks' preferred marketing strategy. Moneyed boards of directors, stockholders and friends who provide start-up capital, ranging from $5 to $10 million, further set the tone by making impressive opening day deposits. Bankers court business accounts and loans in person and by direct mail and telephone to fuel momentum. Consumers discover a new community bank because it's in their neighborhood, or because they choose to pick up stakes and follow their favorite banker. Advertising and promotion budgets are surprisingly modest.

Community bank officials tout the advantages they see in their individualized style of local banking. For example:

o Community banks respond to small business loan requests in two to three days, instead of two to three weeks.

o Local banks survive or thrive in direct relation to their stake in the community. In times of economic stress, out-of-state banks can elect to shift their assets elsewhere.

o Computerization proffers mechanized efficiencies at any forward-thinking bank, regardless of size.

o Small banks can adopt some of the new services developed by big banks and promoted heavily to customers, whose expectations continue to rise.

o More than one community bank has launched courier service to essential business accounts, saving customers time and money.

o Charges and fees tend to be lower at community banks compared with incoming banks that need to recoup premiums paid in acquiring choice community bank properties.

o Familiar faces are common at smaller banks, which pride themselves on high customer loyalty and low employee turnover.

"Business people especially need an ongoing personal relationship with their banker because their world changes so quickly," says Mike McMullan, CEO of Citizens National Bank in Naples. "It's critical they have a banker who understands and adapts to their evolving needs, one who lives and breathes the economics of that community."

"Every decision made on our customer's behalf is made within the walls of this bank building," notes Skip Horne, president and CEO of Marine National Bank in Naples. "Any problem a customer brings to us will be resolved right here, usually within a day or so."

Customer Expectations

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