Banking More on Indie Banks

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Some independent bank owners and executives are emulating traditional entrepreneurs by specifically building the business to flip it. After all, once they've built one successful bank, it's easier to raise capital and community support to do it again.

In many ways, starting a bank is like starting any business. The three main challenges are developing the business plan and associated policies, finding a great management team, and raising capital. Once those are done, developing a great marketing plan is the key to eventual success, says Trent Sanford, president and chief executive officer of Covenant Bank & Trust, an independent bank in Rock Spring, Ga., that opened in June, 2006. Many times, a successful community bank is characterized by the quality and prominence of the local business leaders on its board of directors, says Sanford.

Getting to Know You

With rapid growth and near-immediate profitability, other independents are bound to grow without the help of selling out to a larger player. "Every year, we update our strategic plan," says CommunitySouth's Ducker. "In the next four or five years, we will be seven or eight years old with 12 branches and $1 billion under management. We're gonna keep growing—we're not building it to sell."

Of course, the bigger a bank gets, the harder it is to keep its community feel. Customers increasingly want to know their banker and are growing tired of big banks' lower return on deposits and long waiting times on loans. Since they often experience lower employee turnover, community banks offer customers personal service, along with other advantages that come with a more intimate relationship.

"With a community bank, you get to know the people that own it," says Sid Theus, chief executive officer of American Painting & Renovations, a 20-employee contracting company based in Duluth, Ga. "They know you so well that you can establish a relationship with them, where I'm somebody. Personally, I'm also able to get huge lines of credit and multiple loans."

By all accounts, the boom is here for the short-term. Of all the reasons for the banking bull market, some analysts say the biggest is the affinity that small businesses have for banking with independents. "As long as you see small businesses growing, you'll see community banks thriving," says SAMCO's Bradley. For now, supply has yet to catch up to demand.

Jeffrey Gangemi is a freelance writer based in Mendoza, Argentina.