After buyouts, smaller banks emerge

Following a rash of buyouts of many of the Bay Area’s small banks by bigger companies and consolidation, a group of new bank startups have emerged to fill the community-sized niche.

Presidio Bank, New Resource Bank, the Bank of San Francisco and several others have opened within the last two years, part of a pattern not seen since the 1980s, according to Presidio Bank President and CEO Steve Fleming, whose bank opened in 2006 and is focused on small- and medium-size business banking. These startups are opening at the end of a period in which the number of banks nationally shrank from 15,000 to 7,500 in a 20-year period.

“There is a certain cyclicality to the bank startup business, and we’ve been in a period over the past few years where there has been a surge in bank startups,” Fleming said. “When banks get bought, it tends to free up personnel to start up new banks. That coupled with the success of banks started in the past 10 years … those market dynamics have been an impetus for forming new banks.”

Acquisitions in the last few years have included the purchase of Bank of Walnut Creek by First Republic Bank, which was then bought by Merrill Lynch & Co. (MER), National Bank of the Redwoods by WestAmerica Bank, Commercial Bank of San Francisco by First Banks America Inc., Golden West Financial by Wachovia Corp. (WB) and Greater Bay Bancorp. by Wells Fargo & Co. (WFC).

“Usually, when people sell is when they don’t have any more growth opportunity to create shareholder returns,” New Resource Bank Vice Chairman Peter Liu said.

The buyouts mean growth for larger firms. For example, Wachovia’s acquisition of Golden West, the parent of World Savings Bank, was followed by the opening of new financial center at California and Battery streets in San Francisco. After the conversion of World Savings branches, Wachovia will have eight financial centers in San Francisco and San Mateo, a spokesman said.

Wells Fargo, meanwhile, has grown by 5,000 Bay Area jobs since 1999, and is looking to add 150 more, Executive VP Lisa Stevens said.

With the competition, many large and small banks are looking to differentiate themselves by offering a range of innovative products, even as the consumer side of the industry becomes more stringent about who receives housing loans and other credit in the wake of the ongoing mortgage crisis.

New features at New Resource Bank include the use of a remote-capture device to allow business customers to deposit checks without coming into the bank, and a special 25-year fixed-rate home equity loan that can be used only for solar power installation, Liu said.

Wells Fargo is also offering special solar-power-installation financing with a $250 rebate, Stevens said. Other developments there include the installation of six languages on automatic teller machines and multi-lingual brochures, envelope-free ATMs and mobile phone banking.

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