Small banks have opportunity to thrive

October 28, 2008 12:00:00 AM PDT
It may seem counter intuitive to open a new business in these challenging, economic times, especially if that business is a brand new bank. There's one set to open in Silicon Valley and now could actually be the perfect time for small, community banks.

Jim Wall is like a proud father to be. By the end of the year, Global Trust Bank will be more than just a dream.

"We think there are lots and lots of people who are really deserve good banking service," said Wall, the CEO of Global Bancorp.

In a time when many banks are collapsing, downsizing and making fewer loans, opening a brand new community bank now makes sense to Stanford professor of finance, Jonathan Berk, Ph.D.

"You might imagine that there may be people who are not being serviced and that creates a profit opportunity for especially a community bank," said Berk.

"They may be getting neglected some by their existing banks because banks are turning inward and looking toward their problem loans," said Wall.

In Lafayette, one-year-old California Bank of Commerce, is making a profit and it's still making new loans.

"We've tried to focus on small business as opposed to home ownership sector with construction lending and the result is we've done quite well," said John Rossell, the California Bank of Commerce CEO.

Hotelier, Bimal Patel, is a small business owner who needs money and more options.

The owners of Hotel Zico have been looking for a $500,000 line of credit to continue with renovations. They say when they've gone to several local, larger banks for help, they've been turned away.

"We kind of get lost in the large bank sea," said Bimal Patel. "And we kind of slip through the cracks of the really small loans and the really big loans that they work on," said Bimal Patel, a Hotel Zico owner.

Global Trust Bank has $21 million in capital and is waiting for F.D.I.C. approval. Once that happens, Bimal Patel plans to apply for a loan.


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