Security Bank Holding Co. of Coos Bay, Ore., has its eye on a new bank. So new, in fact, it hasn't even opened for business.
The parent company of $145 million-asset Security Bank plans to invest up to $2 million in Class B common stock in a start-up bank 100 miles to the north in Newport.
The deal not only enables Security to diversify beyond its traditional markets, it also gives the new bank - to be called Lincoln Security - the backing and capital necessary to get off the ground.
After five years, Lincoln Security can either buy back the stock from Security or give the holding company the option of purchasing the outstanding Class A common stock and thus taking a controlling interest.
"The investment is a part of our growth strategy to expand our market to geographic areas beyond Coos and Curry counties, while maintaining our focus on providing local community banking services," said Chuck Brummel, chief executive of Security.
Before the assistance from Security Bank, Lincoln Security had raised $500,000 of its $3 million capital requirement, according to Fred J. Postlewait, the start-up's president and chief executive.
"We're a small community of less than 10,000, and there's only about 40,000 people in the entire county, so raising capital can be a difficult task," Mr. Postlewait said.
Lincoln Security already has state approval to open and should get the go-ahead from the Federal Deposit Insurance Corp. within 30 days. The bank plans to open its doors by late summer or early fall, Mr. Brummel said.
Though Mr. Brummel will serve as chairman of the board, most of the investors and directors of the new bank will be from the Newport area. Security will hold a majority of the outstanding shares, at least in the beginning, but will not exercise control.
"This is a vehicle for them to retain autonomy and local identity," Mr. Brummel added. "We're not going to just turn our back on them, but we want them to do things the local way. That's the whole idea."
"We believe that the affiliation with Security Bank will benefit our new bank by providing it with access to the financial and administrative resources of Security Bank, while allowing Lincoln Security to operate as a local community bank responding to the needs of Lincoln County customers," Mr. Postlewait said.
Mr. Postlewait knows those customers well. He once served as president of the other bank in town - $160 million-asset Bank of Newport, a subsidiary of West Coast Bancorp.
He believes that the town can support another bank, however. Just a few years ago, four independent banks operated in Newport, but rampant consolidation has left just the one other institution in the area. West Coast Bancorp and Commercial Bancorp of Salem merged a year ago to form one of the largest banks based in the state.
"We know the town can support two local banks and we're 100% confident that we can help fill a void in Newport," he said.
Mr. Postlewait was previously chief operating officer of National Security Bank, which was acquired in 1994 by West One Bancorp of Boise, Idaho.
Mr. Brummel said his company had been in talks with individuals in Newport about a new bank for a couple of years.
"We saw it as a wide open area," he said. "They really didn't want to be part of a holding company, but they were having trouble raising money.
