For someone with very little banking experience, Tom Hassey sure is thinking big.
At the age of 70, the former college professor and radio station owner has formed a holding company looking to open community banks in the Southwest. If all goes according to his plan, United Business Holdings Corp. would go public in two years and have $5 billion to $6 billion of assets within seven years.
Achieving such lofty goals will not be easy. Mr. Hassey has commitments for only a fraction of the capital he needs to execute his plan, and industry observers say raising the rest could be a challenge, because investors seem more interested in putting their money in established banks than in start-ups.
Even if United Business Holdings raised the roughly $55 million Mr. Hassey says it would need to get its first three banks up and running, it would be hard-pressed to operate efficiently, given the cost and regulatory hassles of running separately chartered banks, observers said.
But Mr. Hassey, United Business Holdings' chairman, is undeterred. He said in an interview last week that he has been studying bank models for the past year, and that he is convinced the best way to build a banking company from scratch is to be in several dynamic markets.
His secret weapon, he said, will be having teams of 25 to 35 local, well-connected business leaders — he calls them "founders" — who will raise capital at first and, once the banks open, will advise the management teams and send loan and deposit business their way.
"The goal is to have a lot of people and a large sphere of influence," Mr. Hassey said.
United Business Holdings has filed an application to open its first bank, Ventana National Bank California in San Diego, and hopes to receive approval in time for it to open around Sept. 1.
Within the next several months the company intends to file applications for Ventana National Bank Texas in Dallas and Ventana National Bank Arizona in Phoenix, and it hopes have both banks opened by the end of the first quarter, Mr. Hassey said. Presidents and lenders have already been hired for each would-be bank, and the parent is continuing to add founders in each market.
Most of Mr. Hassey's experience with banking has been on the other side of the table. He invested in a Dallas start-up in 1971 and was on a Dallas bank board 40 years ago, but his most meaningful experience was sitting on an advisory board for Neighborhood National Bank in San Diego this decade.
His business model is not unique. The $5 billion-asset Capitol Bancorp Ltd. in Lansing, Mich., has started dozens of banks around the country by rounding up local investors and hiring well-established local bankers to lead them.
The difference is that Capitol is an established company with an infrastructure that can support many banks in far-flung markets. United Business Holdings intends to build a similar infrastructure to handle its banks' back-office functions, but industry watchers said it might be better off establishing itself as a single-bank start-up and then buying or branching its way into other markets when it is ready.
"There is a high degree of inefficiency" running separately chartered banks in three different states, said John Matheny, the director of sales and marketing for Brintech Inc. in Austin. "If you have three separate charters, each charter has to deal on its own with the regulatory process — three different examinations and three different regulatory compliance groups to comply with security."
Mr. Hassey argues that a local bank with local investors would be more successful in winning business.
"Having three charters is better for our banking group instead of having one and having to cross state lines," he said.
Mr. Hassey said he chose to start in San Diego, Dallas, and Phoenix because he is familiar with all three markets, and all three have had strong population and income growth in recent years.
The housing downturn has hurt the Phoenix and San Diego economies, but he said he believes now is actually a good time to start banks in those markets, because others have scaled back their lending as they work through problems with credit quality.
Mr. Hassey said he cannot officially start raising money until regulators approve the charter applications, but so far investors have committed $4 million for the San Diego bank.
Richard Levenson, the president of the San Diego investment banking firm Western Financial Corp., said raising the rest — $20 million each for San Diego and Dallas banks and $15 million for the Phoenix one — could be a challenge. There is plenty of private-equity money out there, he said, but much of it is flowing into banks that need to recapitalize.
"I'm a little bit concerned about the ability to raise that much money," Mr. Levenson said. "I've had a number of banks in Phoenix call and want help raising capital, and they needed a heck of a lot less than $20 million."
Even if United Business Holdings does raise capital, it could have difficulty "getting traction," particularly in a market as competitive as San Diego, he said. "It is a marketplace that is full of banks of less than $500 million in assets, which all seem to be competing for the same business and clients."
Ernest Garfield, the owner of the Scottsdale, Ariz., consulting firm Interstate Bank Developers Inc., said a new bank could do well in Phoenix, where there is less competition among small banks.
"It's a great time for these banks," he said. "They are growing by leaps and bounds, because the big banks are laying people off and cutting back on credit. It's a great time for locally owned banks here."
