Though the capital raised by the average start-up set a record last year, a would-be Internet bank targeting prosperous African-Americans is struggling to find investors.
Organizers of BankBlackwell — headed by James R. Mundy, the former chief operating officer of the black-owned OneUnited Bank in Boston — said this week that they had extended the deadline for its initial public offering by three months, to Sept. 30. The group had said in its March offering circular that it expected to complete the IPO in June and begin operations by the end of summer.
Mr. Mundy would not discuss the delay Tuesday, saying a “quiet period” imposed by the Securities and Exchange Commission prevented him from doing so. But other observers said that an online bank — especially one with such a narrow focus — is a tough sell to investors.
Raising money has not been a problem for most start-up banks of late. Last year they raised an average of $11.1 million in start-up capital, up from $8.6 million the year before and $7.3 million in 2002, according to the Federal Deposit Insurance Corp.
Those that have recently raised significantly more than the average include Community National Bank of Great Neck, N.Y. ($30 million); Bucks County Bank of Warminster, Pa. ($15 million in five weeks); and Empire State Bank of Newburgh, N.Y. ($20 million). Community opened in April, Bucks County last August, and Empire State last July.
But all three were organized as traditional brick-and-mortar community banks. The all-Internet BankBlackwell, based in Boston, would target African-American households with incomes of at least $50,000 and would offer a limited menu: high-interest savings accounts and certificates of deposit, plus mortgage and home-equity loans.
Walter G. Moeling 4th, a lawyer with Powell Goldstein LLP in Atlanta, said Mr. Mundy and his partners may have underestimated the difficulty of raising money for an online bank.
“There’s a creature out there called the community bank investor, and they understand the pattern a traditional community bank follows,” Mr. Moeling said. “This is a different kind of business plan, and there aren’t a lot of models for the community bank investor to compare it with,” so the Mundy group’s “sales job is a lot harder.”
Mr. Moeling said the idea of targeting the growing African-American middle class is fundamentally sound. But William Michael Cunningham, a consultant who concentrates on African-American banking, is more skeptical.
“Frankly, I think they’re too late,” Mr. Cunningham said Tuesday. “They’re trying to do the same thing” as the other Web-only banks “but with a much narrower focus.”
As a pure online bank, BankBlackwell faces competition from a number of players, including ING Bank FSB, a unit of the Dutch ING Group NV, and EmigrantDirect, created by Emigrant Bancorp Inc. of New York this year.
Furthermore, “bricks and mortar count,” Mr. Cunningham said. “If you have both [branches and online], you’re better off than if you only have one or the other.”
