The start-up wave in the Chicago area is showing no sign of slowing down.

The Illinois Department of Banks and Real Estate is reviewing 17 applications to start banks, most in the Chicago suburbs.

"There's probably more start-up activity this year than there's ever been," said Richard A. Soukup, partner at Grant Thornton LLP in Chicago. Twenty-eight bank charters have been issued in the metropolitan area since 1994.

Mergers are driving the trend. Most of the new banks' organizers had worked for banks that were bought out.

"You've got a lot of bankers sitting around with a lot of money," said Stephen Skiba, a bank analyst at ABN Amro in Chicago. "In their minds, they have a good relationship with customers, so they try to build something on their own."

Take New Century Bank, which was opened in Chicago's River North neighborhood in mid-January and whose assets have grown to $35 million. President and chief executive officer Faye Pantazelos, a 23-year banking veteran, was a senior executive at Bank of Ravenswood in Chicago until it was bought by First Chicago NBD Corp. in 1992. (First Chicago has since been bought out by Bank One Corp.)

Ms. Pantazelos and the other founders of New Century said Chicago needs smaller, customer-focused banks. New Century is catering to entrepreneurs, a customer segment that the bank says is being ignored by larger competitors.

"Big banks give you high tech but no people," said Marc Pershan, senior vice president of New Century and an original investor. "Business customers want high tech and high touch."

Mr. Skiba of ABN Amro said there is room in Chicago for more banks. Illinois, which did not allow branching until 1991, is used to supporting hundreds of banks.

"I think we will see more of this as the Chicago market continues to consolidate," he said.

Customers appear to be embracing the new banks. Nearly all of the state- chartered banks established in the Chicago area this decade have met their financial goals, and none has been disciplined by Illinois regulators, said Scott Clarke, deputy bank commissioner in the state regulatory agency.

Northside Community Bank in Gurnee, Ill., for example, turned a profit in just 18 months. Chartered in July 1997, it reported net income of $174,000 and assets of $71 million at yearend 1998.

And Mount Prospect (Ill.) National Bank, which was chartered in September 1997, was in the black by yearend 1998, reporting net income of $10,000 and assets of $95 million.

Mr. Soukup of Grant Thornton said most new banks recoup their start-up expenses within a year to 18 months and become profitable within three years.

Those rules of thumb could change, however, under federal accounting rules adopted this year. Start-up banks now must write off all organization expenses in the first year of operations rather than amortizing them over five years.

Mr. Soukup said that may delay the newest banks' becoming profitable but should not discourage more from being started.

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