Valley Commerce Bank opened in Phoenix last week, becoming the first start-up bank in Arizona in 10 years.

Capitalized at $5 million, Valley was organized by Joseph D. Reid, a Michigan banker who has started his share of new banks. Mr. Reid had never set foot in Phoenix until a year ago, when he concluded it was the country's best market for a new bank.

Valley brings the number of banks in the Grand Canyon State to 29, said Gordon Murphy, executive vice president of the Arizona Bankers Association. Out-of-state banks own about 95% of Arizona's bank assets, he said.

"I have been surprised that we do not have more de novo activity like Valley," Mr. Murphy said.

In Lansing, Mich., Mr. Reid runs Capitol Bancorp, which has $340 million of assets and six banks. He said he targeted the Southwest as a growth area and zeroed in on Arizona because of its small number of independent banks.

For many years the state had 20 or fewer banks, Mr. Murphy said. The number grew in the early 1980s, hitting 54 by 1985, when the state adopted an interstate banking law.

That law and the devastating real estate market of the late 1980s and early 1990s led to the sale, failure, or forced merger of many of these banks.

"Arizona was something of a graveyard of financial institutions," Mr. Reid said. "Anytime there's an area that suffers that type of a beating, there's opportunity."

Mr. Reid and Michigan businessmen Michael Kasten, Jay A. Fishman, and Michael J. Devine organized the bank. Of its 160 shareholders, about 120 are in the Phoenix area and most of the rest are in Michigan.

President Robert A. Homco said he was lured to Valley from Biltmore Investors Bank of Phoenix, a start-up he helped organize 10 years ago with a similar niche.

"We're very optimistic," he said. "The economy has turned around."

Valley's eight employees focus on providing personalized service to small and medium-size businesses and professional practices.

The bank's prospectus projects $15.8 million of assets by yearend and $34 million by 1997.

Mr. Reid said his experience with his four Michigan start-ups suggests the Arizona bank will turn a profit after six months.

"We're excited about getting this thing open," he said. "In 12 months, I think we're going to surprise a lot of people."

Mr. Reid said he is considering additional start-up opportunities, including others in Arizona.

Mr. Murphy, who said he has been predicting a start-up wave in Arizona for several years, said he expects other organizers to follow Mr. Reid's lead.

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