CHICAGO - When David H. Voss decided to reenter banking in January 1998, seven years after selling his community bank here, he ventured not into Chicago's increasingly affluent outskirts but into the city's South Side.
He set up First Bank of the Americas in a predominantly Mexican-American neighborhood that locals call the Back of the Yards.
As banks consolidated in Chicago, "most of the guys in banking went out to the suburbs" to start new companies, said Mr. Voss, chairman and chief executive officer of the $60.8 million-asset community development bank.
Mr. Voss, however, had been studying the demographics and decided that an "opportunity to make a difference, and also to make money," was available in serving the city's Mexican-American population. Though Mexican immigrants are notoriously skittish about putting their money in banks, Mr. Voss said he could not ignore the fact that roughly 754,000 Hispanics - the third-largest Spanish-speaking population in the country -live in Chicago and that most are Mexican-Americans or Mexican immigrants.
Mr. Voss acknowledged that First Bank is unlikely to grow as fast as those in the suburbs. It did not turn a profit until the third quarter of 2000 and made a modest $64,000 in this year's first quarter, whereas new suburban banks, he said, get "old money and big accounts."
Yet since the U.S. Census Bureau reported last year that the nation's Hispanic population had grown by about 50% since 1990, banks of all sizes have actively begun courting Spanish-speaking customers.
First Bank is only one of several Chicago banks eager to tap the growing Hispanic market. Just last week, for example, Harris Bank, the Chicago subsidiary of Bank of Montreal, announced that Caren Ex, the host of a local Spanish-language radio call-in show, would broadcast from a different Harris branch every other Tuesday. Each show will feature Spanish-speaking financial experts who can offer advice and answer questions from callers and people in the branch.
Unlike more established banks, however, First Bank is staking its whole future on this market segment.
It is using a "high-touch" strategy to develop rapport with customers who are traditionally suspicious of banks, said Mr. Voss. He estimated that 65% of the people in the neighborhood rely on payday-loan stores because they have no banking experience, or bad experiences with banks in Mexico.
First Bank's two main objectives, he said, are bringing these customers into mainstream banking and creating jobs in the neighborhood through small-business lending.
To get people in the door and give them a positive impression of the bank, First Bank plays host to health fairs and offers English language classes. It also lets people without accounts cash checks for a $3 fee; lets people open accounts, called First Accounts, with no minimum balance; and offers Electronic Transfer Accounts to recipients of government benefits. And as long as the money is deposited electronically, customers can maintain their accounts for a $3 monthly fee.
The point, said Mr. Voss, is for people to develop enough trust in the bank ultimately to become regular customers.
First Bank also gives space to Accion Chicago, a community group that makes small-business loans of $500 to $35,000 to budding entrepreneurs. Carmen Jimenez, an Accion senior loan officer, said that Mr. Voss is the first banker to offer the group space.
"Originally he was unique, but he started a trend," Ms. Jimenez said. She added that other banks had feared having a competing lender on their premises but that since First Bank set aside a corner of its branch for Accion, other banks in the area had followed suit. Mr. Voss has also helped establish a training program in the bank primarily to teach Accion borrowers how to run a business.
"The goal of our program is to make our clients bankable," Ms. Jimenez said.
First Bank often teams up with Accion in lending to entrepreneurs, making up the difference between Accion's $35,000 lending limit and the start-up capital needed by a business. Mr. Voss estimated that, between Accion and his bank, more than $1 million was lent in the past year to start businesses, including grocery stores, retail shops, and a hair salon.
"No deal is too small" for Mr. Voss, Ms. Jimenez said. "There are other institutions that would not look at a deal under $50,000 because it costs as much to write a $50,000 [loan] as it does a $500,000 deal," she said.