Two booming cities in Arizona are setting the pace for bank start-ups out West.

Phoenix, Tucson, and their surrounding bedroom communities have spawned 11 new banks from 1995 to date-and another five are on the way.

That compares with 16 new banks in all of California during the same period, 12 each in Colorado and Washington, nine in Oregon, and seven in Nevada.

Phoenix and Tucson are hotbeds for start-ups because of rapid population growth, strong economies, and major consolidation in banking.

Arizona State Banking Superintendent Richard Houseworth said his office is swamped with calls from prospective organizers.

"There are still an awful lot of people who want to do business with community banks," said Mr. Houseworth. "They can offer the personalized service that is much more difficult for larger banks."

Anthony Rose, an analyst at the Phoenix investment bank Peacock, Hislop, Staley & Given, said: "Arizona is a unique market, and there is a lot of appeal to starting a locally owned bank. I expect the trend to continue for a while."

The start-up boom in Arizona comes as bank foundings are surging nationwide. Last year, 188 banks were launched, up from 146 chartered in 1996, according to the Federal Deposit Insurance Corp. The trend is an offshoot of the merger wave among large banks, which has left far fewer locally owned institutions in many markets. Entrepreneurs figure that has opened a big opportunity.

Arizona has witnessed buying sprees by Zions Bancorp., Norwest Corp., Banc One Corp., BankAmerica Corp., and Wells Fargo & Co.

Big out-of-state banking companies like those now control more than 90% of the state's deposits, an observer said. In 1987, by contrast, about 95% of deposits were locally held.

"There is a recognition among local businessmen that they no longer control their financial destiny," said Ernie Garfield, an organizer of new banks and founder of Scottsdale, Ariz.-based Interstate Bank Developers, a consulting firm.

The most ambitious entrepreneur active in Arizona is Joseph D. Reid, chairman and chief executive officer of Capitol Bancorp, a $760.6 million- asset holding company based in Lansing, Mich.

Mr. Reid, who operates 10 banks in Michigan and two in Arizona, said he intends to launch four state-chartered banks in or near Phoenix and Tucson this year.

"We're in the business of developing start-up banks," said Mr. Reid. "Arizona's growth rates are dramatic, and it helps us diversify our balance sheet against a turn in the economy."

Two of his projects-Camelback Community Bank, Phoenix, and Southern Arizona Community Bank, Tucson-are to open their doors this summer. Each bank has raised more than $4 million of capital; they will be run by former executives of Wells Fargo and First Interstate Bank, which Wells bought two years ago.

The other two banks-yet to be named-are awaiting regulatory go-aheads and would give Capitol six banks in the state.

Capitol first cracked the Arizona market in July 1996 and quickly succeeded; both of its current banks turned a profit after 10 months of operation. The banks are all run under Capitol's wholly owned subsidiary, Sun Community Bancorp.

It's no surprise that start-up banks are cropping up in Arizona, especially in Maricopa and Pima counties, where Phoenix and Tucson are located.

Arizona is the nation's second-fastest-growing state, after Nevada, with a projected population of five million by 2001.

Arizona's economy has diversified beyond natural-resource-related industries by expanding its service sector and high-tech manufacturing base.

The state has attracted such companies as Motorola and Intel. The tourism and convention center business also is booming.

Furthermore, the state's community banks are posting strong returns on assets-averaging better than 1.30%-compared with the national average of 1.23%, according to the FDIC.

Mr. Garfield said he wants to establish a bank holding company in Scottsdale-where four start-up banks have been successfully launched since 1995-by raising $5 million to $30 million via a public or private offering. He is also considering Tempe or East Phoenix as headquarters sites.

The company's main banking unit would offer international trade financing, Small Business Administration loans, and rural development loans. The holding company, meanwhile, would sell insurance and securities and perform audit functions, said Mr. Garfield.

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