When Hal Russell, the president and chief executive officer of Commencement Bank in Tacoma, decided to get back into banking last year, he made the overwhelmingly popular choice and took a state charter.
Of the 190 banks that opened last year - the most in one year since 2000 - 81% were state-chartered commercial banks. Another 10% took national bank charters, only about 6% took a national thrift charter, and 2% became state-chartered thrifts. (In 2005 a similar percentage of the 179 start-ups chose a state bank charter.)
Mr. Russell and other banks say state regulators tend to be more accessible and understanding of local issues. Washington state regulators will "hold your feet to the fire, but they were willing to listen to us," he said. Commencement opened last month.
The top three states for new banks last year were states with growing economies: Florida (23), California (22), and Georgia (21).
Bank start-up activity tends to be heavy in areas where there is consolidation. Florida and Illinois were tied for the No. 2 spot in terms of announced deals last year, with 24 each, followed by California, with 14. Texas took the top spot, with 29. (Illinois chartered seven banks last year.)
Mark Zaback, the president and CEO of the $18 million-asset Jonah Bank of Wyoming, which opened in July in Casper, said state regulators are more helpful than their national counterparts during the start-up process.
"The state was very helpful - we were probably in contact with them daily for about six months" during the application process, he said.
All banks, whether they apply for a state or national charter, must be approved by the Federal Deposit Insurance Corp., and Mr. Zaback said Wyoming's regulators approved Jonah Bank's application two months before the FDIC did.
Like many new banks, Jonah has a business plan with a local focus, so it does not need the broader scope provided by national charters, he said. "We wanted to be a community bank. We did not want to expand out of Wyoming."
The founder of Libertad Bank of Austin, which opened in January of last year, also cited the speed of the approval process as a reason for becoming a state-chartered thrift. Ricardo Chapa, Libertad's president and CEO, said there were only 22 state-chartered thrifts in Texas when he applied for his charter.
"The thought is that we would get a little more attention" from the Texas Department of Savings and Mortgage Lending, Mr. Chapa said. "They were very accommodating at providing guidance and so forth."
Because Libertad's business plan focuses on mortgages, construction loans, and reaching the unbanked, a thrift charter made sense, he said.
Libertad is also an example of the many financial institutions that have opened this year with a focus on a particular ethnic community. Its Web site notes all of its employees speak English and Spanish.
The $18.6 million-asset MoreBank, which opened last year in Philadelphia, focuses on Korean immigrants. In April the $3.9 billion-asset Capitol Bancorp Ltd. of Lansing, Mich., established an Asian-focused bank in Arizona.
John Blaylock, an associate director with Sheshunoff & Co. Investment Banking in Austin, predicted that the number of ethnically focused banks will continue to increase.
"There are more that I have seen this year. I think that speaks to the rising importance and influence of these specific communities that have these specific banking needs in most of the major metropolitan areas in the country," Mr. Blaylock said. Libertad is one of eight financial institutions founded in Texas last year.
Mr. Blaylock said that many start-ups choose a state charter because they are founded by people who repeatedly start and sell banks and over time develop a cooperative relationship with their regulators.
"The regulators, if they are really cognizant of what their job is, are realizing that there is no way the bankers can know all these things and run the bank at the same time," he said.
Though the cost savings can be considerable, the bankers who chose state charters said that cost was not a big factor in their decisions.
In fact, Mr. Chapa paid $10,000 for Libertad's Texas thrift charter, or twice as much as he would have paid for a Texas bank charter. (A federal thrift charter costs $20,000.)
A national bank charter costs $25,000, but Washington state charged Commencement Bank $6500. Nevertheless, Mr. Russell said rather than cost, he was more interested in being able to travel less than an hour to meet with the state banking commissioner.
"The national charter never even entered my mind," Mr. Russell said.
John M. Schreuder, the chairman and CEO of the $32.3 million-asset First National Bank of Michigan, which opened in April in Kalamazoo, bucked the trend and choose a national charter.
One reason "was the name, the First National Bank of Michigan - that was an old bank that I started with 30 years ago in Kalamazoo," he said.
That bank had been well respected, and Mr. Schreuder said a number of older people who remember the name may pick his new bank. He also said he was familiar with the Office of the Comptroller of the Currency and its exam processes.
"Any perception that the OCC is not receptive to new charters is simply wrong," Comptroller John C. Dugan said in a statement Friday. "I do think, however, that we need to do a better job of getting the word out that the OCC welcomes applications with solid business plans."
Office of Thrift Supervision Director John Reich has made efforts in the past year to attract organizers to the thrift charter, and those efforts may be paying off. Just six start-ups chose the federal thrift charter in 2005, but 11 did last year.
