United Bank's Emma Chappell won over 3,000 small investors
In 1992, Emma C. Chappell founded United Bank of Philadelphia, after an epic five-year effort. It was the first African-American-owned bank the city had seen in 35 years. Today, the bank is considered a leader in lending to minorities, and Chappell, the bank's chairman, president, and chief executive officer, has made it a priority to give other black entrepreneurs a leg up. (See Business Week frontier Online, "A Black Entrepreneur in Banking Gives Others a Break," June 30, 1999). How did she do it? First of all, Chappell won't take "no" for an answer. And she has heard the word plenty often as an African-American woman who started a bank. "I am one person who hates to fail. So if I say I am going to do something, I am going to put all of my time and energy into making it happen," she says.
Chappell started her career as a clerk-photographer for Continental Bank (now part of PNC Bank), one of Philadelphia's largest financial institutions. She worked there for more than 30 years, moving up the ranks. She was the first woman to go through its executive training program and finally became vice-president of the community business loan and development department.
In 1984, Reverend Jesse Jackson tapped her to become treasurer of his Presidential campaign. She took a three-year leave of absence from the bank to work with him, helping to found Operation PUSH, a nonprofit organization dedicated to achieving financial equality for minorities, and then acting as the first vice-president for administration of the National Rainbow Coalition.
But banking lured Chappell back from politics. In 1987, while she was still in Washington, a group of Philadelphia businessmen, bankers, and lawyers approached her with the idea of forming a minority-owned bank in the city. They showed her a 1987 survey with these sobering statistics: Six major banks in Philadelphia had lent about $387 million locally for mortgages. Of that, less than $8 million went to minorities, and less than $2 million to women. "We could not believe it," Chappell says. "The sad part is if you look at most of these minority communities, most of the households are headed up by women." Chappell said the study convinced her that Philadelphia needed a bank that had the community's interests at heart. She set out to create one.
It was a bad year to try to found a bank. In October, 1987, the stock market crashed, and Chappell's financial supporters vanished. "In the meantime, I had put my name out there. I had gone out to the community, been on talk shows, been in the churches, and to the people I knew," Chappell says. "I started drumming up the idea of: 'If we could get a bank going, would you support it?' and they all had said, 'Yes, you do it, and we will support you.'"
The harsh effects of the early 1990s recession on the African-American community in Philadelphia only hardened Chappell's resolve. She decided not to pursue large investors for capital. Instead, she turned to the community. Over the next two years, she set up the bank's structure and sold shares to 3,000 black investors, in $500 blocks.
By 1989, Chappell says she raised $3 million, the amount Pennsylvania regulators told her she needed to capitalize the bank. "But then as I got to Harrisburg...to tell them: 'Here is our business plan, and I have $3 million in the bank,' they told me it wasn't enough, that I needed $5 million. And that is when my heart really sunk." The rationale? Chappell says racism may have been a factor. Another possibility: The savings and loan crisis, and the spectacle of so many small banks failing, may have chilled regulators to the plan. "They never gave a reason, other than to say it was a different economy, so you need more money to start," says Chappell. It took her another year, but she raised an additional $3 million, this time from big investors -- $1 million more than the regulators had demanded.
Shortly after its opening, the bank acquired six more branches -- failed savings and loans in other minority neighborhoods in Philadelphia -- which it bought from the Resolution Trust Corp. "My mission has been to maintain banking services in these underserved neighborhoods, which then allows for the economic viability of those neighborhoods," Chappell says. Today, the bank has assets of $122 million. Its efforts to promote other entrepreneurs include business education and a hands-on approach to lending to them. The bank doesn't just lend to local small-business people. It works closely with them to make sure they have suitable business plans and that they manage their finances properly.
The bank has had its own financial ups and downs in the process. In 1998, the bank's net income fell 94%, to a minuscule $10,000, because a $1 million-plus loan ran into trouble, forcing the bank to increase its loan-loss reserves. The situation has since turned around, says Chappell, who projects 1999 net income at $361,000.
She remains a high-profile figure. Last year, she accompanied President Clinton and the First Lady to Africa, where Chappell says she met with bankers and members of chambers of commerce. In June, she received the Blue Chip Enterprise Initiative Award of the U.S. Chamber of Commerce, which honors small-business owners who have overcome adversity to create opportunities for themselves and their communities. The bank's mission, Chappell says, is "about leveling the playing field and letting people earn money to fulfill their dreams." The most important lesson of her years as an entrepreneur and a banker? Perseverance. "That has been my success," she says. And it's a quality she exemplifies.
By Jeremy Quittner in New York
jeremy_quittner@businessweek.com A Slave's Daughter Was the First Black Woman Bank Founder in the U.S.
Friday, September 11, 2009
Thursday, September 3, 2009
De Novo Bank Application Process
De Novo Bank Application Process
Videos for this Topic
The Importance of Your First Location
View Transcript
Governance Issues for Native American Institutions
View Transcript
Sections in this Topic
Overview
The Charter Decision
Pre-Filing Contact
The Charter and FDIC Insurance Application
What Regulators Look For
Holding Company Formations
Fees to Consider
Public Nature of Applications
Required Stock Subscription for Member Banks
Reference
Main page for Start a Bank
Related Resource
Processing of De Novo Bank Membership Applications
Overview
Bank organizers have several options from which to choose when forming their bank. This topic discusses these options, which depend significantly on the organizers' vision for the institution.
The Charter Decision
There are several decisions to make when considering a new charter. One choice is whether the depository institution will be a commercial bank or a savings bank/association. Another is whether it is to be state or federally chartered.
If an institution chooses a commercial bank charter, the decision is whether to apply for a national bank charter from the Office of the Comptroller of the Currency (OCC) or a state bank charter from the state regulatory authority. Commercial banks with a national charter are supervised by the OCC and are members of the Federal Reserve System. Commercial banks with a state charter are supervised by both the applicable state banking department and either the Federal Deposit Insurance Corporation (FDIC) for state nonmember banks or the Federal Reserve for state member banks.1
If an institution chooses a savings bank/association charter, the decision is whether to be a state-chartered savings association, primarily regulated by the state, or a federal savings bank/association, primarily regulated by the Office of Thrift Supervision (OTS).
Important points to consider when choosing a charter include the following:
Regulatory quality—Does the supervisory process add value?
How accessible and responsive to inquiries is the supervisor?
What supervisory costs are associated with the charter (e.g., application fees, examination charges, etc.)?
What powers, rights, and privileges are conferred by the charter?
Pre-Filing Contact
Although filing required applications is the official start of the regulatory application process, it should not be the first step of the process. Organizers of new banks are strongly encouraged to contact bank regulators prior to filing the required applications. Pre-filing contact, in the form of a meeting or telephone conference with key organizers and supervisors, provides a forum for organizers to obtain specific instructions regarding the application process and filing requirements. Further, whether the de novo will operate with a minority focus or operate generally, the organizers will benefit from guidance regarding access to capital, organizing boards of directors, and regulatory expectations. Insight into these areas may improve strategic decisions, reduce costs, and speed the application process. Regulators can also provide feedback regarding potential issues related to specific charter proposals. For example, pre-filing contact allows for identification of any issues that might be revealed through advance background checks of the organizers, analysis of initial capital adequacy, and study of management's business plan for reasonableness.
In the past, some MOI and de novo organizers have faced challenges during the chartering process that could have been prevented by pre-filing contact with bank regulators. Early recognition of issues allows them to be addressed before submission of the application, facilitating efficient processing of the application.
The Charter and FDIC Insurance Application
The Interagency Charter and Federal Deposit Insurance Application (interagency form) is a combined interagency form issued by the OCC, the OTS, and the FDIC. This form helps to eliminate duplicative information requests by consolidating the reporting requirements of the above-mentioned regulatory agencies into one uniform document.
All three agencies use the interagency form, regardless of the type of charter under consideration. However, the decision to grant or deny the charter application is independent of the decision to grant or deny deposit insurance. Further, depending on the chartering agency (i.e., OCC, OTS, or the state) and membership status (i.e., Federal Reserve member or nonmember), additional applications may be required by the appropriate state agency and the Federal Reserve, respectively. Regardless of membership status, state-chartered banks must file a separate charter application with the appropriate state banking agency, in addition to the interagency form. The Federal Reserve is in the process of changing the policy to allow one combined application to be filed. Further, for a Federal Reserve state member bank, a separate membership application (Form 2083 A/B/C) must also be filed, after preliminary charter approval is granted by the appropriate state chartering agency.
What Regulators Look For
When a regulator reviews new bank applications, the primary objective is to ensure compliance with laws, regulations, and supervisory policy. For instance, certain factors must be given special consideration in approving de novo bank applications, including managerial factors, financial factors, capital adequacy, and convenience and need.
Managerial factors address the competence, experience, integrity, and financial ability of the institution's organizers and management. Financial factors address the viability of the business plan and the ability to achieve and maintain profitability. Capital adequacy addresses the bank's capital in the context of its future growth and earnings prospects, verifying that the bank is raising the required capital. Convenience and need address how the bank plans to serve the financial services needs of the community.
Holding Company Formations
Along with chartering decisions, organizers should consider whether to have a bank holding company take ownership of their bank or remain independent. Bank holding companies allow banks to more easily expand geographically; to move into other product markets (nonbanking activities); and to obtain greater tax benefits and financial flexibility, thereby avoiding some of the constraints imposed by regulation, including limitations on leverage, the types of assets that can be acquired, and liabilities that can be issued.
Bank holding company formations and supervision are the responsibility of the Federal Reserve. The Federal Reserve has adopted, and continues to follow, the principle that bank holding companies should serve as a source of managerial and financial strength for their subsidiary banks. A separate application is needed to form a holding company. This application can be filed in conjunction with the charter application or at a later date.
Fees to Consider
There are direct regulatory costs to consider when chartering a new bank. These fees include charter fees, application fees, and ongoing supervision fees. Charter fees are a one-time charge, assessed when the bank is initially chartered. Application fees are associated with any subsequent application filed, including charter conversions, branching, purchase and assumption, merger/acquisition, and change in control applications. Supervision fees, or assessments, are charged for ongoing regulatory examinations.
While OCC fees are uniform across states, state fees vary from state to state and are generally lower than OCC fees. The Federal Reserve does not charge any fees. Although the FDIC does not charge fees, insurance premiums are imposed in connection with FDIC insurance.
Public Nature of Applications
In contrast to many other aspects of the supervisory process, the applications process is a very public function. Federal regulations require that notice of certain proposals be published in a newspaper of general circulation in the communities that will be affected by a banking proposal to allow the general public an opportunity to comment on the proposal. The public is notified upon receipt of certain types of applications, and the application itself is considered a public document available for review upon request (confidentiality can be requested for private information). Further, the outcome of the application is also made public.
Although the Federal Reserve membership application does not require newspaper publication, the action taken on such applications is still made available to the public.
Required Stock Subscription for Member Banks
As a condition of membership in the Federal Reserve, member banks (both state- and OCC-chartered) are required to subscribe to stock in their District's Federal Reserve Bank. The required subscription is equal to 6 percent of the bank's capital and surplus; 3 percent must be paid in, and the remaining 3 percent is subject to call by the Board of Governors of the Federal Reserve.
Holding stock in a Federal Reserve Bank does not carry with it the typical control and financial interest conveyed to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans; it is merely a legal obligation required with membership. Annually, member banks will receive a 6 percent dividend on their stock, as specified by law, and they can vote for some of the directors (class A and class B directors) of their Reserve Bank.
Reference
The word "member" refers to Federal Reserve System membership. A state nonmember bank is a state-chartered bank that has chosen not be a Federal Reserve System member. A state member bank is a state-chartered bank that has chosen to be a member of the Federal Reserve.
Videos for this Topic
The Importance of Your First Location
View Transcript
Governance Issues for Native American Institutions
View Transcript
Sections in this Topic
Overview
The Charter Decision
Pre-Filing Contact
The Charter and FDIC Insurance Application
What Regulators Look For
Holding Company Formations
Fees to Consider
Public Nature of Applications
Required Stock Subscription for Member Banks
Reference
Main page for Start a Bank
Related Resource
Processing of De Novo Bank Membership Applications
Overview
Bank organizers have several options from which to choose when forming their bank. This topic discusses these options, which depend significantly on the organizers' vision for the institution.
The Charter Decision
There are several decisions to make when considering a new charter. One choice is whether the depository institution will be a commercial bank or a savings bank/association. Another is whether it is to be state or federally chartered.
If an institution chooses a commercial bank charter, the decision is whether to apply for a national bank charter from the Office of the Comptroller of the Currency (OCC) or a state bank charter from the state regulatory authority. Commercial banks with a national charter are supervised by the OCC and are members of the Federal Reserve System. Commercial banks with a state charter are supervised by both the applicable state banking department and either the Federal Deposit Insurance Corporation (FDIC) for state nonmember banks or the Federal Reserve for state member banks.1
If an institution chooses a savings bank/association charter, the decision is whether to be a state-chartered savings association, primarily regulated by the state, or a federal savings bank/association, primarily regulated by the Office of Thrift Supervision (OTS).
Important points to consider when choosing a charter include the following:
Regulatory quality—Does the supervisory process add value?
How accessible and responsive to inquiries is the supervisor?
What supervisory costs are associated with the charter (e.g., application fees, examination charges, etc.)?
What powers, rights, and privileges are conferred by the charter?
Pre-Filing Contact
Although filing required applications is the official start of the regulatory application process, it should not be the first step of the process. Organizers of new banks are strongly encouraged to contact bank regulators prior to filing the required applications. Pre-filing contact, in the form of a meeting or telephone conference with key organizers and supervisors, provides a forum for organizers to obtain specific instructions regarding the application process and filing requirements. Further, whether the de novo will operate with a minority focus or operate generally, the organizers will benefit from guidance regarding access to capital, organizing boards of directors, and regulatory expectations. Insight into these areas may improve strategic decisions, reduce costs, and speed the application process. Regulators can also provide feedback regarding potential issues related to specific charter proposals. For example, pre-filing contact allows for identification of any issues that might be revealed through advance background checks of the organizers, analysis of initial capital adequacy, and study of management's business plan for reasonableness.
In the past, some MOI and de novo organizers have faced challenges during the chartering process that could have been prevented by pre-filing contact with bank regulators. Early recognition of issues allows them to be addressed before submission of the application, facilitating efficient processing of the application.
The Charter and FDIC Insurance Application
The Interagency Charter and Federal Deposit Insurance Application (interagency form) is a combined interagency form issued by the OCC, the OTS, and the FDIC. This form helps to eliminate duplicative information requests by consolidating the reporting requirements of the above-mentioned regulatory agencies into one uniform document.
All three agencies use the interagency form, regardless of the type of charter under consideration. However, the decision to grant or deny the charter application is independent of the decision to grant or deny deposit insurance. Further, depending on the chartering agency (i.e., OCC, OTS, or the state) and membership status (i.e., Federal Reserve member or nonmember), additional applications may be required by the appropriate state agency and the Federal Reserve, respectively. Regardless of membership status, state-chartered banks must file a separate charter application with the appropriate state banking agency, in addition to the interagency form. The Federal Reserve is in the process of changing the policy to allow one combined application to be filed. Further, for a Federal Reserve state member bank, a separate membership application (Form 2083 A/B/C) must also be filed, after preliminary charter approval is granted by the appropriate state chartering agency.
What Regulators Look For
When a regulator reviews new bank applications, the primary objective is to ensure compliance with laws, regulations, and supervisory policy. For instance, certain factors must be given special consideration in approving de novo bank applications, including managerial factors, financial factors, capital adequacy, and convenience and need.
Managerial factors address the competence, experience, integrity, and financial ability of the institution's organizers and management. Financial factors address the viability of the business plan and the ability to achieve and maintain profitability. Capital adequacy addresses the bank's capital in the context of its future growth and earnings prospects, verifying that the bank is raising the required capital. Convenience and need address how the bank plans to serve the financial services needs of the community.
Holding Company Formations
Along with chartering decisions, organizers should consider whether to have a bank holding company take ownership of their bank or remain independent. Bank holding companies allow banks to more easily expand geographically; to move into other product markets (nonbanking activities); and to obtain greater tax benefits and financial flexibility, thereby avoiding some of the constraints imposed by regulation, including limitations on leverage, the types of assets that can be acquired, and liabilities that can be issued.
Bank holding company formations and supervision are the responsibility of the Federal Reserve. The Federal Reserve has adopted, and continues to follow, the principle that bank holding companies should serve as a source of managerial and financial strength for their subsidiary banks. A separate application is needed to form a holding company. This application can be filed in conjunction with the charter application or at a later date.
Fees to Consider
There are direct regulatory costs to consider when chartering a new bank. These fees include charter fees, application fees, and ongoing supervision fees. Charter fees are a one-time charge, assessed when the bank is initially chartered. Application fees are associated with any subsequent application filed, including charter conversions, branching, purchase and assumption, merger/acquisition, and change in control applications. Supervision fees, or assessments, are charged for ongoing regulatory examinations.
While OCC fees are uniform across states, state fees vary from state to state and are generally lower than OCC fees. The Federal Reserve does not charge any fees. Although the FDIC does not charge fees, insurance premiums are imposed in connection with FDIC insurance.
Public Nature of Applications
In contrast to many other aspects of the supervisory process, the applications process is a very public function. Federal regulations require that notice of certain proposals be published in a newspaper of general circulation in the communities that will be affected by a banking proposal to allow the general public an opportunity to comment on the proposal. The public is notified upon receipt of certain types of applications, and the application itself is considered a public document available for review upon request (confidentiality can be requested for private information). Further, the outcome of the application is also made public.
Although the Federal Reserve membership application does not require newspaper publication, the action taken on such applications is still made available to the public.
Required Stock Subscription for Member Banks
As a condition of membership in the Federal Reserve, member banks (both state- and OCC-chartered) are required to subscribe to stock in their District's Federal Reserve Bank. The required subscription is equal to 6 percent of the bank's capital and surplus; 3 percent must be paid in, and the remaining 3 percent is subject to call by the Board of Governors of the Federal Reserve.
Holding stock in a Federal Reserve Bank does not carry with it the typical control and financial interest conveyed to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans; it is merely a legal obligation required with membership. Annually, member banks will receive a 6 percent dividend on their stock, as specified by law, and they can vote for some of the directors (class A and class B directors) of their Reserve Bank.
Reference
The word "member" refers to Federal Reserve System membership. A state nonmember bank is a state-chartered bank that has chosen not be a Federal Reserve System member. A state member bank is a state-chartered bank that has chosen to be a member of the Federal Reserve.
Firsthaitianownedbank
The current economic crises have had major effects in every sector of the economy especially the banking industry. While these effects have brought down many institutions that are vital for economic growth and development, business leaders must continue to develop new ways and ideas that foster growth in our economy. Ben Bernanke, chairman of the Federal Reserve board, speaks at the global financial literacy summit, Washington D.C on June 17, 2009 about community development financial institutions challenges and opportunities, where he states the importance of financial literacy and financial education has never been more important or evident.
Community bank plays a vital role in community development!!!!
Minority owned banks focused on community development have many advantages, yet minority groups either don’t know how to form a community bank or believe that the capital requirement is unachievable. The Federal regulators along with state regulators provide several types of financial assistance to minority owned bank or group desiring to open a bank to meet the credit needs of the community in which they serve.
As a community bank, you could qualify as a community development financial institution, whereby you would be entitled to find funds from the treasury department as well as attracting several type of low funds investment. You can also be part of the Federal home loan bank under a provision of the Federal Housing and community development act section 8.
As a community bank, your focus is to help develop the community in which you operate and facilitate small business investment and provide non-traditional banking services to your customers: including determining a new risk rating based on other factors to determine eligibility for financial products such home loans, auto loans and other.
You can provide one stop financial services to your customers and non-customers such check cashing, bill payment, phone card and other financial service. As a community bank fostering economic growth also include financial education programs where by teaching people to be more financially responsible, the importance of creating and maintaining good credit, how to save for child education.
Only if minority group knew how to take advantage of their purchasing power, they could change their lives as well as the lives of the people in their community. All and all, the most important thing is education and the need to support each other through community banking, such a way will lead to economic development and growth and higher standards of living.
I currently work for a regional accounting firm in the downtown Miami area and I specialize in financial institutions. I believe that it is about time that we the Haitian community join hands together to open the firsthaitianownedbank as a community development bank to serve and meet the credit needs of our people; however, the strategy should be bold enough to not only serve the Haitian community but also surrounding communities. Current analysis shows the need to provide support to many small businesses that are considered undercapitalized and could potentially grow, yet if the financial support is not available, economic growth can not occur.
I must state that our current strategy is to open our first community bank focusing on low to moderate income communities in the North Miami Beach, FL area and to grow across the united state as a national bank. This blog is being posted here in search of support especially in the Miami, Fl area so that we can build a strong management team to help execute the business plan as written once we file the application and obtain approval from the regulators. I Hope to read from you and read your comments. if you are interested in knowing or being part of the organizing team please state so in your comments. To become a director or an officer of the bank will require specific qualifications; however, you can always become a stockholder!!!!!!!!!!!
Community bank plays a vital role in community development!!!!
Minority owned banks focused on community development have many advantages, yet minority groups either don’t know how to form a community bank or believe that the capital requirement is unachievable. The Federal regulators along with state regulators provide several types of financial assistance to minority owned bank or group desiring to open a bank to meet the credit needs of the community in which they serve.
As a community bank, you could qualify as a community development financial institution, whereby you would be entitled to find funds from the treasury department as well as attracting several type of low funds investment. You can also be part of the Federal home loan bank under a provision of the Federal Housing and community development act section 8.
As a community bank, your focus is to help develop the community in which you operate and facilitate small business investment and provide non-traditional banking services to your customers: including determining a new risk rating based on other factors to determine eligibility for financial products such home loans, auto loans and other.
You can provide one stop financial services to your customers and non-customers such check cashing, bill payment, phone card and other financial service. As a community bank fostering economic growth also include financial education programs where by teaching people to be more financially responsible, the importance of creating and maintaining good credit, how to save for child education.
Only if minority group knew how to take advantage of their purchasing power, they could change their lives as well as the lives of the people in their community. All and all, the most important thing is education and the need to support each other through community banking, such a way will lead to economic development and growth and higher standards of living.
I currently work for a regional accounting firm in the downtown Miami area and I specialize in financial institutions. I believe that it is about time that we the Haitian community join hands together to open the firsthaitianownedbank as a community development bank to serve and meet the credit needs of our people; however, the strategy should be bold enough to not only serve the Haitian community but also surrounding communities. Current analysis shows the need to provide support to many small businesses that are considered undercapitalized and could potentially grow, yet if the financial support is not available, economic growth can not occur.
I must state that our current strategy is to open our first community bank focusing on low to moderate income communities in the North Miami Beach, FL area and to grow across the united state as a national bank. This blog is being posted here in search of support especially in the Miami, Fl area so that we can build a strong management team to help execute the business plan as written once we file the application and obtain approval from the regulators. I Hope to read from you and read your comments. if you are interested in knowing or being part of the organizing team please state so in your comments. To become a director or an officer of the bank will require specific qualifications; however, you can always become a stockholder!!!!!!!!!!!
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