Bank Reforestation

Beginning of article

"When I was growing up here, there were nine hometown banks," states Larry McGoldrick as he surveys the banking landscape of Meriden, a central Connecticut city of 60,000.

"Now, there are none," he says.

That will soon change, however. McGoldrick is CEO and lead' organizer of Castle Bank and Trust (in formation). Approximately half the minimum $5.4 million in capital has been raised and McGoldrick hopes to open the bank's doors in mid-July.

He likes the bank's chances for success. "The timing is good for us," he says. "The pendulum has swung too far for big banks." His chances are heightened by the fact that over 67% of the market area's banking deposits are controlled by the out-of-state banking giants First Union and Fleet Financial.

A more striking example of out-of-state control of deposits is the Maricopa County area in Arizona, which includes fast-growing Phoenix and surrounding communities. Over 90% of the market's nearly $30 billion banking deposits are controlled by four big banks: Wells Fargo, Bank One, Norwest, and Bank of America. This out-of-state concentration has led to a resurgence of de novo banks in the area.

Welcome to the reforestation of the banking industry.

After hitting an all-time low in 1993, when only 59 new banks were formed, the number has risen steadily to more than 150 last year. While banking experts believe this trend will continue, by no means do they think the 1998 total will reach the record achieved in 1984 when 393 de novos were formed.

The key factors influencing the recent …