Start-Up Picks Unusual Niche: Homeowners' Associations
Fajt, Marissa, American Banker
About a year after his last start-up was sold in 2001, Mike Kowalski left banking to work for a friend's property management company for a couple of years.
There he came to the conclusion that there is demand for a bank that caters to homeowners' associations and property management companies.
Mr. Kowalski, who co-founded and later sold two banks in Texas, filed a charter application last month with the state's Department of Banking for his third start-up, First Associations Bank. Its target market will be homeowners' associations of condominiums and planned-unit developments across the United States, and it will offer a specialized suite of products and services -- such as lockboxes -- to help property managers function more efficiently.
New banks "have to find a niche," Mr. Kowalski, 52, said in an interview this week. "This is just one of many niches that could be established to go after, and that may make more sense than trying to be everything to everyone. I want to be everything to management companies."
Many banks have targeted specific sectors -- such as doctors or professional firms -- but First Associations would be one of just a handful, and the first in Texas, to go exclusively after property management companies and homeowners' associations.
Mr. Kowalski plans to raise between $12 million and $15 million for the bank, which he expects to open early next year.
Several large banking companies, including Banco Popular North America, Wells Fargo & Co., and Colonial BancGroup Inc. have departments that focus on homeowners' associations.
Colonial significantly beefed up its homeowners' association business two years ago when it bought PCB Bancorp in Clearwater, Fla. Today the $21.9 billion-asset Montgomery, Ala., company handles processing for 650,000 units in five states using a lockbox system that automates the process of accepting condo dues.
Homeowners' groups are also good sources of deposits and loans, said Lee Martino, the executive vice president of association services at Colonial.
"This market is continuing to grow," he said. "Every new subdivision that you see and condominium that goes up needs an association, so there are association deposits available to get, as well as association loans as they age and need repairs and working capital."
Understanding how homeowners' associations work and devoting resources to a specialized product line are critical to working in the business, Mr. Martino said.
According to Mr. Kowalski, homeowners' associations, though generally not well collateralized, operate like miniature rulemaking authorities and taxing authorities. A homeowners' association that receives a loan has the power to make a special assessment that requires property owners to pay the debt. …