Denovo Consultants Offers The Keys to Becoming a Successful deNovo...

Structure and capital must be considered carefully and can have effects on every aspect of the business plan and eventual bank success. Continued merger and acquisition activity throughout the USA is creating a world of opportunity for deNovo banks, their organizers as well as their shareholders. Not all new community banks are being organized by ex-bankers who have been displaced by a mega merger. Local community businessmen are also looking at the endless opportunity afforded them in the deNovo world. Many have had friends that invested heavily in a previous deNovo who have reaped the financial rewards in recent years. Others just see the need to serve the market in which they live. Every bank merger creates the opportunity for community bankers to shine and prosper.

Recent changes in the tax laws also enable deNovo banks to structure both the corporations and capital raise programs differently. In past years, banks were structured as "C" corporations from an Internal Revenue prospective. Many were raising capital in amounts that averaged $12 million, well above the state minimums, and tried to do it with as many investors as possible. They accomplished this by going public or were required to register their stock with the SEC due to an oversubscription of individual investors in excess of the maximum 500. This is a costly process fore the organizers and has an impact on the net capital. Bank presidents or CEO cringe at the thought of paying an investment banking firm, consulting firm and others a fee that would average in excess of $750,000 to get capital raised. One must also look at the type of clientele that the financial institution is trying to attract when deciding whether to be an S corporation or a CC corporation.

When a deNovo's clientele is focused on local professionals and small to medium business, which differs dramatically in approach and marketing from the retail segment, then it makes more sense to not form a "C" corporation and pay an investment banking firm in excess of ¾ of a million dollars to handle the stock offering. It does, however, make more sense, to form an "S" corporation with major advantages. Amongst those advantages would be the type of qualified investor one might attract. The typical investment amount increases from the $5,000 average for a "C" corporation to over $100,000 for an "S" corporation. Therefore it is now only necessary to attract 60-65 investors instead of possibly in excess of 500. The Internal Revenue Service in recent years has increased the maximum number of shareholders in an "S" corporation from 75 to 100 but taking on 100 shareholders in an initial private placement is not advisable. It would be wiser to sell stock to 65 outside qualified-investors, approximately 25% of the shares go to 9-11 board members and then leave the remaining 24-26 slots for employee option programs.

In today's competitive environment, community bank organizations that cannot, or will not, keep pace with the changing business climate, are doomed to under-perform. When a deNovo bank recognizes that in order to best serve the community and be accountable to its shareholders, it must develop a business strategy that will enable it to perform effectively and consistently at the highest-level possible. The definitive element of such a successful strategy is a customer service-oriented culture, which is precisely what many consumers believe is missing, or at best poorly implemented in the large regional and national financial institutions today.

Every bank professes to deliver quality service, but few actually do. There is a large segment of the market that is telling the industry, in a loud and clear voice, that it wants quality service and is willing to pay for it. Yet, the financial services industry is not addressing that issue in a fashion that satisfies a large segment of its customer base. deNovo banks must capitalize on the lack of responsiveness on the part of our potential competitors.

The founders of deNovo Consultants (www.denovoconcultants.com) believe that it is of paramount importance that successful organizations embrace technology. Through the use and application of the technological tools available today, a progressive financial service provider, can deliver a high level of service at a reasonable cost. This is not to say that the high-touch approach to customer service will be compromised in any way.

We see the effective blending of both elements as the key to the success of any financial service provider today.

Therefore, targeting, segmenting and maximizing their customer base should be a deNovo s watchwords. One size does not fit all. If a bank cannot customize its products to match the market, it will be at a distinct disadvantage. Larger banks and competition can not react to customer requests as rapidly as we can.

At the core of successful customer service is the organization's commitment to develop a sales culture with customer service as its primary focus. In order to support a service and sales culture, a deNovo must supply its employees with the detailed data and the tools necessary to effectively abd proactively cross-sell products and services. A deNovo should gather, integrate, track and utilize customer data with the aid of the latest information gathering technology available (all the while respecting and adhering to BSA and other regulatory privacy compliance issues).

Developing a sales culture is critical in order for a bank to enjoy long-term success. The term "sales culture" is open to broad interpretation. Bankers must learn to present products and services to their customers in a proactive fashion and only a qualified, well-trained staff is equipped to do that. We can no longer wait for the customer to come to us.

In addition, this sales mentality cannot be the exclusive responsibility of the officers. Every employee must embrace it. Management must design a program that will help those employees who have little or no sales experience, learn the selling process and enhance the skills of those who do. The financial institution should reward those who are able and willing to cross-sell. deNovo banks must accept the fact that developing a sales culture is no longer an option, but is now a necessity.

About deNovo Consultants (www.denovoconsultants.com): deNovo Consultants is a specialty consulting firm that offers end to end turn-key solutions for entering the world of community banking. The staff at deNovo Consultants are CMPM s (certified master project managers) who get involved in every aspect of the deNovo setup including conceptual, business plans, market analysis, chartering, real estate, design/build, RFP s, core processing, marketing and regulatory right through to the Grand Opening.

For further information contact:

Joseph Isaacs, CEO

727-738-5553

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