Dan's Papers - April 4, 2008 - Banking on Georgica

"It's a good time to start a bank," said Chris Becker, President and CEO of Georgica Bank, at a recent presentation for potential investors held at the Bridgehampton Inn. Although I'm not very familiar with the banking industry, I do have investment experience and a business degree, and what he said rang true. With the ongoing mortgage crisis, rise in foreclosures and overall downturn of the economy, starting a new bank, or any new business, might not seem like a good idea. But with a clean balance sheet and availability of credit, Georgica Bank is entering the market at a good time - it didn't get buried in the current financial crisis, so it won't have to dig its way out. But none of that matters, of course, if it doesn't have a solid foundation. So I went to the presentation, along with my colleague Victoria and about ten other potential investors, to find out who was behind this venture and hear what they had to say.

Before entering the Inn, Victoria and I scoped out the parking lot to get an idea of what types of people attended these things - a few BMWs, a Mercedes, a '98 Buick, a beat-up Chevrolet Cavalier and a taxicab. Interesting. Clearly, many different types of people were curious about Georgica Bank.

Once inside, we were offered refreshments, and I spoke with members of the management team. Their backgrounds were impressive: they all had long successful careers at another local bank, but felt passionately enough about Georgica Bank to walk away from the security of their jobs to join this endeavor. I also liked that the organizational team is made up of local businesspeople with experience in a variety of industries including real estate, insurance, law and architecture. According to them, there is a great need for more personal, one-on-one banking on the East End. I was also impressed that the organizers have invested $3.85 million of their own money in Georgica Bank.

During the presentation, we were shown charts indicating the successful stock performance of publicly traded community banks on Long Island and the median annualized rates of return to shareholders who purchased de novo shares during IPO. It was a logical argument - this is a good investment, and they need investors. But that's what we expected to hear. Becker also explained that this opportunity is for long-term investors (5-7 years), not for someone looking to turn a quick profit. The only negative point raised is that there will be no drive-thru teller, but Becker assured us that Georgica Bank customers would be spoiled (in fact, "Be Spoiled" is their motto). So if for some reason you can't walk into the bank to make a deposit, he will come outside to take your deposit slip.

Additional information we learned included: Georgica Bank is set to open its doors in the fourth quarter of '08 with locations in Bridgehampton and East Hampton. The management team is used to producing above average numbers. There will be no ATM fees. The investment opportunity is a minimum of 2,500 shares for $25,000 and maximum of 50,000 shares for $500,000 (unless you give them a good reason to take more of your money). When the bank is referred to as "de novo," it means it has been operating for five years or less.

When the presentation ended, we mingled with the crowd, ate pastries and drank Pellegrino. Everyone seemed enthusiastic about the idea of investing in a local start-up with such a strong backbone of experienced managers and organizers. With investments, they say stick with what you know - but diversification makes a portfolio stronger. After much review, Victoria and I made our decisions - one of us chose to invest, the other didn't.