PHOENIX (By Ruben Hernandez, Business Journal) June 4, 2004 -- Inspired by the growth of Valley Hispanic businesses, a group of Latino leaders is forming a bank to focus on the Hispanic bilingual market.

The Valley startup reflects a national trend of Hispanic entrepreneurs organizing Hispanic community banks as well as larger banks courting the growing market, say consultants who specialize in helping new banks get off the ground.

Sonoran Bank will be the first new bank in Arizona to specialize in the needs of small and growing Hispanic-owned businesses, said Ricardo Torres, chairman of the new bank and the former president and co-founder of La Voz, the Spanish-language weekly.

Torres estimated the bank will open in early 2004 and will focus on business loans in the $50,000 to $500,000 range. The group has been working on the bank organization for about a year and is raising $7 million to $10 million to meet capital requirements.

"We really want to offer Latino business owners unique, personalized banking services that sometimes are lacking in corporate banks," Torres said. "It is meeting the special needs of Latino business that will allow their businesses to flourish, and our business to flourish."

When it opens, Sonoran Bank will join at least 12 other Hispanic banks in startup mode across the country.

Dan Hudson, chief executive of BankMark, a consulting firm in San Luis Obispo, Calif., said his company is working with seven groups organizing Hispanic banks.

That compares to only seven total Hispanic-owned banks that opened between 2000 and 2004, according to statistics from the Federal Deposit Insurance Corp.

Hudson said the banks he is organizing are in markets such as Charlotte, N.C., Chicago, Denver, and Washington, D.C. Traditionally, Hispanic banks have sprung up along the U.S.-Mexico border, such as the $39 million-asset Bank of El Paso Norte in El Paso, Texas. Others have opened in large Hispanic markets, such as the $94 million-asset PanAmerican Bank of Miami.

"Sonoran Bank will be the first in Arizona, and it will be a premier bank," said Ernest Garfield, owner of Interstate Bank Developers Inc. in Scottsdale.

Garfield, a former state senator, state treasurer, and Arizona Corporation Commission member, was hired by Sonoran Bank's board of directors to help organize the bank.

Garfield said he has helped establish 26 banks in six Western states, including 13 in Arizona over the past 20 years. He is charging a $135,000 fee and will receive stock in Sonoran Bank for his help, he said.

Sonoran Bank has not yet filed with the Federal Deposit Insurance Corp. or the Arizona State Banking Department. Garfield said forming the board of directors was the first step, and now that that process is completed, the next step is to file for legal status.

After that, Sonoran Bank can issue stock to raise capital, Garfield said. Also, the board of directors and a planned 35-member advisory board will raise capital funds internally.

While institutions such as Bank of America court Hispanic consumers and businesses with Spanish-language services and acceptance of "matricula" cards, there is a niche for a bank with the personalized services that Sonoran Bank can offer, according to Torres. Matricula identification cards are issued to Mexican nationals by their consulates.

"A Latino small businessman will be able to walk into our store and get to personally meet the bank president," Torres said. And loan decisions will be made locally and quickly, instead of through a corporate headquarters in another city, he said.

Tanya Wheeless, president and chief executive of the Arizona Bankers Association, said most state banks want to work with the Hispanic community.

"It's a good thing to do for any financial institution," she said. "If you have noticed the bank advertisements, more and more advertising is in Spanish. More and more are accepting matricula cards. That's another sign of financial institutions reaching out and wanting to serve the Hispanic community."

She added, "This is the first bank that has come to my attention where the stated mission is to focus on ethnic business owners."

Although organizers can file as a minority-owned bank, Garfield is not choosing that route for Sonoran Bank.

The FDIC defines a minority-owned bank as one with a target market made up mainly of minorities and with minorities making up more than half of its board. The FDIC established a minority-owned bank classification to encourage the growth of these banks to serve the minority community. The agency has established specific regulations and services for them. However, some feel the label could limit the diversity of clientele.

Hudson said the Hispanic banks he is working with will not be filed as minority-owned.

"It's best not to limit your clientele," he said. "My people won't exclusively serve the Hispanic market, but that is their focus, and their efforts will target the Hispanic market."

Sonoran Bank is a natural evolution of the growth of Hispanic businesses in Arizona, and particularly the Valley, said Loui Olivias, a Sonoran Bank board member and vice president for academic affairs at the W.P. Carey School of Business at ASU.

"The Hispanic market is maturing here," he said. "There has been a tremendous growth of Hispanic businesses, so there is a greater need to access capital to grow their businesses."

Olivias said he joined the group because it was an "exciting opportunity" to be part of the Valley's first Hispanic bank.

"We are not board members who are trying to come in, make money and move on," Olivias said.

"We are from the Hispanic community and will help to build this community and, by doing so, will help the greater Arizona community. That is what will differentiate Sonoran Bank from any other bank in Arizona."

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