New banks part of cycle

A handful of independent banks are trying to break the iron grip the mega banks seem to have on the Bay Area — a cycle that’s been repeated more than once.

“It is a pattern you see time and time again,” says Morningstar Inc. analyst Craig Woker about small, independent bank startups. “Typically, what you see happen after a mega bank merger is small, new and existing independent banks try to steal market share from banks undergoing significant business changes.”

It’s not an easy task.

“[Small banks] have to go up against large and established players and probably won’t show any significant market gain,” he says.

But “significant” is in the eye of the beholder.

“The Bay Area market is extremely good for a new bank because of the tremendous growth of population and number of corporations,” says James Avery, a San Luis Obispo banking consultant.

He has helped start 50 banks in the past 30 years, including the now-organizing Diablo Valley Bank in Danville.

The new banks hope that local knowledge of small businesses will be their trump card.

“There are 23,000 businesses based in San Mateo County and 22,000 of them fall into the category we are aiming at,” says John Schrup, president and CEO of United American Bank, a San Mateo startup. We’ll more than meet our goals with one-tenth of 1 percent of that market.

“You can run a profitable business with a small bank,” Woker says. But he adds the national trend is for consolidation into super regional banks and says most small independent banks will be bought by larger corporations as the banking cycle progresses.

“It’s coming to the point where you almost have one or two regional banks with a stranglehold on each market,” he says.

Until then, these new banks hope to profit by loosening that grip.