Integro Bank is about to become the first de novo since before the financial crisis to open in Phoenix.
It will also become the second startup bank of 2022 in Arizona after Scottsdale Community Bank. Prior to this year, no new banks had opened in Arizona since the $210 million-asset Gateway Commercial Bank in Mesa was established in December 2007.
There is a glaring need for more banking services in Arizona, the fourth-fastest growing state in the country in terms of population last year, according to Thomas Inserra, Integro’s CEO and founder. For more than a decade, the number of banks in the state dwindled while Census Bureau counts of its population swelled.
“You have a big imbalance between supply and demand,” Inserra said in an interview.
When the 2008 financial crisis rocked the lending sector, there were more than 30 community banks in metro Phoenix, according to state data. In the three years before the crisis, 10 de novo banks opened in Arizona.
By this year, there were only four based in the Phoenix area. The dwindling numbers followed bank failures and mergers in the wake of a real estate meltdown and massive loan losses. Across all of Arizona, there were more than 50 community banks in 2008 but only about 10 at the start of 2022.
“Of all 50 states, Arizona has the most acute shortage of banks,” Inserra said. For example, he said, Phoenix has roughly three times the population of Miami, but the South Florida city has four times as many banks as Arizona’s largest market.
That explains why Inserra and a team of founding partners launched their effort last year to start up the new bank.
Nationwide, startup banks became increasingly rare over the past several years. Regulatory hurdles grew in the wake of the financial crisis, which exposed deep vulnerabilities in the banking system. For many, raising capital amid the uncertainties of the pandemic added complications.
Nationally, fewer than 50 de novo banks opened in the U.S. in the past decade, according to the Federal Reserve. That was far below the average of 100 per year before the crisis.
Frank Sorrentino, founder and CEO of ConnectOne Bancorp, which opened up in Englewood Cliffs, New Jersey, in 2005, said the bank startup process was already difficult at that time. It has become substantially more challenging since, he said, while investors are clamoring more for mergers than new banks, viewing size and scale as vital in an era when huge investments in digital services are needed. ConnectOne has $8.3 billion of assets.
“There will be a few” de novos in markets such as Phoenix, “but a few is all there will be,” Sorrentino said in an interview.
While it can often take years to raise capital and win regulatory approval, Integro — the name combines integrity and growth — has nearly completed the process in about a year. This demonstrates just how great a need Phoenix has for a new bank, Inserra said.
The startup recently secured conditional approval from the Federal Deposit Insurance Corp. and state regulators in Arizona. It just needs to bring aboard a couple final investors to reach the $27.9 million of capital needed to get final approvals.
“We’re so confident that we are hiring and planning the opening” for later this month, Inserra said. “We’re getting very, very close.”
Integro will focus on lending to businesses with $20 million in annual revenue or those with fewer than 100 employees. Surveys the companies conducted — as well as investor input — show this is where the greatest need for a new bank lies, Inserra said.
To be sure, major banks such as Wells Fargo and JPMorgan Chase, while based elsewhere, have significant presences in Arizona. But Inserra said they tend to focus on much larger commercial clients, leaving small-business owners searching for options.
Integro sees similar demand for more community bank services in neighboring Nevada and Southern California. It expects to eventually serve the Las Vegas market as well as the Riverside and Orange County markets in California.
“I’m extremely bullish about our opportunities,” Inserra said.