The Community's Bank

Peter Hurst, Chairman & CEO
The Community's Bank
1087 Broad Street
Bridgeport, CT 06604
Tel. (203) 367-8383
Fax. (203) 367-0411

Project Summary

The Community's Bank is the only independent, minority-owned bank in Connecticut. It was established by Peter Hurst to meet the banking needs of the previously underserved areas of Bridgeport, Hartford and Bloomfield, Connecticut, which are all ethnically, racially and economically diverse. Mr. Hurst's key observation was that this area's diversity represented potential profitability. This led him to establish banking locations in areas that other financial institutions refrained from entering, and serve markets whose banking needs had been left unmet.

Financial Challenge

The Community's Bank was started by purchasing $60M in deposits from an existing bank with approximately 8-9k customers. Funding for the purchase was obtained from individuals, institutions, Fannie Mae, National Community Investment Fund, People's Bank and New Capital Access Group, a private equity fund in California. The funding process was only half of the battle though, as Mr. Hurst had to spend over a year to make his case in the regulatory approval process.

Financial Structure

Specific details of the financial structure

Social Benefits

An interesting aspect of The Community's Bank is that it is a for profit entity with goals similar to those of some not-for-profit entities. First, it brought financial services to many people that did not have them. Second, it dramatically lessened the cost of certain financial services that were previously available, although not through banks. Many residents in the specified target markets of The Community's Bank had to pay exorbitant fees for services like check cashing and wiring money. Additionally, funds derived from loans were often only available from institutions engaging in predatory lending practices that involved extremely high rates of interest and over-zealous charging of fees.

Project Significance

The bank is significant in that it demonstrates how a for-profit business model can be used to generate returns to investors and society. Additionally, it provides a model for offering fairly-priced financial services to communities for which such services have been historically denied.

Transferability

Good business ideas arise from seeing opportunities that others miss. Additionally, sufficient data is often needed to verify that what appears to be an opportunity is quite likely to be an opportunity (Mr. Hurst obtain a significant amount of demographic data concerning his target markets). One must also know how to pull together the financing necessary to take the leap from a good idea to a reality. In Mr. Hurst's case, he had experience in finance and knew how to introduce himself and his idea to people with money that they were willing to invest. Many or most people do not have such financial experience and connections; however, they just need to find an honest person who does. Ask a banker, CPA or attorney about financing, as they are often "plugged into" the network that finds uses for dollars waiting to be invested. Finally, one must have a certain amount of intestinal fortitude to build an enterprise. Mr. Hurst had to endure a long and grueling process to file the forms and make the arguments necessary to win regulatory approval. Such roadblocks can only be overcome by diligence and asking the right questions of the right people.

Recommendations

The approach used in this case is a classic entrepreneurial approach that can be used for other for-profit or not-for-profit concepts. Once Mr. Hurst established a vision of his bank, he just asked himself and others what was necessary to achieve his goals. Then, he found answers and acted upon them. Most not-for-profit or for-profit initiatives will also require certain elements of expertise. If you do not have them, then you must find them in others. Mr. Hurst drew upon his financial expertise to both create his business idea and find funding. He had to utilize the resources and feedback of many others to obtain the funds needed for financing and to determine what needed to be done to gain regulatory approval. Others may use a similar approach to successfully start their own projects and ventures.

Author

Scott Cottrell is a first-year student at The McDonough School of Business at Georgetown University. He is also a CPA and lives in Northern Virginia.