Florida has a great climate for growing many things: oranges, palm trees, flowers, lawns-and startup banks. These days, community or independent banks, as they are called, are flourishing throughout the Sunshine State. According to Jack Greeley, an attorney with Orlando law firm Smith McKinnon, which specializes in helping startups obtain charters, state regulators received more bank applications in 2004 than at any other time since 1998, the previous banner year. And this year's applications are already way ahead of last year. "Regulators have a lot to look at, and more in the pipeline," Greeley says.

This comes as no surprise to Charlie Murphy, a former president and CEO of SouthTrust, who started The Bank of Commerce in September 2000. "With the growth we have in our community, the demand is there," he says. "Plus, there is a great deal of investment capital out there."

And a good deal of money to be made. Community banks attract investors because they are a relatively safe investment-the industry is highly regulated-and offer a substantial return. Results may not come as quickly as in the stock market, but when a bank is sold, usually after seven or more years, the payout can be quite a windfall. Christine Jennings founded Sarasota Bank in 1992 and was its president and CEO for 11 years. (She's now making her second run for U.S. Rep. Katherine Harris' Congressional seat.) When it was sold to Colonial Bank in 2003, her investors earned $62.11 per $10 share-over 600 percent appreciation. "We had a bunch of happy shareholders," she says.

Such lucrative turnovers provide a fertile soil for growing new banks. Entrepreneurs see room for new startups to service those customers and small and medium-sized businesses that prefer the personal touch a community bank can offer. "There are close to 270 community banks in Florida," says Greeley. "We have had 100 being sold, while 100 new ones have been founded. The net effect is that we have the same number of banks we had seven to eight years ago-so the niche is open."

Because of Florida's burgeoning economy, national and regional banks have gone on a buying spree, since the easiest way for them to enter the market is to buy market share. As a result Florida bank sales in the last two years have topped the national average by 30 percent to 40 percent for return on shareholders' equity.

Big bank mergers and acquisitions also result in bank executives and CEOs being downsized or cashing out early. Many are in their mid-40s and 50s, not ready to retire, and say, "Hey, I'm still young, what do I do? I'll start myself a bank." While many do so to enjoy a closer working relationship with their customers, they also know the financial benefits of investing in their own enterprise. In her last year as president of Sarasota Bank, Jennings earned $160,000, but the payout on her stock options earned her about $3.3 million.

While experienced bankers form most startups, some happen when a group of investors or businesspeople get together. It may be because they are dissatisfied with the service at bigger banks, or they see it as an investment opportunity for themselves. Or they may be well-connected in a particular industry and want to have an influential position in the community.

All of the above came into play last year, when Carol Green, who had started a bank in Denver in the late 1970s, helped get First America Bank going in Bradenton and Osprey. "I don't think there is any other country in the world where average, successful businesspeople can come together and open their own bank," she says. "Most have centralized banking systems." She is now vice chairman of the board and chairs the executive committee. "I am very entrepreneurial. I just love getting a business off the ground and building it," she says.

So what does it take to get on the bank wagon? Patience, persistence and a year of your life, says Gerald Anthony, who just opened Freedom Bank in Bradenton, his third startup in the area in 16 years. "All three banks took between 10 and 12 months."

Be prepared for a busy journey with lots of bumps along the way. The key to success is getting advice from people who have done it before and using the best consultants money can buy. Says Greeley, "Your objective is not to open a bank, but to be the most successful bank in your market area." He continues, "You are trying to put in place a process or framework that four to seven years down the road will make you a very successful bank."

GET A BOARD OF DIRECTORS

The first and most important thing is to gather a group of like-minded people who are willing to chip in money to get you going, usually a minimum of $100,000 each. They will become your board of directors. In Florida, the state requires you to have two outside directors who have previous experience on a bank board. Make sure you pull people from a variety of backgrounds-doctors, lawyers, C.P.A.s, real estate developers-so that you can draw from different segments of the community to raise capital and bring in business.

Since directors also are required to contribute at least 25 percent of the capital for the bank, it is essential to have people with the financial wherewithal to invest. "When I got started, I wanted to attract directors who could have some major skin in the game," says Murphy, "so that they would have a stake and interest in the success of the bank." At Bank of Commerce, the directors own 48 percent of the stock.

HIRE A MANAGEMENT TEAM

If you don't have a banking background yourself, you also need to hire a chief executive officer. Have high expectations and make sure you get the right person. You will also need a chief financial officer and a chief lending officer on board by the time you begin the regulatory approval process.

Work together to develop a philosophy: What kind of bank do you want to be? What market niche are you going to serve? As people join, you want to have good compatibility, like economic interests and similar visions for the future. While there may be legitimate disagreements, a respectful, collegiate atmosphere is a must. Says Murphy, "It gets pretty intimate in the boardroom, so you want to have people who can get along."

CHOOSE A NAME AND FIND A LOCATION

Think of a good name for your bank and nail down a high-visibility location.

HIRE A GREAT CONSULTANT

When your board is in place, it is time to get an expert consultant to help guide you through the regulatory minefield as you apply for your charter.

Because the United States has dual banking systems-state and federal-you will have to decide which kind of bank you want to be. Over 90 percent of startups in Florida opt to become state banks. The advantage is that you can lend up to 25 percent of your capital to any one customer, which provides a competitive edge over national banks, which can lend only lend 15 percent.

On the other hand, you have to satisfy two regulatory agencies instead of one-the State of Florida and the FDIC, the federal agency that insures loans and deposits.

MEET WITH THE REGULATORS

It is important to build a good working relationship with regulators on the state and federal levels. After the state is satisfied, the FDIC regulators come to town for two to three days. They look at your proposed site and interview the directors separately. The vetting process always has been rigorous-board directors and management team must submit up to 14 pages of information, including bank statements and tax returns, undergo an FBI investigation, and get fingerprinted. According to Greeley, over the last six months, it has become even more intense. Apparently, of the large number of banks opening lately, some have not done as well as others, so the regulators are scrutinizing everyone involved more closely.

RAISING CAPITAL

If all goes well, you will receive conditional approval from both regulatory agencies. You are now ready to go out and raise capital. The regulators usually require a minimum of $7.5 million so you can open with a net of $7 million. (It takes around $500,000 to cover all the organizational expenses-personnel costs, renting the space, the application process, printing work and legal fees.)

These days, however, banks open with more capital. Carol Green's First American Bank raised $10 million. And Gerald Anthony's Freedom Bank opened with $16.9 million. To be a serious player in the current real estate boom, you have to be able to compete in the market-remember, you can only lend 25 percent of your capital to any single customer. Says Murphy, "All the other banks that raised $7 million to begin with have gone back to the well to raise additional capital."

If you don't want to raise the capital yourself, investment firms will do it for you, but they charge 10 percent. Most groups do it on their own, printing a prospectus that lists their business plan, and board and management team. This is where it is important to have high-quality people with high standing in the community.

"It is all about people," says Jennings, "You reputation is critical." She remembers one prospective shareholder saying, "This is my child's education money that I am investing with you. I'm doing this because of you and the people involved."

OPENING THE DOORS

When you are about to open, state regulators come for an inspection to make sure all systems are ready to go.

Anthony recommends doing a soft opening for a month or so to get your staff up to speed and make sure Murphy's Law won't rear its head. "The worse thing to do is go out, blast the market with advertising, and have glitches in the system," he says. So you rely on friends, relatives and word of mouth. At Freedom Bank, he told the first customers, "You know, you're going to be the guinea pigs," and they were good sports about it.

After 30 days, you may want to market more aggressively and have a grand opening event to let the community know that you have arrived.

AFTERMATH

For the board, life will return to normal as management takes over the day-to-day operations of the bank. Still, there are many challenges ahead. The regulators will come to look over your shoulders every six months, sometimes with a team of six or seven. They can look at anything and question anyone they want.

You will also have to prepare for an annual shareholder meeting and get involved in community events. The more visible you are in the community, the more you will thrive.

Above all, good customer service is a must. Says Jennings, "It's the little things that separate you from the rest. Open the doors five minutes early and close five minutes late. Strive to take the best care of your customers that you can."

GETTING ON THE INVITATION LIST.You don't have to become a director to invest considerable money in a bank. Nor do you have to have deep pockets to join in the game, although it helps. During the initial stock offering to raise capital, Christine Jennings' Sarasota Bank had a $10 investment minimum. Charlie Murphy at The Bank of Commerce and Gerald Anthony at Freedom Bank, on the other hand, required investors to buy at least $10,000 worth of shares to join their banks. If you do plan to become a bank director, be prepared to invest between $100,000 and $500,000.

To raise capital, banks will do either public or private stock offerings. Look for tombstone ads in the financial sections of your local newspapers and business magazines for public offerings. Private banks generate lists of prospective shareholders based on the contacts of their initial board of directors and employees, so it helps to know influential people. Murphy generated a list of "friends of the bank" and sent the prospectus to over 1,000 people, ending up with 230 investors.

After opening, many banks remain a closed shop for a while; but as they grow, they often make a second offering to raise more capital. At that time, they usually approach their initial investors first and then widen the field. And there are always opportunities along the way as some stock turns over. Call the CEO or chairman of the board of the bank you would like to join and make your interest known. Most bankers follow Jack Greeley's advice: "Always keep an eye open for additional backers."