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Wednesday, Jun 7, 2023

Investment Bankers Forming S & L; for Hispanic Market

A group of Woodland Hills businessmen is organizing a savings and loan expected to be located in North Hollywood to serve the Hispanic market. Banco Unido in organization has most of its financing lined up and expects to file its application in coming months, the executives said. If it proceeds, the bank would be one of the few de novo thrifts to open in recent years and, according to some, at the cutting edge of a trend to gear savings and loans to specific ethnic markets. “If I was an investor looking at that, I would jump all over it,” said Michael Raab, an analyst with SNL Financial who was speaking generally about the Banco Unido business model and was not familiar with the bank’s organizers. “I think investors are very intrigued by banks servicing an ethnic population.” The organizers of Banco Unido are Bill J. Anz and Francisco J. Martin, co-founders and CEO and CFO respectively of Azure Group, an investment banking firm in Warner Center, and Peter C.K. Judar, who co-founded and serves as managing director for Azure’s wealth management unit. Founded in 2002 as an investment advisory group, Azure later added broker/dealer, mortgage lending and other real estate, legal and advisory services. “We came into the mortgage business with a unique application,” said Anz. “We offered subprime mortgages and carried our own second. As we did that, we noticed a lot of our borrowers were Hispanic and we saw a huge gap in banking products for that group.” The business more recently transitioned from subprime lending to so-called Alt A mortgage lending, a segment that caters to borrowers who are still considered higher risk, but not so risky as subprime borrowers. Then, with the firm’s experience and access to capital, the three began about one-and a-half years ago to organize the bank. Investor groups The organizers say they have lined up three significant investor groups and some individual investors to raise an expected $20 million to open the bank. The board would be composed entirely of Hispanics, most of which the organizers say they have already identified. They expect to choose a CEO in coming weeks and, with a chief executive on board, will file their application with the Office of Thrift Supervision. If all goes as planned, the organizers said, Banco Unido would open in the third or fourth quarter of this year. Their choice of chartering as a savings and loan seems to fly in the face of conventional wisdom. The stigma of the S & L; crisis of the 80s still lingers, and a mere 12 de novo institutions organized as thrifts last year, a fraction of the banks that organized with a bank charter. At the same time, the recent slowdown in the real estate market suggests that the current climate may not be the most advantageous for a new thrift. “People are waiting to see how the real estate market plays out,” said Roberto Barragan, president of the Valley Economic Development Center. “Most of the business plans I’ve seen out there have been business oriented banks because, with the wave of bank acquisitions, there are fewer community banks to serve business needs. I see no one talking about the fact that there is not enough mortgage lending out there.” But the Banco Unido executives figure that organizing as a thrift, with its focus on residential real estate loans, simplified charter requirements in comparison to bank charters and flexibility to operate across state lines, would make the most sense for their business model. “Homeownership within the Hispanic community is something we understand very well,” said Martin. “We understand the risk associated with it, and it’s crucial to have an institution that understands our business model.” Thrifts, despite their stigma, have been performing relatively well. According to the Office of Thrift Supervision, which regulates the industry, net income grew to $15.9 billion industry-wide in 2006 from $14 billion in 2004, although performance has moderated somewhat from 2005. At the same time, the thrifts themselves have been modifying their business models, adding multifamily properties to their lending portfolio. “We’re seeing premium valuations placed on thrifts with a diversified portfolio,” Raab said. The organizers said that their mortgage lending experience pointed up a need in the market that they believe will set Banco Unido apart. “Automatically, if you are Hispanic, there is a disadvantage when it comes to pricing,” said Martin, who is of Spanish descent but was raised in Switzerland. He added that his experience shows Hispanics pay mortgage rates anywhere between one point and one-and one-quarter points higher than Anglos with the same FICA score. Banco Unido already has established relationships with mortgage brokers and other third party providers such as CPAs that the organizers believe will help it to market to the Hispanic community. “I can take my footprint and put it into specific neighborhoods and custom tailor my approach to each one,” Anz said. That way, the three say, they can capture the different Hispanic submarkets in a way that large banks, with cookie cutter programs, cannot.

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