Doctor banks on success with colleagues

Whenever Walter F. Combs, MD, a family physician, in Temecula, Calif., needs a loan, he won't go to any other bank but Mission Oaks National Bank.

After all, why would he? He not only fits the profile of the small- to medium-sized business owner to whom the bank caters but also is one of its three co-founders.

As a frenzied wave of consolidation swept the banking industry in the late 1990s, Gary W. Votapka, Mission Oaks' president and CEO, was working at a bank that had grown from a community bank into one of the state's largest banks.

Seeking a return to community banking, he approached a co-worker, Keith Johnson, about starting a community bank in California.

Johnson said he initially did not let on that he and Dr. Combs also were discussing starting their own bank in Temecula -- halfway between Los Angeles and San Diego. Eventually, he told Votapka, and a meeting was set up.

"Keith, Walt and I got together, met a couple times and decided, 'Yes, the chemistry was right,' " Votapka said.

So the three joined forces in 1999 and recruited about a dozen people, including themselves, to start the bank. Eighteen months later, the dozen organizers received regulatory approval and raised $7.6 million from 325 shareholders, of which up to 35% came from the banks' organizers, Votapka said.

The three co-founders then immediately transferred all their professional -- and personal -- loans and banking activities to Mission Oaks "not only for obviously wanting to support the bank but also the convenience of having everything right here," Votapka said. "It's the only way to do it."

Despite competing against the country's largest banks, Mission Oaks is profitable and doing quite well. Its assets have grown from $7.6 million to more than $100 million, Votapka said.

The bank's initial 325 investors, who paid $10 a share for their stock, aren't doing too shabbily, either. That's because their investment in the bank quadrupled before a 2-for-1 stock split in 2003. At the end of July, Mission Oaks, which trades over the counter under the symbol MKNB.OB, was selling for a post-split $20 a share. Votapka, Johnson and Dr. Combs respectively own 6.4%, 4.1% and 3.3% of the bank's stock.

"Our plan, which is a real proven model for starting a community bank, is to go out and raise the capital right in the community," Votapka said. "The idea behind it is [shareholders] not only invest in the bank but then they also become customers of and advocates for the bank. They tell all their friends and business associate neighbors about the bank, and that really helps jump-start the business. That's indeed what happened to us."

For example, Mission Oaks has financed the purchase of medical office buildings for about a dozen physician groups, Votapka said. Some of them were referred to the bank by Dr. Combs.

Word of mouth

Like all of the bank's directors, Dr. Combs promotes the bank to his friends, family and colleagues. "A doctor will come in and say, 'I was talking to Walt in surgery today and he said I ought to stop in,' " Votapka said.

Dr. Combs, however, has not attempted to promote Mission Oaks through the Riverside County Medical Assn., which has about 720 members, or about 60% of the county's practicing physicians.

The medical society was unaware of Dr. Combs' ties to the bank until learning of it from AMNews, said Mary Barnes, director of membership and communications. Dr. Combs was a member of the medical society until the end of 2002, Barnes said.

Dr. Combs did not respond to requests for an interview. "He's a humble guy [and publicity-shy]," Votapka said. Dr. Combs, who practices full-time, does not play a role in the bank's day-to-day operations but is a director and vice chair.

There are approximately 8,600 community banks in the country, said Tim Cook, director of communications for Independent Community Bankers of America. While the Washington, D.C.-based industry group has no way of determining how many of those banks were founded by physicians, that is unusual, Cook said.

"It's not anybody who can start a bank," he said. "Regulators take a [close] look at the executive team -- the directors and the people who would form a depository institution. But we're talking experienced bankers who are involved with these start-ups typically -- almost always."

Those bankers usually launch a bank after they are laid off when their community bank is acquired or they work at big banks and want to return to their community bank roots, he said.

"A lot of the impetus [for bank start-ups] also comes from the small business community," Cook said. After a merger, there's often "a groundswell within the business community to start a community bank that really specializes in assisting small businesses," he said.

An average of 180 new community banks have been started annually over five years ending Dec. 31, 2003, he said.