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| PR 12-469 Fact Sheet Community Reinvestment Act, Supplement to June Filing Application and Operating Plan
Chairman Linda W. Cropp at the request of the Mayor A PROPOSED RESOLUTION IN THE COUNCIL OF THE DISTRICT OF COLUMBIA To approve the recommendation of the Superintendent of the Office of Banking and Financial Institutions that the application of First International Corporation of Washington to organize a District of Columbia bank, to be known as First International Bank of Washington, be approved. RESOLVED, BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, that this resolution may be cited as the "First International Bank of Washington Approval Resolution of 1997 " Sec. 2. (a) On June 27, 1997, First International Corporation of Washington filed an application to organize a District of Columbia ("District") bank, to be know as First International Bank of Washington, with the Office of Banking and Financial Institutions ("OBFI") pursuant to section 5 of the District of Columbia Regional Interstate Banking Act of 1985, effective November 23, 1985 (D.C. Law 6-63, D.C. Code, 26-804). The applicant filed an addendum specifically addressing community reinvestment issues on September 24, 1997. The applicant has submitted the appropriate application fees and provided information that serves as a basis for the OBFI Superintendent's review. (b) The applicant will invest in the local community by:
( c) The applicant will engage in the following activities:
(d) On August 22, 1997, a notice of public hearing and a request for public comment on the application was published in the District of Columbia Register, which set a hearing date on the application for September 30, 1997. (e) Testimony was provided and comments were received. There was no objection to the formation of a new bank in the District. (f) On October 27, 1997, after review of the application and all supplementary materials, the OBFI Superintendent concluded that the application met the requirements for approval subject to certain conditions, including the granting of deposit insurance by the Federal Deposit Insurance Corporation. The Superintendent notified the applicant of the decision and the conditions in a letter dated October 27, 1997. Sec. 3. The Council of the District of Columbia approves the recommendation of the OBFI Superintendent to grant approval to the First International Bank of Washington to be organized as a District bank, with Charter Number One, subject to the conditions set out in Section 2(f) of this resolution. Sec. 4. The Secretary shall transmit a copy of this resolution, upon its adoption, to the Superintendent of OBFI and to the First International Corporation of Washington. Sec. 5. This resolution shall take effect immediately. FIRST
INTERNATIONAL BANK OF WASHINGTON Background Organization and Capitalization Management and Services The bank will engage in the following activities 1) Private banking to support the bank's domestic and international client base, 2) Trade financing services including the provision of loans, letters of credit, and other fee based services; 3) Project financing services including loans, loan syndications, permissible private offerings, and other fee bases advisory services; 4) Investment advisory services; and (5) All matters incidental to the above activities. Community Reinvestment Act Location 1) comply with local zoning laws and other official land use plans; 2) have no significant impact on land use in coastal areas or on public land management, 3) provide adequate parking for users of the new facility based upon projected volume of business and taking into account peak volume periods. Finally, the bank is not expected to affect any district, site, building, or structure listed in or eligible for listing in the National Register of Historic Places. Public Hearing and Testimony Written testimony was provided by Ms. Hoover and Dr. Raffa. Oral testimony in support of the bank's application was also received by members of the District of Columbia Chamber of Commerce and its international committee, and representatives of the North Capitol Neighborhood Development, Inc. The testimony offered highlighted a number of important benefits that would be realized through the bank's services including: the offering of international trade financing products and services to support small and medium sized companies in the District; the increase in employment opportunities for District residents; the expansion and advancement of minority and small business owners in the District through the promotion and identification of economic opportunities for these businesses; the provision of specific financial products and services to further enhance opportunities for District based minority businesses; and the provision of specific programs including a micro-loan program geared to the enhancement of opportunities for minority businesses in the District. There was no objection to the formation of First International Bank as a new bank in the District of Columbia. Conclusion FIRST INTERNATIONAL BANK OF WASHINGTON For Community Reinvestment Act (CRA) purposes, the District of Columbia will be the bank's community. The Bank will offer services consistent with its business plan and without discrimination to qualified, creditworthy businesses within the target market To meet the needs of the community, the Bank will provide a number of products and services that are targeted to minority owned, women owned and small businesses. The Bank has been in discussions with both the Minority Business Development Center (MBDC), the DC Chamber of Commerce, and the North Capitol Neighborhood Development, Inc. (NCND) with a view to entering into MOW's with these entities to foster business opportunities for the community Discussions with NCND have identified specific areas of cooperation that are directly related to the Bank's community reinvestment obligations. It is intended that the Bank will work closely with NCND in the following areas: (1) consistent with safe and sound banking practices, establishment of a Micro-Loan Program to provide small business loans to existing and start-up businesses to support their activities, including working capital, contracts and receivables, inventory and supplies, equipment, furniture and fixtures, and facade improvement; (2) establishment of a program to assist business owners and new entrepreneurs in the development of their businesses in order to create employment opportunities in local neighborhoods, including the provision of small business loans, loan packaging, seminars, workshops and technical assistance. With respect to both the MBDC and the NCND, and consistent with safe and sound banking practices, the Bank intends to establish and implement a plan of action targeted toward minority businesses with the objective of enhancing their international export and import opportunities. This program could include: (1) development of a data base of potentially qualified businesses within the NCND geographic area; (2) meetings with candidate businesses; (3) technical assistance; (4) seminars/workshops; (5) export letter of credit support, including analysis and mitigation of risk; confirming, negotiating, purchasing the risk of, discounting and/or insuring the foreign bank risk; (6) export financing including arranging financing, provision of loans, provision of pre-export and working capital advances, and revolving lines of credit secured by foreign receivables; and (7) import letter of credit support, including issuance and negotiation of letters of credit, and both warehouse and receivable financing for the post-import transaction. A commercial officer of the Bank will be assigned as liaison officer with the MBDC, NCND, and other community development entities to serve as the Bank's interface in the establishment and implementation of the aforementioned programs. The Board of Directors of the Bank shall establish a CRA statement and shall review the statement at least annually. The Board shall act upon any changes made in the interim at its first regular meeting following such change. All actions relating to review and/or modification of the CRA statement shall be duly noted in the minutes of the meeting of the Board. First International
Bank of Washington APPLICATION TO ESTABLISH A BANK IN THE DISTRICT OF COLUMBIA Date Accepted for Filing: Vicinity between Georgetown on the west and 12th street on the east and south of
Florida Avenue (Street address or location) $2,500,000 Initial Capital Agent: Kimberly H. Hoover, 888 Sixteenth Street. N.W.. Ste. 300, Washington. D.C. 20016 202-835-7443 Will the proposed bank be affiliated with an existing bank, bank holding company, financial institution? Yes ___ No_x_ A. PROPOSED BANK B. NAMES AND ADDRESSES OF ORGANIZERS
C. INDICATE HOW THE ORGANIZING GROUP FORMED AND EXPLAIN THEIR INTEREST IN FORMING A BANK The Organizers are of individuals who have been very active in Washington, D.C. and in the Arab Republic of Egypt ("Egypt") and in the People's Republic of China ("PRC") in the provision of services in support of international private banking, trade financing and project development. The Organizers have developed relationships with senior government officials and with public and private sector companies and high net worth individuals in these countries that provide knowledge, influence and access that will be critical to the success of the proposed bank The proposed bank will initially concentrate its activities in the following areas:
The Organizers have a proven track record of success in the establishment of a large customer base for international private banking services and in the management of investment portfolios for these customers. The Organizers have substantial experience in the development and implementation of financial products required to support the proposed bank's focus of providing fee based products and services for the trade financing and project development requirements of companies and individuals doing business in the targeted countries. They have worked closely with multi- lateral organizations, commercial lending institutions, export-import agencies, and investment bankers in the development and implementation of financing products and services necessary to achieve the project and trade objectives of their clients. The Organizers have identified the need for a bank that specializes in private banking services, with initial focus on the international community, in Washington, D.C., and in the provision of trade financing and project development services to support the growing financing needs of private and public sector companies involved in trade and project development activities in the Middle East and Asia. Locating the proposed bank in Washington, D.C. will provide the opportunity to establish banking operations in a major U.S. city with characteristics that will satisfy a number of critical business goals. As the proposed bank's business center, Washington, D.C. is acceptable to both national and international markets. It offers access to some of the world's largest agencies of international finance, such as the World Bank, which will be of enormous value to the proposed bank in attracting the type of international clients targeted by the bank. In addition, the proposed bank intends to establish a close working relationship with the Export-Import Bank of the United States, which is headquartered in Washington, D.C., to support the bank's trade financing activities. The Washington, D.C. area contains a number of local companies that can benefit from the trade and project development activities of the proposed bank. Trade opportunities could also provide unique opportunities for local minority-owned, women-owned and small businesses seeking additional outlets for their products and services. The Washington area has a large and thriving international community which the bank has targeted for its private banking practice. The proposed bank will be owned by Mr. Gamal and Dr. Raffa, who plan to initially capitalize the bank at $5,000,000. The Organizers intend that approximately 5,000,000 shares will placed in a private placement at a minimum of $1 per share. The Organizers were selected on the basis of their expertise in financial and legal matters; for their knowledge of and access to prospective clients in the targeted countries; for their knowledge of the Washington, D.C. area; and/or their ability to develop the targeted customer base of the proposed bank. The Organizers bring to the proposed bank a balance of expertise, experience, and knowledge of the community that will be useful in organizing and directing the affairs of the bank. A. IDENTIFY THE MARKET AREA The proposed bank will initially target Washington-based businesses and individuals with interests in Egypt and the PRC for the provision of its specialized private banking, trade financing and project development services. Private Banking Services. Organizers of the bank have a proven track record of attracting a sizable customer base of high net worth individuals and for managing the investment portfolios of these individuals. The Organizers will utilize their significant contacts in the domestic and international community to develop a client base for the bank's private banking services. Trade Financing. The Organizers have extensive contacts and influence in Egypt and the PRC that will provide the bank with access to a growing customer base for the bank's trade financing products and services. U.S. companies, both national and local, who could benefit from trade opportunities identified by the bank, also represent a potentially sizable customer base for the bank. Project Development. There is a growing market for financial advisory services to support significant increases in project development activities in both Egypt and the PRC. Organizers of the bank have developed significant contacts and formal arrangements in these countries which will be instrumental in providing the bank with access to a large base of prospective customers for the banks financial services. Major infrastructure projects in such industry sectors as energy, transportation, information technology and telecommunications are examples of the types of projects that are high priority projects in the targeted countries and represent projects that are prime candidates for the bank's financial advisory services. Local and national U.S. companies, who are potential participants in these project development activities, represent the prime customer base for the bank's services. The Washington, D.C. area provides an ideal location for a bank that will draw its business primarily from a national and international client base, from the area's minority-owned, women-owned and small businesses, and from the area's ever-growing private business sector. The specific local businesses that will represent the target market for the bank include the businesses and investment communities of the District of Columbia, northern Virginia, and eastern Maryland. The bank will be established in an office building in the area between Georgetown on the west and 12th street on the east and south of Florida Avenue. B. LIST. AND BRIEFLY DESCRIBE THE SERVICES TO BE OFFERED The Organizers intend to establish a bank to engage in international private banking, trade financing and fee based project development advisory services for clients, focusing on customers in the local Washington, D.C. metropolitan market. The proposed bank will offer a full range of services to international private banking clients and fee based services to support its clients trade financing and project development needs. Private Banking services will include a full range of services to support the bank's domestic and international client base.
Trade financing services are an important element of the bank's focus. Drawing on its knowledge of and access to export and import opportunities in Egypt and the PRC, the bank will support its customers' trade finance requirements through the provision of loans and fee based services. Services envisioned include:
The bank will develop correspondent relationships with internationally recognized and approved banks in Egypt and the PRC, especially to facilitate its letter of credit and factoring services. To further minimize the risk of factoring, the bank intends to work with selected in-country banks by swapping factored receivables involving customers in the country of the bank as well as U. S customers. The bank will develop a close relationship with the Export-Import Bank of the U.S. and with similar organizations in the targeted countries to further the objectives of the bank's customers and to provide the bank with additional security for its trade financing products and services. Project Development. The bank intends to provide a range of products and services, including consulting, financial engineering, loans, stand-by letters of credit, and other products and services as may be required to support a broad range of needs in the project development field. Consulting support will include fee based financial advisory services to support a client's need for financial feasibility studies to support the subject project; financial engineering services to develop optimum financial structures; arrangement for project financing; loan and interest rate advice, permissible private offerings, and other fee-driven services. In selective cases, and upon the request of the client, the bank will syndicate the loans necessary for project financing, which will generally comprise multiple sources of funds, including notes and debentures, convertible debentures, trade credits and commercial paper. Warrants, conversion rights, or rights to other securities will be considered to enhance any straight or unsecured loans that may be required. The bank intends to establish relationships with indigenous banks for financing of local currency that may be required, particularly for working capital purposes. In structuring such financings, the bank will also consider sponsor loans, supplier credits, customer credits, and commercial bank loans. With respect to foreign exchange considerations, the bank will utilize appropriate risk management techniques such as currency swaps or borrowings in the currencies needed for the short term and by financing in the appropriate currencies, swaps, long-dated forward contracts, and local-currency financings in the long term. The bank will develop close relationships with the World Bank and other multi-lateral organizations that have been traditionally involved in project financing. Working with the World Bank on project financings will provide further assurances of the quality of the projects selected as well as the prospect of reduced sovereign risk attributable to the World Bank's presence. In those cases where co-financing is needed, the bank will consider taking a minor loan position in such financings. The bank will also consider loans in those areas that do not qualify for World Bank participation, such as loans for start-up costs; other imported goods and services, local procurement; and working capital needs. The bank will provide stand-by letters of credit as may be required to support its clients in such areas as advance payment guarantees; bid guarantees; performance guarantees; and maintenance or retention guarantees. C. IDENTIFY THE ORGANIZERS. DIRECTORS. MANAGERS. AND PRINCIPAL SHAREHOLDERS OF THE NEW BANK 1. Names and addresses of all proposed interim directors and directors if they are different from Organizers listed in I.B. above 2. Names and addresses of all shareholders expected to own 10 percent or more of the outstanding shares of the proposed bank Mr. Mahmoud Gamal 3. Names and addresses of executive officers 4. Identify the spokesperson for the organizing group
III. COMMUNITY REINVESTMENT ACT STATEMENT A. DELINEATE THE COMMUNITY TO BE SERVED BY THE BANK For Community Reinvestment Act purposes, the District of Columbia will be the bank's community. The bank will offer services consistent with its business plan and without discrimination to qualified, creditworthy businesses within the target market. B. SUMMARIZE THE CREDIT NEEDS OF THE COMMUNITY There are a number of minority-owned, women-owned and small businesses located in the District of Columbia that could benefit from the trade financing opportunities that will be generated by the bank. Local companies in the Washington, D.C. metropolitan area represent a potentially significant market for both trade and project development opportunities that will be identified and supported by the bank's products and services. C. INDICATE THE SERVICES THE BANK WILL OFFER TO MEET THE NEEDS DESCRIBED IN PART B To meet the needs of the local business community, the bank will provide a number of products and services that are targeted to minority-owned, women-owned and small businesses, including:
IV. EFFECTS ON THE ENVIRONMENT AND HISTORIC PROPERTIES A. IDENTIFY EFFECTS ON THE ENVIRONMENT The Organizers intend to locate the proposed bank in an existing building. It is not anticipated that the bank's structure or other facilities will have any significant adverse effect during either construction or operation, directly or indirectly, on any of the following: air quality; water quality; noise levels; energy consumption; density or congestion of population and land use; fish and wildlife conservation; solid waste disposal systems; and environmental integrity of privately owned land, natural resources, or wilderness areas. B. DISCUSS COMPLIANCE WITH LAND USE RESTRICTIONS The Organizers intend that the structure will: (1) comply with local zoning laws and other official land use plans and environmental laws: (2) have no significant impact on land use in coastal areas or on public land management; (3) provide adequate parking for users of the new facility based upon projected volume of business and taking into account peak volume periods. C. IDENTIFY EFFECTS ON HISTORIC SITES The proposed bank will not affect any district, site, building, or structure listed in or eligible for listing in the National Register of Historic Places. The proposed site for the bank's offices is one of the newer office buildings in Washington, D.C. DESCRIBE PROPOSED ORGANIZATION AND RESPONSIBILITIES OF THE BOARD AND SENIOR OFFICERS The proposed bank's Director's will be actively involved in identifying potential customers for the bank's products and services, including customers for deposits, loans and fee based advisory services. The Director's will be responsible for the establishment of bank policy and for monitoring adherence thereto. The Organizers are fully prepared to implement and maintain operating policies and procedures based on sound banking practices and guidelines of regulators and prudent business practice. The Board of Directors will constitute the following committees:
The above committees will report to the Board on a regular basis. Board members will rotate between the two committees on a staggered basis Three senior officers will be responsible for establishing and implementing the policies of the Bank.
The Chairman will be responsible for establishing the strategic direction of the Bank. The President and Cashier will have day to day responsibility for the operations of the proposed bank. They will establish, monitor, and regularly report to the Board on procedures and control systems that have been established to implement the strategic plan of the proposed bank. They will also have responsibility to hire, direct and manage personnel required to meet the objectives of the bank. B. DISCUSS QUALIFICATIONS OF DIRECTORS AND MANAGEMENT The Board of Directors will consist of the Organizers and an additional two to four individuals. The proposed directors are seasoned executives with the requisite business experience, management experience, and professional and business contacts that are required to execute successfully the bank's primary business objectives. Taken together, the Board members have the skills, knowledge and experience necessary to oversee and manage the proposed bank and the products and services that will be provided. Candidates for senior management positions in the bank will have proven business management skills, experience in financial institutions, and a detailed knowledge of the financial services market that the bank intends to target. Following is a detailed listing of the specific qualifications of the senior management team:
Should the bank elect in the future to expand the types of products and services to be offered, the bank will hire qualified personnel to carry out such additional responsibilities. DESCRIBE ANY AGREEMENTS THE BANK INTENDS TO MAKE TO OBTAIN BANKING SERVICES FROM OTHERS With the exception of data processing services, the Organizers do not intend to form contractual agreements with employees or outside management contractors or to obtain other outside banking services. The Organizers will select a qualified and experienced service bureau that not only meets high standards of reliability, but also has adequate emergency backup and security systems. The selected service bureau will be capable of furnishing the following data processing operations and services; loan servicing; deposit systems; cash management and investment sweep options; automatic drafts and transfers; a customer information file; consolidated statements for customers; and a fully integrated general ledger. The bank will work with local agencies and organizations to advertise its intent to procure the aforementioned services. Qualified minority-owned, women-owned and small businesses will be identified and will be encouraged to submit proposals, thereby ensuring that locally qualified entities will be considered for contract award. A. ANALYZE THE MARKET The proposed bank is in many ways a natural extension of and complementary to th current activities of the Organizers. Ms. Kimberly Hoover, Esq. is an international lawyer and a Managing Director of Gateway International LLC,, a firm specializing in the support of western companies in their pursuit of trade and investment opportunities in the PRC. As further explained below, Gateway has established strategic alliances and agreements with a number of key entities in the PRC. The clients of Gateway and its in-country partners are candidates for the services offered by the proposed bank, particularly with respect to the financing services offered in support of trade and project development activities. Through her legal activities and through her activities in support of Gateway, Ms. Hoover has extensive knowledge of U.S. companies, both national and local, who could benefit from the trade and project development opportunities that will be identified for both Egypt and the PRC. These local and national U.S. companies are potential customers of the banks financial services and products. Ms. Hoover has been very active in the development and implementation of trade and project development opportunities in the PRC. Ms. Hoover has developed contacts with numerous western companies in need of the Bank's services in the PRC. These include the First Washington Asia group of companies, the China Universal Law Firm, and the Zhong Lian First Consulting Company Limited ("Zhong Lian"), which is a joint venture between First Washington and the central government's State Planning Commission ("SPC"). They also include prominent western companies in telecommunications, transportation, energy, publishing, and oil and gas. Ms. Hoover will help identify for the Bank those projects in the PRC that satisfy the criteria for participation established by the bank. These projects are expected to represent opportunities for local D.C. minority-owned, women-owned and small businesses as well as local companies in the Washington metropolitan area. Ms. Hoover is already working with certain local companies to support their efforts to obtain opportunities in the PRC for the sale of their products and services. These companies represent both start-up and mature companies, all of whom are potential clients for the banks trade financing and financial advisory services. Dr. Raffa has more than twenty years of experience as a banker, including private banking, portfolio management, trust banking and trade financing. Dr. Raffa presently manages over $600 million on behalf of high net worth individuals. Dr. Raffa was head of the credit and marketing departments for the National Bank of Egypt, London. He was with Misr America Int'l. Bank, an affiliate of Bank of America, where he was in charge of the correspondent banking department with emphasis on the Middle East, the U.K., Europe and the U.S. Dr. Raffa has extensive contacts with individuals in Egypt who are ideal candidates for the bank's international private banking services. Dr. Raffa has extensive knowledge of and contacts with senior level officials in Egypt in both the private and public sector and, through these contacts, will be able to direct to the bank trade and project development clients who would benefit from the bank's financial advisory services and products. Mr. Mahmoud Gamal. Mr. Gamal is an international businessman with extensive contacts and experience in Egypt. Mr. Gamal was previously with the airline industry in Egypt and now is head of an international trading company based in the Netherlands. The Target Market The Washington, D.C. metropolitan area is home to a substantial number of public and private companies, many of whom are known to the Organizers, that are prime candidates for trade and project development activities in the Middle East and Asia. The following exhibits set forth further information on these companies as well as information on the investment climate and opportunities in Egypt and the PRC.
Future Clients Within the Washington Area Establishing a bank in the District of Columbia will enable the bank to focus on and develop opportunities for local companies, including minority-owned, women-owned and small businesses in the District of Columbia. The trade and project development activities of the bank will provide additional outlets for the products and services of these local companies. The bank will undertake to develop a program to identify qualified local companies and an advertising program that will make these firms aware of potential trade and project development opportunities. National and local private companies are excellent candidates for the trade and project development opportunities that will be supported by the bank. The Organizers are aware that the Washington, D.C. metropolitan represents a potentially large customer base for its private banking services and, over time, the bank intends to pursue this customer base for provision of its private banking services. B. ANALYZE THE COMPETITION The proposed bank's competitors will consist primarily of specialized banks that are focused on private banking, trade and/or project development, including investment banks. The Organizers believe there is no significant competition in the Washington area for its particular business plan. C. EXPLAIN THE STRATEGIES YOU WILL FOLLOW TO CAPTURE A SHARE OF EACH PRODUCT MARKET AND THE RESULTS YOU EXPECT TO ACHIEVE The proposed bank is a natural extension of and complementary to the present activities of the Organizers. The banks products and services have been carefully selected to provide the Organizers with a vehicle for financing of trade and project developments activities in which they are actively involved in developing. The proposed bank has decided to initially concentrate its activities in niche market areas where the Organizers have established a significant base of expertise, knowledge, influence and access that is truly unique and represents a potentially significant competitive advantage to the bank for its private banking, trade financing and project development products and services. Dr. Raffa has established a reputation for his expertise in managing investment portfolios for Egyptian clients. Dr. Raffa's intimate knowledge of the Egyptian community and its large potential customer base for private banking services, combined with his high visibility, access and influence within this community, provides the bank with significant advantages for attracting clients. Clients for private banking services generally rely on personal relationships for selection of a bank to manage their affairs, and Dr. Raffa's ability to attract such clients, based on his proven track record and access, will be instrumental in the bank's ability to attract and retain a significant customer baser for its private banking products and services. Project and trade opportunities that will be developed through Ms. Hoover's efforts will provide the Bank with access to trade and project development clients in the PRC that are not normally available to its competitors. The Bank has the requisite expertise to provide these clients with the financial products and services that will be required . Local and national companies that are potential suppliers of products and services, and/or prospective candidates for participation in project development opportunities, represent an additional, and potentially significant, customer base for the bank. Proposed Methods and Sources for Attracting Deposits Clients utilizing the banks private banking services, as well as local and national companies who will be participants in the trade and project development activities that will be supported by the bank's financial products and services, represent the primary sources of deposits. The Organizers anticipate that the bank's typical client will be the recipient of other services offered by the bank, or the services offered by the bank's Organizers. There are a number of initiatives the bank intends to take to attract deposits, including:
The bank will focus its deposit strategy on relationship-oriented, comprehensive services, and intends to attract depositors from the clients seeking a bank from which they can obtain a maximum return on their relationship. The Organizers anticipate that the deposit mix will consist primarily of interest bearing accounts, primarily money market transaction accounts and certificates of deposit. The Bank will also offer checking accounts to those clients who desire such accounts as a part of their banking relationship. The Organizers believe that the needs of smaller depositors in the Washington area are more adequately met by currently available facilities than those of the larger depositors. Although the proposed bank intends to offer a range of banking services, these services are not intended to be aimed at the mass retail banking market. Given the proposed bank's anticipated customer base and service approach, there are no current plans to open branch banking facilities. Proposed Lending Strategy The Organizers plan a very conservative lending strategy, which, except for any lending for community reinvestment purposes, will initially be restricted to short and medium term fully secured loans to its private banking clientele. The proposed bank may provide short-term loans in support of its trade financing and project development activities. Any loans provided will be in accordance with defined lending policies promulgated by the Board of Directors. The bank's loan emphasis will be on short-term (up to 18 months), on longer term (two- to twenty years), and on loans to international clientele of known creditworthiness. Private Banking Strategy The Organizers have established relationships, access and influence with that sector of the Egyptian community that represents a significant potential customer base for the bank's products and services. The Organizers have developed a strategy that is expected to produce a core book of private banking clients during the initial three years of operation. Over time the bank expects to build on this initial customer base by extending its private banking services to the Washington D.C. metropolitan area. Trade Financing and Project Development The bank will utilize the extensive contacts and influence of the Organizers to develop a strong book of business in Egypt and the PRC. As these opportunities materialize, the bank will rely on the Organizers and officers to utilize their substantial knowledge and access to prospective clients in the U.S., with particular focus on companies in the District of Columbia and in the Washington D.C. metropolitan area. A. REVIEW THE MAJOR PLANNING ASSUMPTIONS USED IN THE MARKET ANALYSIS AND IN SETTING THE PLANS AND OBJECTIVES FOR THE NEW BANK. INCLUDE AT LEAST THE FOLLOWING: MARKET GROWTH. INTEREST RATES. COST OF FUNDS, AND EFFECTS OF DEREGULATION The Organizers are intimately familiar with significant growth opportunities and with prospective clients in the Middle East and Asia; with the large Middle Eastern and Asian population in the Washington, D.C. area, and with companies in the Washing ton D.C. area in need of the Bank's trade and project development services. The Organizers believe there is a substantial market among these entities in the form of the private banking, trade and project development services proposed by the Bank. The emergence of new establishments in the Washington, D.C. economy provides an indication that the market for financial services of the type being proposed by the Bank will stimulate significant demand for the Bank's services. To fund its operations, the proposed Bank will draw from various sources. The Bank will start from a base of capital and will quickly build a fairly stable base of medium and large time deposits drawn from both the Washington, D.C. market and from prospective customers in the Middle East and Asia that are known to the Organizers. Funding gaps will be filled by purchased money in the Federal funds market, the CD market, the reverse repurchase agreement market, and the Euromarket. The Organizers have sufficient resources available to ensure that no funding shortfalls occur. The Organizers intend to maximize profits subject to the constraint that interest rate exposure, credit, and liquidity risk are all held to acceptable levels. Given that the ultimate objective for the proposed Bank is to demonstrate an earnings pattern that displays steady growth over time, the Organizers believe that the chief functions of management will include the following: Interest Rate Exposure Management In the short run, the management of the Bank will determine the size and composition of its balance sheet by carefully weighing the composition of the investment portfolio, the dealer position it assumes, and the sources of short-term funds Interest rate exposure will be managed by gapping or mismatching these "money market" aspects of the balance sheet. Asset and funding choices for the proposed bank will be determined by the shape of the yield curve, the regulatory implications, and the demand (and level of risk) for loans The proposed Bank will also develop a stable client base. To attract and maintain their customer base, the Organizers are prepared to offer competitively priced time deposits and other deposit products, origination fees, and service charge income to supplement higher interest rates, where necessary. The overall cost of funds, including the cost of maintaining the deposit base, will be incorporated into the loan pricing decision. Credit Risk Management There is always the risk on every loan that the borrower will not repay. Organizers are well aware that this potential exists. They have crafted an initial loan strategy to provide that such loans will be fully secured. In addiction, the Bank will initially select loan customers from known entities within the Washington, D.C. market and from known prospective clients in the Middle East and Asia. As the Bank grows, credit evaluation will be extended to other markets. Liquidity Management Of significant importance to the proposed Bank is the ability to buy funds at a reasonable price when needed. The Organizers will place special emphasis on the characteristics of the Cashier and the role of the money desk in the responsibilities of the Chief Operations Officer. The composition of the investment portfolio is also intended to minimize funding shortfalls. In addition to emphasis on liquidity, credit, and interest rate management, the relationships with each customer will be carefully developed and managed through the hiring of loan and money managers experienced in the wholesale banking environment. These managers will assist customers of the proposed Bank in the selection of financing and funding products that will accommodate the requisite customer transactions. The Organizers of the proposed Bank believe that the success of a Bank can be based on providing the proper source of funding and/or the most appropriate financing products for the Washington, D.C. market and for customers in the Middle East and Asia in need of a greater variety of options. With careful attention to interest rate, credit, and liquidity risk management, the proposed Bank management will supplement their net interest income with fee income associated with properly addressing the funding and financing needs of the Bank's constituency. B. ASSET AND LIABILITY STRUCTURE 1. Pro formas. Show the expected asset/liability mix volume for each type of service. fixed asset investments, and officer and staff remuneration. Refer to Schedules 1 through 5 for the assumptions and pro formas. 2. Discuss the advantages and disadvantages of the proposed asset/liability mix and any actions that will be taken to reduce major risks through funds management techniques and systems. The financial structure of the proposed Bank as reflected in the projected average balance sheet has been developed utilizing the Organizers' operating plan for the proposed Bank. In order to enable the Bank to achieve profitability, a potential asset portfolio has been planned to take advantage of market opportunities. The earning asset portion of the balance sheet will be comprised of investments and assets diversified in terms of type and maturity. Investments in overnight Fed Funds, Treasury bills, Treasury bonds, and an amount of tax-exempt securities required to offset taxable income will be utilized. Several types of commercial, cash management account (e.g. credit card) and international trade financing loans, which are tied to a designated index, will also be utilized. The deposit portfolio will include commercial and retail money market accounts, as well as certificates of deposit with varying maturity and size. The proposed Bank will generate demand for these certificates of deposit through marketing efforts that target the business contacts of the Organizers. Short-term funding of the loan portfolio will be achieved through the effective marketing of small-sized money market accounts. Sufficient liquidity is illustrated by the projected loan-to-deposit ratio of less than 70% by the fifth year of operation. The provision for liquidity is also evidenced by the amount of equity capital and composition of the loan portfolio. The intent in maintaining this liquidity position, however, is to manage the interest rate position of the Bank rather than to serve as a source of income potential. A loan pricing algorithm which incorporates the cost of funds as well as the designated index, with prudent operating expense management, should provide the Bank with its desired return. Credit risk of the loan portfolio will be minimized through the use of credit analysis and cash flow forecasting techniques. A loan grading system to evaluate loan quality and the value of collateral behind each loan, as well as other necessary underwriting criteria, will be utilized to minimize the risk exposure of the proposed Bank's asset portfolio. C. DISCUSS THE ORGANIZERS' PLANS FOR PROVIDING THE BANK WITH INDEPENDENT AUDIT SERVICES The Organizers anticipate engaging the services of one of the Big Six certified public accounting firms, or of a CPA firm of equal competence. VIII. CAPITALIZATION/NET WORTH PLAN A. STATE THE CAPITALIZATION PROPOSED. AND JUSTIFY THE AMOUNT REQUIRED, GIVEN MARKET FACTORS, STRATEGIES, AND EXPENSES The Organizers intend to construct an institution with a sound financial structure and to maintain an adequate capital ratio. In order to provide adequate levels of liquidity and profitability for the proposed Bank in its initial years of operation, the Organizers have decided to infuse $ 5,000,000 in initial capital, thus providing time for the loan and account managers of the Bank to attract and develop a deposit base and a market for the Bank's fee based financial advisory services. The Organizers of the proposed Bank understand that the risks associated with insolvency and illiquidity can be controlled through effective management of capital. The Organizers will provide adequate capital to ensure that the value of assets exceeds the value of liabilities and that creditors will be repaid on a timely basis. The capital adequacy of the proposed Bank will provide for protection from insolvency, a means to absorb any losses, and maintenance of customer confidence. The proposed Bank is expected to generate profits in {year } of operations as indicated by the projections in Schedule 3. B. DISCUSS THE PLANS FOR RAISING CAPITAL INITIALLY AND TO FINANCE GROWTH WITHIN THE FIRST FIVE YEARS. EXPLAIN HOW YOUR PLANS WILL KEEP THE BANK IN CONFORMITY WITH CAPITAL ADEQUACY GUIDELINES. DISCUSS THE NUMBER OF SHARES TO BE AUTHORIZED, NUMBER OF SHARES TO BE ISSUED, PAR VALUE PER SHARE, AND SALE PRICE PER SHARE The proposed Bank will initially be organized and capitalized at $5,000,000 as a District of Columbia corporation under the general corporation laws of the District of Columbia. The Organizers estimate the Bank's organizational expenses to be no more than $100.000, leaving the Bank with $4,150,000 cash and $750,000 in fixed assets to begin operations. The capital will come from the Organizing group. The Organizers will cause the amount necessary to be raised to make the bank viable and sufficiently capitalized. The Organizers of the proposed Bank have provided sufficient capital to ensure liquidity and solvency; however, should asset growth exceed projections or earnings growth fall short of projections, there are sufficient personal resources within the organizing group to contribute additional capital, if necessary, to maintain adequate levels of capital, earnings, and liquidity. If needed, the Organizers may also choose a private placement if this is necessary to further ensure the bank is viable and sufficiently capitalized. The private placement would not result in a change of control in the Bank. |
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