Common Good Bank of [STATE]: BUSINESS PLAN
VI. Records,
Systems, and Controls
VII. Financial
Management Plan
VIII. Monitoring
and Revising the Plan
IX. Alternative
Business Strategy
Appendix A: Assumptions.................................................................................................. a1
Appendix B: Balance
Sheet............................................................................................... a4
Appendix C: Table
of Regulatory Capital Levels............................................................. a6
Appendix D: Deposit
Flow Chart....................................................................................... a7
Appendix E: Changes
in Stockholder's Equity................................................................. a8
Appendix I: Income
Statement......................................................................................... a9
Appendix O: Table
of Loan Origination Levels.............................................................. a11
Appendix P: Community Population............................................................................... a12
Appendix R: Interest
Rate Assumptions for New Production....................................... a13
Appendix S: Startup
Costs............................................................................................... a14
Appendix V: Sensitivity
Analysis on Assumptions......................................................... a16
Appendix Y: Survey
and Survey Results......................................................................... a20
A. Mission
Common Good Bank
of [State] will be a new community bank in [City], [STATE], serving communities
in [Service Area] and dedicated to the common good – a "common good
bank" as designed and defined by the Society to Benefit Everyone (see
commongoodbank.com). On the face of it, a common good bank is just like any
other community savings bank: offering home mortgages, small business loans,
car loans, savings and checking accounts, CDs, merchant accounts, credit cards,
ATM cards, and investment opportunities.
But a common
good bank is no ordinary bank. Its
overarching mission is to advance the common good of its member depositors, the
wider community and the world. By "common good", we mean peace and
justice, a healthy planet and the well-being of each and every individual
person, empowering first those most in need. Most of the bank's profits go to
the community. Member depositors use an innovative combination of democratic
systems (see http://commongoodbank.com/democracy.html)
to guide the bank's socially responsible lending priorities and contributions
to the community. This is economics by the people for the people.
Choosing
benefit-to-the-community as the bank's foremost purpose opens the way for some
additional innovations, to support individual members and the local economy
(see below). This bank's annual financial benefit to the community is projected
to be as much as $100,000 by the end of the first year – much more than other
banks give to the community, even after many years in business. This could
provide additional funding for food pantries, public education, social
services, the arts, emergency services, community development, and many other
worthwhile purposes.
Benefits to
individuals include better rates on
deposits and loans, affordable stock options with a planned return of prime
minus 1.5% (currently about 6.75%), rebates from local merchants (typically 5
or 10 percent), and a local debit/credit card for purchases and cash
withdrawals in every nearby town. (NOTE: This is not a stock offering. The
first common good bank does not yet exist and cannot yet offer stock.)
Benefits to
local businesses include a focus on
small business lending, incentives to buy local, funding for economic
development, negotiable credit lines, 24/7 advertising, and local debit/credit
cards with no fees and immediate deposit to the merchant's account, processed
by card swipe or touch-tone phone.
B. Who are we?
Common Good Bank of [State] - Organizing Committee
Name, Chair
Name
Name etc.
Common Good Bank of [State] - Board of Directors (planned)
Name, Chair
Name
Name etc.
Technical Assistance
The common good bank model is designed
and promoted by the Society to Benefit Everyone, a 501(c)(3) (pending)
nonprofit organization that promotes sensible and compassionate decentralized
democratic economics. The Society to Benefit Everyone offers trainings and
technical assistance to communities and community organizations working to
establish and run a common good bank.
Common Good Bank Design Project Staff:
William
Spademan, Administrator
Mike
Noble, Banking Consultant
And
dozens of volunteers
Common Good Bank Design Project Advisory Board:
Organization
names are for identification purposes only and do not imply formal affiliation
or endorsement.
David Ahlfeld
Engineer
University of Massachusetts Amherst
Andrew Baker
former Director
Shelburne Falls Area Business Assoc.
Lynn Benander
Business Development Consultant
Laura Bessette
Ashfield Hardware
Alan Eccleston
Organizational Effectiveness Consultant
Change Work Associates
Manfred Gabriel
Senior Associate Attorney
Latham & Watkins
Sheila Garrett
Teacher
The Meeting School
Nancy Hoff
Ashfield Hardware
Juliet Jacobson
Web Designer
Randy Kehler
Promoting Active Nonviolence
Wendell Kelley
Kelley Woodworking
Amy Klippenstein
Sidehill Farm
Paul Lacinski
Greenspace Collaborative
Robert Lester
President
Gerencia Ambiental Internacional, S.A.
Peter Letson
Mathematician, retired
Carol Lewis
Director of Finance and Administration
Community Partners
Christopher Lindstrom
Special Projects Coordinator
E.F. Schumacher Society
Mary Link
Fundraising Consultant
Tom MacLean
Engineer, retired
Boeing
Andrew Martin
President
ADDvantaged, Inc.
Michael Mazgaonkar
Rural Development Consultant
Pariavaran Suraksha Samiti
Mike McCusker
McCusker's Market
Blake Meike
Principal Engineer
JumpTap, Inc
Terry Mollner
Executive Director
Trusteeship Institute
Mike Morton
Software Engineer
Google, Inc.
Aji Palar
Student
Valerie Palar
former Town Clerk
Town of Ashfield
Bill Perlman
Chair
Ashfield Select Board
Phil Pless
Realtor
Upton-Massamont Realtors
Chris Rawlings
Rawlings Excavation
Donald J. Sarich
CEO
Permaculture Credit Union
Suzette Snow Cobb
Manager
Green Fields Market
Barbara Snyder
C.P.A., Manager
Whittlesey & Hadley, P.C.
Susan Spademan
Real Estate Broker, retired
Coldwell Banker Spademan Assocs.
Loren Spademan
Real Estate Broker, retired
Coldwell Banker Spademan Assocs.
Irene Wachsler
Auditor
Deloitte & Touche LLP
C. The Plan
1.
Vision. In the long
term, following the same principles as Gandhi's constructive program, common
good banks aim to create an ever more democratic, sensible and compassionate
political and economic infrastructure, by starting small and growing from
within the current system.
2.
History. The details
of our strategy have evolved over the course of several years. Existing
economic systems we have tested (in theory or in practice) include local
currencies, barter, LETS systems, unregulated do-it-yourself banks, community
development credit unions, mutual banks, state-chartered institutions, and
micro-lending. For many varied reasons, none of these existing systems quite
worked for our purposes, by itself. However, each of these systems has
influenced our final strategy in important ways. A detailed discussion of the
problems we encountered appears elsewhere (see http://commongoodbank.com/history).
3.
Startup. Our optimal plan is to organize as a state-chartered stock
savings bank, raising a minimum of $5 million in capital by recruiting about
3,300 initial members, typically investing about $1,500 each. The Assistance
Company will receive these investments as loans, pending the availability of
stock, at which time the Assistance Company will buy stock on behalf of each
investor. Investors will be asked to advance 10% or more of their investment
well before opening. The interest on these advances will help support the
common good bank project.
Purchases of stock by depositors will easily be sufficient to satisfy statutory
requirements for capital adequacy (according to our survey results). The total
annual financial return on stock purchases (dividends plus appreciation) will
be limited to prime minus 1.5% (currently 6.75%). With capital increasing
effortlessly in proportion to membership and assets, the bank’s potential
growth rate is limited only by administrative and logistical considerations.
No for-profit enterprise will be allowed to purchase stock. No individual
person will be allowed to own more than one percent of the bank's stock, once
the bank opens. These prohibitions reduce the possibility of a hostile
takeover.
4.
Timeline.
Month
1-6: Planning
·
settle major details of
business plan
·
recruit pro-bono legal
assistance
·
customize policy
documents (based on common good bank model policies)
·
select initial
directors (7 Trustees and 7 Supervisors)
·
select and hire CEO
·
enlist support of 100
local individuals, key businesses and local government
·
select a site for the
bank office
·
schedule
pre-application meeting with state regulators
Month
7-12: Application for Bank Charter
·
raise $50,000 in
donations to fund Application phase
·
assemble initial large
investors or guarantors, as required by state regulators
·
meet with state
regulators
·
finalize proposed
business plan
·
revise business plan as
required
·
prepare application for
state charter
·
submit application
Month
13-18: Sign up members, prepare software
·
sign up 3,000+ initial
members
·
get local business
commitments for merchant tithing and accepting local debit/credit card
·
line up initial loans
·
acquire and customize
software
·
setup website
·
incorporate the
Depositors Association and apply for 501(c)(3) status
Month
19-24: Prepare premises, personnel and equipment
·
rent (or buy) and
renovate office space
·
buy and install
equipment
·
hire and train
employees
·
setup premises
·
test manual and
electronic systems
·
advertise
Month
25 ([OPENING DATE]): Go!
·
open with a celebration
·
honor the founding
organizers, contributors and investors
The
bank will succeed in the local market by virtue of several unique strategies
for efficiency, customer-orientation and service to the common good.
A. Service To The Common Good
1. Community benefit. The
bank is designed expressly to benefit the local community, both in its
investment priorities and in its distribution of surplus profits. Our initial
survey suggests that this feature, even alone, is sufficient to attract 93% of
respondents away from the competition. Potential benefits to the community may
include: supplementary funding for public education, assistance to the elderly,
the poor and the sick, funding for the arts, public gardens, emergency
services, community development, and many other worthwhile purposes.
2. Hands-on democratic process. Socially responsible investment priorities and disbursement of
funds to the community are guided by an innovative system of direct vote with
revocable proxies, enhanced by town meeting style discussions, giving member
depositors full participation and a visceral sense of their ownership in the
bank. The “liquid democracy” system requires that each member depositor choose
an ongoing proxy, trusted to vote on his or her behalf. The member may revoke
that proxy at any time, by choosing a different proxy or by voting directly,
overriding the proxy vote.
3. Merchant tithing (rebates on purchases). Many local businesses have agreed to offer a rebate of 2% or
better to members of a common good bank. The businesses responding to our
survey volunteered an average rebate of over 4%. This rebate will not benefit
the bank directly, but will benefit the bank’s member depositors and the local
community. Half of each rebate goes to the member; half to the community (in
addition to the bank’s surplus profits). This benefit to the community begins
immediately, even before the bank shows a profit. Projections based on survey
results show this tithing resulting in a 1% Return on Assets for the community
by the end of the third year, and over 3% by the end of the eighth.
4. Stock Options for Depositors. The bank will maintain adequate capital by encouraging depositors
to buy stock, earning a higher rate of return than their insured deposits. Our
survey shows that the average depositor will buy more than enough stock to
satisfy regulatory capital requirements.
B. Customer-Orientation
1. User-friendly conventional services. All services and procedures will be designed with the quality of
the customer’s experience as our top consideration. The bank will offer the
products and services typically offered by community banks, including combined
checking & savings accounts (described below), IRAs, mortgages, home-equity
loans, car loans, business loans, ATM services, merchant accounts, credit
cards, cashier’s checks, traveler’s checks, and on-line banking (transfers,
payments, statements, applications and check-ordering). Most loan and checking
account terms can be customized to suit the customer’s needs.
2. WOW! account. The bank will
offer a WOW! account, a unique combination of a NOW account, a Certificate of
Deposit, stock purchases and a reserve credit account. Each member depositor
chooses his or her own minimum balance. Substantial interest is paid on that
balance. Any withdrawal to below that level is treated as a reserve-credit loan
to the member (using the deposit and stock as collateral), making the chosen
minimum balance, in effect, a one-month, low-penalty CD.
3. Reserve credit. Every
member depositor will be extended a line of reserve credit (initially equal to
the member's stock holdings in the bank), which grows depending on the level of
responsible account activity. There is still a penalty for withdrawals beyond
the credit limit.
4. Local debit/credit card. The
bank will offer a local debit/credit card that can be processed using a
card-swipe or touch-tone telephone. Member merchants pay zero transaction fees
when accepting this card. The same card can double as a Visa card and/or ATM
card. This local debit/credit card is much more efficient to process than
checks.
5. Exceptional security.
The bank’s security systems will leave extremely little opportunity for fraud
or identity theft. The local debit/credit card will carry a photo of the member
depositor and will not display the member’s account number. Internet access
history and withdrawal patterns will be monitored by software and any unusual
account activity can be reported instantly to a bank employee and/or to the member,
by email and automated telephone messaging. Member identification in person or
by telephone will be enhanced by bank employees’ likely small-town personal
knowledge of the member depositors, aided by caller-id and photographs in
account records. The small size of the bank minimizes a criminal’s potential
gains from fraud or theft, making the bank a comparatively undesirable target.
Contractors (for audits, consulting and repairs) will be allowed in restricted
areas of the bank’s premises only by appointment and with proper
identification. They will be accompanied by an employee at all times.
C. Cost Efficiency / Competing Effectively
1. Self Service. Customers will be
encouraged to make deposits by mail or at a drop box. Most cash withdrawals
will be made by ATM or by presenting the local debit/credit card at a
participating local business. Forms for opening accounts and applying for loans
will be available online and at convenient public locations. Customer
identification is verified by public notaries at those locations, on contract
with the bank. Customers visiting the bank’s office will be assisted in using a
computer on-site to open an account, apply for a loan or manage their accounts.
Self-service empowers the members and saves on staffing costs, benefiting
everyone. For additional savings, part-time loan officers and investment
counselors may be available by phone or in person by appointment, rather than
working in the office all day.
2. Technology. Communications
from the bank to the member depositors will be primarily by email or fax;
alternatively by automated telephone or (for an extra charge) US Mail. The bank
will take full advantage of electronic check processing technology, handling
only errors and exceptions manually.
3. Outsourcing. Off-hours phone
answering will be outsourced for 24/7 service. Check printing, payroll,
auditing and bill payment service will also be outsourced.
4. Multilateral benefits. Surplus
profits that would otherwise go to excessive dividends will instead be applied
to balance advancement in five areas: growth, benefit to the community,
employee benefits, higher depositor interest rates, and lower borrower interest
rates. All of these increase our effectiveness in the marketplace.
D. Legal Form
1. Incorporation. The
bank will be organized as a Stock Savings Bank, chartered by the state or (if a
state charter is denied) by the United States Office of Thrift Supervision
(OTS), insured by the Federal Deposit Insurance Corporation (FDIC), regulated
by the OTS and the Securities and Exchange Commission (SEC).
2. Stock. The bank will
issue a single class of capital stock: common stock having a nominal par value
of one cent per share. The total annual financial return to investors
(dividends plus appreciation), will be limited to prime minus 1.5% and the bank
reserves the right to buy the stock back at the current price implied by this
limitation, making hostile takeovers financially unrewarding.
E. Physical Location
The
main office of the bank will be in [City]. The bank will have no branch offices
during its first three years, but may have drop boxes and ATMs in the
surrounding towns.
A. Product Strategy