1. Establishing New Banks, Branches & ATMs
Chapter 4

2. Federal (National) Bank
Brings added prestige
More Costly
Subject to stricter regulatory framework
Larger deposits/loan
Technical assistance from national bank authorities
Part of Federal Reserve System
Federal banking rules can pre-empt (prevent) state laws

3. State Bank Easier to secure state charter Less costly
Not part of federal reserve system
Subject to state law
Customized service

4. Factors affecting regulatory decisions regarding Chartering a New Bank
Target market (service area)
Competing financial institutions within the service area
Sizes of business in the service area
Level of competition
Traffic pattern
Population density, growth, income, age, education, occupation etc.
Financial history of the service area
Ownership of the stocks (capital)
Experience of the organizers
Projected deposits, loans, revenues and expenses (quality of the projection)

5. Chartering a New Bank
External Factors
Internal Factors

6. External Factors Level & Growth of Economic Activity
Need for a New Financial Institution
Level of Competition

7. Internal Factors Qualification & Quality of Management Experience
Contacts

8. Factors Affecting Sites for Full-Service Branches
Traffic count
Business Activities
Population age, density and growth
Population per branch
Financial-service competitor

9. Establishing a Full-Service Branch (Capital Budgeting Decision)
Expected Rate of Return
- Compare the expected rate of return of the branch with the required/acceptable rate of return or with cost of capital of the bank
Geographic Diversification
- New branch increases or decreases the
return and risk of the bank

10. Decision to Install a New ATM (Capital Budgeting Decision)
NPV of New ATM =
Present value of the stream of cash savings from new ATM discounted at required return or cost of capital
Minus (-)
Initial cash outlay for the new ATM
Install ATM if the NPV is Positive