Only a couple of new banks have emerged in Connecticut since The Connecticut Bank & Trust Co. in Hartford first opened its doors in 2004. The state, and the entire New England region, recently has lagged behind the rest of the East Coast in terms of new-bank openings.

Entrenched community banks and slow population growth have separated Connecticut, and the rest of New England, from the “blistering pace of new bank openings” seen along much of the rest of the East Coast.

“There are far fewer new banks started in New England versus the rest of the country,” said David Danielson, president of Danielson Capital in Virginia. Danielson Capital recently released a report on new banks for the second quarter of this year, and noted that six new banks opened along the East Coast, from South Carolina to Maine, in the second quarter. Nineteen new banks opened in the first half of 2006.

One new bank opened in Connecticut this year – the Darien Rowayton Bank. It was preceded by RBS National Bank’s opening in Stamford last year, and The Connecticut Bank & Trust Co., which opened in Hartford in 2004.

De novo banks in Connecticut have a certain set of challenges, Danielson said.

“It’s a tougher environment,” he noted.

New England has a lot of thrifts that are entrenched in small communities, and which do not push for high profits. One of the most difficult competitive situations for Connecticut’s financial institutions comes in the form of NewAlliance Bank, the New Haven-based result of a merger of three banks. The institution has more than $7 billion in assets, and a return on equity of 3 percent, which is much lower than most banks, according to Danielson. That gives the bank the ability to price its products very competitively, and makes it difficult for other banks.

“How do you compete with that?” Danielson said.

New England is saturated with established banks, and the population is not growing quickly, which slows down the rate of de novos. In other parts of the country, such as the area near Washington, D.C., developers are tearing up farms and building 3,000-lot subdivisions, Danielson said. Some of the large counties there are growing by as much as 8 percent a year.

“It’s a very different market down here,” he said.

Getting Closer

During the second quarter of this year, much of the new-bank activity was gathered around New York and New Jersey, and in the Carolinas. Some of those new banks also managed to raise impressive amounts of capital; BankMeridian in South Carolina raised more than $31 million, and Bank of New Jersey raised $44 million.

In Connecticut, three de novos have applied for a temporary certificate of authority, which allows them to raise capital. Higher One Bank in New Haven, a bank that would back a business that fuses college IDs and debit cards, has extended its certificate for several years. The Bank of Greenwich received a certificate last year, and Quinnipiac Bank & Trust Co. of Hamden received one earlier this year.

Despite the difficulties of opening a new bank in Connecticut or in New England, the spate of mergers and acquisitions over the last several years might propel some to organize a new bank, said Robert Segal, a senior investment officer at J. William Mantz Investment Advisors in Danvers, Mass.

“I think someone would do it because there have been a lot of consolidations and mergers,” he noted. “Consumers would rather do business with a bank that is local Â… a big reason is the customer can get closer to the decision-maker; the bank president might work close to the lobby, rather than in Charlotte, N.C.” Bank of America’s headquarters are in Charlotte.

But opening a new bank is not without its challenges, Segal said.

“They have to bring in new customers, have to get customers away from existing banking relationships,” he said. “But I think, especially with mergers, people may not want to do business with a bank that is located out-of-state. [It is] an opportunity for a bank to bring in customers that are local. Customers like it; if they have a problem, that they can talk to someone face-to-face rather than on an 800 number.”

Indeed, new banks in Connecticut have touted their community roots. The Bank of Greenwich, which could open soon, has focused on its status as the only locally run bank in Greenwich. The Connecticut Bank & Trust Co. has Hartford roots; the bank took the name from a now-defunct but previously very well-known Hartford institution.

Although New England has seen a slower pace of new-bank openings than the rest of the East Coast, it has been a relatively busy couple of years for the region.

“From what we’ve seen, at least in New England, we’ve seen a lot of banks open,” Segal said. “We’ve seen, relative to the prior couple of years, more than we’ve been used to seeing. That’s my perception.”

One reason for the entrenchment of so many community banks is that Connecticut and Massachusetts have a large number of mutual banks, according to Sean Mahoney, associate/attorney with Kirkpatrick & Lockhart, Nicholson, Graham in Boston.

“Mutual banks don’t merge with the same frequency as stock banks, and mutual banks aren’t subject to takeovers the way a stock bank is,” he said. “If you looked at the mutual charter, it is really designed to let the institution stay around a long time. In other parts of the country, they don’t have that option. In places like Florida or Texas, banks last 15 years then are taken over.”

Segal reiterated that New England’s slow growth has resulted in fewer de novo banks.

“I don’t know what the regulations are in the other states,” he said. “But I would say more [banks open elsewhere because of] the growth prospects, because people are Â… moving down south because of weather and housing.”