Small Banks Count On 'The Bank Lady'

Katie Edge is known as "The Bank Lady." She is a lawyer who helps community and small-scale retail banks get started. With the recent banking crisis, now may not seem like a good time to start a bank. Edge talks with Linda Wertheimer about getting banks started, even in tough economic times.

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LINDA WERTHEIMER, host:

With all the dispiriting news about banks that we've heard this year, we've wondered if anyone still thinks about going into banking, or even starting a bank, now. Our next guest can tell us what that's like or even if it's likely. Katie Edge is a lawyer in Nashville, Tennessee. She is a bank startup specialist, and in her career, she has helped something like 25 small retail banks get going. Some people call her the Bank Lady, and she joins us now on the line. Welcome to the program.

Ms. KATIE EDGE (Attorney, Miller & Martin PLLC): Good morning.

WERTHEIMER: I understand that you were retained by a startup bank called CapStar, which opened its first branch over the summer, which is not a great time to start a bank. How are they doing?

Ms. EDGE: They're doing great. As a matter of fact, we laughed that, when we opened the bank, sort of in the middle of a period when other people were wondering whether that was a good idea...

WERTHEIMER: In a period when lots of banks were closing.

Ms. EDGE: Well, that's right. CapStar, of course, made lemonade out of lemons and said, we don't have a single bad loan on our books.

(Soundbite of laughter)

WERTHEIMER: What about - is that true of the other startups that you've worked with?

Ms. EDGE: Yes, I think so. CapStar was the only bank started in Tennessee in 2008. Prior to that, we had a large number of de novo banks beginning. At one time, I think I had three or four going on simultaneously.

WERTHEIMER: De novo meaning - that's lawyer talk for...

Ms. EDGE: New.

(Soundbite of laughter)

WERTHEIMER: The banks you work with are a good deal smaller than the sort of Wall Street banks that have been crashing and burning. Is that why they are doing better? Is that why things are working for them?

Ms. EDGE: I think so. Part of it is size, but they also - if you'll pardon a Southern expression -sort of tend to their knitting. The community banks that we have here in Tennessee tend to be banks that are doing traditional banking. They take deposits from individuals and businesses, they lend money to individuals and small- and medium-sized businesses, and they don't get into esoteric kinds of activities. Very, very few of them have any exposure to the subprime lending market.

WERTHEIMER: Well, what is happening with the Bank Lady's banks? What are they telling you when they call you up?

Ms. EDGE: I think they are somewhat concerned about the economy, although some of my banks call and tell me that they've never been better. I have a few - you know, I'd be out of work if I didn't have a few banks in the ditch.

(Soundbite of laughter)

WERTHEIMER: So, there are some?

Ms. EDGE: There are a few troubled banks, but we believe that they are under control.

WERTHEIMER: Now, last year, you said there was only one launch in the whole state of Tennessee.

Ms. EDGE: That's correct.

WERTHEIMER: What do you think is going to happen in 2009?

Ms. EDGE: I really don't think there will be a startup in 2009. I would love to do one, and frankly, I think it's a very good time. If investors are willing to put up the capital, it would be an ideal time to actually start the process, because it takes a year, start to finish, to open a new bank.

WERTHEIMER: What do you think it says about the state of the economy, that you don't really think anybody's willing to take that step?

Ms. EDGE: Well, I think that there is a general nervousness about the economy, and I can understand that. But I've been doing this a long, long time, and economies are cyclical, and this, too, shall pass.

WERTHEIMER: Katie Edge is a lawyer for the firm Miller & Martin in Nashville, Tennessee. Ms. Edge, thanks so much.

Ms. EDGE: Thank you, Linda. It's my pleasure.

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