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<p>SAN BERNARDINO, Calif. – In what a credit union official admits is a highly unusual move, Arrowhead Credit Union hopes to open a state-chartered bank solely to service business clients. An application for the new financial institution, tentatively called Arrowhead Bank, is expected to be filed within 60 days with the California Department of Financial Institutions. “We have a large field of membership that has a lot of small business owners within it, and we want to be able to serve them better,” explained Jane Ronnfeldt, vice president of Arrowhead CU. She said the move to start a bank was prompted by federal regulations limiting member business loans to 12.25% of assets. “We just don’t think that’s going to be enough in the future,” she said, adding that the bank plan was designed as a “proactive” move. “We’re not even close to it yet, but we’d rather start this now than get up to the edge and not be able to do things for the members,” she said. The new institution will be a de novo bank – started from scratch rather than through the purchase of an existing bank. The new bank will be capitalized with $3 million; assets will come from the current business portfolio. The bank will be a wholly-owned subsidiary of the credit union, the same as its three existing subsidiaries: Arrowhead Financial Group, Arrowhead Trust Inc., and CU Insurance Services. “The credit union is not changing at all,” Ronnfeldt stressed. “We’re staying Arrowhead Credit Union. That’s really important. We don’t want anybody to think the credit union is turning into a bank.” Ronnfeldt said business members will find the new bank – which will operate out of the credit union and its branches – offers them services they simply are unable to obtain from the credit union. One of the major changes will be provided by software geared to banking concerns, such as providing account analysis and sweep accounts. “We’ve been trying to push round pegs into square holes, and it’s not keeping people happy,” Ronnfeldt said of the current credit union technology. “We just decided if we want to pursue this line of business then we have to take it seriously. We’ll have a banking system that will be able to provide the kinds of services that people want.” Offering those services will also allow Arrowhead to capitalize on the rapid growth in the Inland Empire, which is composed of both Riverside and San Bernardino counties. According to the latest census data, the two counties are home to 14 of Southern California’s 20-fastest growing cities. The 3.8 million population of the Inland Empire today is expected to double in the next 25 years. Population growth jumped 52% between 1986 and 1996. “We’re really positive about the Inland Empire and the economic situation,” Ronnfeldt said. “We think it’s only going to get better.” She said Arrowhead had no intention of going outside the Inland Empire. “We want to help the business owners here,” she said. “That’s really why we’re doing it. It’s just to provide the services that people have been asking for. It comes down to servicing our membership base.” Ronnfeldt admitted that a credit union applying for a state-chartered bank was a highly unusual move, one that she said was almost unheard of. She said she didn’t expect any problems gaining approval with DFI. “The more we work through the process, the more positive we are about it,” she said. Ronnfeldt downplayed the idea that Arrowhead’s move was simply aimed at skirting the law that limits member business loans to 12.25% of assets. “It’s not so much to get around anything,” she said. “It’s just that we’re not able right now to provide some of the products and services we really want to give to members in a cost-effective way. “What we’re doing is trying to find a better way to serve our members,” she added. “That’s really all it’s about. If we could do it within our current structure, we would do that.” The disclosure of the bank plan comes just days after Arrowhead Financial Group, a credit union subsidiary, announced that it had completed the acquisition of four area financial planning firms. The acquisitions were aimed at making it the Inland Empire’s first one-stop shop for business and personal financial services (CU Times, Feb 13). Last fall, Arrowhead acquired a commercial insurance company. “The Arrowhead group of businesses is now the only financial institution in the Inland Empire offering a credit union, insurance services, investment management, financial planning, tax planning and trust services under one roof,” said Jim Estes, president of Arrowhead Financial Group. Ronnefeldt said that business people coming to the planned bank would find a wealth of services under one roof. “Business owners can come to us and we can help them with the commercial insurance they need to run their business,” she said. “Then our trust company can help them with their 401k retirement plan. The investment group can help them with need to invest funds and get the most out of their dollars. And the credit union can help on the personal side. “If the whole thing works as we expect it to, and we know it will, then it’s kind of a seamless opportunity for somebody,” she noted. “You don’t have to run from your broker to your insurance company to your bank to your credit union. You come into the (Arrowhead) office and deal with one person who can facilitate your transactions. “We’re putting all the pieces together,” she added. “At some point people won’t have to go anyplace else. They’ll just have to come to Arrowhead. We’re really excited about it.” -</p> <p>[email protected]</p>

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