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DC bank for Ethiopian-American community highlights niche de novo opportunities

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DC bank for Ethiopian-American community highlights niche de novo opportunities

A Washington, D.C.-based bank in organization hopes to cater to the Ethiopian-American community. The de novo's focus on an underserved market could make it more attractive to regulators, some industry experts say.

Marathon International Bank filed an application with the Federal Deposit Insurance Corp. in January. It intends to be a D.C.-chartered commercial bank, with a "particular emphasis" on serving U.S. residents of Ethiopian origin, according to the application.

Julie Hill, a professor at the University of Alabama School of Law, said Marathon appears to be "kind of on the same theory" as Bank of Bird-in-Hand. The Pennsylvania bank opened in 2013 and caters primarily to the Amish community. It was the first bank to open in the U.S. since 2010.

"If you can identify a market that is easy to show to the regulators has been underserved, they have a harder time telling you, 'No, we don't really need your bank,'" Hill said. "... I think the smart advice to potential de novo investors is find something that's easy for regulators to see is not being done now."

A niche strategy may see more favor among regulators, said Jeffrey Adams, a managing director at investment banking firm Banks Street Partners. But down the road, he said, the profitability of these de novos will be determined by "who the executives are leading the effort" and how much demand there is for the specialty products.

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Kevin Halsey, a consultant at Capital Performance Group, said D.C. could be a prime spot for new banks, because of its large, diverse population with unique needs. He said new banks have to prove from day one they have a "carved-out value proposition."

He also pointed to another bank in organization: Nashville, Tenn.-based Studio Bank. According to its website, Studio will be a boutique bank for "Nashville's creators."

"All the branding and everything else is centered around that studio feel," he said. "... Truthfully, that's what it's going to take. It is becoming increasingly harder to get the attention away from big banks and others with much larger marketing budgets."

According to Marathon's application, much of the area's Ethiopian-American population is underbanked by regional and national financial institutions. Of the Washington, D.C., metropolitan area's 6.1 million people, about 45,000 individuals and 14,000 households are of Ethiopian descent, organizers wrote, citing 2015 U.S. census data. They said anecdotal evidence suggests the actual population could greatly exceed the estimate. Organizers wrote that the area's banks do not understand the "culture, language and business practices of the Ethiopian Diaspora."

Marathon also expects to appeal to individuals and small- to medium-sized businesses outside of the Ethiopian-American community. Marathon plans to offer money remittance services; domestic and international wire transfers; linguistic services; traveler's checks; and, subject to regulatory nonobjection, international letters of credit.

Zekerias Tamrat is listed as Marathon's proposed president and Gregory Garrett as the proposed CEO. Tamrat was most recently employed by PNC Bank in Pikesville, Md. Garrett was an organizer and former CEO of Platinum Bank in Lubbock, Texas. Tamrat and Garrett declined to comment.

Marathon's management and board of directors will include members of the D.C. metro area and national Ethiopian community. Takalign Gizzaw, the proposed chairman of the board, is an economist who previously served as managing director of the Development Bank of Ethiopia.