For startup banks, 2023 was an up-and-down year

December 28, 2023 2:30 PM

The year 2023 was an uneven one for new bank formation.

After the Federal Deposit Insurance Corp. approved 12 deposit insurance applications in 2021, followed by another 12 in 2022, the number of deposit insurance approvals for new banks dropped to 5 in 2023.

At year-end, five new banks — including two approved late in 2022 but none of the 2023 class — had opened their doors.

The 2024 pipeline appears more robust. First, there are the three banks in formation that have deposit insurance in hand: Orca in Bellingham, Washington, Nova in Huntsville, Alabama, and Nave in San Juan, Puerto Rico. Meanwhile, decisions on 13 applications — including three filed in November — are pending. Twelve of those pending applications were filed in 2023.

There seems little question that regulators have established a high bar for groups seeking to open de novo banks. A total of 19 community bank groups have withdrawn deposit insurance applications or had them returned by the FDIC since 2022, though four of those groups later refiled.

Here are profiles of the five banks that opened in 2023.

Adelphi Bank Chairman and CEO Jordan Miller

Black-owned MDI sets up shop in Columbus, Ohio

Adelphi Bank became the nation's first new African American de novo bank in more than two decades when it opened its doors in Columbus' King-Lincoln Bronzeville neighborhood in May.

Led by Chairman and CEO Jordan Miller, a retired Fifth Third Bancorp executive, the minority depository institution Adelphi has deep local roots. Vice Chairman Kevin Boyce served on Columbus' city council and as Ohio's treasurer. Boyce currently serves on the Board of Commissioners for Franklin County, which includes Columbus. In August, Adelphi named Michael Coleman — Columbus' mayor from 2000 to 2015 — as lead independent director.

Adelphi was named for a Black-owned savings and loan that served Columbus before the Great Depression. Following the disruptions sparked by George Floyd's May 2020 murder, Boyce, Miller and Dr. Kamran Haydar, an emergency room physician, began planning for the new Adelphi. "The hope is that we change lives," Miller said in an interview with American Banker.

Adelphi, which raised $25 million in initial capital, is making an impact. In its first five months, the bank built a $13.2 million loan portfolio, including $6.2 million in commercial-and-industrial loans, according to the FDIC.

Beach Cities opens with a pair of branches in June

Culminating two-plus years of planning, Beach Cities Commercial Bank opened with two branches, in Irvine and Encinitas, California, in June. Beach Cities raised more than $28 million from founders and more than 200 subscribers, according to its president, Jeffrey Redeker.

Like many other executives at de novo banks, Redeker sensed an opportunity arising from the industry's ongoing consolidation. Even massive, deposit-rich Los Angeles has lost dozens of banks over the past decade and a half.

"Consolidation has certainly displaced a lot of clients that were at smaller banks," Redeker said in an interview with American Banker. "People are banking in places they probably didn't choose."

Beach Cities has continued building its team in the nearly five months since it opened, adding two veteran Southern California bankers at its Encinitas branch in November. At Sept. 30, Beach Cities reported $16.5 million in deposits along with loans totaling $8.1 million, according to the FDIC.

Community Unity becomes Michigan’s second de novo in four years

Community Unity received its charter from Michigan's Department of Insurance and Financial Services on June 26, about two weeks after Beach Cities Commercial Bank opened. Headquartered in Birmingham, an affluent suburban community north of Detroit in Oakland County, Community Unity is Michigan's second post-Great Recession de novo. It followed the $228.3 million-asset Mi Bank, which opened in Bloomfield Township, another Detroit suburb, in April 2019.

Andy Meisner, a co-founder and CEO of Community Unity, served as treasurer of Oakland County, which includes Birmingham, from 2012 to 2021.

Working with the Detroit-area investment bank Donnelly Penman & Partners, Community Unity raised $28.6 million in startup capital. The bank, which celebrated its official opening Oct. 18, plans to focus on small-business lending.

Longtime Southern California banker starts fresh at Icon

Ernest Hwang is a well-known name in Southern California banking circles. Since getting started in banking at the Los Angeles City National Bank in the late 1990s, Hwang has served as president at Security California Bancorp in Riverside and as chief banking officer at Pacific Premier Bancorp in Irvine. Pacific Premier acquired Security National in 2016.

Now, Hwang, the president and CEO of Icon Business Bank in Riverside, is presiding over the launch of a new bank. Icon, which opened in August, is the Southern California region's fourth de novo since 2021, along with Beach Cities, Bank of Irvine, which opened in November 2022, and the 2-year-old $173.4 million-asset Genesis Bank in Newport Beach. Things seem to be off to a promising start at Icon. At Sept. 30, after less than two full months of operations, Icon reported $1.2 million of loans and $4.2 million of deposits, according to the FDIC.

Scottsdale emerging as a de novo hot spot

Scottsdale, Arizona — a tony Phoenix suburb — saw the birth of its third community bank in recent years with the opening in October of Zenith Private Bank and Trust.

(Scottsdale Community Bank opened in January 2022, and Integro Bank opened in June 2022. Gainey Business Bank opened nearby in Phoenix proper in 2021.)

Zenith Private operates as a full-service commercial bank. It offers wealth management services through a sister company, Zenith Wealth Advisors. Both Zenith Bank & Trust and Zenith Wealth Services are subsidiaries of Zenith Financial Holding Co. Zenith is the first Arizona de novo chartered with trust powers in more than two decades, according to Barbara Richardson, director of Arizona's Department of Insurance and Financial Institutions.