August has been a busy month for de novo banking, with two banks opening their doors and another two groups filing for deposit insurance to bring the pipeline of pending applications to 16.
Cypress Bank & Trust in Palm Beach, Florida, expects to open Monday with branches in Vero Beach, Melbourne and Jacksonville. Cypress, which
Genesis Bank opened last week in Newport Beach, California. It’s the third bank project for veteran California banker Stephen Gordon, who serves as chairman and CEO. Before Genesis, Gordon founded Commercial Capital Bancorp in Irvine in 1998. In 2010, Gordon led a group that acquired the struggling $273 million-asset Bay Cities National Bank in Redondo Beach,
Meanwhile, the Federal Deposit Insurance Corp. recently accepted deposit insurance applications from two more de novo groups, Brava Bank in Bloomington, Minnesota, and Nova Bank in Huntsville, Alabama.
Cypress will be the ninth bank to open in 2021, compared with seven for all of 2020, according to the FDIC.
Before the financial crisis, de novo bank openings were a weekly occurrence. In 2006, for instance, a total of 68 new banks began operations, according to the FDIC. Since 2012, openings have come less frequently. Between April 2011 and January 2017, just two new banks opened. Since then, the busiest year for bank starts was 2019, with 13.
The pandemic slowed startup-bank activity in 2020 as the economy came to a standstill. But since then, as conditions have improved, it appears to have sparked a renewed interest in forming new community banks, Paul Davis, director of market intelligence at Strategic Resource Management, a Memphis, Tennessee-based advisory firm, said Wednesday.
"A lot of these groups believe the pandemic exposed the need for more financial service options. They see the pandemic as a catalyst," Davis said.
Increased availability and affordability of financial services technology is also driving interest in de novo banks. “Some organizers could be challenged to bring in the capital mandated by regulators ... especially since there’s so much interest in investing in fintechs,” Davis said.
Gordon
Southern California “clearly does not have as many banks … and it doesn't have nearly as many community banks that have strong leadership, strong vision and enough capital to make a difference,” Gordon said last week in an interview.
“I think that puts us in a really great position to be impactful here in our market.”
Genesis differs from Gordon’s first two banks in two key respects: It has adopted a branch-light model and it’s limiting its footprint to four Southern California counties, Orange, Los Angeles, Riverside and San Bernardino.
“The first bank I launched, Commercial Capital Bank, had locations across California. I think we had 22 locations,” Gordon said. “When we had all those locations, we also had an organization that had multiple cultures. ... I felt like we had 22 different Commercial Capital banks.
“Then, in the launching of Opus, the vision was to be in all the major metropolitan markets up and down the entire West Coast. That meant we had a whole bunch of submarkets, a whole bunch of subcultures, a whole bunch of regions.”
Gordon made it clear he intends to run a much leaner operation at Genesis.
“You don't have to [open branches],” Gordon said. “That’s finished. COVID was the death knell for the branch system.”
“I have no desire to spend my life on airplanes,” he added. “And I have no desire to have subcultures where we're constantly trying to figure out how to have it be one culture, one vision, one brand.”
Genesis’ footprint is much more compact, “but it happens to be the second-largest demographic in the U.S.,” Gordon said. According to the FDIC, the four-county deposit market totals about $741 billion. Gordon is determined to capture a bigger share than he did with either Commercial Capital or Opus.
“I always felt like as much as we were headquartered in Southern California, we didn’t do the amount of business that we should have done there had we” focused solely on the region, he said
As for Cypress, it plans to use its existing brand recognition to drive additional business in the Florida markets where it operates.
“We have a strong financial history, with deep connections to the local communities,” President and CEO Dana Kilborne said in a press release about the bank’s upcoming opening. “We plan to leverage our unique position in the Florida market to best serve our clients and shareholders.”
