De novo activity in 2018 was the busiest it has been in a decade.
Several factors contributed to the activity, including a growing economy, industry consolidation, tax reform and a more receptive regulatory environment.
The Federal Deposit Insurance Corp. approved 14 applications this year, an increase from eight in 2017. Through Dec. 15, the agency, which grants deposit insurance to new banks, has received 24 applications in 2018.
Jelena McWilliams, the new FDIC chairman, recently wrote in
Still, some industry observers say the momentum will not carry over into 2019.
New bank formation could face new obstacles in areas such as capital raising, particularly due to the malaise that has hit bank stocks in recent months. Other chilling factors could be a change in the political environment and economic uncertainty, industry observers said.
“I expect we're going to see a modest slowdown and some of the groups out there are not going to be able to raise their capital and will have to pull back,” said Donald Musso, president and CEO of FinPro, which is working with several de novo efforts. “Even though the doors are open and the OCC and FDIC are clamoring for more banks, the market is going to be the hold up.”
"The Democrats' success in taking back the House has significantly reduced optimism for the prospects of further bank regulatory relief," added Greyson Tuck, a lawyer at Gerrish Smith Tuck. "The euphoria, particularly in the banking industry, that existed shortly after President Trump’s election has certainly subsided. This has left fewer individuals looking to pursue de novo bank charters."
At least one de novo effort is struggling to raise capital.
Spirit Community Bank in Statesville, N.C., has found it challenging to raise its target of $20 million, said William Long, who is leading the organizers. The group's application is mostly complete and discussions with regulators have gone well so far, he said.
“We hired a company in October to come in and help us sell our initial capital stock,” Long said. “It’s much slower than I had anticipated.”
The group still hopes to open in March, though it could be delayed.
“A lot of people have changed their minds,” said Long, who remains determined to open the bank. “We have heard every excuse under the sun. We’re encouraged by all the people who have helped, but the majority of folks haven’t come to the table to buy stock.”
On a positive note, a number of approved banks are set to open next year.
Three de novos made their debut in 2018: Studio Bank in Nashville, Tenn., CommerceOne in Birmingham, Ala., and Gulfside Bank in Sarasota, Fla.
Community Bank of the Carolinas in Winston-Salem, N.C., which recently received conditional approval from the FDIC, needs to raise more capital and gain approval from its state regulator before opening. Organizers hope to open North Carolina’s first post-crisis bank by early March, said Jim Monroe, who is set to become the bank’s chief financial officer.
Watermark Bank in Oklahoma City, which received regulatory approval in November, is targeting a Jan. 22 opening date, said Matthew Pollock, the proposed bank’s president and CEO.
Organizers, who raised $25 million, have been hiring more bankers and building out Watermark’s systems and products, Pollock said. Watermark has also moved into its headquarters.
“We continue to have an exceptional response from the community, shareholders and potential employees,” Pollock said.
“What we have found is that there are many highly skilled bankers in the market who have an entrepreneurial spirit ... and have proactively been reaching out to us," Pollock added. "Our shareholders are anxious to start banking with us and have already started to tell the story in the community.”
Coastal Community Bank N.A. in Hollywood, Fla., and Mi Bank in Bloomfield Township, Mich., also expect to open in the first quarter.
