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MOE wave creates 'once-in-a-lifetime' opening for de novos

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MOE wave creates 'once-in-a-lifetime' opening for de novos

After a year of four large mergers of equals priced at more than $1 billion — the most since 1998 — de novos are looking to take advantage of an industry rife with consolidation.

Several bankers said the wave of MOEs creates an opening to form startup banks or expand into new markets to capitalize on potential customer or talent attrition.

Consolidation was one of the driving factors for the organizers of Farmers Branch, Texas-based TYME Bank, proposed CEO Joseph Hansen said in an interview. He said the bank's organizers thought the amount of deal activity in the Dallas-metro market presented a "very decisive, strategic opportunity."

"This is an opportunity for us to come in and take advantage of the disruption," he said.

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Craft Bank, an Atlanta de novo, began the application process before BB&T and SunTrust announced their MOE. But the largest Atlanta-based bank moving its headquarters out of the city gives Craft Bank the opportunity to gain talent and customers, proposed CEO Ross Mynatt said in an interview.

In addition to startup banks, some established banks are hoping to take advantage. Nashville, Tenn.-based Pinnacle Financial Partners Inc. is also looking to benefit from customer and talent attrition with its recently announced move into the Atlanta market with a de novo branch — a strategy CEO Michael Turner has used before in the Southeast.

"[Atlanta] is dominated by a lot of large banks that are going through lots of transition. There is lots of turmoil in the marketplace," Turner said in an interview. "This competitive landscape is really attractive."

Taking away customers from large banks is a proven strategy for smaller banks, said D.A. Davidson analyst Kevin Fitzsimmons, and the large deals in 2019 only created more opportunities for de novos.

"This is a once-in-a-lifetime opportunity, or at least generation. I'm not suggesting there's going to be any big stumble there but ... for all the customers and employees that have been loyal to those institutions, all of a sudden it brings up the opportunity for a conversation because maybe they'll be willing to look to go somewhere else," he said in an interview.

The Southeast saw two large MOEs in 2019: the merger between BB&T and SunTrust Banks Inc., now Charlotte, N.C.-based Truist Financial Corp., and the announced tie-up of Memphis, Tenn.-based First Horizon National Corp. and Lafayette, La.-based IBERIABANK Corp.

Texas saw one MOE with the announced deal between McKinney, Texas-based Independent Bank Group Inc. and Dallas-based Texas Capital Bancshares Inc.

Banks in the Midwest stand to benefit from the MOE between TCF Financial Corp. and Chemical Financial Corp.

Of the 21 de novo applications filed with the Federal Deposit Insurance Corp. in 2019, 16 were in states or territories where at least one of the participants in last year's large MOEs has branches. One of those 16 de novos withdrew its application. The remaining five de novos were in California, Utah, New Jersey and Arizona, which had two applications.

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