Slowly but surely, de novo activity is gaining traction in revitalized markets, Kathy Moe, regional director of the Federal Deposit Insurance Corp.'s San Francisco office, said at a Jan. 31 FIG Partners conference.
But in an evolving industry, some are questioning the need for more de novo institutions.
"We've certainly seen a little bit of a pickup in activity, across the country, not just in the San Francisco region," Moe said. She said most of the interest is in rebounding markets, especially in "states that were hit the hardest" by the number of post-crisis bank closures. In her region, she said interest is brewing in California, Utah and Nevada.
"I think that's a good thing," she said.
James Cornelsen, president and CEO of Bowie, Md.-based Old Line Bancshares Inc., said the dearth of new banks is more of a "risk-reward issue" than a regulatory issue.
"It's going to change the landscape of banking within the next 10 years dramatically," Cornelsen said.
Mark Kanaly, a partner at Alston & Bird LLP in Atlanta, said three groups have visited his firm to discuss opening de novos in the southeast. He said two "died on the rocks from a lack of investment," and the third is "still floundering around."
He said the second group tried to rally interest by telling investors a new bank would be good for the community. "And one of the investors said 'I'd rather build a park,'" Kanaly said.
In 2016, the FDIC took steps to encourage de novo formation, scaling back its heightened supervisory monitoring period for de novos from seven years to three years; holding outreach meetings; and developing a handbook to aid applicants.
Some say there is still uncertainty surrounding the amount of capital it takes to open a new bank. According to the FDIC, initial capital of a proposed depository institution should provide a Tier 1 capital-to-assets leverage ratio of at least 8.0% through the first three years of operation.
"So, depending on what your business model, your market, where you're trying to serve, that's what our expectation would be," said Moe of FDIC. "To be competitive, say in Southern California, starting out with $10 million is probably not going to be a sufficient number."
The number of new banks still pales in comparison to pre-crisis levels. Since Jan. 1, two new banks have opened their doors, including Santa Ana, Calif.-based Infinity Bank and San Diego-based Endeavor Bank. Both banks' capital offerings were oversubscribed.
Another California de novo, Costa Mesa-based Blue Gate Bank, opened in January 2017.
Overall, there have been nine banks established since 2010. Most have occurred since the beginning of 2017.
"There's a lot of hurdles, for obvious reasons," Moe said. "Nonetheless, we talk to all groups that come in, and some we hear from again and others we never hear from at all. Putting together a complete application is really the key [to] getting a de novo started and getting it done quickly and approved by regulators."
