At least five new banks are forming in the state of Georgia, a volume of “de novo” effort that hasn’t been seen in at least 10 years.
A strong economy in Georgia and nationwide, an improved regulatory environment and a desire to fill local banking gaps are some of the factors driving the effort to start new banks.
But it’s one thing to apply to start a new bank, and quite another to reach the point of opening for business, one industry observer noted.
The last traditional bank to form in the state of Georgia was NOA Bank in Duluth, which opened for business on Nov. 6, 2008, said Kevin Hagler, commissioner of the Georgia Department of Banking and Finance. While Community & Southern Bank opened in Carrollton, Ga., on Jan. 29, 2010, it was super-capitalized for the purpose of acquiring banks in receivership that were being sold by the Federal Deposit Insurance Corp., he said.
Three groups forming new banks have applied to reserve names with the state Department of Banking and Finance, which is a preliminary step in forming a bank under a state charter, which the agency issues. The reserved names are: Private Bank of the South, whose name reservation application was published by the department in April; The Bank of Danielsville, whose name reservation application published in November 2017; and Trust Company Bank, with a name reservation published in October 2017.
In addition to those three new bank efforts, groups are working to establish new banks in Johns Creek in north Fulton County, and in the northern arc, possibly Gwinnett County, said Byron Richardson, principal and senior consultant with Atlanta-based Bank Resources Inc., who consults on the formation of new banks.
Richardson is working with separate groups that seek to form Private Bank of the South in Clarke County and Trust Company Bank in Cobb County.
Private Bank of the South is looking to raise $20 million to $25 million and to apply for a charter in the next two to three months, Richardson said. It will be a commercial or business-oriented bank based in Athens, he said.
Private Bank of the South will focus on commercial lending, including government-guaranteed lending such as Small Business Administration and U.S. Department of Agriculture loans, some tax-credit types of lending, and “the whole gamut” of commercial lending including C&I, industrial, commercial real estate, and real estate, he said.
“It will not have a consumer focus in the classical sense of the word,” he said.
“We have a very strong board and group of organizations putting this together. Right now, we are keeping those individuals confidential. I can tell you it is a group of leading people in that Clarke County-Athens MSA,” Richardson said.
The bank’s organizers believe Athens-Clarke County is a robust market with great potential, he said.
“We believe the time is right in terms of the overall banking environment, not only in Clarke County but in Georgia and the Southeast,” he said.
Richardson noted the regulatory environment has improved since federal regulators sought to address the banking crisis of the recession era with programs including the Troubled Asset Relief Program, or TARP.
“There were a lot of regulatory problems with banking and earnings problems, primarily because of real estate-related problems, that had a negative impact on earnings,” he said. “Bank earnings have rebounded significantly. Banks are stronger and better than they were at early part of this decade.”
Trust Company Bank is not as far along as Private Bank of the South, Richardson said. “It is coming together, put it that way.”
Richardson said there are also efforts to restart a 2017 de novo effort in Johns Creek, and he expected another group to announce a de novo effort within the next 60 days “up in that northern arc. It will not be Johns Creek; probably Gwinnett,” he said.
In early 2017, a Chinese-American investor group led by American Investment & Immigration Center owner Jinsong Yang had applied to form Pacific Metro Bank in Johns Creek. The group planned to raise $12 million to $15 million and serve the Chinese-American community in the affluent north Atlanta community.
However, the group withdrew the Pacific Metro Bank application after about six months, according to Chris Johnson, owner and managing partner of Brightlane Partners, a consultant who helped develop the business plan and application for Pacific Metro. He said he was not aware of any effort to restart Pacific Metro Bank. Johnson said this week he was not working on any other de novo bank groups currently, but he expects to be in the future.
There have been about 10 to 12 bank applications nationwide in the past year, Johnson said. The pace of new bank formations will likely pick up from two to three per quarter currently nationwide, to four to five per quarter in the next two years, Johnson said.
Yang said this week he was no longer involved with Pacific Metro Bank.
The Bank of Danielsville is about 30 days away from filing an application, said Ken Watson, the bank’s proposed president and CEO. It is slated to be a general purpose bank, with both consumer and commercial offerings, in Madison County. Oglethorpe County is a secondary service area.
Watson said it was too early to give additional details about the bank, including its capital goal.
The acquisition of the former Bank of Danielsville by Century South Bancorp in the late 1990s, and the 2008 acquisition of Merchants and Farmers Bank of Comer by First Citizens Bank and Trust Company Inc. on June 1, 2008, left a void in the area’s banking offerings, Watson said, although he noted First Madison Bank & Trust, which started in 2005, also is a community bank.
The organizers are “extremely excited” about the opportunity, said Watson, a veteran banker who resigned from First Citizens Bank in January after 10 years to go to work for the new Bank of Danielsville organizers. A native of Oglethorpe County and a University of Georgia graduate, he has lived in Madison County with his wife and 10-year-old daughter since 2001.
Hagler couldn’t discuss any conversations the agency has had with de novo groups until it has received an application for a charter. But in terms of conversations with interested groups, “we are having more conversations. They are occurring more frequently,” -— about one a month compared to zero five years ago, then ticking up to about a meeting per quarter a few years ago, he said.
Inquiring parties have a wide range of expertise and experience, from displaced former bankers to neophytes, but more folks with traditional banking backgrounds are in the conversations now than there were a year ago, he said.
“This is a positive. We are excited about having more de novo activity in the state,” Hagler said.
The interest was driven by a high level of M&A activity since the recession: five mergers in the last year, 10 in 2016, 13 in 2015, seven in 2014, he said.
“That is a normal occurrence,” Hagler said. “What worries me is we didn’t have new de novo activity to backfill (the M&As).”
Rob Braswell, president and CEO of the Community Bankers Association of Georgia, said he knew of three to four groups seeking to start new banks in Georgia. He declined to give further details before the groups made public filings.
But he said it is nice to be talking about new banks forming, in contrast to eight to 10 years ago when the talk was about banks failing.
The state of Georgia has not seen this level of de novo activity since the recession, Braswell said. Bank closures and consolidations since the economic downturn have left multiple communities across the state without a locally based bank, so bankers who were displaced due to consolidation are taking advantage of opportunities to start a locally owned bank in some of these areas.
Some areas in Georgia that lack local banks are the southern crescent of metro Atlanta, northwest Georgia including the mountains, and central Georgia, he said.
“This is a great sign — sprouts of new blooms of growth,” Braswell said. “Georgia has bounced back tremendously well — the state of Georgia, as well as banking in Georgia — from the recession.
“This activity that we are talking about is another indicator that the state and the banking community in Georgia are both back, and back in a very healthy and vibrant way.”
Changes in the banking environment post-recession make it more difficult to form banks, said Chris Marinac, managing principal at Atlanta-based bank consulting firm FIG Partners LLC.
“Today the capital requirements are much tougher; the liquidity requirements are much higher,” he said.
“It is much harder to get a developmental bank or a new bank formed. It is possible, but it is more difficult. I think the barrier to entry is higher.”
The capital requirements for a new bank need to be $25 million or higher, versus starting at $10 million back in the 2002-2006 era, Marinac said.
“It’s just a different ball game than it was. Certainly, we could see a few new banks form. I think there is a vast difference between new ideas that are proposed and what’s actually closing with raised capital,” he said.