To understand just how hard it is to start a bank these days, consider Coastal Bank and Trust. Organizers raised the $11 million of capital they needed, but just made the deadline in the prospectus with minutes to spare.

"We got our last check at 4:45 p.m. on Dec. 31," said Rob Norris, the Jacksonville, N.C., bank's president and chief executive officer.

Had that not happened, Coastal would have had to send all the money back, or at least give investors the option to back out, he said.

The $30 million-asset Coastal opened its doors in April, joining a handful of start-ups that have managed to overcome tight capital markets, increased regulatory scrutiny and a soured public perception of the banking industry.

The bank organizers who have succeeded say it has not been easy. Even Norris said the relief at getting the capital in time was short-lived, as scrutiny from the Federal Deposit Insurance Corp. soon added new stress.

"I thought when we raised our money we were home free," Norris said. "We were happy and thought it was going to be smooth sailing. Then we had to go through a lengthy process with the FDIC to get the OK."

Those who made it through the gauntlet offer would-be bank owners a number of suggestions: have a large board composed of directors with deep community ties; a business model that does not rely on brokered deposits; and a good deal of patience.

"The mere fact that we got opened would be a good sign," said Mike Ewing, the president and CEO of Oak View National Bank in Warrenton, Va., which was established last month. "We know how blessed we are to get open because there are some really good bankers who are not being approved right now."

Despite the challenges, bankers called the effort worthwhile because they are in a perfect position now — clean balance sheets, fresh capital and, for some, plenty of loans to pick from.

"We have even had other banks refer prospects to us because they aren't making loans," said Charles Eldridge, the president and CEO of the newly formed Regent Bank in Greenville, S.C. "That is the first time in my 38 years that I have seen that."

During the first half, just 17 banks opened, down from 48 a year earlier and 70 in the first six months of 2007.

The FDIC has said there is no moratorium, formal or otherwise, on new bank insurance. But several observers said that the agency is undoubtedly scrutinizing insurance applications much more closely than in the past and that they have been told it would not issue insurance for new banks in particular areas.

Several would-be organizers have thrown in the towel because obstacles were too large to overcome.

Chuck Schultz, who had been trying to organize First Milton Bank in Georgia, said his group ended up having to withdraw their charter application last month.

First Milton had preliminary approval for deposit insurance, but could not raise the required capital before the approval expired, Schultz said. He estimated organizers had been reaching out to investors for at least 15 months.

"Institutional money just disappeared, and when the economy started to take a sudden dip, people started to have more concerns with money and were much tighter with their wallets," said Schultz, who has helped start five banks since 2004.

"Last fall, when the banking issues hit and stocks started going in the tank, people started having concerns about banking's viability. … Everything was making it more difficult for people to part with their money, and in particular, to part with it for a bank."

For those that do open, the extended period of start-up time and a slower economy will mean burning through more capital before turning a profit, said Dave Danielson, the president and CEO of the consulting firm Danielson Associates.

"The regulatory environment has become more expensive and the time for the approval process increased," he said. "You bring everybody on board and you end up carrying them longer. That has been the most difficult part for most banks. They are opening with a retained loss that is larger than they thought."

Bankers at recently opened start-ups said the FDIC does not look kindly on business plans that include brokered deposits. Several said they had to eliminate such deposits from their plans entirely.

"If we had a business model with a significant amount of brokered deposits, we wouldn't have been approved at all," Norris said.

Nonetheless, others won approval, including Liberty Bank of Washington in Poulsbo, which opened June 11. Its business plan allows up to 10% of its deposits to be brokered, said Bill Fogarty, the bank's president and CEO.

Mike D. Owens, the president and CEO of Coastal Carolina National Bank in Myrtle Beach, S.C., said his advice to would-be banks is to have a big organizing group.

"It was a good time to have a large board with extensive community ties," he said, noting that his bank has 21 founding directors. "But even with that, we had to have a very focused effort on our capital-raising campaign." Coastal Carolina ended up raising $22 million, mostly from friends and family, he said.

Owens said one thing he would have done differently would have been to not register with the Securities and Exchange Commission, which delayed the bank opening by six months and added costs.

"The cost associated with being registered with the SEC exceed the benefits of being able to sell to anyone in the community," he said.

"The sensible way" is to use the exemption under Regulation D for security issuers who court only sophisticated investors, Owens said. Given the large sums of money that bank organizers seek, "you are really selling these kinds of investments to an accredited investor" anyway.

Fogarty at Liberty Bank of Washington said he met with roughly 3,000 people to raise $11.5 million over the course of roughly a year.

"We expected it to take four or five months," he said. "Some banks in 2006 were basically funded overnight. We knew it would take a little extra time, but not nearly that long."

One problem, he said, was that "other banks started to have some negative information come out, and talk of a bailout put a real damper on folks wanting to invest in banking."

Norris, at Coastal Bank and Trust, said that when the FDIC vetted his group's application, "they looked at our business plan and asked for a revision — less commercial real estate and less acquisition and construction lending, more capital for the three-year period."

In the end, Norris said, all the "pain" was worth it. Other banks in Coastal Bank and Trust's market are inwardly focused, creating lending opportunities, and a flight to safety has spurred demand for deposits, he said.

"We've been open since April 15 and we're more than halfway to our deposit goal for the year."

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