Add South Carolina to the expanding list of states with a new bank in formation.
A group in Charleston plans to open Beacon Community Bank in the fourth quarter. The institution, if approved, would be first de novo in the city since Atlantic Bank & Trust opened in February 2007.
In what must come as an encouraging sign for the banking industry, Beacon joins a roster of banks in various stages of formation. Others include Winter Park National Bank in Florida; Bank of Austin in Texas; Endeavor Bank in San Diego; and Pacific Metro Bank in Jones Creek, Ga.
Beacon’s organizers say Charleston is ready for a new hometown bank.
After years of consolidation, the $2.2 billion-asset CresCom Bank and the $430 million-asset Bank of South Carolina are the only banks based in the coastal city.
At the same time, the local economy has boomed. Boeing began building its 787 Dreamliner passenger jets in Charleston in 2012, while Volvo and Mercedes-Benz are building production facilities in the area that should create more than 3,000 jobs.
“Those three are the big drivers and they’ve created a huge ripple effect,” said Brooks Melton, who would become Beacon’s CEO.
Melton declined to discuss specifics of his group’s application, including the amount of capital it will seek to raise.
A decade ago, Charleston was home to seven banks with less than $1 billion of assets. The disappearance of most of those institutions has likely created gaps in the market, said Jonathan Hightower, a lawyer at Bryan Cave in Atlanta.
“The loss of small banks can sometimes cause a particular market to lose the service to which it became accustomed,” Hightower said.
“De novo banks may step in to fill some of those voids,” Hightower added. “The challenge, of course, is building a compelling economic case for a new bank while at the same time finding a business plan that is palatable to the regulatory agencies and attractive to new board members.”
Beacon plans to follow a traditional community bank strategy, focusing on small businesses, entrepreneurs, real estate developers and retail customers that value a local institution.
Beacon’s team is made up of former community bankers, including Melton, who previously served as a market executive at CommunityOne Bancorp, which was recently bought by Capital Bank Financial in Charlotte, N.C. Two other executives worked at Southcoast Community Bank, which was sold to BNC Bancorp in High Point, N.C.
Capital and BNC subsequently agreed to be sold to larger institutions.
Despite a small uptick in de novo applications, only Blue Gate Bank in Costa Mesa, Calif., has opened this year.
That will likely change. Winter Park’s organizers plan to open in August with one branch and 15 employees. Additionally, Connecticut’s Department of Banking is set to hold a hearing June 22 on a charter application from TNB Corp.
De novo activity could accelerate as more banks open, said Chris Johnson, managing director at the Atlanta consulting firm Brightlane Partners.
The industry has been waiting for some “guinea pigs” to complete the process, Johnson said. “As more and more organizing groups come public with their applications, I think that it is building positive momentum for groups that were sitting on an idea.”
Regulators, which for years were skeptical of charter applications, are starting to look askance at transactions where investor groups buy existing charters only to move to new markets, Johnson said.
“Enough small communities have lost their locally owned bank to where I don’t believe regulators are interested in seeing too many more charters being purchased and moved elsewhere,” Johnson said.
Hightower also predicts de novo activity will increase.
“It’s an uphill battle," he said, "but I think we’ll continue to see a trickle of de novo bank applications centered around qualified management, dynamic communities and time-tested business plans.”