David Cuthbertson believes Monroe, N.C., needs a community bank.
Cuthbertson, an area homebuilder, is leading an effort to create North Carolina's first new bank in nine years. He is working with 11 other business leaders to open a homegrown community bank in Union County, about 30 miles outside of downtown Charlotte.
“It’s just always felt good to walk into a local bank and have everyone know who you are,” Cuthbertson said. “It was a lot easier for someone that was well known in the community to come in and apply for a loan. We don’t have that anymore in Union County. I have been here all my life and I just feel like it’s a good thing for the community and I want to be part of it.”
Organizers said regulators have been receptive to the idea of a new North Carolina bank, but they have a ways to go before their vision becomes a reality. They still must develop a business plan and receive minimum capital requirements from regulators before raising funds.
North Carolina, which has lost about 40% of its banks since late 2010, is a logical state for a new community bank, industry observers said. While there is room for a local community bank, experts said it would take a considerable amount of capital, deep industry knowledge and patient investors to get the proposed venture off the ground.
“It is time for a market test,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “I really hope they succeed. It’s been so long since the market has been tested. We just don’t know if de novo viability is still out there.”
Swarms of North Carolina banks have been bought by out-of-state banks in recent years, including a handful in the Charlotte area. Bank of America will be the only bank based in the city once a number of pending deals close, including NewDominion Bank’s sale to Park National in Newark, Ohio.
In Union County, large and midsize banks have a firm grip on the market. BB&T controls about 30% of the deposits in the county, and Wells Fargo controls 15%. First Citizens BancShares, F.N.B., SunTrust Banks and Fifth Third Bancorp each have shares at or above 10%.
Despite a potential need, organizers looking to start a bank can expect a higher capital requirement than de novos formed before the financial crisis.
It is common for de novos to raise $30 million before opening, or nearly double what new banks had to raise a decade ago, said Christopher Marinac, an analyst at FIG Partners in Atlanta.
As for experienced management, the Union County organizers have hired Randy Helton, a former CEO at American Community Bancshares in Monroe, as an adviser. American Community was sold in 2009 to Yadkin Financial, which in turn was bought last year by F.N.B. (Cuthbertson was an American Community shareholder.)
Helton, who had been interested in a de novo effort for a couple of years, said Ray Grace, the state's banking commissioner, has encouraged the group to move forward. Helton, who expects to meet with the Federal Deposit Insurance Corp. in the next 30 days, has also enlisted the help of Tony Gaeta, a retired lawyer in Raleigh, N.C., who has worked with about 30 startup banks over the years.
Helton said he envisions the proposed bank having a strategy similar to American Community's — offering bread-and-butter products and services to Union County, with the potential of expanding to nearby “bedroom communities” over time.
Though an experienced banker, Helton hasn't run a bank in nearly a decade, and the Charlotte banking scene has changed tremendously since then, Marinac said.
Helton "certainly understands how to run and grow a bank," Marinac added. "I think it’s going to be very interesting to see what people join the team.”
The bank's organizers are optimistic they can recruit bankers seeking new opportunities after recent bank sales. While there have been whispers about other de novos forming in North Carolina, Helton said he isn’t worried about competition for capital.
“Unless they're going into our market — and I don’t believe that they are,” Helton said. “I’m a fan of community banks. I hope they do well, are successful and accomplish what they want to do.”
Cuthbertson, who is spending his time securing preliminary commitments from potential investors, said the community has been receptive to the vision for a new bank.
“We have pretty substantial commitments with [people] we’ve worked with for years who want to see a community bank come to fruition,” he said.
Investors will need to be patient because it normally takes about three or four years for a de novo to become profitable, industry sources said. Though new banks could use technology to lower costs, it will still take efficient management to expedite profitability, Marinac said.
“My sense is that investors are much less patient today than when de novos were more popular in the early 2000s,” Marinac added.