Given how hard it is to win regulatory approval for a new bank these days, a tactic being used in Texas could gain wider use.
Timothy Bryan wanted to start over after the bank his family owned in Bryan, Tex., was sold and the acquiring bank later failed. But Mr. Bryan did not want to wait months for a charter.
So he opened a loan production office in his hometown for Bank and Trust, a $320 million-asset bank based more than 300 miles away in Del Rio. This week he plans to convert it to a branch and start taking deposits.
"This is a way we could get into business over the weekend," said Mr. Bryan, 58. "We didn't have the luxury of sitting around for six months waiting for a charter."
Industry observers said this strategy could become more common because of the long waits lately for regulatory agencies to issue charters and deposit insurance for start-ups. But they said one hurdle to such an arrangement is that it requires a lot of trust between the two banking groups, considering one is putting capital on the line and the other needs to be able to buy back the business it builds at a reasonable price.
Mr. Bryan agreed that trust is important. Bank and Trust is owned by the Cauthorns, old family friends of his.
Dan Hudson, the president and chief executive officer of NuBank Group in Dallas, a consultant to start-ups, said three groups he is working with have started moving their loan customers to partner banks. (Confidentiality agreements prevented him from naming the clients.)
He said this tactic is "more frequent now than it ever was," because getting approval for start-ups is tougher. For example, the Federal Deposit Insurance Corp. used to take a few months to approve applications for deposit insurance, but now the wait is up to a year.
But rarely does an entire team from one bank join another and build branches with no plans of sticking around, observers said.
Mr. Bryan's group of 21 bankers had worked together at what was the oldest banking company in the state, First National Bank of Bryan. Mr. Bryan was the chairman and CEO of the bank when it sold in 2007 to Franklin Bank Corp. of Houston, which failed Nov. 7.
Prosperity Bancshares Inc. in Houston acquired the deposits, branches, and some assets of the failed thrift from the FDIC. But instead of joining Prosperity, Mr. Bryan's group opted to start their own bank.
Dan Rollins, the president and chief operating officer of the $9 billion-asset Prosperity, said he wishes them well. "I hate to see good people go, but healthy competition is good for everybody," he said.
Prosperity plans to have seven branches in the Bryan area after consolidating its five branches with the nine Franklin ones, Mr. Rollins said.
With its existing relationships there and the increase in its branch total, the market should continue to be a strong one for Prosperity, he said.
Mr. Bryan's plan is to accept deposits and book loans for Bank and Trust until a shell charter becomes available, possibly later this year or next. (A shell charter is a spare one left over after one bank acquires another, and buying one is faster and cheaper than applying for a new charter.)
Then Mr. Bryan's group would raise capital, buy the loans made while at Bank and Trust, and open a new bank.
The group also would buy the three branches they intend to get under way in Mr. Bryan's hometown, which is named for his great-great-grandfather.
No name has been chosen for the would-be start-up.
Mr. Bryan said an early estimate calls for organizers to raise $20 million to $25 million from local investors to fund the eventual exit from Bank and Trust and capitalize the new bank. However, no specific deal terms have been worked out with Bank and Trust yet.
Partnering with the Del Rio bank will allow the Bryan bankers to continue the customer relationships they have without interruption, said Mr. Bryan, who is leading the group but does not have a title with Bank and Trust. He used his cell phone for an interview Thursday, because the phones at the new branch were still being set up.
John Blaylock, an associate director with Sheshunoff & Co. Investment Banking, said the Bryan bankers' strategy, while unusual, makes sense.
"The sooner they can get back in business, the more of the business they are going to be able to capture," he said. "You want to try and get that as quick as you can. As time goes on, customers get used to the new bank and the operating style. And the management team of the acquiring bank, Prosperity, is going to make sure customer relationships stay there."
Bank and Trust did not return calls for comment.
But Mr. Blaylock said the Del Rio bank is likely to receive a premium when the Bryan bankers depart and increase its earnings while it has the loans and deposits they attract.
