This banker’s how-to guide to beating grueling de novo process
David Dotherow has joined a rare group of bankers by opening a post-crisis bank.
Winter Park National Bank in Florida opened on Aug. 1, roughly a month after the Federal Deposit Insurance Corp. approved its application. Only three other banks have debuted this year: International Bank of Commerce in Oklahoma, Blue Gate Bank in California and Bank of Austin in Texas.
Other factors set Dotherow and his bank apart.
The bank took a rather unique approach by filing for a national charter where it will be supervised by the Office of the Comptroller of the Currency. It also opened its doors weeks before Hurricane Irma cut through Florida.
Dotherow, who founded and sold New Traditions Bank, recently discussed the application process, his bank's first few weeks and how his team prepared for Irma. While its community suffered significant damage, the bank came through the storm relatively unscathed.
Here is an edited transcript of the discussion.
Can you provide on update on Winter Park’s balance sheet?
DAVID DOTHEROW: We have $25 million of deposits that have come in and we’ve booked approximately $13 million in loans.
Does that live up to expectations for the first two months?
Yes, sir. The key to success for the first year is winning business from our investors. They are bringing their business to the bank eagerly. We expect that pace to continue, hopefully at least for the first year.
Our biggest challenge being brand new, quite frankly, is making sure all our technology systems are working properly. That’s a lot more complicated than it was 10 years ago.
Have you experienced any glitches?
No. We have not had any glitches.
How has banking changed since you opened your last institution in 2008?
Community banking in today’s world is about providing personal service and relationships, but customers are expecting access to convenience along with being able to pick up the phone and talk to someone who can make a decision. Fifteen years ago, mobile banking didn’t exist.
Everything has changed from a technological standpoint. We used to have five couriers. In today’s world it’s more about the technology coming through a customer's computer or smartphone.
It’s still a big deal when a new bank opens. Has the new community recognized that?
We’re getting a lot of buzz in the community that a bank has opened. I’ve gotten a number of calls from bankers even out of state asking how the process went and what they could expect if they decided to start a de novo bank. It’s all positive. Everybody wants to know how the process went now we’re open.
What’s your advice to those who want to form a bank?
To get approved you need to have strong leadership in management and on the board. At least have one good, strong management person and several experienced board members. Regulators are looking for that experience. They’re not looking to approve a bank that is green behind the ears.
You better have a strong business plan. Don’t make it too complicated. They’re vetting that plan and whether you can perform to it. I think if you get too complicated or too creative, they’re going to have heartburn.
Tell us more about your plan.
We kept things very simple. It has to do with the types of business you’re going after, the type of deposit accounts you’re going after and the types of loans you want to do. You need to show them you’re looking for conservative, solid business — at least in the de novo state. If you’re going to do something creative on loans, you’re going to have to really explain why you’re going after that type of business and how you’re going to achieve it. I’m not saying you have to be 100% traditional, but if you make things too complicated, you’re going to have issues getting your business plan approved.
The last thing I would say — I kept getting this question all the time — how are you going to raise your capital? Will you be able to do it? What’s your time frame? That was very important to regulators. They don’t want to approve you and find out you can’t raise the capital.
The bank ended up raising $40 million.
That’s one of the things I’m proudest of. We didn’t hire an outside consultant. All that money was raised locally. That’s the key to success for a community bank.
You can take passive investors and we had plenty of people from out of state who wanted to invest. What do they bring to help grow your bank? You need to make sure investors are going to bank with you. It’s in their enlightened self-interest to help the bank get to profitability. You really have to make sure you’ve got that figured out before you file an application.
You’ve had a long banking career. Is it still fresh and exciting?
This will be the fourth community bank I’ve been involved with and the third where I’ve been part of the founding management group. There’s probably been more excitement with this one just because of the challenges to getting a bank approved. Let’s face it, raising capital is harder. I’m more proud of this process and the capital we raised and the management team we put together.
It wasn’t just stroking a pen. It was a lot more difficult. It was scrutinized by the regulators a lot more. They were very cooperative, but I’ll tell you, it wasn’t a cakewalk. Trust me, it wasn’t like 10 or 15 years ago where they were approving so many banks each month.
De novos used to target profitability within a year or so. Do compliance costs make it harder to do that?
We still believe we will reach profitability within two years. By using technology and not carrying the overhead of staffing so many branches, you’re able to achieve profitability in relatively the same time frame as before.
Were there any issues that surprised you in the first six weeks?
You’ll find this interesting, and I hesitate to tell you because it sounds like we can’t open accounts, and we can. Since we haven’t had a new bank in Florida in almost 10 years, getting other banks to acknowledge that our routing number exists has been a challenge. It gets better every week as banks update systems.
Would you like to see more new banks open?
Absolutely. We need community banks. The small and midsize businesses aren’t what the larger institutions are looking to help. There’s a void we will fill in our community.
Timing is everything. You work hard to get the bank up and running and a hurricane comes. How tough is that?
It’s been interesting. We’ve gotten calls from our regulators making sure our disaster recovery plans were in place and ready to go. It’s not something you think about every day, but you’ve got to be ready.