Pub. 10 2019 Issue 3

www.wvbankers.org 14 West Virginia Banker Build It or Buy It: By Neil E. Grayson, B.T. Atkinson, and Randall L. Saunders, Nelson Mullins Riley & Scarborough LLP Introduction Build it or buy it? The decision is not just for home buyers – it also applies to those seeking to start a bank. Although these are two well-established ways to start a bank, at any given time over the past 40 years, it has usually been pretty clear which approach made more sense. During most of the 1990s there were few de novos because the regulatory hurdles were so high. Similarly, from 2008 until 2016, the FDIC had placed a virtual moratorium on de novo banks, so the only realistic path was to buy an existing small bank and make it your own, a de facto de novo. During this period, most “new” banks were recapitalizations of troubled banks forced to sell as a last resort. On the other hand, from the late 1990s until the start of the Great Recession, new banks were relatively easy and inexpensive to form, resulting in a wave of de novo char- ters averaging more than 100 per year during that period. With the notable shift in regulatory attitudes over the last few years, obtaining a de novo charter is again an option. In some markets there are also small, healthy banks for sale – especial- ly in rural markets with little growth potential and aging man- agement teams. Based on current bank stock values, these banks can be cost-efficiently purchased and rebuilt to form a How Best to Start a New Bank Today Continued on page 16