Pub. 9 2018 Issue 3

Fall 2018 23 West Virginia Banker B.T. Atkinson is a partner in Nelson Mullins Riley & Scarborough LLP’s Charlotte, NC office. He focuses his practice on corporate, securities, and regulatory issues for financial institutions and other public companies. He can be reached at (704) 417-3039 or by email at bt.atkinson@ nelsonmullins.com. Neil Grayson is a partner in Nelson Mullins Riley & Scarborough LLP’s Greenville, SC office. He focuses his practice on corporate, securities, and regulatory issues for financial institutions and other public companies. He can be reached at (864) 373-2235 or by email at neil.grayson@ nelsonmullins.com. Randall Saunders is a partner in Nelson Mullins Riley & Scarborough LLP’s West Virginia office. He focuses his practice on banking and financial services litigation, class action defense, regulatory compliance, tax lien resolution, real and personal property tax appeals, and real estate. He can be reached at (304) 526-3507 or by email at randy. saunders@nelsonmullins.com. consolidation of banking options has left West Virginians with fewer banks to service the needs of a population that has remained roughly the same size. West Virginia has an advantage over some other states in its region due to its historically larger percentage of desirable commercial and industrial loans as compared with the more regulatory-scrutinized commercial real estate loans. With over 115,000 small businesses and a growing customer desire to deal with local banks, there has never been a better time to look at starting a de novo bank in West Virginia. The following are some observations of the developing new de novo bank market, drawn from our experience with two of the recently-opened de novo banks, two others that have been announced, and our current work with nearly a dozen other de novo bank groups in various regions of the country. A detailed business plan and well-prepared regulatory application are essential. Before the recession, it had become easy enough to form a new bank that many successful de novo groups prepared their own regulatory applications without outside assistance. However, regulators have recently made it clear that a busi- ness plan with solid, detailed projections and a complete, thorough regulatory application are essential. As a result, it is more important than ever to engage an experienced bank consultant and legal counsel to assist with the application process. Less capital is needed for regulatory approval than popular opinion suggests. Many bankers and attorneys believe that excessive amounts of capital are required to form de novo banks. This is not the reality. Recent trends suggest that a de novo bank with a tra- ditional community bank model in an urban market can open with between $20 million and $25 million, although a smaller amount of capital may be sufficient for a banking institution to be incorporated in West Virginia. Raising the capital is achievable, but hard work. Due to the community-based nature of many de novo banks, Before the recession, it had become easy enough to form a new bank that many successful de novo groups prepared their own regulatory applications without outside assistance. However, regulators have recently made it clear that a business plan with solid, detailed projections and a complete, thorough regulatory application are essential. As a result, it is more important than ever to engage an experienced bank consultant and legal counsel to assist with the application process. a popular option to raise a bank’s initial capital is through a public offering of common stock. While new banks will still rely on their local markets for the majority of their capital, bear in mind that it is much harder work than it used to be before the recession. Don’t expect institutional investors to invest in a traditional de novo bank. On the other hand, we have seen investment bankers successfully raise capital from their family office and high-net-worth clients. Expect at least nine-to-twelve months to open the bank. However, much of this time will be spent finding the manage- ment team and the organizers. If the application is com- plete and well prepared, it could take as little as four-to-five months to receive regulatory approval. While the process for starting a de novo bank may seem daunting in West Virginia, there is no doubt that surf’s up in the state: the ripe conditions flooding the national market with excitement are just as present here in West Virginia. 