October 17, 2018
Presenters:
David Ghegan, Troutman Sanders
Chris Johnson, Brightlane Partners LLC
The Application Process for
Chartering a New Bank
Third of Our Seven-Part Series
DE NOVO BANK ACCELERATOR WEBINAR SERIES
1
Our Presenters Today…
Chris
Johnson
Brightlane
Partners
LLC
David
Ghegan
Troutman
Sanders
2
Purpose of Today’s Session
An overview of the application and review process
for chartering a new bank, including:
Developing a Strategy
Building a Team
Finding a Site
Develop the Business Plan and Application
Pre-filling Meeting
Application Submission
Regulatory Review & Approval
Q&A Time
3
The Application Process
6. REVIEW AND
APPROVAL
Approval to obtain a
charter and deposit
insurance
2. TEAM SELECTION
Organizers, Directors,
Management
3. FINDING A
LOCATION
Market research,
space needs,
operational needs
4. BUSINESS PLAN AND
APPLICATION DEVELOPMENT
Financial projections and associated
strategy
5. APPLICATION SUBMISSION
File with appropriate regulators,
public notice
1. STRATEGY
Charter type, location,
corporate and capital
structure, research, seed
funding, timeline
4
Strategy
Questions to ask
– Why do I want to start a bank?
– What type of charter do I need?
– Where are the market opportunities?
– What will be the corporate and capital
structure and needs?
– How do we get there?
5
Strategy (Cont.) – Choosing a Charter
National Bank
Charter
Factor State Bank Charter
Fees ✓
Less accessible Access to Regulator ✓
Faster response times
✓
OCC only Number of
Regulators
State + Federal
✓
Federal preemption – not
subject to many state laws
Preemption
-- Management Team
Familiarity
--
6
Strategy (Cont.)
What to do first?
– Legal entity formation
– Open an operational account
– Raise seed funds
– Hire necessary service providers
Seed money
– Starting a bank takes a substantial upfront investment to cover:
Salaries (CEO and others)
Professional service businesses (consultants, legal
counsel, accountants, etc.)
Research studies
Filing fees
Etc.
– Costs vary greatly, but generally range from $300,000 –
$600,000
– Warrants as a vehicle for rewarding risk
7
Application Sample Timeline
8
Team Selection
Organizers
– Early investors in the
business (seed funding)
– Take the project from an
idea to a reality
Directors
– Assist in Management hiring
– Assist in business plan and
policy development
Management
– Big 3: CEO, CFO & Sr.
Lender
– Will develop the business
strategy, choose vendor
relationships, and hire staff
Sample Board of Directors
Chairman Lead Organizer
President &
CEO
Bank CEO
Director Local Lawyer
Director Local Accountant
Director Local Community
Leader or Business
Owner
Director Experienced Bank
Director
Director Experienced Bank
Director *A bank board of 7 – 13 members is suggested with at least 2
outside members that have prior bank experience
9
Finding a Location
Market Research
– Where is the best opportunity?
– What other financial institutions service the area?
– What will be the impact on the community of opening
a new FI?
Space Needs
– State of Georgia “requires” at least 6,000 sq. ft. for
main office
Operational Needs
– Drive-thru
– Parking
– ATM
– Teller space
– Room to grow
10
Don’t forget, a lot of these are available…
11
Business Plan and Application Development
Application Content
1. Overview Overview of the institutions business and products
2. Management Who will be the directors and officers of the bank, why are
they qualified, what are the Board committees, and what
training is available to management and the board.
3. Capital What form of capital is authorized/issued, who are the known
subscribers, how adequate is the capital structure.
4. Convenience and Needs of the
Community
What is the geographical market area, why does it need a
bank, who are the competitors, what is the CRA strategy.
5. Premises and Fixed Assets A physical description of the premises, agreement to buy or
lease, what are the fixed assets and providers of those
assets.
6. Information Systems Describe the information systems to be used by the bank and
how.
7. Other Information Other involved third-party vendors, correspondent banks,
and bank policies.
12
Business Plan and Application Development (Cont.)
Business Plan Content
I. Executive Summary Provide an overview of the plan.
II. Description of Business Describe the business, any market niche, the corporate structure,
location, and growth plans.
III. Marketing Plan Provide factual support that the FI has reasonable prospects to
reach projections, customer volume, and income targets. This
section should provide an in-depth analysis on how this will be
achieved and major planning assumptions made.
IV. Management Plan Who will be the directors and officers of the bank? What will be
the organizational structure? What training will be provided?
V. Records, Systems and Controls Describe accounting, audit systems, internal vs. external, etc.
VI. Financial Management Plan Provide capital/earnings goals and how they will be reached.
VII. Monitoring and Revising the Plan Describe how the BOD will monitor adherence to the plan.
VIII. Alternative Business Strategy If market conditions change, how will the plan change?
IX. Financial Projections Provide quarterly projections for the first 3 years.
X. Appendix Include supporting evidence of the data presented in the plan.
13
Business Plan and Application Development (Cont.)
Pre-Filing Meeting:
– Timing
– Who should attend?
– General Topics for Discussion
– Convenience and Needs
– Experience and Team
– Big Picture Concerns
14
Application Submission
Affidavit/Notice of Publication
Copies of contracts/agreements
Stock benefit plan
Market Feasibility Study
CRA Strategic Plan
Waiver request
Filing fee
Consultation with SHPO
Bank Policies that affect the
Business Strategies of the Bank
Application
3-Year Business Plan
3-Year Financial Projections
Stress Tests
Opening Day Balance Sheet
Corporate Filings
Articles of Incorporation/Association
Bylaws
Oath of Director
CEO Employment Agreement
Interagency Biographical and
Financial Reports
Fingerprint Cards
Checklist of what to include with the application:
15
Application Submission (Cont.)
Any Additional IBFR Forms
Remaining Employment
Agreements (if any)
CFO
COO
Offering Materials
Proposed Stock Certificate
Warrant Agreement
Corporate Financial
Reports/Audited Statements
Remaining Bank Policies
Checklist of what can come at a later date:
16
Review and Approval
Review and Approval Timeline
3 Business Days Written acknowledgement of receipt.
30 to 45 Days Written notice that either the application is substantially
complete and accepted for filing or that more information
is needed.
60 to 90 Days Field investigation is held, additional concerns
communicated to organizing group or advisement that no
concerns or issues exist.
30 to 60 Days Following resolution of any concerns or issues, review
process will be completed and the applicant will be
notified of any non-standard conditions, and finalize
recommendation for action.
17
Review and Approval (Cont.)
Regulatory agencies look at the following aspects of the
application to determine if approval should be given:
– The institution’s financial history and condition;
– The adequacy of its capital structure;
– Its future earnings prospects;
– The general character and fitness of its management;
– The risk presented by the institution to the Deposit
Insurance Fund (DIF);
– The convenience and needs of the community to be
served by the institution; and
– Whether the institution’s corporate powers are
consistent with the purposes of the FDI Act
18
Review and Approval (Cont.)
Most importantly, regulatory agencies will look at:
– The soundness of the business plan;
– The qualifications of the proposed board of directors
and senior management; and
– The adequacy of the proposed capital
Conditional approval will be given if all statutory factors
are favorably resolved and satisfaction of certain
standard conditions, such as:
– Requirements for minimum initial capital
– Minimum ongoing capital maintenance for the de
novo period
– Fidelity bond insurance coverage
– Financial statement audits during the de novo period
19
Summing it All Up
Invest the time/effort on the front end in
preparing the business plan/application
Focus on experience in assembling the Board
and senior management team
Emphasize the convenience and the needs of
your community
Capital! Capital! Capital!
20
The Application Process for Chartering a New
Bank
DE NOVO BANK ACCELERATOR WEBINAR SERIES
David Ghegan
404.885.3139
Chris Johnson
770.653.5136
DE NOVO BANK ACCELERATOR WEBINAR SERIES
Upcoming Webinars:
•Regulatory Views – Oct. 31
•Raising Capital/Shareholder Expectations – Nov. 14
•Operational Considerations – Nov. 28
•Wrapping it Up – Dec. 12
The Application Process for Chartering a New
Bank
DE NOVO BANK ACCELERATOR WEBINAR SERIES
Thank you for
participating!
The Application Process for Chartering a New
Bank
