Independent Banker - January 2022 - 57

HOW ONE DE NOVO REFLECTS ITS DIVERSE COMMUNITY
Genesis Bank in Newport Beach,
Calif., is one of just two of the
nation's 143 MDIs, or minority
depositary institutions, with
the distinction of being diverse
and multiracial, according to
founding chairman and CEO
Stephen Gordon. The de novo,
which serves a " majority-minority "
community in the Los Angeles
area, also has a majority-minority
seven-person board.
Gordon and the Genesis Bank
team were inspired to launch
the de novo, in part, because
large banks pulled away from
their communities during the
pandemic. " There were many,
many businesses left behind, and
the banks did not step up and
lead to the level that they should
have, " he says. " We are putting
our money where our mouth is by
being designated an MDI. "
So far, the strategy is working.
Genesis Bank opened in August
2021 with $57 million in capital,
roughly half of which Gordon
supplied himself. The bank is
contemplating a second round
of capital raising. " Being an MDI,
there's a very strong affinity for
the institution and our mission, "
Gordon says. " We're drinking
a little bit from a fire hose, and
that's a nice position to be in. "
Tuck says. He notes that the stock of affordable bank
charters is making it more attractive for buyers to make
an acquisition. Many acquired banks are profitable on day
one, while it typically takes de novos two or three years to
achieve profitability, he adds.
Another sticking point for de novos is raising enough
capital to secure regulatory approvals.
Capital requirements for de novos are generally twice the
levels prior to the Great Recession, according to FDIC data.
Since 2015, the average capital requirement for de novos
has been approximately $34 million.
These capital thresholds are not an impossibly high bar.
In 2021, First Bank of Central Ohio raised $28 million
in six weeks by targeting businesses in real estate and
the medical and dental sectors. " We could have raised
more, but for us there's a point where too much capital
isn't good. You can't get it to work fast enough, " says CEO
John Smiley.
Smiley believes the de novo route has distinct advantages
over acquiring a bank charter,
especially with acquisition
opportunities as scarce as
they are in Columbus, Ohio.
" There's a need, because so
many banks have gone by the
wayside, " he adds.
While Smiley says
First Bank of Central Ohio
CEO John Smiley
acquisition may be a faster
route, it took only about a
year for First Bank of Central
Ohio to open, which it did in
April 2021. By taking the path
it did, the bank was " able
to start something fresh, "
he adds.
Signing on customers is yet another hurdle for de novos.
" You're having to take market share away from other banks
to get customers, unless you're in a really high growth
area, " Cole says.
Tuck agrees. " De novos may have customer relationships
with individuals, but they don't have longstanding, deeprooted,
'I've banked at this bank for 20 or 30 years,' types
of relationships, " he says.
FINDING YOUR NICHE
One solution is to target a specific niche, a strategy used
by Bank of Bird-in-Hand. Maley says understanding the
Amish community's commitment to helping one another
is how Bank of Bird-in-Hand is growing $100 million to
$150 million in assets each year while successfully raising
capital, too. " The people we serve will repay their loans, "
she says. " They'll eat turnips if they have to, but they'll pay
you back. "
Several new banks, such as Genesis Bank, are targeting
a digitally savvy niche. " The pandemic forced everybody of
every age and every demographic to change their behavior
and embrace technology, " Gordon says. " Everyone learned
how to transfer money, pay bills and wire funds either
online or through mobile. "
Genesis Bank has no legacy systems or platforms. " We
have our fingerprints all over the technology, " he says.
" We're able to entirely focus on the client in the manner
that the client wants to function. "
Regardless of niche, it's important for any de novo or
community bank to understand its target customer and
how to address their needs. " In the end, it's the community
that matters, " Maley says, " and we're part of a community
of people helping people. "
Elizabeth Judd is a writer in Virginia.
independentbanker.org Q 57
http://www.independentbanker.org
Independent Banker - January 2022

Table of Contents for the Digital Edition of Independent Banker - January 2022
