Are You Ready to Start a Bank?

Tips & advice for getting a bank started from Jack Henry & Associates, Inc.®

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Congratulations on taking the first step to exploring the possibilities of starting a new bank.

Starting a bank is no easy endeavor. At Jack Henry Banking, we realize it takes a lot of time, money, and the right strategy to make a new bank successful. In business since 1976, Jack Henry is no stranger to the de novo market. The good news is, we’re here to help make the process less stressful and give your bank the proper foundation to set you up for growth and success.

For any bank to grow, we know it is imperative that their core platform allows them to be the bank they want to be, regardless of their size. We are extremely proud of the superior third-party integration and customization options we’re able to offer – industry-leading technology and tools that deliver the flexible enterprise-wide automation you need to compete and position your bank for success long into the future.

With Jack Henry Banking, you’ll gain a partner rather than just a vendor. We are always looking ahead and at how we can be the best business partner to our clients and their continued growth. And you don’t just have to take our word for it. In the past decade, we have worked with nearly 100 de novo banks, and many of them have shared their stories like this one:

 From American Banker

 In early 2016, when Lynn Carson and his partners went looking for a community bank to acquire, their aim was clear: to create an institution that would use cutting-edge technology to punch above its weight.

 "... in order to compete with those guys who are on every corner, you've got to have technology that is solid."

 Bank3 picked Jack Henry Banking's SilverLake System after the incumbent vendor failed to take the bank's timetable seriously.

Other successful de novo banks Jack Henry has partnered with that have recently been in the news:

What is a "De Novo Bank"?

A de novo bank is a newly chartered bank that is not acquired through purchase. It could also mean a newly opened bank branch. A de novo bank could be a commercial bank, state bank, national bank, savings bank or thrift bank and others.

What is a de novo bank for state banks? For state banks, the rule is a de novo bank is a state bank that has been in operation for five years or less. Commercial banks can become a de novo bank if after five years or less of existence they decided to change to state membership. If this happens, the banks need to file de novo bank application and adhere to required supervision standards.

Thrift Banks, Edge Act Companies and Industrial banks converting to state membership would still be considered de novo banks even if they existed for more than five years already. This is because they need to exhibit first that they have the operating stability of a commercial bank. These organizations who converted their memberships to state memberships are referred to as converted banks.

The supervision policy is required from de novo banks until they reach the fifth year because past experience shows that problems in banks often reveal during their fourth and fifth years of operations.

The problems are brought about by management who lacks the necessary experience, turnover of staffs particularly management and directors, disinterest of the directors and improper lending practices. All these factors could contribute problems to the bank.

Getting Started

Starting a bank requires dedication, capital funding and involves a long process that could take a year or more, as well as permission from at least two regulatory authorities. Extensive information about the individual organizer(s), the business plan, senior management team, finances, capital adequacy, risk management infrastructure, and other relevant factors must be provided to the appropriate authorities in order to gain approval.

The best guarantee of success is to have a solid business plan in a market with excellent growth opportunities. Starting a new bank is also an intensely detailed undertaking in which a number of key decisions must be made and important issues addressed.

The steps to organizing a De Novo Bank are as follows:

Submit an application to the FDIC and State Banking Agency

  • A mission statement
  • A business plan with three years of financial projections
  • Policies for loans, investments and other operations of the bank

The regulatory agencies review this information closely

  • Possible modifications at the direction of the regulators

Approval must be received prior to opening

Additional Information

Until January 2016, just two new banks had opened their doors since 2010. The first de novo in those five years came when Bank of Bird-in-Hand opened late in 2013, while Primary Bank in New Hampshire opened its doors nearly 18 months later in July 2015.

The following institutions were noted as recent de novos and referred to in a slide-show presentation by American Banker[1]:

De Novo Openings

  1. Since, Blue Gate Bank in Costa Mesa, CA opened on January 23, 2017 after launching a plan in 2015. The FDIC approved their application in October 2016, requiring the founders to raise at least $30 million in capital.
  2. Also opening in January 2017 was the Oklahoma operations of International Bank of Commerce, making it a separately chartered bank. The application took a year and was approved in December 2016.

Pending Approvals

  1. Investors intending to raise $15 million in capital applied in October 2016 to form Pacific Metro Bank to serve the Chinese-American market in Johns Creek, GA.
  2. Christopher Woolley, founder of Square 1 Bank in North Carolina, applied in August 2016 with the FDIC to establish Endeavor Bank, another commercial bank servicing small-midsize business and professionals in San Diego County, CA. They would have $25 million in initial capital.
  3. With $30 million in shareholder equity, the founders of Infinity Bank (also referred to as SoCal Bank) applied in July 2016 to open in Santa Ana, CA.
  4. Winter Park National Bank aims to be the first bank to open with a national charter in about seven years. The proposed bank’s CEO was the founder of New Traditions Bank which was later sold to Old Florida Bancshares which is now part of Iberiabank.
  5. Four board members of Bank of San Antonio are organizing Bank of Austin with an application in December 2016. They plan to pen with at least $35 million in capital.
  6. Another bank applying for its own charter is Tennessee Bank & Trust in Green Hills, operating as part of Farmers Bancorp in Blytheville, AR. The application was filed in October 2016.
  7. TNB Corp. in Norwalk, Conn, has applied to the FDIC to offer low risk deposit accounts to institutional investors. No dates were given. The founders noted in the application that they plan to invest in “safe assets” such as securities.

About Jack Henry & Associates, Inc.

Jack Henry & Associates’ original business line was founded in 1976 to provide banks with off-the-shelf banking software. More than four decades later, Jack Henry Banking is a leading provider of the integrated technology platforms banks need to process financial transactions, automate business processes, and manage mission-critical customer and business information.

We now serve as the primary technology partner for approximately 1,100 banks ranging from community banks to multi-billion dollar mid-tier banks and multi-bank holding companies, including approximately 15 percent of mid-tier banks with assets ranging from $1 billion to $30 billion.

Our broad product and service offering enables banks to execute their business strategies with technology platforms tailored to support unique growth, service, operational, and performance goals. Our banking solutions encompass three functionally distinct core systems, more than 140 complementary solutions, in-house and outsourced delivery alternatives, contemporary technology, and the infrastructure necessary to support today’s complex banking platforms as a single point of contact, ongoing service, and accountability.



Recent News

Read more about starting a bank

Is This the Age of De Novos? - by Shelba Murphy - Solution Specialist Manager, Jack Henry & Associates

Are De Novo Banks on the Rise? - by Cheryl Winokur Munk, Independent Banker

Prices Rise for De Novo Banks - by Bill Poquette,

De Novo Field Widens with S.C. Group's Application - by John Reosti, American Banker

FDIC Releases Final De Novo Handbook - by ABA Banking Journal

2017 Likely to be a Record-Breaking Year for De Novo Banks - by Try Sullivan, TRUPOINT Partners

How Core Conversion Spurred a Community Bank's Explosive Growth - Brian Patrick Eha, American Banker

Bank of Bird-In-Hand, a De Novo Success - Bank of Bird-In-Hand

The Bank of Austin Files to Become City's Newest Bank - Will Anderson, Austin Business Journal

De Novo Bank Overview - by BKD

Additional Resources

Handbook for De Novo Organizers Applying for Deposit Insurance

Download a copy of "Applying for Deposite Insurance: A Handbook for Organizers of De Novo Institutions" from the FDIC here.

Attend a De Novo Outreach Meeting

View a list of upcoming events here. Hosted by the FDIC Community Banking Initiative.

View the De Novo bank application process

Read about the how to start a De Novo bank, the requirements involved, and the application process by clicking here.