Why do we need new banks? Aren’t there too many already, and didn’t the financial crisis prove that a lot of small ones were too vulnerable to economic shocks?
Those are questions Alex Sanchez and other community bank advocates have been asked for years.
But Sanchez, the president and CEO of the Florida Bankers Association, says de novos provide a key ingredient the “entrepreneurial society” in the U.S. craves — a fresh supply of small banks that nurture small businesses.
He recently wrote an op-ed calling for more investment in community banks, pointing to de novo bank activity in his home state, as well as two recapitalizations, as evidence of a community banking resurgence. He noted four banks that have raised a combined $200 million.
“As I talked to the bankers and they told me how much capital they had raised, I said, ‘Wait a minute,’ ” Sanchez said in an interview. “Someone needs to tell the story … that investors are coming back to community banks. Our country needs more community banks.”
The Federal Deposit Insurance Corp. has approved three applications from Florida-based organizing groups in the past two years. Winter Park National Bank opened in August 2017, and Gulfside Bank in Sarasota debuted in November. Coastal Community Bank in Hollywood plans to open later this year. At least three other potential banks are in the works in the state.
Sanchez recently spoke with American Banker about Florida de novo bank activity and why he expects investors to back community banks around the country.
Here is an edited transcript of the conversation.
How are Florida’s de novo banks doing?
ALEX SANCHEZ: They’re doing well, and they’re being well received in the communities they’re serving. It’s local banks with local ownership and local capital, so everyone has skin in the game. When you look at that statistic — 50% of Americans work for small businesses — isn’t that impactful? And then 50% of small-business loans come from community banks. Just those two figures tell you the important role community bankers play. We need big banks and regional banks — they play a role as well. But community banks are critical.
Do you expect more groups in Florida to plan new banks?
I think so. I think that’s going to happen across the country. I hope Congress is listening to the importance of the role that community bankers play. That’s part of our advocacy. We go to Washington frequently to meet with members of Congress to impress on them that they need to create the right regulatory environment to ensure community banks are not becoming a thing of the past.
Why do you think Florida has so much new bank activity?
If you look back to the time frame of 2003, 2004 and 2005, you always had a lot of de novo activity here, and California and other states as well, but certainly in our state. I think you’ll see other states as well have de novo activity. If they don’t have it now, they soon will be because vacuums are being created where there are no locally owned banks. I think dentists, doctors, candlestick makers and other business groups are going to get together and say, “Let’s form a community bank. Our bank was sold.” In a state like Florida, we have 900 people a day moving into our state so that’s a great marketplace.
An outsize number of de novo banks failed during the financial crisis. What do you say to people worried about new banks running into trouble when the economy turns?
Our bankers are a reflection of the economy. If the banks are doing well, the economy is good. If economy is bad, our banks are not doing well. When people started not repaying loans that they otherwise qualified to have, that’s going to impact the banks. That will always be an issue. So let’s just hope that positive economic days are still ahead of us.
That doesn’t take away the need for local community banks. Even in tough days, we need local community banks because we are a country of small business and small businesses are what fuels this economy. I just got back from the United Kingdom, and when I met with people over there they said, “Wow, why do you have so many community banks?” I said, “Because we are an entrepreneurial society in the U.S.” Everyone wants small businesses, but how do you create an entrepreneurial environment and attitude? You have to have the access to capital, and who better than bankers in the local community?
How would you describe state of banking in Florida?
I think it’s strong. Whether you’re selling banking products and services, or shoes or cars, this is a state where you want to be, because we’re the third-largest state, with 21 million Floridians — and adding 900 more a day. Things are going well in our state, but we remember the bad times, and we keep those in mind as we push forward.