Back in January, I expressed the hope that the FDIC wouldn't smack down the only de novo bank application that a chance in a thousand of being approved, simply because the applicants included, and intended to serve, members of the Amish community, a band of renegades well-known for international unpasteurized milk trafficking. We understand that when it comes to asking the question "Got Milk?" even the Colombians and the Mexicans ask it with an air of humble supplication.
Well, the FDIC let this one pass on by (the first in three years) and that makes the folks at Bank of Bird-in-Hand as happy as if they had Two-in-Bush (yes, I broke my previous promise to leave that one alone). The organizers indicated that their experience may be a template for the process that other successful de novo applicants will have to follow, including:
- Board members who not only had previous experience as company directors, but experience specifically as a bank director.
- A "thorough" application process (an eighteen-inch thick application, versus a three-inch thick application for a de novo twenty years ago);
- A review process akin to an 18-month long proctoscopy, only without the pleasant chit-chat with your doctor's nurse.
- A business plan that will be scrutinized with an electron microscope by Olympic-caliber second guessers unhindered by the burden of actual private sector banking experience.
- 8% leverage capital ratio's maintained not for the first three years, but for the first eight (making it extremely difficult for all but those who deal "sub rosa" in illegal milk products to make a decent ROE).
- Sacrificing your first born male child to Moloch.
Look, this approval is not a harbinger that the de novo floodgates are opening. Rather, it's evidence of how tough it will be for de novo applications to be approved, and how unique the circumstances of the individual de novo banks will be that are eventually approved. If you're spending into seven figures (or, at the very least, high six figures) on a process that's "iffy," you have to have the mentality of a riverboat gambler, a saint, or a blithering idiot to go through it when recent history demonstrates that many may feel that they are called, but few are actually chosen.
The linked article discusses a letter of protest about the de novo application and approval process, and requirements, from the IBCA and the American Association of Bank Directors. Those organizations decry the difficulties strewn in the path of such applications, and claim that it's depriving smaller communities to access to needed credit. If so, the arguments are falling on deaf ears. The attitude won't change without legislation, and how likely is that to happen in the frozen tundra of D.C.?
[Sound of crickets chirping]
As the American Banker's Alan Kline asserted several months ago, the decline in the number of banks in this country (the overwhelming majority of them community banks) since the onset of the last economic meltdown has been dramatic. It's also due as much or more to the lack of de novo charter approvals as it is to mergers and acquisitions. It's a trend that will continue and one to which those of us who serve that industry had better either adapt or find something better to do. Like heckling Liz Warren for a living, or something equally as emotionally satisfying, if not as lucrative. Whatever we do, accepting reality is not really an option for those who want to survive.