When Triad Business Bank opened March 16, the country was just beginning to get a glimpse of how the coronavirus pandemic would disrupt the economy and everyday life in America.
When the North Carolina-based bank received its charter in March, it became the country’s newest bank, serving the area surrounding Greensboro, Winston-Salem and High Point.
“I joke with people and say it was a little like watching Harrison Ford run out of the Temple of Doom, and watching the whole thing collapse behind him,” Triad Business Bank CEO Ramsey Hamadi told Banking Dive, on launching a de novo just as the economy began to unravel because of the virus.
“Very quickly, within a week, we suddenly were completely focused on the Paycheck Protection Program (PPP),” Hamadi said, referring to the Small Business Administration’s coronavirus relief package, which is aimed at helping small businesses weather the economic downturn brought on by the pandemic.
It’s a difficult time to launch any business, much less a bank. But the timing comes with opportunities and challenges, industry leaders said.
“It’s a great time, actually, to open a bank, because you won’t have any problems. Technically, you don’t have any loans on your books,” Paul Schaus, president, CEO and founder of consulting firm CCG Catalyst, told Banking Dive.
The problem, Schaus said, is in attracting the necessary capital to launch a bank.
Capital requirements, which are set by regulators and vary based on market size and the bank’s business plan, have spiked since the 2007-08 financial crisis, and had proved a significant hurdle for de novos before the pandemic.
Unless you have investors with deep pockets, raising capital for a de novo is a challenge even without the threat of a global recession, said Schaus, who has been involved in the creation of 19 de novos throughout his career.
Depending on their stage in the process, several de novos have already experienced the coronavirus’s impact on fundraising.
Before it opened, Triad Business Bank anticipated it would raise well over $55 million, or be in a position where it would cap funding at that amount, Hamadi said.
The bank had surpassed its minimum requirement of $48 million in early February, Hamadi said. “We had been oversubscribed,” he said.
The bank was in the midst of an active capital campaign before the outbreak brought the raise to a halt. It ended up raising $52 million before opening its doors.
“We noticed that capital markets impact,” Hamadi said.
The pandemic has caused some earlier-stage de novos to adjust to a new economic reality that may also affect launch timelines.
Hitting the pause button
RockPoint Bank, a proposed de novo in Chattanooga, Tennessee, had to pause its $30 million equity raise