MCBP~~HERE WE GO,GOT SOME NEWS HERE March 25, 2018 12:19 a.m. UPDATED 3/26/2018
Banking veteran plans first new bank in Michigan since recession
By KURT NAGL
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Banking Economic Development Economy More +
First application for de novo bank since Great Recession submitted last week
Number of community banks in Southeast Michigan has shrunk from 22 to six
Single 1,400-square-foot branch location planned for Bloomfield Township
Rob Farr: Filed application to charter bank.
Rob Farr is treading territory left uncharted after the Great Recession.
The veteran local banker is aiming to open the first new bank in Michigan since 2009.
Last week, he filed an application with the state and the Federal Deposit Insurance Corp. to charter a new community bank planned for the corner of Lahser and Maple roads in Bloomfield Township.
Farr said the market needs more banks catering to small and medium-sized businesses. And he thinks the time is right for more newly chartered banks, known in the industry as de novo banks, whose creation ground to a halt in the Great Recession.
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"You're not going to see the kind of activity you saw earlier in the 2000s, but the model is still good," said Farr, 61. "There are fewer banks servicing smaller businesses."
Before the economic downturn, there were 22 community banks — those with $1 billion in assets or less — in Southeast Michigan. Only six survived, and Farr's was one of them.
He founded Bank of Birmingham in 2006, during a boom in community banking that also saw the creation of what became Troy-based Talmer Bancorp in 2007.
In 2009, the bank lost $2 million and found itself in dire straits which most of its counterparts could not weather. But the bank persevered and, in 2016, was acquired by Bank of Ann Arbor for about $33 million with $300 million in assets.
Even as companies started to expand again and confidence in opening new businesses grew, the depleted number of banks stayed the same because of heavy federal regulations post-recession and the cold feet of would-be bankers.
A good economy and dearth of banks could spawn new bank charters in Southeast Michigan and across the country, said Michael Moran, senior consultant with ProBank Austin. However, a lot of that rides on the fate of legislative deregulation, such as Senate Bill 2155, which seeks to ease restrictions on banks that were tightened by the Dodd-Frank Act coming out of the financial crisis and Great Recession.
"With the banking industry, there's a pretty clear line of demarcation between the global behemoths and the community banks," Moran said. "Ninety percent of chartered banks in the country are community, but they hold 10 percent of the total assets."
Before the recession, banks were being chartered at a clip of 150-200 each year across the nation. In the past five years, there have been only about a dozen.
In 2016, the FDIC launched its Community Banking Initiative, encouraging new charters. Farr went to an information session in Chicago and it was all the convincing he needed.
Under the holding group MiCommunity Bancorp, Farr and a group of 13 others — with backgrounds in investing, manufacturing and real estate — are aiming to raise the necessary $25 million to $30 million to make the project happen, and have tapped investment advisers Donnelly Penman & Partners and Schwartz & Co. for assistance.
(Disclosure: Crain's Group Publisher Mary Kramer is one of the founding investors. She was not involved in writing or editing this story.)
The group has so far raised $1.65 million in capital. Farr said that amount is twice what he needed when starting his bank in Birmingham, but capital requirements were made more stringent after the recession.
Considering what happened to community banks a decade ago, the investment is a risky one, but Farr is confident the timing is right. He said he's also sure his new bank, like the one in Birmingham, could withstand another downturn when it comes.
"And we have the suburbs and now we have the added benefit of Detroit making such a huge comeback; the automotive economy is strong," Farr said.
For Farr and his partners, the next few months will be spent waiting and raising capital. The federal and state approval process will take anywhere from four to six months, and in April they are planning to start raising capital from accredited investors for an escrow account.
If the funding and approval fall into place, the plan is to open a small branch in 1,400 square feet of leased office space at 3707 W. Maple Road. Farr will serve as its chairman and CEO, and the other 13 partners will make up the board. It will likely employ 15 people and grow as needed.
The bank has yet to select what name it will operate under. It will offer all the standard services and products of a community bank with a primary focus on business lending. There are also plans to offer a full product line to individual depositors as well.
Farr said the bank will be a "one-stop shop" for business owners. He also said it will emphasize online banking and mobile deposit.
"Traditionally community banks have not had large banks to service customers," he said. "That's not as important as it was 10 years ago. The technology piece has been a big help."
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