How to Start Your Own Bank

							How to Start Your Own
Bank
Banking and Credit
Mr. Yates
Get the bricks ready…
   What if you wanted to start your own
    bank?
   Do you just rent some space, put out a
    sign and started taking deposits? Not
    exactly.
   Let's look at the steps you have to go
    through in order to start your own bank.
   The rules and requirements vary from
    state to state
We’ll put it right here…
   Just as with any business, you'll first have to
    make some pre-planning decisions -- like who
    your partners (called the organizing group)
    will be.
   You'll also have to write a business plan.
   All of these things will be taken into
    consideration when you apply for a state or
    federal charter.
Charter!
   A charter is an agreement that governs the manner
    in which the bank is regulated and operates.
   It authorizes the organization of the bank by either
    the state or federal agency.
   The agency that charters the bank is primarily
    responsible for protecting the public from unsafe
    banking practices.
   It conducts on-site examinations to make sure the
    bank's financial condition is good and that the bank
    is complying with banking laws.
Charter chatter…
   State charters and federal charters typically do not
    differ too much in the way the bank conducts
    business.
   They do, however, differ in other areas.
   For example, in Florida, a state bank is not required
    to be a member of the Federal Reserve System,
    while federally chartered banks are.
   Also, state-chartered banks are regulated by state
    agencies, while federally chartered banks are
    regulated by federal agencies.
Banking: The Director’s Cut
   The organizing group has to identify directors, a chief
    executive officer (who usually has to have past
    experience running a bank) and other executives.
   The integrity, past business histories and credit
    histories of these people will greatly affect the
    acceptance or denial of the bank's charter.
   The important thing is to carefully select these
    partners and make sure they are team players, have
    the experience and know-how to help you make the
    bank work, and can withstand (both professionally
    and personally) the close scrutiny of the regulatory
    investigation.
Them directors…
   The number of directors you must have varies from
    state to state.
   These partners have to put up money as an initial
    offering that shows their level of commitment and
    helps get the bank going.
   The required amount varies by state - it may be as
    low as 10 percent to 15 percent of the total capital
    needed to start the bank.
   This group then becomes shareholders in the bank.
   In most cases, there is a limit of 24.9 percent to how
    much stock an individual or company may have,
    unless the company is a holding company.
Holding Company?
   A bank holding company is a company that has
    control over a bank.
   It holds 25 percent of the stock and has the ability to
    control the election of a majority of the directors of
    the bank.
   The Federal Reserve may also determine that a
    company either directly or indirectly has controlling
    influence over certain management and policy
    decisions for the bank.
   The organizing group has the option of establishing
    a holding company for the bank when it applies for
    the charter.
Where’d I put that bank?
   The location of your bank is also a very important decision.
   You have to do some market research to determine how well a
    new bank will do in a particular area, or where the best spot in
    a large geographic region might be.
   This information is also required for your application for a
    charter.
   You may be competing against others who are also trying to
    charter a bank in that area!
   Even though competition is healthy for business and
    consumers, there is still the need to make sure a stable and safe
    financial environment is maintained.
   The economy will also be taken into consideration in locations
    where there are lots of competing banks.
Now we’re ready for bricks
   The specific physical location of your bank is
    chosen by the organizing group and is just as
    important as finding the right market.
   You want the bank's location to be convenient
    for customers and in a heavily trafficked area.
   You also need to decide whether to buy or
    lease a building.
Still need money for that bank!
   The capital requirements to start a bank often vary
    greatly from state to state.
   In Florida, the suggested capital requirement is $6
    million for a bank in a metropolitan area and $4
    million for a bank in a rural area.
   In other states, such as New York, that amount might
    be $10 million or more for metropolitan areas.
   Those capital requirements are usually determined
    by your strategic plan and pro forma financial
    statements for the market you've selected.
Raisin money in the sun
   Organizing groups may shoot for 400 to 750
    or more shareholders in order to raise the
    money needed to start the bank
You name it!

   Now you have to name it, and get ready for
    paperwork with a capital “P.”
   Once you have all of the details ironed out, you
    fill out the charter application and submit it
    (along with a lot of other information) to the
    state's board of finance and banking
   Or, if you're applying for a federal charter,
    you'll send it to the Office of the Comptroller of
    the Currency.
Paperwork…
   The names and addresses of all of the organizers and the holding company (if
    there is one)
   The names of the proposed directors, the CEO, the senior loan officer and the
    cashier
   The name and address of the bank
   The number of shares, par value, and share prices for each share that will be sold
   The total amount of common stock, as well as surplus and reserves for operating
    expenses
   The number of shares of bank stock that each organizer plans to purchase
   Where the money for purchasing those shares is coming from
   Names and addresses of proposed investors who will own more than 10 percent of
    the bank's total stock
   A completed charter application for each organizer, proposed director and
    principal stockholder, CEO, senior loan officer, cashier, and all other executive
    officers
   Pro forma financial statements
    Mo’ paper
   An addendum to those financial statements that explains assumptions and strategies
    to achieve the projected market share for each type of product or service
   Assumptions used to calculate earnings
   Everyone involved in the purchase or lease of the proposed bank building
   Any business or personal affiliations between the bank property seller or lessor and
    any of the organizers, other bank officers, and shareholders who will own 10 percent
    or more of the bank stock
   Copies of location feasibility studies and local zoning laws
   Copies of results of any environmental tests conducted at the bank's location
   Projected organization costs (this includes filing and regulatory fees, professional
    and consulting fees, payroll and payroll taxes, rent, capital-raising costs, printing,
    postage, telephone and office supplies)
   Proposed salaries and benefits for bank officers
   Copies of any employment contracts that may be given to officers
   Copies of proposed bank policies
   And finally, your detailed business plan!
And a check…
   Not to mention a filing fee of $15,000
And that’s not all…
   If your application is deemed complete, then a
    decision will be given within 180 days.
   If your charter is granted, you will usually
    have up to one year to open your bank.
   In all states, you are required to apply for
    deposit insurance with the FDIC before you
    can accept deposits from the public.
Resources
   http://money.howstuffworks.com/personal-
    finance/banking/bank10.htm