Tar Heel Tattler - March 2005

Buyer wants bank to charter his course
By Arthur O. Murray

Steve Johnson started Atlanta-based NetBank, one of the first to do business only online, in 1997. He’s still a director, and it has nearly $6 billion in assets. In 1999, he started Jacksonville, Fla.-based Florida Banks, sold in January for more than $160 million, about 40 times earnings.

So why would he shell out $3.3 million for Gibsonville Community Savings Bank, with its piggy-bank-size $16.6 million of deposits and $20 million of assets? It’s what’s over it, not what’s in it, says Johnson, president and CEO of T. Stephen Johnson and Associates, an Alpharetta, Ga.-based banking consultant.

He wants the bank’s charter for his Atlanta Bancorporation holding company. Johnson has applied to regulators to change it to a federal charter, which he’ll use to open banks in high-growth markets such as Atlanta, the Triangle and the Triad. The sale is expected to close in the second quarter.

Buying a bank for its charter is rare — this is the first case UNC Charlotte finance professor Tony Plath has seen in 18 years of tracking banking in North Carolina. But it makes sense. It typically takes a year and at least $8 million of capital to get a federal charter for a new bank, says Arnie Danielson of Danielson Associates, Rockville, Md., banking consultants. Johnson still needs regulatory approval, but that could take as little as three months.

He plans to raise at least $40 million to recapitalize the bank. “The way you have to do one of these banks is bring on a lot of people pretty quick. I didn’t want to wait for full-fledged bank regulatory approval. That’s what it’s all about, trying to shortcut the amount of time you’re carrying all those people without being open.”

Why this bank? It was small and in the right place, a town of about 4,500 people on the Alamance/Guil-ford county line. It also had been asked by the state banking commission to either recapitalize or produce a new business plan, which meant it would be open to a purchase. Johnson hasn’t decided on a name, but he does have a market in mind: business loans from $3 million to $10 million. “Small community banks are doing a good job of taking care of the small customers, and the big banks are taking care of the big customers.”

Plath isn’t sure this sector is underserved, pointing to Raleigh-based First Citizens BancShares, Rocky Mount-based RBC Centura and others. But he figures Johnson will find out. “He’s entering a competitive market.”