Wanted to see if anyone here has ever invested in a new (De Novo) bank or had the opportunity to invest in one.  The pros and cons of doing it.  This would be a community bank in a fast growing area in the southeast.

I have and wish I hadn't.

Can't value or sell the stock, no market. I'm pretty sure my investment is doing well, but without a ready market there is no way to confirm and no way to sell or even to rationally decide not to sell.

If I'd have made the investment via an IRA or some other really long term vehicle I might think differently. It probably been at least a decade since I made the investment.

JPK

That is pretty vague.  What is the bank's business model? Generally the way to make money in community banking is to get big enough that a bigger player buys you out.  In terms of it being a good investment,  it depends. If it doesn't take off like the other poster said there is no liquidity in the investment.  Like any startup is either worthless or not at some point.

The refi boom is over,  commercial RE is on the rocks and consumer RE and autos are to the moon, wtf is this bank going to make money on? C&I?

No better time to get absolutely fucked in risk by buying off a super risky customer base while established banks are kicking out risky customers and current financial look great on an inflation bump.

Those were some of my concerns. I’m potentially one of the organizers and understand being bought up by a bigger bank. But wouldn’t want my investment to be tied up for a decade or more.

Multiple people in my family have stock in a community bank that now has 10 branches.   No idea what it is worth.  When my grandfather died they were trying to figure out to sell or not.  They just kept them because the only way to sell was to another stock owner and nobody was looking to add.  So it is likely going up but you can’t get out.  The money has been in there for 15 years or more by now. So money you don’t need to see again and maybe pass on when you die, sure.  The people we know with larger holdings cycle through being board members.  That has opened the door to knowing when people need money and improvements the city is making so buy on that side of town type stuff.

That is odd.

It seemed screwy to us.   However it is structured they had a limit on the total number of people who could own the stock.   A down select if you will.  No takers at that time so they kept it.  I think they consolidated it to one person in the family instead of dividing it evenly.  One owner before one owner after kind of thing.

That sounds like a typical chapter S community bank.

What doesn't sound typical is no one wanting to increase their percentage of ownership.

I worked for many people that owned 2 of the small banks here. It was just kind of there. Family tradition. Couldn't really sell it,  didn't really make money.  Just existed.

They didn't really view it as ownership in business.  Just something they had that was on some papers in a drawer.  They went to the annual meetings.