TRENDS IN DE NOVO BANK CHARTERS

(Click on any image to open PDF.)

The Trends in De Novo Bank Charters is sourced from the F.D.I.C. with tables or graphics created by BankingStrategist.com.

De novo banks opening since 1990 totaled over 3,100. The charts show the important role that de novo banking played prior to the Great Recession and how de novo banking collapsed post crisis.

Where historically, de novo banking was an important component of the banking industry rejuvenation - prior to the Great Recession, there were over 2,800 new banks chartered, or 149 on average each year. Today, de novo banking is the exception with just over 260 new banks chartered since 2009, or approximately 2 on average each year.

This trend is probably irreversible.

The following are key sources of information and activity on de novo banking:

 
De Novo Bank Replenishment Rate:  De novo banking has played an important role in the banking system. As the banking industry consolidated through mergers and acquisitions, de novo banking replenished the industry with new, competitive players. The concept of “De Novo Bank Replenishment Rate” is shown in this graph. The metric is calculated by dividing the number of de novo banks that opened each year by the total number of banks outstanding at the end of the prior year. From 1990 through 2008, the De Novo Bank Replenishment Rate was 1.42%. De novo banks expanded the size of the banking industry by just over 1.4 percent each year, replacing a portion of the banks that were merged. Following the Great Recession and financial crisis, this rate dropped to a negligible 0.04%.

De Novo Bank Replenishment Rate: De novo banking has played an important role in the banking system. As the banking industry consolidated through mergers and acquisitions, de novo banking replenished the industry with new, competitive players. The concept of “De Novo Bank Replenishment Rate” is shown in this graph. The metric is calculated by dividing the number of de novo banks that opened each year by the total number of banks outstanding at the end of the prior year. From 1990 through 2008, the De Novo Bank Replenishment Rate was 1.42%. De novo banks expanded the size of the banking industry by just over 1.4 percent each year, replacing a portion of the banks that were merged. Following the Great Recession and financial crisis, this rate dropped to a negligible 0.04%.

 
Trends in FDIC De Novo Bank Openings Since 1990:  De novo bank openings saw a significant change prior to the Great Recession and after the Great Recession. The number of de novo banks that opened dropped from an average of 149 per year for the nineteen years from 1990 to 2008 to only 2 for the +10 years from 2009 to 2019.

Trends in FDIC De Novo Bank Openings Since 1990: De novo bank openings saw a significant change prior to the Great Recession and after the Great Recession. The number of de novo banks that opened dropped from an average of 149 per year for the nineteen years from 1990 to 2008 to only 2 for the +10 years from 2009 to 2019.

Trends in FDIC De Novo Bank Applications Since 2000:  De novo bank applications saw a significant change prior to the Great Recession and after the Great Recession. FDIC actions dropped from 1,387 for the nine years from 2000 to 2008 to only 57 for the +10 years from 2009 to 2019.

Trends in FDIC De Novo Bank Applications Since 2000: De novo bank applications saw a significant change prior to the Great Recession and after the Great Recession. FDIC actions dropped from 1,387 for the nine years from 2000 to 2008 to only 57 for the +10 years from 2009 to 2019.

De Novo Banks by State:  Historically, de novo banking occurred in larger population centers, markets expected to experience strong economic growth and in states where there has been significant banking industry consolidation due to mergers and acquisitions.

De Novo Banks by State: Historically, de novo banking occurred in larger population centers, markets expected to experience strong economic growth and in states where there has been significant banking industry consolidation due to mergers and acquisitions.

Trends in FDIC De Novo Bank Applications for Leading States Since 2000:  The same trend occurs by the leading states for de novo activity before (Green) and after (Red) the Great Recession. Defining characteristics of states with de novo activity: growing populations, strong local economies and history of bank merger and acquisition activity.

Trends in FDIC De Novo Bank Applications for Leading States Since 2000: The same trend occurs by the leading states for de novo activity before (Green) and after (Red) the Great Recession. Defining characteristics of states with de novo activity: growing populations, strong local economies and history of bank merger and acquisition activity.

De Novo Banks Opened Since 2017:  While de novo bank openings are down significantly from pre-recession levels, another characteristic is important. Most new banks are opened in markets with population growth and faster growing local economies.

De Novo Banks Opened Since 2017: While de novo bank openings are down significantly from pre-recession levels, another characteristic is important. Most new banks are opened in markets with population growth and faster growing local economies.

Trends in Capitalization Requirements for De Novo Banks:  There is a significant increase in the required capital for de novo banks following the Great Recession. While the capitalization requirements are unique to each application, the trend reflects a doubling of the average capital requirement from approximately $15 million prior to the financial crisis to approximately $30 million post-crisis. The reasoning for the heightened capital requirements are to provide capital cushion to withstand recessionary economies and target business plans that have larger total asset goals (view is that there is a critical mass required for success?).

Trends in Capitalization Requirements for De Novo Banks: There is a significant increase in the required capital for de novo banks following the Great Recession. While the capitalization requirements are unique to each application, the trend reflects a doubling of the average capital requirement from approximately $15 million prior to the financial crisis to approximately $30 million post-crisis. The reasoning for the heightened capital requirements are to provide capital cushion to withstand recessionary economies and target business plans that have larger total asset goals (view is that there is a critical mass required for success?).