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Are de novos making a comeback?

By Elise Hauser, August 3, 2017

The FDIC paper The Entry, Performance, and Risk Profile of De Novo Banks published in April 2016 reports that the number of de novo bank failures and acquisitions annually has drastically declined since 2010, primarily due to the fact that new bank formations have become nearly inexistent.

Cheryl Monk, a writer in New York, reviews the de novo environment in her article published in the July 2017 issue of Independent Banker. She writes that, while in recent years new bank formations have been at an all time low, an increase in de novo activity may be on the horizon.

In order to encourage new bank formation, the FDIC has shortened the number of years de novo banks are subject to de facto capital requirements, among other improvements to make de novo bank formation more appealing. In a press release on May 1st, the FDIC stated that it has “taken a number of steps to enhance the transparency and clarity of the deposit insurance application process.” Some of these changes include:

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For the full story featuring Sageworks, visit Community Bank Insight – Are de novos making a comeback?