Introduction

Environment More Favorable for De Novos

Environment More Favorable for De Novos

Environment More Favorable for De Novos

The FDIC released its Quarterly Banking Profile on Tuesday, August 22nd and by most accounts, the banking industry had a stellar 2nd quarter. We will be discussing that further in the weeks to come. Our biggest take-away from the press conference releasing that data, however, had nothing to do with the data at all.

FDIC Chairman Martin Gruenberg remarked in the Q and A session following the release that the agency has approved six applications for deposit insurance in the past ten months. While that pales in comparison to the nearly 200 that were approved in 2007, it is more  than had been approved in the previous 60 months combined.

The FDIC has been trying to encourage the formation of new banks. It even released a handbook in May to make it easier for interested parties. The problem was, there was no interest—in more ways than one.

De novo banks rely more heavily on interest income than do established banks. When the Fed Funds rate dropped to near zero in December 2008, De novo bank applications dropped right along with it. Now that the Fed Funds rate is rising, the environment is becoming more favorable for start-up banks.

The last new bank we had in this country was Blue Gate Bank, which opened for business on October 3, 2016 in Costa Mesa, CA. The second newest bank was 19 months earlier. Primary Bank was chartered March 9, 2015 in Bedford, NH. A list of all banks chartered since 2008 that are still active can be found on pages 2 and 7.