More than half of the de novo banks that started in recent years were in the black to start 2022.
Of the 37 operating de novo banks established between 2017 and the first quarter of 2022, 19 posted a profit in the first quarter. Only 14 of those banks open for at least a year reported profits over the last 12 months ended March 31.
For this analysis, S&P Global Market Intelligence looked at all operating de novo banks established between 2017 and June 27, 2022, excluding shelf charter banks, nondepository trusts, companies with a foreign banking organization charter and newly formed holding companies, unless the company was formed to establish the bank.
Once again, Johns Creek, Ga.-based Loyal Trust Bank led the pack, reporting a 1.94% 12-month return on average assets as of March 31.
Established in November 2019, Loyal Trust rode the Paycheck Protection Program wave during the onset of COVID-19, rapidly growing its loan portfolio. The bank's PPP portfolio peaked in the first quarter of 2021, hitting $44.0 million, which accounted for roughly 63% of its entire loan portfolio at the time. As the PPP loans on its books were forgiven, Loyal Trust's total PPP portfolio fell to $8.4 million as of March 31, 2022, but its total loan portfolio dropped by much less to $59.7 million over the same time frame.
Another member of the class of 2019, Oklahoma City-based Watermark Bank, posted the second-highest ROAA in the group at 1.37% for the 12 months ended March 31. After posting a net loss during each of its first seven quarters in operation, Watermark has been profitable for the last six quarters in a row.
At the other end of the spectrum, New York-based Grasshopper Bank NA's -9.01% ROAA over the last 12 months was the largest loss among the banks analyzed. However, the bank's $4.0 million net loss in the first quarter was its smallest quarterly loss since it was established in May 2019.
De novo activity picks up
De novo bank formation is off to a strong start in 2022 with eight new banks established as of mid-June, equal to the eight established over all of 2021, according to S&P Global Market Intelligence data.
 | * Access more details on established de novo banks. * S&P Global Market Intelligence's "banks in organization" page. |
Although worries over persistent inflation and its effects on the economy have dented bank stocks and could dampen enthusiasm for opening a new bank, at this pace, 2022 could surpass 2019's 13 de novo bank openings, which was the recent high-water mark for de novo openings following the mortgage meltdown era.
