Analysis: Success Rate of New Banks
The success rate of new banks has historically been high. Carpenter & Company completed an analysis of the financial results posted by all 1,687 banks opened in the United States from 1992 to 2015.1
Our findings were instructive. Of those banks, 1648 – 98% of the total – achieved profitability and 91% achieved sustained profitability.1 Failures were few – excluding failed banks focused on construction and development lending, which historically has had high risk, fewer than 2% of the new banks failed.
Times and markets differ. It’s always important to have good management, strong capital levels and solid business plan. But our analysis confirms that over 9 out of 10 new banks have put themselves in a position to achieve sustained success.
1 Source: SNL Financial
2 Sustained profitability defined by Carpenter & Company as i) at least four consecutive quarters of positive earnings and ii) at least eight total quarters of positive earnings.