De novo bank: A de novo bank is a newly chartered bank, generally treated as de novo through its first three years.
Where it comes from
The FFIEC gives each de novo bank a peer group named for the year it opened, so a bank chartered in 2024 is compared with the other 2024 charters rather than with established banks of the same size.
How to read it
A de novo’s ratios are not comparable to anything else. It opens with a large capital raise and no loan book, so its capital ratios are enormous, its efficiency ratio is terrible, and its return on assets is negative until it scales. All of that is the plan, not a problem.
The common mistake. Putting a de novo in a size based peer group. At $80 million in assets it lands beside community banks with twenty years of retained earnings behind them, and every comparison that follows is meaningless.
Go deeper
- FFIEC peer group codes explained
- BankingLens pricing and what a subscription adds: percentile rank against the bank’s own FFIEC peer group, fourteen quarters of trend, and the flags an examiner reaches for first.
See also. FFIEC peer group, Bankers bank, Efficiency ratio.
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