THE PERFORMANCE OF DE-NOVO COMMERCIAL-BANKS - A PROFIT EFFICIENCY APPROACH

We examine the profit efficiency of US banks chartered between 1980 an d 1994. Our results suggest that profit efficiency improves rapidly at the typical de novo bank during its first three years of operation, b ut on average takes about nine years to reach established bank levels. Excess branch capacity, reliance on large deposits, and affiliation w ith a multibank holding company are associated with low profit efficie ncy at de novo banks. De novo national banks are initially less profit efficient than are state-chartered de novos, perhaps reflecting diffe rences in the chartering philosophy of federal and state bank regulato rs. (C) 1998 Elsevier Science B.V. All rights reserved.