The East Coast was flooded by a wave of new bank charters in the late 1980s and early 1990s. But for all the fanfare that accompanied the new institutions, a study has found that most are just limping along - and a number are still losing money.

Of the 196 banks established from 1984 to 1992 in 10 states and the District of Columbia, 26 have reported an average loss of $832,000 in the four quarters ended March 31. On average, the group lost $1.51 for each $100 of assets, and one institution - Reliance Bank, White Plains, N.Y. - lost a stunning $12.98 on assets.

The study by Rockville, Md.-based Danielson Associates Inc. also showed that most of the other start-ups from the same period, while profitable, are still reporting anemic growth. On average, deposits are up only $12.5 million, while average annual income climbed only $538,000. The group's return on average assets for the year ended March 31 was a meager 0.6%.

Hundreds of East Coast banks opened their doors in the late 1980s and early 1990s, encouraged by the ease with which capital was raised, high property values, and a willing Office of the Comptroller of the Currency. But a combination of the recession and a regulatory crackdown on asset valuations spelled doom for the trend - and the fortunes of the new banks. Only nine new banks have been started in the region since 1992.

The study also looked individually at those newer banks but didn't include them in calculating average incomes, because start-ups generally don't make money in their first three years.

The study shows that many of the struggling institutions that opened between 1984 and 1992 are in urban areas, particularly New York, Philadelphia, and Washington, said Arnold Danielson, president of Danielson Associates.

He explained that the problem for these banks stems from trying to absorb the higher overhead costs of major urban areas. Whereas it might cost only about $900,000 to operate a branch in suburban locations, a downtown site could cost as much as $1.6 million while producing the same yield, he said.

Mr. Danielson said new banks in suburban areas generally have to get up to about $35 million to $40 million in assets to break even, while about $60 million in assets is needed before they'll start earning money.

But for urban banks, both minimum asset sizes are about $20 million higher, he said.

The 26 banks have total assets of $2.6 billion, but an average size of only $99 million.

Also, some of the new banks operate in local economies that are still in the tank, especially Connecticut and the metropolitan New York area, he said. That prevents those institutions from growing and may affect their existing asset quality.

"Those banks that are in the larger cities just have to grow faster, and sometimes that causes a little quality problem," he said.

In fact, Founders Bank in New Haven, Conn., failed this summer, 10 years after it opened. Founders had the highest four-quarters loss of any of the banks studied, at $4.9 million.

Though many of the banks were started during the new-bank boom in the late 1980s, the struggles do not reflect a failure of that boom, said Cynthia J. Stanaro, senior vice president of Danielson Associates.

Most of the struggling institutions opened just before the recession, when the new banks faced pressure to rapidly add loans on their books because of excess capital and high property values. As a result, she said, those banks didn't have enough other loans on their books and were hit harder by the sudden devaluation.

"It just happened at a bad time," she said.

According to the quarterly study, Virginia has had the most new banks, with 30, while New Jersey is right behind with 27, New York with 25, and Pennsylvania with 24.

The most profitable state for start-ups was Massachusetts, with an average annual income of $1.4 million for the four quarters studied. Its nearest competitor was New Jersey, with an average income of about $830,000 per year.

The state with the worst record for new banks is Connecticut, with 15 start-ups and an average loss of $22,000 for the last four quarters. The District of Columbia had only two new banks in the period, with an average loss of $89,000.

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