State Consolidated Bank Stress Tests (U.S.)
Undercapitalized Banks by State and by Economic Region
Loss of Regulatory Capital under Stress
The graphs on this page are part of the Invictus Bank Sustainability and Stress Analysis. Invictus runs stress tests for every FDIC-insured bank in the U.S. at least quarterly, and the following graphs focus primarily on the impact to banks expected to be undercapitalized by state and economic region. For this analysis, undercapitalized banks are considered to be those with less than 8% risk-based Tier 1 capital under a 2-year stress test, without considering the potential contribution (positive or negative) from earnings.
Please note that these graphs do NOT represent forecasts of future earnings or performance.
They depict the results of applying stress tests to bank balance sheets.
Charts reflect data as of Q2 2011.
Results are a weighted-average based on the risk-weighted assets of each bank, with banks over $20B in assets excluded from the analysis. Economic regions are as defined by the U.S. Bureau of Economic Analysis.
Invictus produces detailed stress test analyses for all FDIC-insured banks. To order an individual bank report, please log in or contact us.
Invictus also provides analyses and other services for banks outside the United States. Please contact the Invictus London office for more information.
Three graphs are presented for the undercapitalized banks in each state and region:
STRESS TEST SUMMARY
A consolidated view of the expected changes in risk-based Tier 1 capital for the undercapitalized banks in each state or region.DOWEL CHART
The expected decline in capital attributable to each stress factor and loan category for all banks in each state or region.PROJECTED CAPITAL SHORTFALL
The expected total Tier 1 capital shortfall for the under-capitalized banks in each state or region.
To see a national summary of undercapitalized banks by state (post-stress), click here.
GRAPHS
Stress Test Summary: This graph represents a consolidated view of the expected changes in risk-based Tier 1 capital for all undercapitalized banks* in the state/region, weighted-averaged by risk-weighted assets. The first (purple) bar shows the risk-based Tier 1 capital as reported. The second (grey) bar reflects the current risk-based Tier 1 capital after correcting for estimated under-provisioning in loan/lease loss reserves, before consideration of stress. The third (red) bar shows post stress results without the potential contribution of earnings. The fourth (yellow) bar shows post-stress results inclusive of earnings contributions to capital. *(less than $20 Billion in assets) |
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Stress Test Summary: This graph represents a consolidated view of the expected changes in risk-based Tier 1 capital for all undercapitalized banks* in the state/region, weighted-averaged by risk-based assets. The first (purple) bar shows the Tier 1 capital as reported. The second (grey) bar reflects the current risk-based Tier 1 capital after correcting for estimated under-provisioning in loan/lease loss reserves, before consideration of stress. The third (red) bar shows post stress results without the potential contribution of earnings. The fourth (yellow) bar shows post-stress results inclusive of earnings contributions to capital. *(less than $20 Billion in assets) |
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Dowel Chart: This graph represents the average decline of Tier 1 capital post-stress on a weighted average basis for all banks* in the state/region. The height of each dowel is associated with a distinct loan category and represents that category’s contribution to the decline of Tier 1 capital over the 2 year stress horizon. The decline in capital is then distributed based on various stress factors allocated based on general national criteria. The sum of all the heights of the dowel represents the net cumulative impact to the decline of Tier 1 capital.
*(less than $20 Billion in assets) |
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Dowel Chart: This graph represents the average decline of Tier 1 capital post-stress on a weighted average basis for all banks* in the state/region. The height of each dowel is associated with a distinct loan category and represents that category’s contribution to the decline of Tier 1 capital over the 2 year stress horizon. The decline in capital is then distributed based on various stress factors allocated based on general national criteria. The sum of all the heights of the dowel represents the net cumulative impact to the decline of Tier 1 capital. *(less than $20 Billion in assets) |
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Projected Capital Shortfall:
This graph represents the total capital shortfall for all undercapitalized banks* in the state/region under a stressed scenario. It is the cumulative capital required to restore all undercapitalized banks in the state/region to an 8% risk-based Tier 1 capital threshold, shown both with and without the expected contribution of earnings (or losses) to capital. The bar on the right, showing the capital shortfall after applying an earnings component to the analysis, reflects the total shortfall for the undercapitalized banks in the state which remain below the 8% threshold even when their earnings are considered.
*(less than $20 Billion in assets) |
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Projected Capital Shortfall: This graph represents the total capital shortfall for all undercapitalized banks* in the state/region under a stressed scenario. It is the cumulative capital required to restore all undercapitalized banks in the state/region to an 8% risk-based Tier 1 capital threshold, shown both with and without the expected contribution of earnings (or losses) to capital. The bar on the right, showing the capital shortfall after applying an earnings component to the analysis, reflects the total shortfall for the undercapitalized banks in the state which remain below the 8% threshold even when their earnings are considered. *(less than $20 Billion in assets) |
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INDIVIDUAL BANK ANALYSIS
To order an Invictus Sustainability Stress Test on any bank in the U.S. or to discuss our state-wide and region-wide graphs as displayed above, please log in or contact us.
State Consolidated Bank Stress Tests
The loan portfolios of the banks in each state/region are a proxy for the distribution of lending activity within that state/region. These portfolios, when stress is applied, reflect the economic impact of a continued recession on the respective state. The consolidated stress distributions vary dramatically from state to state, reflecting each state's portfolio mix and regional economic response to the recession. Over time, changes in the loan portfolios and their stress distributions become an excellent indicator of the recovery within each state. We believe that these reports, which we update on a quarterly basis, are a pragmatic depiction and evaluation of the condition of regional economies and their economic recovery patterns.
These reports are designed to help regional banks in assessing their own stress positions in the context of their operating and competitive environments. The stress impact on banks is a direct reflection of their portfolio mix and the economic conditions within their geographical footprints. As such, each bank's performance should be evaluated not only on a stand-alone basis, but also on a relative basis to their actual competitive marketplace. Invictus produces this same style of graphic output for each FDIC-regulated bank in the United States and U.S. Territories.
Stress Testing Background
Invictus has been stress testing all 7500+ FDIC-insured banks since the start of the recession. These stress tests have been performed using a wide variety of public data. We supplement the public data with information learned through working with client banks on detailed customized stress tests, and with general guidance from regulators. Working with bank and regulator clients provides us with an extraordinarily valuable learning process, resulting in a continuous development of our stress testing approach and the accumulation of extremely valuable insights.
- The Invictus stress test focuses heavily on "leaching out" the weaknesses inherent to existing portfolios that have yet to be recognized through traditional credit procedures. The quantification of these inherent weaknesses is a function of many factors: the date of loan origination, timing of future repayments and interest rate reset events, regional loan to asset values, bank provisioning history, consolidated regional provisioning history, the efficiency of the bank's loan classifications systems, among others.
- The stress tests presented here make no significant economic assumptions regarding interest rates, unemployment rates, and other economic factors. The primary assumption is that the next two years will see no significant/miraculous market recovery, and that the economic regions will endure a two-year slow jobless recovery.
- For the purpose of this statewide presentation, all banks across the country are stressed in a uniform manner to facilitate comparisons. Pro forma regional adjustments are applied on a very limited basis. This consistency enables relative comparisons between states.
Disclaimer and points to note concerning this information:
- Banks with assets in excess of $20 Billion are excluded. Banks are assigned to the jurisdiction in which they are chartered. Nationally chartered banks are assigned to their home state. Economic regions are as defined by the U.S. Bureau of Economic Analysis.
- The core information inputs come solely from publicly available data including the FDIC Call Reports and Thrift Financial Reports (FFIEC Central Data Repository Data Base), SNL Financial, Moody’s, S&P, Bureau of Economic Analysis (BEA), and the Securities and Exchange Commission (SEC), among others. While we believe that the data provided to us is accurate, we do not review the data bases sources for misclassifications or for information updated subsequent to the time we prepare our reports.
- While the assumptions for stress tests could be unique for different bank profiles, we apply a consistent set of assumptions to all banks in this review to provide an “apples to apples” comparison. The stresses applied here closely mirror those used in the analyses provided to state regulators.
Continuous Improvement
We are firmly committed to continuous improvement in our models. This commitment applies both to the sourcing and reliability of data, and to the application of the ICAM™ stress-testing methodology to further develop useful and valuable information from raw data. Some planned future developments on a state by state, post-stress aggregate basis include but are not limited to:
- Refinements to permit deeper drill downs by portfolio
- An additional state analysis based upon where loans reside
- Liquidity metrics by state showing comparisons in liability composition, deposit composition, unencumbered liquid assets, loan to deposit ratio, and contingent demands on liquidity
- Asset redeployment and concentration issues
- Sensitivity to changes in interest rates
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