Stress Tests | State-by-State Data Shows More Than 25% of U.S. Community Banks Will Be Undercapitalized


New Ground-Breaking Bank Stress Test by Invictus Group Available On-Line for First Time

State-by-State Data Shows More Than 25% of U.S. Community Banks Will Be Undercapitalized

Economic Impact on Bank Lending Highlighted

NEW YORK , NY, July 13, 2011—The Invictus Group LLC, an independent financial risk management firm, announced today that it has posted online (at the results of its ground-breaking stress test of all banks and lending institutions in the U.S., Puerto Rico and the Virgin Islands. More than 25% of all U.S. banks fail the minimum risk-based 8% Tier 1 capital requirement under the Invictus two year stress test. The stress test report also indicates that as many as one-fifth of banks in at least 66% of states are projected to be undercapitalized on a post stress test basis. Arizona, Florida and Maryland have the highest percentage of banks at risk with over 50%. Approximately one third of all lending assets reside in banks that are undercapitalized.

“In consultation with regulators and others, we at Invictus have been fine-tuning our unique approach to bank stress testing since before the recent recession set in,” said Kamal Mustafa, CEO and one of the founding partners of Invictus. “In back testing, our model accurately predicted every bank that failed in the U.S. since September 2008 in which the institution did not receive a capital injection. We believe our Company has established a new, higher standard of stress testing of Tier 1 capital that is far more sensitive and useful than the historical regulatory capital assessments now in wide use.”

“Banks are at the fulcrum of business activity, and this is particularly true of community banks serving local businesses, which finance commercial and residential real estate and aid in job creation,” said Mr. Mustafa. “Their financial well being is important to their communities. The Invictus Capital Assessment Model (ICAM™), in addition to measuring capital adequacy, provides important oversight of the national disparity of economic stresses and strains.”

Data available on the Invictus site show that after the application of a two year stress test:

  • 1,983 or 26% of the 7,695 banks in the country will be undercapitalized.
  • 20% or more of the banks in approximately two-thirds of the states will be undercapitalized.
  • Arizona has the largest percentage of undercapitalized banks (53%), and Illinois has the largest number of banks (158) that will be undercapitalized.
  • Illinois has the largest amount of assets (approximately $100 billion) residing on balance sheets of banks that will be undercapitalized.

“Invictus has taken stress testing to a new level, and what our model indicates, where the historical measures do not, is that far too many banks are not yet out of the woods. Serious challenges remain, especially given current high unemployment and the weak economy,” Mr. Mustafa added. “We are encouraged by the support we are receiving from regulators and bank officials with whom we’ve shared our data, and who are providing us with platforms to address industry groups throughout the country as to our methodology and insights.”

Invictus said that its analyses should be of use not only to regulators and bank boards of directors and executives, but also to a wide range of interested parties, including state officials, investment banks, investors, providers of D&O insurance, corporate treasurers and the public, among others.

Invictus results are based on extensive experience and knowledge gained from performing stress tests for every bank in the country and the ability to compare a bank’s forward looking performance in their competitive environment. The ICAM™ system uses publicly available data from sources such as the Federal Reserve Bank, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and SNL among others. Unlike traditional stress testing, which relies principally on bank earnings capabilities, Invictus’s proprietary ICAM™ system focuses on balance sheet items in predicting future regulatory capital levels. Invictus has been a leader in the use of stress tests in individual bank strategic planning and in banks’ regulatory communications.

Invictus’ website contains detailed stress test information consolidated to state and regional levels, including projected capital declines by loan category and the total capital shortfall in the state/region. The analysis reflects banks with assets of $20 billion or less, and allows for state to state and state to region comparisons. Data on the site will be updated quarterly. In the interim, Invictus will be publishing additional analyses of regional and national trends, as well as analyses of subsets of data, such as publicly held banks and subsidiaries of foreign owned banks.

In addition to enabling both bank officials and regulators to make side-by-side comparisons with other lending institutions on a state and regional basis, the information, derived from the Invictus website, is also useful in evaluating the strengths and weaknesses of local economic activity.

About Invictus

Invictus ( was established in 2008 as an independent financial risk management and advisory firm. The Invictus senior management team has a depth of experience in international banking, regulation, information technology, credit, liability management securitization, insurance and investment banking. Invictus recognized that
today’s difficult global economic environment renders traditional analytical methods inadequate to evaluate a bank’s capital requirements – and have created a new and superior methodology for the financial services industry that generates a range of analytical reports providing unprecedented insight into the banking sector. Invictus’ advisory services are competitive positioning, merger and acquisition screening, and risk analysis among others.


As for Florida, more than a quarter of Florida banks are undercapitalized, but New York research firm Invictus Group says that number could soar to more than 50 percent. The report says 51.8 percent of Florida-based banks would be undercapitalized, which it defines as a Tier 1 capital ratio of less than 8 percent.

To access the reports state by state click here…


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