Number of Undercapitalized Banks Falls To Lowest Level in Five Years

26 banks were considered undercapitalized as of June 30, according to research from SNL, compared to 38 the same time last year.

The number of undercapitalized banks in the U.S. fell to its lowest level since 2008, according to research from Charlottesville, Va-.based SNL Financial.

According to SNL, as of June 30 26 banks and thrifts were undercapitalized, based on the criteria of having Tier 1 capital ratios below 4%, compared to 38 institutions at the end of the first quarter and 56 institutions a year ago. Tier 1 capital is generally defined as a bank's main source of capital, primarily including commons tock and reserves.

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The firm said the number of undercapitalized institutions has fallen to the lowest level since the third quarter of 2008, when 14 banks were considered undercapitalized. The number of undercapitalized banks in the industry has steadily declined for the last 11 quarters, with failures accounting for the bulk of the decline. The trend was consistent through 2012 as well, when the number of undercapitalized banks decreased by 26 to 44 institutions.

According to SNL, just 20 banks have failed so far in 2013 — 12 of them during the second quarter.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio