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Undercapitalized US banks increase in Q1

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Undercapitalized US banks increase in Q1

The number of undercapitalized U.S. banks and thrifts increased in the first quarter, while the number of institutions designated by the Federal Deposit Insurance Corp. as "problem" banks continued to decline.

On March 31, 14 institutions met at least one of the undercapitalized bank criteria: Total risk-based capital ratio under 8%; Tier 1 capital ratio less than 6%; common equity Tier 1 ratio less than 4.5%; or leverage ratio less than 4%. That number stood at 12 at year-end 2018.

According to the FDIC, the number of problem banks fell to 59 on March 31 from 60 at year-end 2018. Total assets of those problem institutions decreased to $46.67 billion from $48.49 billion.

Dallas-based Grand Bank of Texas was undercapitalized at March 31 based on a total risk-based capital ratio of 6.85% and Tier 1 capital ratio of 5.60%. On April 1, the bank and its parent Casey Bancorp Inc. were acquired by Tupelo, Miss.-based BancorpSouth Bank.

Maumee, Ohio-based Resolute Bank became undercapitalized in each of the four capital categories during the first quarter. The bank posted losses for six consecutive quarters, amassing $3.7 million in cumulative net losses during that span. Despite an annualized net charge-off rate of 13.7% in the first quarter, nonperforming loans as a percentage of total loans and leases rose to 12.8% from 7.5% at Dec. 31, 2018.

Other entrants to the undercapitalized bank list were Almena, Kan.-based Almena State Bank; Louisa, Ky.-based Louisa Community Bank; and Towson, Md.-based Maryland Financial Bank. Those three banks, as well as Resolute Bank, had an annualized return on average equity of negative 50% or worse in the first quarter. Maryland Financial, which ended March 31 with total assets of $1.6 million, is liquidating this year.

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Banks report regulatory capital information on the call report schedule RC-R, which can be accessed under the Regulatory Financials section of a company's briefing book page on the Market Intelligence website or with the Excel add-in tool.