Undercapitalized Banks and Thrifts

This story originally posted on RealMoney.com on Tuesday, March 31. For more information about subscribing to RealMoney, please click here.

The ranks of undercapitalized banks continue to grow.

The full set of finalized regulatory data for the fourth quarter is available for all U.S. banks and savings and loans, and TheStreet.com Ratings has updated its list of undercapitalized institutions. Since our preliminary lists of undercapitalized banks and thrifts were published on Feb. 20, five more banks filed finalized call reports showing they were undercapitalized as of Dec. 31.

One bank has been removed from the list. Finalized call report numbers for Warren Bank of Warren, Mich. include a total risk-based capital ratio of 8.04% as of Dec. 31, putting the institution into the adequately capitalized category.

Under normal regulatory capital guidelines, a bank or thrift needs to have a tier-1 leverage ratio of at least 5%, a tier-1 risk-based capital ratio of at least 6% and a total risk-based capital ratio of at least 10%. To be considered adequately capitalized, these ratios need to be 4%, 4% and 8%.

Undercapitalized Banks - Dec. 30, 2008 ($millions) Highline Financial

This time we have included all 14 institutions that filed regulatory financial reports showing they were undercapitalized as of Dec. 31, and failed during the first quarter. With two-thirds of the 2009 failed institutions having reported being undercapitalized, this is obviously a good indicator of the likelihood of an institution's failure.

Of course, in the current environment, several banks and thrifts have entered into regulatory agreements requiring them to achieve higher capital benchmarks in order to be considered well-capitalized. An example of this is Corus Bank NA, held by Corus Bankshares (CORS), which was required to achieve and maintain tier-1 leverage and tier-1 risk-based capital ratios of at least 9% and 12% within 120 days of a Feb. 18 agreement with the Office of the Comptroller of the Currency.

For information on all of the bank failures during 2008 and 2009, please see TheStreet.com's interactive bank failure map, which also includes a table listing failures by date.