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149 Banks Underwater: TheStreet Watch List

NEW YORK ( TheStreet) -- Community Banks are floundering as the number of undercapitalized institutions remains high despite institutions falling off the list as a result a continuing wave of bank failures.

There are now 149 undercapitalized institutions on the TheStreet's Bank Watch List, with preliminary second-quarter data now available for roughly 91% of the nation's banks and thrifts. The number is expected to grow as the remaining regulatory data comes in. Banks are required to file their call reports by August 15.

Based on second-quarter regulatory data supplied by SNL Financial for the nation's banks and savings and loan associations -- and factoring-in 22 bank and thrift failures since TheStreet's previous Watch List was published on May 5 -- 149 institutions were undercapitalized according to the regulatory guidelines that apply to most institutions.

Click the link below to see the full list:

>>>Bank Watch List

It is important to note that any capital raised by institutions during the third quarter of 2011 will not be reflected on the Watch List.

Most banks and thrifts need to maintain Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of at least 5%, 6% and 10% to be considered well-capitalized under regulatory guidelines. Some trust banks carry lower capital requirements. The ratios need to be at least 4%, 4% and 8% for most to be considered adequately capitalized.

Four of the banks and thrifts on the Watch List were actually negatively capitalized as of June 30. The largest of these -- in fact, the largest on the Watch List -- is Community One Bank, NA of which is a subsidiary of FNB United (FNBN).

The holding company on April 27 entered into a deal to acquire Bank of Granite Corporation (GRAN) of Granite Falls, N.C., with $158 million in new capital being contributed by The Carlyle Group and Oak Hill Capital Partners. The target company holds Bank of Granite, which is also on the Watch List. On Tuesday, FNB United announced a total of $310 million in private equity subscription agreements, contingent upon approval of current shareholders and regulators.

It's a complicated deal, and in order for it to be completed, all private equity investors need to meet their commitments, the U.S. Treasury needs to agree to exchange $51.5 million in preferred shares of FNB United -- held in exchange for bailout funds received through the Troubled Assets Relief Program, or TARP - for common shares in the new combined holding company, and CommunityOne needs to repurchase repay outstanding debt and repurchase preferred stock held by SunTrust (STI - Get Report).

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