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Eighty-two banks and seven thrifts across the U.S. failed to hold the amount of money required by regulators, according to a full set of preliminary regulatory data for banks and savings and loan associations as of March 31.

A bank or S&L typically needs 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. The ratios need to be at least 4%, 4% and 8% for an institution to be considered adequately capitalized.

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A previous list of undercapitalized banks wasn't complete, and no data were available for S&Ls. The update, the information for which was gathered by SNL Financial this week, excludes the 14 institutions that reported being undercapitalized as of March 31 and subsequently failed. Of those, five had negative capital ratios on March 31, begging the question of why it took state and federal regulators so long to close them. (See TheStreet.com's Bank Failure Map for an interactive summary of all bank and thrift failures since the start of 2008.)

In the case of BankUnited, which failed a week ago, the Federal Deposit Insurance Corp. and the institution's primary regulator, the Office of Thrift Supervision, were involved in complex negotiations with groups of private equity investors looking to buy the troubled thrift's assets.

BankUnited's assets were purchased by an investor group led by John Kanas, the former CEO of NorthFork Bank, which was acquired by Capital One Financial ( COF) in 2006.

The investor group purchasing BankUnited's branches, retail deposits and most assets included WL Ross & Co., Carlyle Investment Management, a unit of Blackstone Group ( BX), Centerbridge Capital Partners, LeFrak Organization, The Wellcome Trust, Greenaap Investments and East Rock Endowment Fund.

If a company owns 25% or more of an S&L, it's considered a thrift holding company and comes under OTS supervision. That's why there were so many private-equity companies in the investor group -- they certainly don't want federal regulators to supervise their investing activities.

For banks, the rule is even more strict, with a 10% threshold. Converting a target bank to an S&L charter is a way to address that additional complication. This is a feature of an agreement between Colonial BancGroup ( CNB) and an investor group led by Taylor Bean & Whitaker Mortgage, which is looking to provide $300 million in capital in return for 75% ownership in the Montgomery, Ala., holding company.

Undercapitalized Banks and Thrifts

The list of undercapitalized banks has two caveats: It's still preliminary data subject to revision, and a bank or thrift may have raised capital since March 31. The list also excludes banks whose capital ratios exceed the usual regulatory requirements for adequately capitalized institutions but are considered undercapitalized because regulators are requiring them to hold additional money.

Undercapitalized Banks and S&Ls as of March 31.
Preliminary Regulatory Data (in Millions of Dollars).
SNL Financial, Inc.

When we published our previous list on May 5, there were 17 undercapitalized Illinois banks, ranking that state first. With two Illinois bank failures last week, the state is now tied with Georgia, which has 15 undercapitalized institutions.

Georgia has had 11 bank failures during 2008 and 2009, the most for any state, with large holding companies like SunTrust ( STI), Regions Financial ( RF), BB&T ( BBT) and Synovus Financial ( SNV) taking advantage of the opportunity to snap up failed institutions' branches and deposits.

Two of the remaining Illinois banks on the list reported negative capital ratios as of March 31, along with one thrift headquartered in Pennsylvania. These institutions are in bold.

The largest institution on the list is Corus Bank, NA of Chicago, a subsidiary of Corus Bankshares ( CORS).

Other states factoring large on the list include California, with 10 undercapitalized institutions, and Florida, with seven.

The largest holding company that has acquired failed banks in California is US Bancorp ( USB), which took over the deposits and branches of Downey Savings and PFF Bank & Trust in November.

Free Financial Strength Ratings for Banks, Thrifts

TheStreet.com Ratings issues independent and very conservative financial strength ratings on each of the nation's 8,500 banks and savings and loans. These are available at no charge on the Banks & Thrifts Screener. In addition, the financial strength ratings for 4,000 life, health, annuity, and property/casualty insurers are available on the Insurers & HMOs Screener.

The writer owns shares in Riverside Banking Co., the holding company for Riverside National Bank of Florida, of Fort Pierce, a former employer.

Philip W. van Doorn joined TheStreet.com Ratings Inc. in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.

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