Undercapitalized Bank List Still Growing

A previous version of this story incorrectly included the ticker of California Bank of Commerce.

NEW YORK ( TheStreet) -- Despite the signs of economic improvement, the pace of bank failures is likely to accelerate as the shakeout continues among community lenders with capital shortfalls.

Based on preliminary first-quarter regulatory data supplied by SNL Financial for roughly 92% of the nation's 7,300 banks and savings and loan associations, 156 were "undercapitalized," according to the regulatory guidelines that apply to most institutions. Clink the link below to see the full list.

>>>Bank Watch List

That number is down slightly from 163 undercapitalized banks and thrifts on a similar list published by TheStreet.com on Feb. 24; however, 40 of the institutions on the previous list have already failed.

More undercapitalized banks are likely to be identified when the full set of first-quarter regulatory data becomes available.

There have been 64 bank failures so far during 2010, more than double the number for the same period last year. In addition to all the institutions that are short of capital, the Federal Deposit Insurance Corp.'s "problem bank list" has continued to grow.

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% respectively 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% respectively for most to be considered "adequately capitalized".

Here's the entire list of undercapitalized banks, based on preliminary March 31 regulatory filings. The list is likely to grow once a complete set of data for the industry becomes available. Please note the list doesn't reflect any capital raised by bank institutions during the second quarter of 2010. The list is sorted by state, and then by asset size.

Publicly-traded holding companies with multiple undercapitalized bank subsidiaries include Bank of Florida Corp. ( BOFL) of Naples, with three subsidiaries, and Capitol Bancorp ( CBC) of Lansing, Mich, which holds Pisgah Community Bank of Ashville, N.C., Michigan Commerce Bank of Ann Arbor, Sunrise Bank of Arizona, of Phoenix, and Central Arizona Bank of Casa Grande.

Bank of Florida Corp. announced a first-quarter loss of $33.1 million on Monday, and said it needs to raise $65 million in new capital in order for all three of its subsidiaries to become adequately capitalized. The holding company is currently engaged in a rights offering that seeks to raise nearly $72 million.

All three Bank of Florida subsidiaries have missed regulatory guidelines to become adequately capitalized by April 17. One of the subsidiaries, Bank of Florida - Southwest of Naples, was among six institutions on the list with negative capital positions as of March 31.

Capitol Bancorp had 64 separately-charted bank subsidiaries in 17 states at the end of 2009, and through sales of some subsidiaries and mergers of others, plans to reduce the number of subsidiaries to 26 this year. The company announced agreements with private investors to raise $7.5 million in common equity on April 26.

The largest of the undercapitalized banks on the list is Sterling Savings Bank of Spokane, Wash, which had $10 billion in total assets as of March 31. The institution is the main subsidiary of Sterling Financial ( STSA), which announced plans for a private $555 million common and preferred stock offering on Monday. Sterling Savings Bank posted a net loss of $78.6 million for the first quarter, when it set aside $85 million for loan loss provisions. Net loan charge-offs for the first quarter totaled $133 million.

The second largest institution on the undercapitalized banks list with $3.2 billion in total assets is Midwest Bank and Trust of Elmwood Park, Ill., which is held by Midwest Banc Holdings ( MBHI). The FDIC was reported last week to be soliciting bids from other banks to acquire Midwest Bank and Trust.

Other undercapitalized subsidiaries of publicly-traded holding companies with more than $2 billion in assets include Hanmi Bank of Los Angeles, which is held by Hanmi Financial ( HAFC); Bank of Hampton Roads of Norfolk, Va., which is a subsidiary of Hampton Roads Bankshares ( HMPR); and Bank of the Cascades, which is held by Cascade Bancorp ( CACB).

Ongoing Bank Failure Coverage

All previous bank and thrift failures since the beginning of 2008 are detailed in TheStreet.com's interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in red, and states with no failures in grey. By moving your mouse over a state you can see its combined 2008-2010 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.

Free Financial Strength Ratings

TheStreet.com Ratings issues independent and very conservative financial strength ratings on each of the nation's 8,500 banks and savings and loans. They are available at no charge on the Banks & Thrifts Screener.

-- Written by Philip van Doorn in Jupiter, Fla.

>>>Undercapitalized Bank List

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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