NEW YORK ( TheStreet) -- While the Federal Deposit Insurance Corp. reported earnings improvement at more than half of U.S. banks and savings and loan associations last week, the ranks of troubled community banks continued to swell.

Based on a full set of first-quarter regulator data provided by SNL Financial for the nation's 7,900 banks and savings and loan associations, 161 were undercapitalized, according to the guidelines that apply to most institutions. Click the link below to see the full list:

>>>Bank Watch List

The list is sorted by state, city and name of the undercapitalized bank or thrift. The Watch List of 161 institutions is down slightly from 163 on a similar list published by TheStreet on Feb. 24, although 49 of the institutions on the previous list have already failed.

When the FDIC published its quarterly banking profile on Thursday, the agency also said that its "problem bank list" had grown to 775 from 702 at the end of the fourth quarter and 305 at the end of the first quarter of 2009. While the problem bank list is not made public, it presumably includes all the undercapitalized institutions as well as others threatened by high levels of nonperforming loans and securities.

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.

Sterling Savings Bank of Spokane, Wash., is the largest bank on the watch list with $10 billion in total assets and is the main subsidiary of Sterling Financial ( STSA). The holding company had announced on May 6 that it had received approval from the U.S. Treasury Department to raise $555 million worth of common and preferred stock, including an investment of up to $170 million by Thomas H. Lee Partners, a Boston-based private equity firm. Then on Monday, Sterling Financial announced that Warburg Pincus Private Equity had agreed to invest $139 million while Thomas H. Lee Partners had agreed to lower its investment to the same amount, for a combined $278 million. If Sterling succeeds in raising the entire $555 million, the two investment groups would then have a combined 40% stake in Sterling, after regulatory approval.
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