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).

Out of $15 million in subordinated debt owed to SunTrust by CommunityOne, $12.5 million had been converted to preferred shares, as of March 31.

The second-largest institution on the Watch List is Community Banks of Colorado of Greenwood Village, which had $1.4 billion in total assets as of June 30. The institution is operating under a Feb. 8 Federal Reserve Prompt Corrective Action, requiring it to become adequately capitalized within 90 days or agree to be acquired or merge with a stronger institution. On June 21, the Denver Business Journal reported that Community Banks of Colorado had agreed to sell some of its branches to Community Bank Partners of Denver.

First Mariner Bank of Baltimore is the third-largest institution on the Watch List, with $1.2 billion in total assets as of June 30. The bank's capital continued to decline during the second quarter, when a net loss of $10.5 million left it with a total risk-based capital ratio of 6.92%, declining from 7.91% the previous quarter. The bank is a subsidiary of First Mariner Bancorp ( FMAR).

The holding company announced on April 25 that it had entered into an agreement with Priam Capital Fund I LP for an investment of $36.4 million, as part of the company's plan to raise $160 million in new capital. Priam's investment was contingent upon First Mariner lining up the remaining $123.6 million in capital. Priam's deadline passed on July 18, with no announcement from First Mariner. When the holding company announced its second-quarter results on July 29, CEO Edwin Hale simply said that "we are continuing our efforts to increase our capital levels to achieve compliance with regulatory requirements."

Capitol Bancorp ( CBCR) of Lansing, Mich. is one of two publicly traded bank holding company with multiple subsidiaries on the Bank Watch List, including Central Arizona Bank of Casa Grande, Sunrise Bank of Arizona of Phoenix, Bank of Las Vegas, 1st Commerce Bank of North Las Vegas, Nev., Sunrise Bank of Valdosta, Ga., First Carolina State Bank of Rocky Mount, N.C., Pisgah Community Bank of Asheville, N.C., Sunrise Bank of Albuquerque, N.M., and Michigan Commerce Bank of Ann Arbor.

The holding company had 64 separately-charted bank subsidiaries in 17 states at the end of 2009, and reduced the number of subsidiaries to 23 in 2010, through sales of some subsidiary banks and mergers of others.

in its first-quarter 10-Q filing with the Securities and Exchange Commission, Capitol Bancorp reported that on the holding company level it was negatively capitalized, with a Tier 1 leverage ratio of negative 1.19%.

Mercantile Bancorp ( MBR) had two subsidiary banks on the preliminary second-quarter Watch List, -- Heartland Bank of Leawood, Kan., and Royal Palm Bank of Florida, of Naples. The holding company's main subsidiary is Mercantile Bank of Quincy, Ill., which was well-capitalized per ordinary regulatory guidelines as of June 30, and reported a second-quarter profit of $774 thousand.

The holding company has not yet reported its second-quarter results.

Thorough Bank Failure Coverage

There were three bank failures last Friday, including IntegraBank, NA, which was the largest institution on TheStreet's previous Bank Watch List. The FDIC sold the failed bank to Old National Bancorp ( ONB).

A total of 61 institutions have been shuttered by regulators this year. During the current wave of failures that began in 2008, there have been 383 banks and thrifts closed by regulators, with Georgia in the lead with 67 bank closures; followed by Florida, with 54 failures; Illinois, with 43; and California, with 37 failed banks and thrifts.

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

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2011 totals. Clicking on a state opens a detailed map pinpointing the locations and providing additional information for each bank failure.


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

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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.