153 Banks On the Brink, and Counting

NEW YORK ( TheStreet) -- There are now 153 undercapitalized institutions on the TheStreet's Bank Watch List, which is only one fewer than last quarter, despite two dozen banks being shuttered by regulators in the meantime.

Based on a now-complete set of third-quarter regulatory data supplied by SNL Financial for the nation's banks and savings and loan associations -- and factoring-in the 24 bank and thrift failures since TheStreet's final second-quarter Watch List was published on August 16 -- 153 institutions were undercapitalized according to the regulatory guidelines that apply to most institutions.

The list is updated from the preliminary Watch List published on Nov. 2, now that all U.S. banks and thrifts have completed their third-quarter regulatory filings.

Click the link below to see the full list:

It is important to note that any capital raised by institutions during the fourth 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.

Three institutions have failed since the preliminary third-quarter watch list was published on Nov. 2, including SunFirst Bank of St. George, Utah, which was unique among bank failures in the current cycle, with the Federal Deposit Insurance Corp. retaining some of the institution's failed deposits, which were possibly "subject to external litigation." The bank was among several institutions involved in what the U.S. Justice Department called a "poker Ponzi scheme" involving Full Tilt Poker and several other online gaming sites, with a former executive charged with money laundering, according to several reports.

Large banks that the Justice Department said were unwittingly involved in the accusations against the online gaming companies included Bank of America ( BAC), Citigroup ( C), JPMorgan Chase and Wells Fargo ( WFC).

Two of the banks on the third-quarter watch list were negatively capitalized as of September 30. These include CommunityOne Bank, NA, of Asheboro, N.C., and Premier Community Bank of the Emerald Coast, of Crestview, Fla.

CommunityOne is the largest institution on the third-quarter watch list, with $1.6 billion in total assets as of Sept. 30. The institution is unlikely to appear on next quarter's Bank Watch List, as its parent, FNB United Corp. ( FNBND), completed a $310 million recapitalization on Oct. 24, in connection with its acquisition of Bank of Granite Corp. of Granite Falls, N.C., the parent company of Bank of Granite, which was also undercapitalized as of Sept. 30.

FNB announced that Brian Simpson would serve as the combined company's new CEO, with Bob Reid becoming FNB United's new president. The combined company's new board of directors includes representatives from The Carlyle Group and Oak Hill Capital Partners, each of which invested $79 million as part of the recapitalization.

FNB United's shares on Oct. 31 underwent a 1-for-100 reverse split in order "to increase the per share trading price of the Company's common stock to satisfy the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market." Shares were to trade for 20 days under the ticker "FNBND" in order "to designate that it is trading on a post-reverse split basis," after which the shares will trade under their customary "FNBN" ticker symbol.

FNB said that CommunityOne Bank, NA and Bank of Granite will "separately until late spring of 2012 when, subject to receipt of regulatory approval, it is anticipated the consolidation process will be completed and will thereafter operate solely as CommunityONE Bank."

The second largest bank on the preliminary third-quarter watch list is the privately-held U.S Century Bank of Doral, Fla., which had $1.5 billion in assets as of Sept. 40 and slipped to undercapitalized after a third-quarter net loss of $28.3 million. The bank posted net losses totaling $68.6 million for the first three quarters, with net charge-offs -- loan losses less recoveries -- of $42.8 million, mainly from commercial construction and development loans, but also from commercial mortgage loans and single-family mortgage loans.

U.S. Century Bank on June 2 entered into a consent order with state regulators and the Federal Deposit Insurance Corp., agreeing to improve board of directors supervision of the institution, hire a new CEO "with proven ability in managing a bank of comparable size and in effectively implementing lending, investment and operating policies in accordance with safe and sound banking practices," hire a new CFO and chief lending officer, and raise sufficient capital to achieve a Tier 1 leverage ratio of 8% and a total risk-based capital ratio of 12% within 120 days of the order, meaning that the Sept. 30 deadline was missed.

The third-largest bank on the preliminary third-quarter watch list is First Mariner Bank of Baltimore, with $1.2 billion in total assets as of Sept. 30. The bank is held by First Mariner Bancorp ( FMAR), which in April 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 to complete the deal has been extended to Nov. 30.

Next is Tennessee Commerce Bank, with $1.2 billion in total assets as of Sept. 30. The bank is held by Tennessee Commerce Bancorp ( TNCC). The bank slipped to undercapitalized with a very large third-quarter net loss of $102.3 million. The holding company reported on Nov. 1 that it was critically undercapitalized and would restate its second-quarter results, with the bulk of the bank's third-quarter losses "identified by examiners from the FDIC and the Tennessee Department of Financial Institutions during their regulatory joint examination started on September 26, 2011, which is still in progress."

Tennessee Commerce also said it had retained Macquarie Capital (U.S.A.) and FIG Partners to evaluate "all possible strategic alternatives."

On Nov. 2, Tennessee Commerce Bank was slapped with a an FDIC consent order, requiring the bank to raise enough capital to be considered adequately capitalized by Dec. 2, or "immediately take any necessary action" to be acquired by or merge with a stronger institution.

Capitol Bancorp ( CBCR) of Lansing, Mich., had nine undercapitalized bank subsidiaries as of Sept. 30, 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 20 as of June 30, through sales of some subsidiary banks and mergers of others.

Capitol Bancorp on Nov. 10 reported a third-quarter net loss of $22.8 million, or 55 cents a share, declining from a net loss of $52.2 million, or $2.45 a share, during the third quarter of 2010. The holding company reported being negatively capitalized as of Sept. 30.

Thorough Bank Failure Coverage

A total of 88 institutions have been shuttered by regulators this year. During the current wave of failures that began in 2008, there have been 410 banks and thrifts closed by regulators, with Georgia in the lead with 74 bank closures; followed by Florida, with 57 failures; Illinois, with 47; and California, with 38 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.

>To contact the writer of this article, click here: Philip van Doorn.

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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.

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