155 Undercapitalized Banks Still Litter U.S.

NEW YORK ( TheStreet) -- With year-end data for all of the nation's banks and savings and loan associations now available, there are 155 undercapitalized institutions on the TheStreet's Bank Watch List. That is 10 fewer than last quarter, although 15 banks have been shuttered by regulators since the final fourth-quarter watch list was published in February.

Based on fourth-quarter regulatory data supplied by Thomson Reuters Bank Insight for the nation's nearly 7,400 banks -- and factoring-in the 15 bank and thrift failures since TheStreet's final fourth-quarter Watch List was published on Feb. 16 -- 155 institutions were undercapitalized at as of March 31, according to the regulatory guidelines that apply to most institutions.

Click the link below to see the full list:

It is important to note that any capital raised by institutions during the second quarter of 2012 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.

The Federal Deposit Insurance Corp. reported last week the U.S. banking industry's first-quarter aggregate profit of $35.3 billion was its best performance since the second quarter of 2007. The regulator also said that there were 772 "problem institutions" as of March 31, declining from 813 the previous quarter and 888 a year earlier.

With the pace of bank failures slowing and the number of undercapitalized banks beginning to decline, it is reasonable to expect many of the institutions on the Bank Watch List to see regulatory pressure to merge with stronger institutions, rather than facing failure.

Plantation Federal Bank of Pawley's Island, S.C., was actually negatively capitalized as of March 31, after a $27.6 million first-quarter net loss lowered its Tier 1 leverage ratio to -4.88% as of March 31,

U.S. Century Bank of Doral, Fla., remains the largest institution on the watch list, with $1.4 billion in total assets as of March 31. The bank slipped from well capitalized to adequately capitalized in the fourth quarter of 2010, when it posted a $52 million net loss, as it set aside reserves, mainly for nonperforming commercial real estate and development loans, and saw its total risk-based capital ratio fall below 10.00%.

The bank slipped to undercapitalized in the third quarter of 2011. Following total losses of $79 million during 2011, U.S. Century Bank posted a first-quarter net loss of $3.6 million. The bank's ratio of nonperforming assets to total assets remained stubbornly high, at 21.42%, according to Thomson Reuters Bank Insight.

U.S. Century Bank in June of last year 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 qualified new senior officers achieve a Tier 1 leverage ratio of 8% and a total risk-based capital ratio of 12% within 120 days of the order.

The second-largest bank on the first-quarter watch list is Guaranty Bank of Milwaukee, which was not included in the fourth-quarter watch list, because the institution's Dec. 31 thrift financial report was restated. Beginning with the first quarter of 2012, all savings and loan associations and federally chartered savings banks that were formally regulated by the Office of the Thrift Supervision and previously filed thrift financial reports are now required to file call reports, like all other banks and thrifts.

A first-quarter net loss of $5.1 million left Guaranty Bank with a Tier 1 leverage ratio of 2.83% and a total risk-based capital ratio to 5.40%.

The third-largest undercapitalized bank on the fourth-quarter watch list is First Mariner Bank of Baltimore, which had $1.2 billion in total assets as of March 31. The bank is held by First Mariner Bancorp ( FMAR).

The holding company still hopes to meet the conditions of an April 2011 agreement Priam Capital Fund I LP, which was modified in September. Under the agreement, Priam would invest roughly $36.4 million in First Mariner Bancorp, contingent upon the company raising another $123.6 million from other investors.

First Mariner Bank is operating under cease and desist orders from state regulators and the FDIC. The bank and the holding company also entered into an agreement with the Federal Reserve, agreeing to improve its management and achieve respective Tier 1 leverage and total risk-based capital ratios of at least 4.00% and 8.00% for the bank by Dec. 31.

First Mariner Bank reported a first-quarter profit of $1.1 million.

The fourth-largest institution on the Watch List is Citizens First National Bank of Princeton, Ill., which had $1.0 billion in total assets as of March 31. The institution slipped to undercapitalized during the fourth quarter, when a $15.2 million net loss left the bank with a Tier 1 leverage ratio below 4.00%. During the first quarter, the bank earned $1.2 million, but was still undercapitalized, with a Tier 1 leverage ratio of 2.37%.

The bank is held by Princeton National Bancorp ( PNBC), and on Sept 20 entered into a consent order with the Office of the Comptroller of the Currency, agreeing to improve its credit administration, implement monthly liquidity reviews, submit a three-year strategic plan, and within 90 days bring its Tier 1 leverage ratio up to 8.00% and its total risk-based capital ratio up to 12%.

The holding company in October entered into an agreement with the Federal Reserve bank of Chicago, agreeing to act as a source of strength to the bank, submit a capital plan to the Fed.

The bank in March was ordered by the OCC to "submit an acceptable Capital Restoration Plan."

Capitol Bancorp ( CBCR) of Lansing, Mich., had nine undercapitalized bank subsidiaries as of March 31, 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 15 as of March 31, through sales of some subsidiary banks and mergers of others. The company announced this month that it had "into agreements to sell its interests in three additional affiliates in various regions of the country," that were expected to be completed during 2012.

Capitol Bancorp had $2.1 billion in total assets as of March 31, and said it "continued to be classified as 'undercapitalized'" as of March 31, with a ratio of total equity to total assets of -5.89%.

Thorough Bank Failure Coverage

A total of 24 institutions have been shuttered by regulators this year, following 92 failures in 2011. During the current wave of failures that began in 2008, there have been 438 banks and thrifts closed by regulators. Georgia leads all states with 75 bank closures; followed by Florida, with 61 failures; Illinois, with 50; and California, with 39 failed banks and thrifts.

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

>>>Click here for the 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 2008-2012 totals. Clicking on a state opens a detailed map pinpointing the locations and providing additional information for each bank failure.

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-- 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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