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Texas Bank Growth Needs to be Wrangled

Stocks in this article: BAC WFC CMA CFR PB ZION

All four of the states we have already surveyed for the fourth quarter had banks or thrifts included on TheStreet's Bank Watch List, that were undercapitalized under ordinary regulatory guidelines. Texas had none.

Texas Banks with Weakest Asset Quality

The following list includes all banks in the state with nonperforming assets comprising more than 10% of total assets as of Dec 30:

Nonperforming assets (NPA) include nonaccrual loans, loans past due 90 days or more and repossessed assets. Government-guaranteed loan balances are excluded. The ratio of net charge-offs to average loans is annualized.

The total risk-based capital ratios needs to be at least 8% for most institutions to be considered adequately capitalized by regulators and 10% for most to be considered well-capitalized. Most of the undercapitalized banks on the above list are operating under regulatory orders to achieve and maintain total risk-based capital ratios higher than 10%.

The list also includes financial strength ratings provided by Weiss Ratings. Weiss Ratings uses a very conservative ratings model, placing the greatest weight on capital strength, credit quality and earnings stability to assign ratings ranging from A-plus (Excellent) to E-minus (Very Weak).

The Texas institution with the highest nonperforming assets ratio as of Dec. 30 was Park Cities Bank of Dallas, which had $612 in total assets as of Dec. 30 and a crippling nonperforming assets ratio of 29.23%. The bank is operating under an April 2010 consent order from the FDIC and state regulators, agreeing to raise its total risk-based capital ratio to 13%, submit a strategic plan, and improve its credit administration and interest rate risk management.

Largest Texas Banks

Deposit gathering in Texas is dominated by three of the "big four" U.S bank holding companies.

JPMorgan Chase Bank NA -- the main subsidiary of JPMorgan Chase (JPM) -- has the leading deposit market share in Texas, with 18% of deposits in the state as of June 30, 2011, according to the most recent FDIC data. The bank's deposit market share grew from 16% a year earlier.

Bank of America NA-- held by Bank of America (BAC) -- has a second-place market share in Texas, with 14% of deposits in the state as of June 30, with its share unchanged from a year earlier. After Tom Brown of Second Curve Capital said in December that he had suggested to Bank of America board of directors member Chad Gifford that the company consider selling part of its branch network -- with the company's Texas operations given as an example -- as a way of showing the market that the company's assets really were worth more than the fraction of book value the stock was trading for, the Wall Street Journal on Feb. 17 reported that the company might indeed consider a Texas sale if it were to come under severe stress.

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