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Undercapitalized Bank List Grows

The number of smaller community banks that are undercapitalized per regulatory guidelines is growing, new data shows.

The number of smaller community banks that are undercapitalized per regulatory guidelines is growing, as new data is beginning to identify institutions too small or too weak to receive government bailout assistance.

The number of banks considered undercapitalized per

regulatory guidelines

rose to 45 as of Dec. 31 from 38 in September, according to Highline Financial. While that might not seem like a significant increase for this environment, there were 12 bank or thrift


in the fourth quarter alone.

The Treasury Department's investments through its $700 billion

Troubled Asset Relief Program

, or TARP, thus far have mostly gone to very large holding companies like

JPMorgan Chase

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Bank of America

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or to community banks determined to be in decent shape.

Two of the banks on our preliminary list of 45 undercapitalized banks as of Dec. 31, have already failed. State regulators closed

Bank of Clark County

of Vancouver, Wash. on Jan. 16. The Office of the Comptroller of the Currency shut down

Ocala National Bank

of Ocala, Fla. on Jan. 30.

The table below lists all the remaining banks that were undercapitalized as of Dec. 31 that we know of, save one that only operates as a trust bank, with no deposits or loans, and a very small Texas bank that is just a "shell" at this point, with no deposits, no loans and hardly any assets, since the bank charter is being transferred.

Please keep the following in mind:

The list is based on preliminary data

: Most banks have filed their call reports, which our data provider, Highline Financial, obtains from the FDIC. The data was not yet finalized when we downloaded it on Feb. 5, and there were at least 100 banks that had not filed yet. This data is often updated by banks before it is finalized.

The list only includes banks

: Data for the over 800 savings and loan institutions supervised by the Office of Thrift Supervision is not available.

The data is for the banks themselves, not holding companies.

A bank on the list may have raised capital since Dec. 31

: Most community banks with capital concerns are trying very hard to raise capital any way they can. Some on the list may have raised significant capital privately since filing their Dec. 31 call reports. If your bank is on this list, you should determine if you have any deposits that exceed the FDIC's insurance limits and consider discussing the situation with your bank.

Looking at the data, it's not surprising that most of the banks on the list have weak loan quality, with nonperforming asset ratios in the double digits for many. The undercapitalized banks at the top of the list are in such dire condition that without significant capital infusions, failure seems imminent.

Philip W. van Doorn joined Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, 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.