Many Bailed-Out Banks Still In Danger Of Collapse

Close to 100 banks that received bailout funds from the federal government are still at risk of failing, according to the Wall Street Journal.

Most of the 98 banks the Journal identified as troubled are small, with a median size of "$439 million in assets as of Sept. 30." The nation's three biggest banks, by comparison, have assets of about $2 trillion each.

As we noted last month, small banks, by their nature, tend to be heavily exposed to local real estate markets making recovery more difficult. The WSJ offers this example:

...a TARP recipient in deep trouble: closely held Legacy Bank of Milwaukee. The bank had $205 million in assets as of Sept. 30 and got $5.5 million in TARP funds in January 2009. But more than half of Legacy's loans were in commercial real estate, and its nonperforming loans have escalated to 23% of its portfolio. It has posted eight straight quarterly losses, for a total loss of $11.6 million. Last month, the Federal Reserve declared Legacy "significantly undercapitalized," giving the bank until mid-January to either sell itself or raise more capital.

The number of TARP recipients in trouble is up slightly from last quarter's WSJ analysis, which found 86 banks in "shaky condition."