The Next 442 Banks That Could Fail

Dear Friend,

Don't kid yourself into thinking that the worst of the financial crisis has passed. For some banks, it's just beginning. Eating all those bad loans is hurting all banks, and many more are going to fail.

The Federal Deposit Insurance Corp. (FDIC) says 80% of banks are profitable. But that leaves 20% that are bleeding cash.

There are 7,760 banks in the U.S. -- and 442 of them are in immediate danger of failing. Make sure your bank isn't on this list. Details below.

The FDIC currently has 829 banks on its "Problem Bank" list. So far this year, 157 banks have failed, about one-third of which did so in the third quarter.

That's a truly frightening number by historical standards: About 40% of the banks that have failed since 2000 did so in the first nine months of 2010.

Trouble is, the FDIC doesn't release its problem loans list -- it only says how many banks are on it.

But by using a special ratio that measures a bank's problem loans (the precursor to the loans that are eventually charged off), investors can determine with a high degree of accuracy whether their bank is safe.

It's called the "Texas Ratio" -- and it was developed by a financial wizard named Gerard Cassidy who used it to correctly predict bank failures in Texas during the 1980s recession, and again in New England in the recession of the early 1990s.

The Texas Ratio is determined by dividing the bank's non-performing assets by its tangible common equity and loan-loss reserves. Tangible common is equity capital less goodwill and intangibles. As the ratio approaches 1.0, the bank's risk of failure rises.

With only five exceptions, every bank that has failed in the second and third quarters has had a Texas Ratio greater than 0.90.

Using this highly accurate barometer of bank health, I've not only reassured myself that my own bank -- the highly excellent Amarillo National -- is safe and sound, I've also made a list of the 442 banks most likely to fail. You can get a free copy of this list by submitting the form below. If you bank at one of these institutions or have friends or loved ones who do, please pass this information along to them.

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Is Your Bank One Of The 442 In Immediate Danger of Failure? Fill out this form and we'll email you our list of 442 "Danger" banks.
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I don't want to see any bank go under. But the fact is many have and many more will as the financial system works through its mountain of bad loans. The best way to predict which banks are in hot water is to use the Texas Ratio.

One bit of good news is that the 20 publicly traded banks in the S&P 500 have low Texas Ratios.

Institution	Ticker	Texas Ratio
Northern Trust	NTRS	0.03
People's United	PBCT	0.14
Hudson City Bancorp	HCBK	0.16
Comerica	CMA	0.21
Fifth Third	FITB	0.18
Citigroup	C	0.16
Keybank	KEY	0.18
M&T	MTB	0.05
First Horizon	FHN	0.30
Marshall & Ilsley	MI	0.30
Regions Financial	RF	0.34
Zions Bancorp	ZION	0.42
J.P. Morgan Chase	JPM	0.31
PNC Financial	PNC	0.27
BB&T	BBT	0.04
Huntington	HBAN	0.25
Suntrust	STI	0.33
Bank of America	BAC	0.35
US Bank	USB	0.27
Wells Fargo	WFC	0.45

These large banks are strong. Too many others, however, are not. Please submit the form below to get the list of 442 U.S. banks in danger of failing immediately.

And again, if you have friends or loved ones who bank at one of the listed institutions, please pass this information along to them promptly.