The number of banks reporting serious losses is on the rise, a bank rating agency has warned in a report based on fourth-quarter data.

Veribanc of Wakefield, Mass., defines banks with "serious losses" as those that would use up equity within a year if losses continued at the rate reported in the fourth quarter.

It reported that 31 banks-most with less than $100 million of assets- suffered serious losses, the highest fourth-quarter total since 1994.

The overall number of banks that lost money in the fourth quarter rose as well, to 1,067, or 11.4%, according to Veribanc's analysis of Federal Reserve Board data. It was the highest percentage of banks reporting losses since 1992.

Warren Heller, research director at Veribanc, said there is no problem common to the banks with serious losses, except that many are in markets with weak economies. Most are community banks, he said.

"Banks with serious losses are an indicator of heightened volatility in the economy," Mr. Heller said.

Some took one-time charges in the fourth quarter, which caused losses, and others suffered from poor management, he said.

About half a dozen of the banks, for example, are in agricultural areas that have been hit hard in the past year by low crop prices. Farmers State Bank in New Ross, Ind., lost $687,000 in the fourth quarter, partly because it charged off about $500,000 of poorly performing loans to corn and soybean farmers.

William E. Etcheson 3d, president and chief executive of $37 million- asset Farmers State, said it decided to write down the loans in December as part of "a belt-tightening." With commodity prices expected to remain low at least through this year, Farmers State projected that some farm borrowers would fall behind on loan payments this year.

"Overall, farming has been off, and we wanted to be prepared," Mr. Etcheson said, adding that more agricultural banks are likely to take writedowns this year.

Mr. Etcheson said Farmers State should return to profitability in the first quarter. If it continued to report $687,000 losses, however, its equity would be depleted in eight months, Veribanc calculated.

Keith Leggett, an economist at the American Bankers Association, played down the significance of Mr. Heller's report. Though the farm economy may be worsening, he said, U.S. businesses-and banks-are very healthy overall.

"I honestly think he is making a mountain out of a molehill," Mr. Leggett said.

Historically, banks have taken special charges in the fourth quarter to clean up their balance sheets before the new fiscal year. So losses from that period are not indicative of a bank's long-term viability, Mr. Leggett said.

For example, American Bank in Wichita, Kan., reported a $12.3 million loss for the quarter ended Dec. 31. The $282 million-asset bank charged off loans and boosted loan-loss reserves by $10 million as part of its conversion from a C Corporation to an S Corporation.

Other banks, such as First National Bank and Trust Co. of Corbin (Ky.) and First State Bank in Churdan, Iowa, charged off expenses and subsequently reported serious losses for the fourth quarter because they were being acquired by larger institutions. First National was bought out by Union Planters Corp. of Memphis, and First State is now a branch of United Bank of Iowa, a subsidiary of Ida Grove (Iowa) Bancshares.

Still, some banks on Veribanc's list are clearly struggling.

Brentwood Bank of California in Los Angeles installed a new senior management team after reporting a $1.1 million loss for the quarter. Jack Feldman, Brentwood's new president and chief executive officer, said the bank has struggled to stay in the black ever since it converted from a thrift charter in 1993.

"The bank has been wanting to be a commercial bank," said Mr. Feldman, but the former management "didn't know how." He has been a commercial banker for 25 years.

In addition to new executives, the $61 million-asset bank hired a group of commercial lenders. Mr. Feldman said the bank should be profitable by yearend.

Five others on Veribanc's list have caught the attention of federal regulators. First of Childersburg (Ala.) and Zia New Mexico Bank in Tucumcari have been reprimanded for being behind in preparing for the year- 2000 computer date change.

Pacific Trust & Loan Co. in Woodland Hills, Calif.; Cache Bank in Greeley, Colo.; and Victory State Bank in Columbia, S.C., were cited for infractions ranging from poor management to low capital levels. And Victory State Bank, with $14 million of assets, was shut down by the Federal Deposit Insurance Corp. on March 27.

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