Dennis Pollack, who runs an institution that is probably one of the 125 on the Federal Deposit Insurance Corp.'s problem list, is brutally honest about his predicament.

"Morale has been horrible," said Mr. Pollack, president and chief executive officer of Connecticut Bank of Commerce. "No one wants to be with a loser, and this bank has always been a loser."

It's not easy being a "problem bank" when the industry as a whole is basking in record earnings. Times have changed from, say, 1987, when the FDIC problem list peaked with 1,575 institutions.

"Anyone who is not doing well in this environment has got problems," said Ross Demmerle, a bank analyst at McDonald & Company Securities in Cleveland. "If we hit a recession they're going out of business."

The FDIC does not disclose the actual problem list, but Mr. Pollack all but confirmed that his $80 million-asset bank in Stamford, Conn., is on it. He was hired nine months ago to turn it around, and in particular get it out from under a regulatory cease-and-desist order.

The problem list, now with 89 commercial banks and 36 thrifts, tends to expand with each industry crisis - as it did, for example, when banking was plagued by bad loans to developing countries, to the energy industry, or to the real estate market.

Financial institutions get the dubious distinction by failing to meet the regulatory Camel standards. ("Camel" stands for capital levels, asset quality, earnings, liquidity, and management practices. Problem banks are those with fours or fives on the five-point Camel scale.

FDIC officials said problem banks are fewer than at any time in recent memory because many of the precipitating crises have played themselves out.

"It's no secret one of the reasons the number is low (is) the environment is good," said Don Inscoe, associate director of the FDIC's division of research and statistics. "Borrowers who were once troubled are able to repay banks."

"You'd like to think that was all good management," said John J. Lyons, president and CEO of Regent Bank in Philadelphia, which he was hired to turn around. "A healthy economy, low inflation, and a relatively low long- term bond yield work wonders with any banking organization."

One analyst said new managements - whether initiated by board decision or shareholder revolt - are in the cards for severely troubled banks and thrifts.

"A beleaguered bank is forced into a siege mentality," said John Carusone, president of the Bank Analysis Center in Hartford, Conn. "There's pressure from shareholders, there's pressure from predators. In general, institutions that are handicapped financially are questionable survivors."

But there can be reason to hope about an unprofitable bank's chances.

The Office of Thrift Supervision said this week that none of the troubled thrifts in its purview are "seriously troubled," meaning they are not in imminent danger of collapse.

Just as regulators do not reveal specific Camel ratings, bank managements are not allowed to disclose if they are "problems."

American Banker used data from Sheshunoff Information Services and Veribanc Inc. to zero in on the worst-performing banks in the country based on capital adequacy, earnings, and asset quality. Although it cannot be confirmed that these institutions are on the FDIC's list, executives at some of them were not shy about discussing their performance problems.

Several stated that new management had taken over in the past year, and things are looking up.

"If we didn't come in at the time when we came in, the bank would have been closed in a week," said Suresh Kumar, president and CEO of Brentwood Bank of California. "There was a lot of positive attitude toward the new management and new investors."

The $90 million-asset Los Angeles bank sold $2 million in stock last month to raise its equity capital from the 4.08% of assets it reported in the third quarter.

Sidney King, president and CEO of First American Bank, Jackson, Miss., will launching a campaign Tuesday to raise $900,000 in capital for his minority-controlled bank.

The capital ratio at $14 million-asset First American has slipped below 4%.

"I'm confident the bad is behind us and the future is bright," Mr. King said. "By getting the capital in, I'm confident we can build this bank and build it very profitably."

Mr. Pollack, too, is upbeat about the prospects at Connecticut Bank of Commerce. He said investors are putting in capital, and the bank could turn a profit this month for the first time in six years.

"We're right on the cusp," he said.

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