Tamalpais Bancorp has reported that it drastically reduced problem assets but ran out of capital.

The $629 million-asset company in San Rafael, Calif., said late Tuesday that its bank unit was significantly undercapitalized at the end of the fourth quarter and that the parent company was in a negative capital position, with a total risk-based capital ratio of minus-0.11% at Dec. 31.

The company lost $28.2 million in the quarter, compared with earnings of $850,000 a year earlier. Driving the dramatic loss was a $27.4 million provision for loan losses, compared with a provision of $1.6 million a year earlier.

Tamalpais said the larger provision was required by the haircuts it had to take on loans sold in the fourth quarter and those it is preparing to sell in this quarter.

Nonperforming assets totaled $46.6 million for the quarter, down 40% from the third quarter but making up 7.41% of total assets. For the year, the company lost $37.6 million, compared with earnings of $4.8 million in 2008.

The bank's capital ratios were below those required by a September cease-and-desist order for a leverage ratio of 9% and a total risk-based capital ratio of 12% by Dec. 31. Its leverage ratio was 2.73%, and its total risk-based capital ratio was 4.87% at yearend. The company signed an agreement with the Federal Reserve last month to prepare and submit a capital plan within 60 days.

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