WASHINGTON, DC-A new report by the Treasury Department showswhat other earlier data has suggested: small banks are in trouble.This particular data point comes from a May report to Congress onthe status of TARP repayments. It found that 101 bailed-out banksthat participated in the program have missed paying the governmenta dividend. Nearly all of these banks are small institutions. That101 figure is a 25% increase from February.

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On the whole, the program is doing well, according to thereport, which also said that the total amount repaid by banks tothe program has surpassed the amount of outstanding debt for thefirst time. In May, total repayments reached $194 billion, whilethe outstanding debt is $190 billion. There are some caveats tothis milestone, however. Namely, the outstanding debt amount doesnot include $106 billion that has been committed to institutionsbut has yet to be paid out. With that added to the final tally, theoutstanding debt becomes $296 billion.

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The news about the small banks is especially disconcerting,though, coming on the heels of other indications that theseinstitutions--most of which are burdened with sour real estateloans--are not regaining their financial health as quickly as theirlarger counterparts.

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In February, a Congressional Oversight Panel sounded the alarmover banks' vulnerability to falling commercial real estate valuesand the trouble many owners will have in refinancing debt that iscoming due. The agency cited figures that have become routineknowledge within the industry: between 2010 and 2014, about $1.4trillion in commercial real estate loans will reach the end oftheir terms. Nearly half are underwater as commercial propertyvalues have fallen more than 40% since the beginning of 2007.

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Increased vacancy rates continue to exert a powerful downwardpressure on the value of commercial properties. It will be thesmaller regional and community banks--which have higherconcentrations of such loans--that will experience adisproportionate share of defaults, compared to larger national ormoney center banks, the report found.

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Small banks--and jumpstarting lending to these companies,including for real estate purchases--have been a focus of the ObamaAdministration, which has been pressing Congress in recent weeks topass its $30 billion aid package to small businesses.

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