The Strongest Banks Out There

The industry's ratio of loan loss reserves to total loans was 1.80% as of June 30, 2008, rising from 1.09% in June 2007. This ratio has continued to stay ahead of the net charge-offs ratio. Looking at total capital ratios for banks and thrifts, the leverage ratio has fallen, but the ratio of capital and reserves to nonperforming loans has actually increased.

Exposure levels may increase considerably in the third quarter, with nonperforming loans continuing to rise and the earnings pressure from investment securities write-downs.

Strongest Banks and Thrifts

Most of the highest-rated banks and thrifts have less than $1 billion in total assets.

Let's begin with a list of larger banks with strong ratings. Out of 187 banks and thrifts reporting at least $5 billion in total assets as of June 31, 13 had financial-strength ratings of B+ or higher.

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Source: June 30, 2008 regulatory data, via Highline Financial, Inc.

Most of the institutions on the above list are not national players, although there are some familiar names.

Most have high levels of capital. To be considered well-capitalized under regulatory guidelines, a bank or S&L needs to maintain a leverage ratio of at least 5% and a risk-based capital ratio of at least 10%.

The capital ratios and earnings figures reflect varying business models. For example, GE Capital Financial (a subsidiary of General Electric (GE Quote)), had the highest capital ratios on the list as of June 30.

GE Capital Financial's balance sheet consists mostly of loans to other institutions, as well as commercial loans. Not surprisingly, asset quality has remained strong. General Electric's credit-card loans are concentrated in another institution, GE Money Bank, which was rated a B- (good financial strength) by TheStreet.com Ratings.