Strongest and Weakest California Banks

Remaining Undercapitalized California Banks - Dec. 31, 2008 ($Mil) Highline Financial

While IndyMac Federal Bank reported capital ratios that were negative as of Dec. 31, we left the institution off the list above because the FDIC was running it at the end of the fourth quarter.

The FDIC ran the successor to the failed IndyMac Bank FSB until the agency sold its remaining assets and branches on March 19 to OneWest Bank, a new thrift organized by a group led by J.C. Flowers & Co.

Please see Undercapitalized Banks and Thrifts for an updated summary of all undercapitalized U.S. institutions.

All the bank and thrift ratings based on Dec. 31 financial reports will soon be updated on TheStreet.com's bank and thrift ratings screener.

California banks burdened with problem loans: Six California banks and thrifts had nonperforming asset ratios above 10%, a sign of trouble for most banks. TheStreet.com Ratings has assigned almost all these institutions "weak" grades of D-minus or lower, except for IndyMac Federal Bank, which wasn't rated while it was in receivership.

California Banks and S&Ls Reporting nonperforming Assets Exceeding 10% as of Dec. 31 ($Mil) Highline Financial

When evaluating a bank's overall health, it's important to consider whether the amount set aside for potential loan losses keeps pace with its net charge-offs, the amount lost on bad loans. We can do this by comparing the ratio of loan loss reserves to total loans with the ratio of net charge-offs, or actual loan losses, to average loans. A company that doesn't build reserves as fast as it writes off loans could be headed for net losses in future quarters.

Keep in mind that the net charge-off ratios above were for all of 2008. The pace of charge-offs in the fourth quarter might have been higher. The data also doesn't include any capital raised this year.