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Ailing California Still Has Strong Banks

Stocks in this article: BAC JPM USB

California Banks and S&Ls Rated B+ or Higher (Millions of Dollars)
chart Ratings takes a conservative approach with bank ratings, and places the greatest weight on capital strength, credit quality and earnings stability.

Looking at the highest-rated California banks and thrifts, most had nonperforming asset ratios below 1%, and risk-based capital ratios greatly exceeding the 10% required for most institutions to be considered well-capitalized under regulatory guidelines.

The largest bank among the highest-rated in the state was Silicon Valley Bank of Santa Clara, a $10.7 billion subsidiary of SVB Financial Group (SIVB).

Largest California Institutions

The following includes capital, earnings and asset-quality indicators for the 10 largest California banks and thrifts.

10 Largest California Banks and S&Ls (Millions of Dollars)

Two of the nation's largest holding companies have subsidiary banks in the state with portfolios comprising almost entirely of residential mortgages, including Bank of America California NA, held by Bank of America (BAC), which has remained profitable through the crisis, and JPMorgan B&TC NA, held by JPMorgan Chase (JPM), which was organized in August 2008 and has also remained profitable.

The biggest bank in the state with a weak rating is United Commercial Bank of San Francisco, a subsidiary of UCBH Holdings (UCBH).

United Commercial Bank was included in's list of undercapitalized banks and thrifts as of June 30, with a tier 1 leverage ratio of 4.02% and a risk-based capital ratio of 7.92%. Those ratios need to be 4% and 8% to be considered adequately capitalized under regulatory capital guidelines. Well-capitalized banks are at least 5% and 10%.

Even after charging off $426 million in soured loans during the second quarter, United Commercial's nonperforming-loan ratio still increased to 10.44% as of June 30, up from 8.28% in the previous quarter. The annualized ratio of net loan charge-offs was 20.39%, and the bank's ratio of loan-loss reserves to total loans was 4.37% -- far behind the pace of loan losses.

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