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Updated from 6:59 a.m. EDT

In step with our

Banks That Can Snap Back Hard

article, at we set up a portfolio called

Bank Stocks That Are Toast

. The FDIC has publicly stated that 90 or so banks are on its watch list for possible defaults.

Here are the requirements we used for the portfolio:

1. Increasing nonperforming loans, or NPLs.

We want companies that are actually experiencing an increase in their defaults. And that are loaded with toxic subprime, prime and Alt-A paper.

2. Increased capital reserves requirements into the company's loan-loss provisions portfolio.

These companies will need to raise more capital at extremely dilutive spreads to continue their current business.

3. Widening credit default swap spreads, or CDS.

The portfolio includes such stocks as


( CORS),

Downey Financial






To read more, please click here.

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