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California ranks second to
for the largest number of
during the current economic crisis, with regulators shutting down eight institutions since the beginning of 2008.
While Georgia has had more bank failures, California has been the costliest state for the Federal Deposit Insurance Corp., accounting for $13.6 billion of the $19.5 billion of costs incurred by its insurance fund as of Feb. 27.
Strongest California banks and thrifts:
As bad economic news piles up and the banking industry increases its overall
to problem assets, it's easy to forget that strong banks and thrifts still exist. Based on year-end financial reports, 28 of California's 317 banks and thrifts were rated B-plus or better, grades considered "good" or "excellent."
What about larger institutions?
The following chart shows the capital, earnings and asset quality indicators for the 10 biggest California banks and thrifts.
Bank of America California NA
of San Francisco, held by
Bank of America
, was rated C-plus, or "fair," a downgrade from B-minus last quarter. The downgrade reflected the institution's holding company affiliation. Its larger sibling,
Bank of America NA
of Charlotte, N.C., also received a C-plus grade.
City National Bank
of Beverly Hills, a subsidiary of
, ranked highest among California's largest banks and thrifts, with a B rating.
Weakest California banks:
The three California banks that failed this year were undercapitalized based on
as of Dec. 31. Three other California institutions were considered undercapitalized by regulatory standards as of Dec. 31. TheStreet.com Ratings has assigned financial strength ratings of E, or "very weak," or lower for each of them.
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
until the agency sold its remaining assets and branches on March 19 to
, a new thrift organized by a group led by
J.C. Flowers & Co.
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
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.
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.
Significant California bank failures:
IndyMac was the largest failure in California since the beginning of 2008. Other significant failures included
of Newport Beach and PFF Bank & Trust of Pomona, which failed on Nov. 21.
acquired their deposits and branches.
Other large California failures included County Bank of Merced and Alliance Bank of Culver City, which
on Feb. 6.
acquired County Bank's deposits and branches.
bought those of Alliance Bank.
contains a summary of all failed banks and thrifts for 2008 and 2009.
TheStreet.com Ratings issues independent and very conservative financial-strength ratings on the nation's 8,300 banks and savings and loans. These are available at no charge on the
. Financial-strength ratings for 4,000 life, health, annuity and property/casualty insurers are also available on the
TheStreet.com Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times. To see how your portfolio can use this research,
Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.