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) -- While there have been no bank failures in California in 2012, nearly 20% of the Golden State's banks and thrifts have disappeared over the past four years and roughly 20% of the banks that survived are still losing money.

California has seen 38 bank failures since the wave of closures that began in 2008, trailing only Georgia, with 75 failures, Florida, with 60 and Illinois with 48. But California's overall banking landscape appears healthier than the other three states, since only two banks headquartered in the state were undercapitalized per normal regulatory guidelines as of Dec. 30, according to data provided by HighlineFI.

As we discussed on our coverage of banks in




, and


, community banks attempting to move beyond the real estate crisis are facing continued regulatory and political pressure against various sources of revenue, putting the traditional "free checking" business model in jeopardy.

The Consumer Financial Protection Bureau, last Wednesday announced that it had "launched an inquiry into checking account

overdraft programs

to determine how these practices are impacting consumers," with Director Richard Cordray saying that "overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it."

The Durbin Amendment's cap on interchange fees that large banks charge merchants to process debit card purchases has also been very painful, even for smaller players not directly affected by the rule, since their interchange fees must also decline, in order to accepted by merchants.

The Federal Reserve reported in its Beige Book on Jan. 11 that economic activity in the system's 12th District (San Francisco) "continued to grow at a moderate pace during the reporting period of late November through the end of December," although "housing markets stayed at very low levels, and demand for nonresidential real estate generally was weak."

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Bright spots included a slight expansion of demand for business and consumer services, a small increase in manufacturing activity, and "robust" demand for agricultural producers, because of the use of resources for energy production. District banks reported that loan demand "improved a touch," although "although contacts noted that businesses remain very cautious in their approach to capital spending."

Please see


Bank Watch List

for a full listing of all the banks and thrifts across the country that were undercapitalized, per normal regulatory guidelines.

Since the Watch List is based solely on capital ratios, we take a different approach on our quarterly coverage of banks in key states, by looking at overall credit quality to identify troubled institutions.

California Banks with Weakest Asset Quality

The following list includes all banks in the state with nonperforming assets comprising more than 15% of total assets as of Dec 30:

Nonperforming assets (NPA) include nonaccrual loans, loans past due 90 days or more and repossessed assets. Government-guaranteed loan balances are excluded. The ratio of net charge-offs to average loans is annualized.

The total risk-based capital ratios needs to be at least 8% for most institutions to be considered

adequately capitalized

by regulators and 10% for most to be considered well-capitalized. Most of the undercapitalized banks on the above list are operating under regulatory orders to achieve and maintain total risk-based capital ratios higher than 10%.

The list also includes financial strength ratings provided by Weiss Ratings. Weiss Ratings uses a very conservative ratings model, placing the greatest weight on capital strength, credit quality and earnings stability to assign ratings ranging from A-plus (Excellent) to E-minus (Very Weak).

The California bank with the weakest overall asset quality at the end of 2011 was

Palm Desert National Bank

, with a nonperforming assets ratio of nearly 31%. The bank was critically undercapitalized with a total risk-based capital ratio of 3.61%, after suffering net losses totaling $4.4 million in 2011. The bank entered into an agreement with the Office of the Comptroller of the Currency (OCC) in October 2008, agreeing to improve its credit administration and liquidity management, and make various other operating improvements. A new order from the OCC in January 2010 required the bank to submit a strategic plan and raise significant new capital by May 2010.

Largest California Banks

Bank of America, NA

-- the main banking subsidiary of

Bank of America

(BAC) - Get Bank of America Corp Report

-- has the lead deposit market share in California, with 26% of deposits in the state, as of June 30, 2011, according to the most recent FDIC data. The bank's market share declined slightly from a year earlier. Bank of America has a long history in California, which was the bank's home state when the original Bank of America was separated from Transamerica in the 1950's.

Wells Fargo Bank, NA

-- held by

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

of San Francisco -- is in second place with a 19% California deposit market share as of June 30, 2011, increasing slightly from a year earlier.

After those two giants which have nearly have of the state's deposits between them, the third-ranking deposit gatherer in California is

Union Bank, NA

of San Francisco, which had a 7.3% deposit market share as of June 30, 2011, just ahead of

JPMorgan Chase Bank, NA

(held by

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

), with a 7.2% market share.

Here are the 10 largest banks headquartered in California along with key metrics as of Dec. 30:

The largest bank actually chartered in California (Wells Fargo Bank, NA is technically headquartered in Sioux Falls, S.D.) is Union Bank, NA, with total assets of $89 billion as of Dec. 30. Union Bank, NA earned $138 million during the fourth quarter, with a return on average assets of 0.61%, which was its lowest ROA over the past year, when the ROA ranged as high as 1.23% in the first quarter of 2011.

During the fourth-quarter, earnings were boosted by a $6.4 million release of loan loss reserves, which was a much smaller amount that the previous four quarters, including a $129.5 million release in the first quarter of 2011..

Like many banks in the seemingly eternal low-rate environment, Union Bank has seen its net interest margin -- the difference between a bank's average yield on loans and investments and its average cost of funds -- decline, to 3.24% in the fourth quarter, from 3.53%, a year earlier.

The bank is held by

Mitsubishi UFJ Financial Group



Interested in more on Mitsubishi UFJ Financial Group? See TheStreet Ratings' report card for

this stock


The second-largest bank headquartered in California is

Bank of the West

, which is a subsidiary of

BNP Paribas SA

( BNP), and had $62.4 billion in total assets as of Dec. 31. Bank of the West's fourth-quarter ROA was 0.69%. The ROA has ranged between 0.48% and 0.69% over the past fourth quarters The bank's net interest margin declined to 3.13% during the fourth quarter, from 3.25% a year earlier.

The third-largest California bank is

First Republic Bank

(FRC) - Get First Republic Bank Report

of San Francisco, which was acquired by Bank of America as part of the purchase of Merrill Lynch in January 2009, and then sold in July 2010 to an investor group that included

Colony Financial

(CLNY) - Get Colony Capital, Inc. Class A Report


General Atlantic LLC

and was led by First Republic's original management team. First Republic completed a public offering in December of 2010.

First Republic was recently included among


list of 10

most profitable

bank stocks, with a 1.41% ROA for all of 2011, improving from 1.33% in 2010.

The bank was also included among a group of banks posting

solid growth

in commercial and industrial loans highlighted by Jefferies analyst Ken Usdin last Thursday.

Interested in more on First Republic Bank? See TheStreet Ratings' report card for

this stock


Strongest California Banks and Thrifts

Based on third-quarter financial reports, 11 California institutions were assigned "recommended" ratings of B-plus or above by Weiss Ratings:

The list is sorted by rating, and then alphabetically by institution name.

The largest institution on Weiss's "recommended list" for California is

Bank of New York Mellon Trust Co., NA

of Los Angeles, which is a rather small subsidiary of

Bank of New York Mellon

, with $2.1 billion in total assets as of Dec. 30.

Bank of New York Mellon Trust Co. provides trust services across the United States, and is a solid contributor to the parent company's bottom line, with $36.9 million in fourth-quarter net income, for an ROA of 7.02% and a return on equity of 9.05%.

Interested in more on Bank of New York Mellon? See TheStreet Ratings' report card for

this stock


Thorough Bank Failure Coverage

There have been only no bank failures in California this year, following 4 closures in 2011, 12 in 2010, and 17 in 2009.

There were two

bank failures

in Georgia and Minnesota on Friday.

All 423 previous U.S. bank and thrift closures since the beginning of 2008 are detailed in


interactive bank failure map:

The bank failure map is color-coded, with the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2011 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.


Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here:

Philip van Doorn


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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., 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.