TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

California ranks second to Georgia for the largest number of bank and thrift failures 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.

TheStreet.com Ratings

Strongest California banks and thrifts: As bad economic news piles up and the banking industry increases its overall exposure 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."

California Banks and S&Ls Rated B+ or Higher - Dec. 31, 2008 ($Mil)
Highline Financial

What about larger institutions? The following chart shows the capital, earnings and asset quality indicators for the 10 biggest California banks and thrifts.

Largest Ten California Banks and S&Ls - Dec. 31, 2008 ($Mil)
Highline Financial

Bank of America California NA of San Francisco, held by Bank of America ( BAC), 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 City National ( CYN), 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 regulatory guidelines 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.

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.

Significant California bank failures: IndyMac was the largest failure in California since the beginning of 2008. Other significant failures included Downey Savings of Newport Beach and PFF Bank & Trust of Pomona, which failed on Nov. 21. U.S. Bancorp ( USB) acquired their deposits and branches.

Other large California failures included County Bank of Merced and Alliance Bank of Culver City, which failed on Feb. 6. Westamerica Bancorporation ( WABC) acquired County Bank's deposits and branches. Zions Bancorporation ( ZION) bought those of Alliance Bank.

TheStreet.com's interactive Bank Failure Map 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 Bank & Thrift Ratings Screener. Financial-strength ratings for 4,000 life, health, annuity and property/casualty insurers are also available on the Insurers & HMOs Screener.

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, click here now!

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.

More from Investing

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

Will Kraft Heinz Buy Pepsico or Mondelez?

Will Kraft Heinz Buy Pepsico or Mondelez?

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China

Why Starbucks Latest Data Reveal Should Worry Investors

Why Starbucks Latest Data Reveal Should Worry Investors

Starbucks Sets Latest Plan to Recaffeinate Shares

Starbucks Sets Latest Plan to Recaffeinate Shares