NEW YORK ( TheStreet) -- Most of California largest banks saw continued improvement in profitability during the first quarter, although 38 Golden State institutions were still losing money. Following the pattern being seen for other key states in the boom-and-bust cycle for the housing market -- including Florida, Georgia and Illinois -- most of California's banks saw continued improvement in asset quality and profitability during the first quarter, with over 85% of the state's 258 institutions now in the black, according to regulatory data provided by Thomson Reuters Bank Insight. Since the current wave of bank failures began during 2008, 39 California banks and savings and loan associations have failed, trailing only Georgia, with 78 failures, Florida, with 61 and Illinois with 50. But only four institutions in the state have failed so far this year. The most recent California bank to fail was Palm Desert National Bank, which was closed by the Office of the Comptroller of the Currency on April 27, and sold by the Federal Deposit Insurance Corp. to Premier Pacific Bancorp ( PPBI) of Costa Mesa, Calif. Please see TheStreet'sBank Watch List for a full listing of all the banks and thrifts across the country that were undercapitalized as of March 31, 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 March 31:
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. The only bank on the list that was undercapitalized was Palm Desert National Bank. 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).