How to Spot a Dying Bank

This is an interesting article by Seeking Alpha that gives two ratios on how to spot a dying bank.

In order to spot banks in danger, two popular ratios are used. First, when you divide non-performing assets by all outstanding loans, you find that a ratio over 5% signals danger (see CNBC article). Using this ratio you find that other banks, in addition to BankUnited and Downey (BankUnited's ratio is 5.36%, while Downey is at 13.86%) are suspect, including Corus Bankshares (CORS) at a 13.18% ratio, Doral Financial (DRL) at 12.82%, and FirstFed Financial (FED) at 6.73%. A second commonly used ratio that compares non-performing assets divided by reserves plus common equity causes Washington Mutual (WM), with a ratio of 40.6%, to also become suspect. Any value around 40% is thought to be in the danger zone.

I have never heard of any of those banks at all. All of these stocks are in the single digits except for Doral Financial which is at $12.12. I guess you could also say that Washington Mutual may be on the borderline of the death zone. That along with Lehman's Bruce Harting's note could be part of the reason why the stock dropped by 34% today.