) -- Three times as many U.S. banks and thrifts are


compared to last year as the industry struggles to recover from the credit crisis.

Earlier this month, preliminary data from SNL Financial indicated that capital levels at 108 banks had fallen short of regulatory requirements as of June 30. Now that complete second-quarter data is available, that list has grown to 116. Only 30 banks were undercapitalized a year earlier.

Almost a year after

Washington Mutual

became the biggest bank failure in U.S. history, the nation's banks and thrifts continue to wrestle with troubled loans on their balance sheets. The Federal Deposit Insurance Corporation said yesterday that its "problem list" of banks had expanded to 416 from 305 the previous quarter.

Undercapitalized banks are more likely to fail than those that meet regulatory requirements. To stay afloat, these banks must suspend dividends and raise capital, through their current investors or private equity, or arrange asset sales or mergers with stronger institutions.

Most banks and S&Ls need to maintain tier 1 leverage, tier 1 risk-based and total risk-based capital ratios of at least 5%, 6% and 10% to be considered well-capitalized. The ratios need to be at least 4%, 4% and 8% for most to be considered adequately capitalized.

A previous list of undercapitalized banks and thrifts wasn't complete, because a full set of second quarter data wasn't yet available. The updated list, based on data from SNL Financial, excludes the 12 institutions that have failed since the previous list was published.

Among the 89 undercapitalized banks and S&Ls on a list published by

in late May, 35 have already failed. This year, 81 institutions have failed, and 25 were seized by regulators in 2008.

Banks and thrifts have up to 18 months to make corrections to their financial reports, so it's possible that an institution with a significant capital shortfall didn't make the list. An example is

Guaranty Bank

, which announced on July 17 that its first-quarter financial results needed to be restated to account for an additional $1.45 billion in securities writedowns. Guaranty Bank

failed on Friday


Undercapitalized Banks and Thrifts

Data used to compile the list of undercapitalized banks is subject to revision. For example, a bank or S&L might have raised capital since June.

The list also excludes banks and thrifts whose capital ratios meet the typical government standards but are considered undercapitalized because regulators are requiring them to hold additional capital.

The list is sorted by state in ascending order by tier 1 leverage ratio.

The largest institution on the list is

United Commercial Bank

of San Francisco, a subsidiary of

UCBH Holdings


, which had $12.8 billion in total assets as of June 30.

Five of the institutions on the list reported negative tier 1 capital as of June 30. The largest of these is

Corus Bank NA

of Chicago, the main subsidiary of

Corus Bankshares



Washita State Bank

of Burns Flat, Okla., had a strong tier 1 leverage ratio of 9.26%, despite its low risk-based capital ratio of 3.86%. As the government quantifies banks' potential losses, draconian accounting rules are causing some of Washita's securities that were recently downgraded to be weighted up to 400% of their value.

The states that have had the most bank failures during 2008 and 2009 continue to dominate the undercapitalized list.




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each have 15 undercapitalized banks or thrifts on the list, followed by


with 11.

Georgia continues to lead all states with 23 bank or thrift failures during 2008 and 2009, followed by Illinois with 14 failures, California with 13, Florida with eight and


with five failures.

Large bank holding companies that have acquired failed institutions during 2008 and 2009 include

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

, which acquired Washington Mutual, the largest-ever bank or thrift to fail in the U.S.;

SunTrust Banks

(STI) - Get SunTrust Banks, Inc. Report


Regions Financial

(RF) - Get Regions Financial Corporation Report


Fifth Third Bancorp

(FITB) - Get Fifth Third Bancorp Report


U.S. Bancorp

(USB) - Get U.S. Bancorp Report


Zions Bancorp

(ZION) - Get Zions Bancorporation (ZION) Report


PNC Financial

(PNC) - Get PNC Financial Services Group, Inc. Report

; and


(BBT) - Get BB&T Corporation Report


Free Financial Strength Ratings Ratings

issues independent and very conservative financial strength ratings on each of the nation's 8,500 banks and savings and loans. They are available at no charge on the

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Reported by Philip van Doorn in Jupiter Fla.

The writer owns shares in Riverside Banking Co., the holding company for Riverside National Bank of Florida, a former employer.

Philip W. van Doorn joined 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.