Florida, Georgia, Illinois home to America's most troubled banks

The number of U.S. banks holding less capital to cushion against losses than regulators require reached 116 in the second quarter -- more than triple than 30 that earned that dubious classification last year, according to a new study by research firm SNL Financial and TheStreet.com. The three most vulnerable states: Georgia, Florida, and Illinois. Already hit hard by bank failures, these three have more financial institutions on the brink than the other 47 states.

How strong a predictor of trouble is being "undercapitalized" (as the government puts it)? Of 89 undercapitalized banks documented at the end of March in a study, 35 have failed.
SNL Financial and TheStreet.com's tally of banks on the brink is different from the official list of troubled banks maintained by the Federal Deposit Insurance Corp., which includes 434 institutions. This unofficial (and undisclosed) accounting of bruised banks includes 15 each from Florida, Georgia and Illinois.

That finding makes sense in the context of the failures that have occurred this year. Georgia leads the country with 18; Illinois, 13; and Florida, six. (See the full list here.) Another state in grave trouble: California. With 11 banks on the list, the Golden State is home to the biggest undercapitalized institutions on the list. Los Angeles–based United Commercial Bank, a subsidiary of UCBH Holdings (UCBH), boasts assets of $12.8 billion, more than any other bank on the list. California National Bank, owned by privately held FBOP Inc., is second, with just over $7 billion in assets.

Three banks failed on Friday, bringing this year's nationwide tally to 84. Mortgage foreclosures and bad loans to real-estate developers are devastating local banks in areas where home prices and construction got particularly out of control.

Nonetheless, FDIC Chairman Sheila Bair has said it's not yet time for her agency to take advantage of a massive line of credit with the Treasury Department to replenish the fund it draws on to pay for bank failures. "No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors," she said last week in a statement.

Recent US Bank Failures
Drag the map for more information on recent bank failures. Source: FDIC/DailyFinance
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