Dec. 19--The number of troubled banks in Michigan continues to rise, new data from the bank ratings firm BauerFinancial Inc. show.

At the end of the third quarter, 14.4% of Michigan banks were rated problematic, troubled or worse by BauerFinancial, up from 13% at the end of June and significantly above the national average of 6.2%.

But Michigan no longer leads the nation in problem banks, ranking sixth among the states and the District of Columbia as of the end of September. Washington, D.C., led the list, with a third of its banks experiencing problems, followed by Georgia at 22.7%, Oregon at 20%, Florida at 17% and Arizona at 16.1%.

At the end of the third quarter, 23 of Michigan's banks were rated problematic, troubled or worse, up from 21 at the end of June. One bank, Main Street Bank in Northville, is no longer on the list because regulators closed it in October and sold its assets to another Michigan bank.

The three banks added to the list are: Troy-based Flagstar Bank, Macatawa Bank in Holland and New Buffalo Savings Bank in New Buffalo.

Four of the banks on the latest list received a zero rating, BauerFinancial's lowest, up from three at the end of June.

Michigan's rising jobless rate and the crises in the auto and housing industries are expected to add to the financial pressures facing the state's banks. Main Street was the first bank to fail in Michigan since 2002.

"We will see further bank failures," said Terry McEvoy, an analyst at Oppenheimer & Co. Inc., who follows several Michigan banks.

He predicts banks will be coping with more problems involving their commercial real estate and business loans.

The tough environment already has forced one of the state's major banks, Flagstar, into the arms of a New York private-equity firm. And in October, Capitol Bancorp Ltd., a Lansing-based community bank development company, announced plans to merge several of its troubled banks in Michigan, including three in metro Detroit.

However, there's still interest in starting banks in Michigan. So far this year, state regulators have received and approved two applications. That's up from only one in 2007.

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