More than a tenth of the 7,380 banks in the US remain at risk of failure despite the sector posting strong profit growth during the second quarter.
The Federal Deposit Insurance Corporation's quarterly analysis revealed its "problem banks" list reached 829 in the second quarter, an increase of 54 institutions, mainly small community banks.
Problem bank levels remain at the highest level for more than 16 years. So far 118 banks have failed this year, with 45 closing in the second quarter.
Despite the additional problem banks, the sector posted a $21.6bn profit in the second quarter, as loan losses subsided.
"This is the best quarterly profit for the banking sector in almost three years," FDIC chairman Sheila Bair says.
"Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend."
However, Bair says the industry still faces challenges.
"Earnings remain low by historical standards, and the numbers of unprofitable institutions, problem banks and failures remain high," she adds.
"But the banking sector is gaining strength. Earnings have grown, and most asset quality indicators are moving in the right direction."
Slow progress in improving diversity
Share purchase deal with assets of £28m
Came into effect in January
Three examples of compensation rule issues
Buying in baskets