Banks Strain as Capital Drains
Some undercapitalized banks were nearly wiped out by securities losses springing from the government takeover of Fannie Mae (FNM) and Freddie Mac (FRE) in September, which all but eliminated the value of the mortgage giants' preferred stock.
There have been indications that the federal government's infusion of capital into 52 bank and savings-and-loan holding companies (at last count) is settling things down. However, Treasury's planned $250 billion in preferred equity investments is mainly going to stronger institutions.
Preliminary third-quarter industry data for the nation's banks show that the number of undercapitalized institutions increased considerably from June 30.
To be considered well-capitalized under regulatory guidelines, a bank or S&L needs to maintain a leverage ratio of at least 5% and a risk-based capital ratio of at least 10%. At the end of the second quarter, 127 banks and 12 S&Ls were considered below well-capitalized.TheStreet.com has preliminary Sept. 30 call-report data for 97% of U.S. banks, but S&L information won't be available for a few weeks. Looking at the early bank data, 139 banks were below well-capitalized. Of 36 considered undercapitalized, six were significantly undercapitalized and seven critically undercapitalized. Before listing the 13 banks, it is important to point out: The list is based on preliminary data. Most banks have filed their call reports, which our data provider, Highline Financial Inc., obtains from the FDIC. The set of data was not yet finalized when downloaded on Nov. 10, and about 3% of banks had not filed yet. The call reports are often updated by banks before they are finalized. The list includes only banks. Preliminary data wasn't available for S&Ls.
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