More Than 100 U.S. Banks Lack Capital

NEW YORK (TheStreet) -- More than 100 banks and savings and loan institutions in the U.S. were undercapitalized as of June 30, according to preliminary data from SNL Financial.

That means capital levels at these 108 banks fell short of standards set by federal and state regulators. SNL Financial's data includes 99% of the 8,500 banks in the U.S., but less than 20% of the roughly 785 savings and loan institutions.

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.

Among the 89 undercapitalized banks and S&Ls on a list published by TheStreet.com in late May, 27 have already failed. The largest was Vineyard Bank NA of Corona, Calif., which failed on July 18. The Federal Deposit Insurance Corp. sold its deposits and branches to California Bank & Trust of San Diego, a subsidiary of Zions Bancorp (ZION Quote).

A bank or S&L typically needs to maintain tier 1 leverage, tier 1 risk-based and total risk-based capital ratios of at least 5%, 6% and 10%, respectively, to be considered well-capitalized. The ratios need to be at least 4%, 4% and 8% for an institution to be considered adequately capitalized.

Many institutions have been forced to hold even higher levels of capital, including Corus Bankshares (CORS Quote). The Chicago-based condominium lender had been ordered boost its tier 1 leverage ratios to at least 9% by June 18. On Friday, Corus said its tier 1 capital had dropped to negative $157 million as of June 30.