UPDATE 1-Corus Bankshares says it is in critical condition

* Corus says it is “critically undercapitalized”

* Corus says critically undercapitalized banks often fail

* 44 percent of assets are nonperforming

* Regulators reject capital plan

NEW YORK, July 31 (Reuters) - Corus Bankshares Inc CORS.O, a Chicago lender battered by losses on condominium loans, said it is "critically undercapitalized," a condition that could result in its failure.

Corus posted a second-quarter loss of $487.3 million, or $9.07 per share in a regulatory filing, and said that nearly $3.1 billion, or 44 percent, of its $7.07 billion of assets are nonperforming, or not generating payments.

If Corus were to fail, it would be among the largest U.S. lenders to do so this year.

The company has struggled with what it has termed “a rapid and precipitous decline” in the value of collateral securing condominium constriction loans, including many in Arizona, southern California, southern Florida and Nevada.

Earlier this year, Corus had been put under special regulatory oversight by the Federal Reserve Bank of Chicago and the U.S. Office of the Comptroller of the Currency.

According to Friday’s filing, Corus said regulators rejected on July 6 its plan to liquidate its banking unit and sell assets over a 2-1/2 year period, and then sell whatever remained to an investor.

The next day, it said, the Chicago Fed rejected a proposed capital plan as “not viable” and “unacceptable” because it failed to address Corus’ “serious capital erosion.”

Corus said its Tier-1 capital had fallen to negative $157 million at the end of June. It said it is “highly unlikely” to obtain outside capital “that does not include the provision of substantial assistance” by the Federal Deposit Insurance Corp or other federal regulators.

Entities deemed critically undercapitalized typically go into conservatorship or receivership by bank regulators within 90 days, the company said in its filing.

Corus had hired Bank of America Corp to help it find capital or sell assets, a person familiar with the matter said last month. Several private equity firms have been exploring buying Corus assets, according to published reports.

Shares of Corus fell 0.5 cents to 24 cents in afternoon trading on the Nasdaq. (Reporting by Jonathan Stempel)