The outlook for Peoples Community Bancorp Inc. in West Chester, Ohio, appears increasingly grim after a second deal to sell itself collapsed.

The $721 million-asset company announced in a Securities and Exchange Commission filing late Monday that CenterBank in Milford, Ohio, had backed out of an agreement to buy Peoples' deposits, branches, and most of its assets. It was expected to pay a 5.5% premium on the deposits.

This may prove a fatal blow for Peoples, which warned in its third-quarter 10Q filing with the SEC that terminating the deal would "have a material adverse effect on and impair the company's business, financial condition, and ability to operate as a going concern."

If it were not bought, "the company may not be able to continue operations," it said in the filing.

Badly battered by losses on real estate loans, Peoples has been trying to find a buyer for more than a year. In September 2007, it struck a deal to sell itself to Integra Bank Corp. in Evansville, Ind., for $85.6 million, but Integra called off the deal in January. Peoples still owes Integra $17.5 million for a line of credit that came due in June.

The deal with the $87 million-asset CenterBank was announced in September. To close it, the buyer was to receive an $80 million investment from Community Bank Strategic Equity Fund LLC, a private-equity fund in St. Paul.

Stewart Greenlee, CenterBank's chief executive, said in an interview Wednesday that the economic recession's impact since the deal was announced produced a "determination that we could not close the purchase according to the agreement." He declined to elaborate or say whether the parties had tried to renegotiate. A call to Peoples was not returned.

Peoples is one of several banks that have issued ominous statements about their ability to survive, absent a buyer or infusion of capital.

In September, Downey Financial Corp. in Newport Beach, Calif., warned of its impending demise if it could not attract capital or a buyer. Lacking either, the $12.8 billion-asset thrift was seized by the Federal Deposit Insurance Corp. in November.

In its SEC filing Monday, Peoples said it had extended an agreement with Community Bank Strategic Equity Fund for the latter to invest in a bank if one would agree to buy Peoples this month.

Bert Ely, an independent analyst in Alexandria, Va., said the chance of Peoples finding a buyer at this stage is "relatively remote." And if it fails to find a buyer or raise capital, it probably is "not going to make it," he said.

Peoples lost $46.9 million in the first nine months of last year. At Sept. 30, 6.3% of its assets were nonperforming, up from 3.7% a year earlier. Its assets have shrunk by 20% in the past year, largely because it has been under an enforcement order from the Office of Thrift Supervision since March that bars it from making any new loans.

Karen Dorway, the president of the bank rating firm BauerFinancial Inc. in Coral Gables, Fla., said Peoples "has some significant challenges ahead of it." Bauer has given Peoples its lowest possible rating.

She said that, if the company continues to lose money on bad loans at the rate it did in the third quarter, it could probably only make it "another quarter or two" without some kind of capital infusion or purchase deal.

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