The last time Bradford Bank in Baltimore tried to go public it had growth in mind, but this time its proposed conversion is more about pumping up capital to satisfy regulators.

The $526.7 million-asset mutual thrift announced in March of last year that it would convert to a public company and use much of the proceeds to buy Patapsco Bancorp Inc. of Baltimore, but Bradford failed to raise the capital it needed, and in January the deal was called off.

Now Bradford is trying to convert again, this time under much different circumstances.

With its credit quality deteriorating and its capital levels down, Bradford said it expects to receive a cease-and-desist order from the Office of Thrift Supervision requiring it to improve capital ratios.

It also needs additional funds to pay its debts. Bradford owes Patapsco a $2 million breakup fee, which will come due Dec. 31, and it owes $3 million on a loan it got to buy Valley Bancorp in January of last year.

Dallas R. Arthur, Bradford's president, acknowledged that its latest stock offering could be no more successful than its last one, because since then bank and thrift stocks have fallen even more out of favor with investors.

But several analysts said that the poor market for bank and thrift stocks promises more upside for conversions, and that investors in the Bradford offering would get far more bang for their buck than they would have in its first attempt to convert.

Bradford needs to sell at least 2.1 million shares at $10 each to complete the offering. But it could sell up to 3.3 million shares if demand is high enough.

Mr. Arthur said that if Bradford sells enough shares to price the offering at the midpoint of the range, that would be 51.18% of Bradford's tangible equity — a substantial discount compared with the conversion it proposed last year, when the midpoint would have been at 117% of tangible equity.

Theodore Kovaleff, an analyst at Granta Capital Group LLC, said pricing is likely to be the main factor in whether Bradford can complete the deal.

For the right price, "the investors will come out of the woodwork," he said.

The conversion market began to get rocky last year, and several offerings were called off. With the challenging market dynamics, the price-to-book ratio has been falling steadily for deals completed this year, Mr. Kovaleff said.

Generally, the offering price for a converting thrift is above tangible book value, but at least two this year priced below book, which can be attractive to investors because of the potential for bigger gains, he said.

"There's an extra thing going for you as an investor," Mr. Kovaleff said. "There really shouldn't be any nasty surprises out there," because Bradford must disclose detailed information about its woes in a filing with the Securities and Exchange Commission.

Bradford reported a $712,000 loss for the first half of this year and a $1.1 million loss for last year, according to Federal Deposit Insurance Corp. data. Its nonperforming loan ratio nearly doubled during the first half of this year, to 4.26% at June 30.

It attributed the deteriorating asset quality to the housing market collapse. Bradford said it rapidly increased construction and development loans that were dependent on lot or home sales for repayment. Its plan to get back on track calls for reducing exposure to these loans.

Bradford said it expects the cease-and-desist order to prohibit originating acquisition, development, nonresidential real estate, commercial, construction, or land loans without regulatory approval. The order also is expected to impose new capital levels above the minimum regulators generally require to qualify as well capitalized. Bradford said it likely would have to maintain a Tier 1 risk-based capital ratio of at least 8% and a total risk-based capital ratio of at least 12%.

As of the end of the second quarter Bradford had slipped to an adequately capitalized level, with a Tier 1 risk-based ratio of 8.38% and a total risk-based ratio of 9.65%.

To help improve its financial condition, Bradford said it intends to shave $500,000 of expenses through several initiatives. This year it cut nine employees, terminated its title insurance business, and reduced directors' fees by 15% and management salaries by 10%.

But a successful offering would make all the difference. Even if it sold only the minimum amount of shares, Mr. Arthur said, Bradford would be able to exceed the higher capital requirements, pay off its debt, and still have cash to spare.

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