The capital markets are open, and even scratch-and-dent banks are finding investors.

Last week a handful of struggling companies either closed on capital raises or announced plans to raise capital despite pending or expected agreements with regulators.

"That's amazing," said William Luedke, a partner in the Houston office of the law firm Bracewell & Giuliani LLP. "It shows that investors are becoming accepting that regulatory enforcement agreements are par for the course and not scaring off investors. … Before, if you were under an agreement, it was a deal killer. You would say, 'We can't go out with this on our back.' Now, we see it is no longer the case."

The capital markets have clearly reopened, and many healthy banks have raised capital in recent weeks. Most have done so to repay funds under the Treasury Department's Troubled Asset Relief Program or to take advantage of acquisition opportunities. Largely, they were considered some of the strongest banks.

But now a slice of the capital pie appears to be going to banks where the capital raise may be to satisfy a regulatory order.

"I think the market has opened wider for banks, and this could be one of those 'which came first: the chicken or the egg?' " questions, said Tim O'Brien, a managing director at Sandler O'Neill & Partners. "Maybe examiners are more forceful of the issue because the market is more supportive of raising capital. Or maybe the market is more supportive because better banks are being encouraged to raise capital by regulators."

Last week the $34 billion-asset Synovus Financial Corp. in Columbus, Ga., completed a $600 million offering with a memorandum of understanding still pending with the Federal Reserve.

The $2.3 billion-asset United Western Bancorp Inc. in Denver completed an offering for $80 million, and noted in its prospectus that it was expecting to receive a memorandum of understanding from the Office of Thrift Supervision after an ongoing exam that would require it to have an 8% leverage ratio and 12% total risk-based capital ratio.

The $1.2 billion-asset Pacific Continental Corp. in Eugene, Ore., filed with the Securities and Exchange Commission to raise up to $40.3 million. In the filing, the company said it believed a recent exam with the Federal Deposit Insurance Corp. would yield a memorandum of understanding that would address the company's capital and order it to reduce classified assets, lower the levels of construction lending, and request approval before paying dividends. The company said the funds raised could be used for a failed-bank acquisition.

Analysts following Pacific Continental said it was considered a solid company in the Northwest that has been quick to address loan-quality issues.

United Community Banks Inc. in Blairsville, Ga., said it was planning to raise $175 million. In filings with the SEC the $8.4 billion-asset company said the capital raise, "coupled with our ongoing efforts to reduce classified assets, through note and asset sales, will limit any enforcement action to an informal memorandum of understanding with the FDIC."

The company's subsidiary bank acquired the failed Southern Community Bank in Fayetteville, Ga., on June 19. United Community lost $16 million in the second quarter.

Most of the banks either declined to comment for the story or did not return phone calls.

Tommy Prescott, the chief financial officer of Synovus, said his company's MOU did not include a capital component, but was focused on reporting processes. Still, Prescott said regulators nudged a capital raise.

"It is clear that the bar is raising from a peer and regulatory standard, and we were encouraged by regulators and they favored the idea of raising capital," he said. "There was no specific amount or time line. Actually the plan implemented and time line was our own."

Chet Fenimore, the managing partner in the Austin office of Hunton & Williams LLP, said he is working with several banks that have either raised capital or are raising capital at the directive of regulators.

"The window of opportunity is open for banks that may have some issues, but don't have significant issues to raise some money," Fenimore said. "We have all been desensitized to MOUs. They were really rare in 2002. Now, in many cases an MOU is a good thing because it isn't a C&D. Many of them feel fortunate that they have an MOU and not a C&D in this environment."

Analysts following United Community and Pacific Continental said the two should have no problems getting shares sold, despite the expectations of regulatory agreements.

"I don't think the MOU matters completely if it is for capital and they can get the deal done, because that solves the requirement," said Albert H. Savastano, an analyst at Fox-Pitt Kelton Cochran Caronia Waller LLC who follows United Community.

One reason Savastano gave for investor appetite for bank stocks is that many mutual funds are underweighted in the sector, which has performed well since March.

Still, analysts say they do not believe the market is open to everyone. Those that need capital the most will still be shut out of the market, several analysts said, noting memorandums of understanding are not severe.

"There is a difference between an MOU and a" cease-and-desist order, said Timothy Coffey, a West Coast analyst with FIG Partners LLC. "The C&Ds are very cut and dry about where you have to have capital levels. MOUs are kind of guidelines."

Coffey also noted that besides being a relatively healthy bank, any company is also going to need to impress investors with a business plan.

"They are going to have to show how they can earn money to pay it back to investors," he said. "Investors aren't going to give money to a bank because they need the capital. They want to see what they can do with it."

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