Raising capital through the stock market has become a dicey prospect for banking companies, with a growing number delaying such offerings while others are pursuing alternate funding routes.

Through September, 45 offerings were terminated in filings with the Securities and Exchange Commission this year, up from 37 offerings called off in the same period in 2009, according to data from SNL Financial LC. Despite improvement in bank stock prices, two factors are fueling this move: a lack of demand to fully subscribe offerings and an inability to hold prices steady.

"There are just a lot of mixed signals out there," said Carter Bundy, an analyst at Stifel Nicolaus & Co. Inc. Bankers and investors realize "this is not going to be a huge trajectory [to economic recovery]. This is going to be a slow grind, and that's going to impact a lot of financial institutions and their ability to raise capital."

As a result of this uncertainty, some publicly traded banking companies are looking to complete their capital-raising efforts in the private placement market. And companies under regulatory orders with little time to raise capital may have no choice but to seek an acquirer.

The capital-raising market is especially difficult for companies with credit issues that must repay their Troubled Asset Relief Program funds, Bundy said. "It's going to be a tough outlook through the end of the year and the beginning of 2011, and likely the rest of that year," he said.

Six of the 45 offerings terminated this year, and 16 of the 37 in 2009, involved publicly held banks redeeming their Tarp funds and consequently terminating their shelf registration filed with the SEC. The pool of terminations included offerings for common stock, preferred stock, trust preferred and debt-related offerings.

Analysts said investors are wary of banks that have not yet redeemed Tarp investments. With these companies, potential investors have a "show-me" attitude before they will get on board with a recapitalization.

"Generally, those have been much more difficult to do in the marketplace, particularly when there is not new leadership coming in," said Mark Muth, a senior research analyst at Howe Barnes Hoefer & Arnett Inc.

Capital Bank Corp. in Raleigh provides a recent illustration. On Sept. 30 the $1.7 billion-asset company announced that it had withdrawn its offering of 34.5 million shares of common stock, and would look at "other alternatives" for raising capital. It did not return phone calls seeking further comment.

Muth said Capital Bank likely called off the market-driven capital effort because investors were looking for a "meaningful change" in management and were concerned that the company might soon need to raise more capital.

Capital Bank had withdrawn a $55 million public offering in January before raising $8.5 million in capital through a private placement announced in March. Its bank unit was well capitalized, with a 10.55% total risk-based capital ratio as of June 30.

Similarly, Virginia Commerce Bancorp Inc. in Arlington recently announced that it found capital elsewhere after terminating a public offering in July.

On Sept. 24 the $2.8 billion-asset company announced a deal with several institutional investors to raise $10 million through common stock and another $11.4 million through two warrants, if exercised.

As some publicly held companies reconsider their options, more are turning to private placements — a market already crowded with privately held banks. The lure is that it is often less rigorous and less costly than a public offering.

"With a private placement, we can do everything behind the scenes," said William C. Marsh, chairman and president of Emclaire Financial Corp., a holding company in Emlenton, Pa.

On Aug. 25, Emclaire, with $487.1 million of assets, made official in a filing the termination of its capital effort last December. Though stock prices have been rising since then, Marsh said he has considered several private placements within the community as a way to accumulate capital.

Marsh said the reluctance to attempt another public offering stems from the fact that shareholders partly base their investment decision on how quickly the stock will produce returns. "Whereas, the community [private] investors are looking for the longer-term investment," he said.

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