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Troubled Washington Bank Sees Volume Spike

Cowlitz Bancorporation's shares have popped on heavy volume over the past few sessions, even though main subsidiary Cowlitz Bank is desperate to raise capital.



) -- Volatility seems to be par for the course of late for shares of

Cowlitz Bancorporation



The stock was off more than 10% in midday action on Wednesday to $3.58. Volume of around 100,000 was already well above the issue's trailing three-month daily average of 60,675, but that number is inflated by a spike in trading in the past four sessions when a combined total of roughly 3.1 million shares changed hands.

Prior to that, the average daily share volume for the previous 90 sessions through last Wednesday was less than 10,000.

Today's downdraft follows news after Tuesday's closing bell that the company had received a Supervisory Prompt Corrective Action Directive from the Federal Deposit Insurance Corp. on June 15. The directive calls for Cowlitz's main subsidiary,

The Cowlitz Bank

of Longview, Wash. to recapitalize within 30 days of the order or sell or merge with a stronger institution.

The sell-off also comes after the stock had surged as high as $6.99 in intraday trading last week , rising about 150% on Thursday alone. To give an idea of how sleepy the stock was at this time last week, it finished last Wednesday down 3 cents at $1.50 on volume of 3,100.

The FDIC's order comes on the heels of May 26 agreement between the holding company and the Federal Reserve Bank of San Francisco, under which Cowlitz Bancorporation had agreed to take several steps to strengthen itself and the bank, including submitting a capital restoration plan within 60 days, and a cash flow projection within 30 days of the order.

News of the order shouldn't have come as a huge surprise. The Cowlitz Bank was included in


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Bank Watch List

of undercapitalized banks and thrifts, based on first-quarter regulatory data provided by

SNL Financial

, because the bank's Tier 1 leverage ratio was 3.37% and its total risk-based capital ratio was 6.68% as of March 31.

These ratios need to be at least 5% and 10% for most banks to be considered

well capitalized

. The ratios need to be at least 4% and 8% for most institutions to be considered adequately capitalized by regulators.

On the holding company level, Cowlitz Bancorporation was actually in a negative capital position as of March 31 following a first-quarter loss of $12.2 million, according to a company filing with the Federal Reserve. Both the holding company and the bank were considered "critically undercapitalized" according to the company's first-quarter 10-Q filing with the Securities and Exchange Commission.

The holding company's shares were down 43% through last Thursday's market close. The shares were subject to a 1-for-10 reverse split on March 2.

Other recent events include a filing on Friday by Cresent Capital VI LLC, a local private equity investor group, that it had sold 74,536 shares and continued to hold 155,200 shares.

Cowlitz management was unavailable for comment this morning, but


will publish updates as more information becomes available.


Written by Philip van Doorn in Jupiter, Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.