NEW YORK ( TheStreet) - Using market and regulatory data provided by SNL Financial, TheStreet has developed a list of ten actively traded bank and thrift holding companies that are cheaply priced and face earnings weakness through 2011, which could facilitate decisions to merge with larger competing institutions.

With so many bank stocks trading below book value and smaller players facing continued weakness in the economy and other earnings challenges from new regulations limiting overdraft fees and a coming torrent of new rules based on the banking reform legislation passed in July, it's only a matter of time before bank M&A heats up.

Here are the criteria we used to develop our list of likely targets that are actively-traded:
  • Closing price below tangible book value as of Aug. 27.

  • Total risk-based capital ratio above 10%.

  • Nonperforming assets (NPA) below 6% of total assets.
  • Consensus full-year 2011 net loss per share estimate among analysts polled by Thomson Reuters.
  • Three-month average daily trading volume of at least 50 thousand shares, according to data prepared by SunGard and provided by SNL Financial.
  • Despite reports that "the bargains are over" for failed banks, the Federal Deposit Insurance Corporation's gravy train continues: Most buyers of failed institutions are still getting 80% loss-sharing deals from the agency, and most premiums paid for acquired deposits are relatively small.

    With this set of criteria, we have excluded the banks that are likely to fail, since potential buyers would save themselves a lot of risk by waiting for failure and bidding on a government-assisted acquisition.

    We have also excluded holding companies that expected to post positive earnings per common share for 2010 or 2011. While there are certainly many attractive merger candidates among profitable holding companies, boards of directors of companies expected to post negative earnings per share for 2011 might face extra pressure from shareholders to sell, as patience runs out. This approach excludes companies like BOFI Holding ( BOFI), which has remained profitable through the crisis, and has traded around book value for years.

    We also chose not to exclude companies owing the government for bailout funds received via the Troubled Assets Relief Program, or TARP. While having preferred shares held by the government is considered by some to be a barrier for merger deals, Toronto-Dominion Bank ( TD) agreed in May to acquire The South Financial Group ( TSFG), with the Treasury agreeing to a big haircut on TD's redemption of TSFG's TARP preferred upon completion of the deal. Although it's not really a target since the company has a pending merger agreement in place, we've kept TSFG in our group of ten, since the deal hasn't been completed.

    The following are the ten holding companies that met our criteria sorted by total assets, with the smallest companies listed first.

    Company Profile

    Shares of Guaranty Bancorp ( GBNK) of Denver, Colo. closed at $1.41 Wednesday, returning 7% year-to-date.

    Income Statement

    The company reported a second-quarter net loss of $4.4 million or 11 cents a share, following a first-quarter net loss of $1.8 million or 6 cents a share. A year earlier, the net loss was $10.9 million or 21 cents a share. Over the past year, elevated loan loss provisions have been a contributing factor in the company's losses, and Chief Operating Officer Paul Taylor explained that the company's expenses were "way beyond normal," as Guaranty Bancorp incurred legal and other expenses as it worked through repossessed assets.

    A bank's provision for loan losses is its quarterly addition to its loan loss reserves, as it anticipates losses on specific problem loans, and directly affects earnings.

    Taylor also comment on Guaranty Bancorp's net interest margin - essentially the average yield on loans and investments less the average cost of funds - which was 3.31% for the second quarter, compared to the aggregate second-quarter margin of 3.81% for all U.S. banks and thrifts reported by the FDIC, saying that the company's margin had declined over the past two years as the company reduced risk from the "legacy balance sheets" of the four banks the company purchased in 2004 and 2005. He also said the margin would "probably approach 4% by year-end" and that the company's goal was to achieve a margin of about 4.50%. balance sheet risk as it integrated

    Balance Sheet

    Guaranty Bancorp had $2 billion in total assets as of June 30. The company is not a TARP participant. Despite a track record of significant losses in 2007, 2008 and 2009 followed by narrowing losses for the first half of 2010, Guaranty Bancorp's tier 1 leverage ratio was 7.87% and its total risk-based capital ratio was 14.80% as of June 30, above the 5% and 10% most banks have to maintain in order to be considered well capitalized by regulators.

    Guaranty Bancorp raised $58 million in regulatory capital through an offering of preferred shares in August 2009, and said in its most recent 10-Q filing with the Securities and Exchange Commission that it "does not have any current plans to raise additional capital."

    Nonperforming assets - including loans past due 90 or more days or in nonaccrual status (less government-guaranteed balances) and repossessed assets - comprised 4.83% as of June 30, which compared to the aggregate second-quarter "noncurrent assets" ratio of 3.31% reported by the FDIC for all U.S. banks and thrifts.

    While Guaranty Bancorp's nonperforming assets ratio declined from 5.55% the previous quarter and slightly from 4.84% a year earlier, the company reported net charge-offs - loan losses less recoveries - of $13.5 million for the second quarter, for an annualized ratio of net charge-offs to average loans of 3.82%. In comparison, the national aggregate net charge-off ratio for the second quarter was 2.74%.

    Stock Ratios

    As of Wednesday's close, the shares were trading for 0.7 times tangible book value according to SNL.

    Analyst Ratings

    One analyst is covering the shares, with a hold rating, according to Thomson Reuters.

    With weak core earnings, Guaranty is not a compelling play for new investors, even with the company's low valuation, since there are many bank holding companies trading below book value that are already profitable. Meanwhile the company's cheap price relative to book value, decent capital position and network of 34 branches in Colorado's Front Range could make Guaranty Bancorp an ideal candidate for a take-out.

    Company Profile

    Seacoast Banking Corp. of Florida ( SBCF) of Stuart closed at $1.19 Wednesday, down 27% year-to-date.

    Income Statement

    The company posted a second-quarter net loss to common shareholders of $14.7 million or 25 cents a share, following a first-quarter net loss of $2.5 million or 4 cents a share and a loss of $63 million a year earlier, or $3.35 a share, when the company recorded a non-cash $49.8 million goodwill impairment charge.

    Earnings declined from the first quarter mainly because the company's provision for loan losses increased to $16.8 million from $2.1 million.

    Balance Sheet

    Seacoast had $2.1 billion in total assets as of June 30.

    Despite a high level of nonperforming assets and loan losses as it suffers along with the Florida economy, the company has successfully raised capital over the past two years through public and private offerings. As of June 30, Seacoast's capital ratios were high, with a tier 1 leverage ratio of 10.60% and a total risk-based capital ratio of 18.84%. The company is operating under an order from the Comptroller of the Currency to keep that second ratio at or above 12%.

    Nonperforming assets comprised 5.26% of total assets as of June 30, declining from 5.45% the previous quarter and 7.09% a year earlier. The net charge-off ratio for the second quarter was 5.94%.

    Stock Ratios

    Seacoast's shares were trading for 0.8 times tangible book value as of Wednesday's close, according to SNL.

    Analyst Ratings

    The ten analysts covering the shares all rate them a hold.

    Seacoast has shown that it is a survivor among Florida banks, raising quite a bit of capital over the past two years, and its asset quality is showing signs of improvement. The company also seems likely to emerge as a winner among locally managed institutions on Florida's Treasure Coast, as its largest local competitor, Riverside National Bank of Florida, failed in April.

    While he is neutral on the shares, FIG Partners analyst Christopher Marinac said in a late-July report that the shares are worth "nearly $2.25 per share by 2012," based on his firm's projection that the company will achieve "$0.30 in normalized EPS."

    Company Profile

    Shares of Bank Mutual Corporation ( BKMU) of Milwaukee closed at $5.23 Wednesday, down 23% for 2010.

    Income Statement

    The company reported net income of $731 thousand or 5 cents a share for the second quarter, down from $2.1 million or 2 cents a share for the first quarter and $3.8 million or 8 cents a share during the second quarter of 2009, as low interest rates, weak loan demand and an increase in problem loans took their toll. The company's net interest margin has narrowed for six consecutive quarters.

    Balance Sheet

    Bank Mutual Corp. is not a TARP participant. The company had $3.5 billion in total assets as of June 30 and was strongly capitalized with main thrift subsidiary Bank Mutual reporting a tier 1 leverage ratio of 9.85% and a total risk-based capital ratio of 21.84%.

    The nonperforming assets ratio for the thrift subsidiary was 2.25% as of June 30, rising from 1.31% a year earlier, although actual loan losses have been very low over the past year.

    Stock Ratios

    The shares traded for 0.7 times tangible book value as of Wednesday's close.

    Analyst Ratings

    Just two analysts cover Bank Mutual Corp. and both have hold ratings on the shares. While Bank Mutual Corp. is clearly a healthy company, its business model suffers in a prolonged period of low interest rates, and it's conceivable that the company's investors and board of directors could decide to throw in the towel at some point and salve returns by selling the company.

    Company Profile

    Shares of Sun Bancorp ( SNBC) of Vineland, N.J. closed at $5.08 Wednesday, returning 35% year-to-date.

    The company received quite a boost and its shares soared in July when an investor group led by Wilbur Ross agreed to invest $100 million in the company, in a deal expected to be completed over the next several months after regulatory approval.

    Income Statement

    Sun Bancorp reported a second-quarter net loss of $81.2 million or $3.46 a share, mainly resulting from a non-cash goodwill impairment charge of $89.7 million. In comparison, Sun lost $762 thousand or 3 cents a share in the first quarter and reported a net loss to common shareholders of $8.8 million or 38 cents a share for the second quarter of 2009, when the company repaid TARP in full for $89.3 million.

    Balance Sheet

    Sun Bancorp had $3.5 billion in total assets as of June 30. The company estimated that the $100 million in new capital would boost its tier 1 leverage ratio to at least 11.75% and its total risk-based capital ratio to at least 14.00%.

    Sun's nonperforming assets ratio was 3.62% as of June 30, rising from 2.08% a year earlier. The net charge-off ratio for the second quarter was a low 0.52%.

    Stock Ratios

    The shares were trading for just 0.5 times the company's June 30 tangible book value, as of Wednesday's close, according to SNL.

    Analyst Ratings

    Out of five analysts covering the share, four rated the company a buy, while one recommended holding the shares, according the Thomson Reuters.

    Sun Bancorp shows that our approach of "letting the chips fall where they may," can highlight a company looking to acquire, rather than one considering a sale. Ross's investment shows that the company's low valuation made it attractive. With shares trading for just above half the company's liquidation value, the vote of confidence from Wilbur Ross and the prospect of expansion through cheap acquisitions, Sun Bancorp looks like an excellent growth opportunity for investors willing to go in for the long haul.

    >>Sun Bancorp: How to Play It

    Company Profile

    Shares of Banner Corporation ( BANR) of Walla Walla, Wash. closed at $2.09 Wednesday, declining 21% year-to-date.

    Income Statement

    Banner reported a second-quarter net loss to common shareholders of $6.9 million or 28 cents a share, following a first-quarter net loss of $1.5 million or 16 cents a share. A year earlier, the company reported a net loss to common shareholders of $18.4 million or $1.04 a share.

    The year-over-year improvement in earnings reflects a decline in the provision for loan losses to $16 million from $45 million.

    Balance Sheet

    The company had $4.7 billion in total assets as of June 30, and owes $124 million in TARP money. In March, main subsidiary Banner Bank entered into a memorandum of understanding with state regulators and the FDIC, requiring the bank to improve its asset quality and maintain a tier 1 leverage ratio of at least 10%. The bank was in compliance with the agreement as of June 30, with a tier 1 leverage ratio of 10.77%, after the holding company raised $171 million in common equity through a public offering completed on June 24.

    At the holding company level, nonperforming assets comprised 5.99% of total assets as of June 30, declining from 6.39% the previous quarter and 6.22% a year earlier. Banner's net charge-off ratio during the second quarter was 1.76%.

    Stock Ratios

    The shares were trading for 0.5 times tangible book value as of Wednesday's close.

    Analyst Ratings

    Six analysts cover the shares, and three recommend buying the shares and three recommend holding the shares.

    Keefe, Bruyette & Woods analyst Matthew Clark has a "Market Perform" or neutral rating on the shares, although his 12-month target for Banner's shares is $2.50, which would be a 19% gain from Wednesday's close, although he also said in a late-July report that nonperforming assets and "other classified assets may still absorb a fair amount of recently raised capital."

    Company Profile

    Shares of United Community Banks ( UCBI) of Blairsville, Ga., closed at $2.61 Wednesday, for a year-to-date decline of 23%.

    Income Statement

    The company reported a second-quarter net loss to common shareholders of $62.1 million or 66 cents a share, compared to losses to common shareholder of $35.9 million or 38 cents a share during the first quarter and $18.6 million or 38 cents a share in the second quarter of 2009.

    The increased loss for the second quarter included $45 million in expenses from the company's sale of $103 million in nonperforming loans and repossessed properties.

    Balance Sheet

    United Community had $7.7 billion in total assets as of June 30. The company owes $180 million in TARP money. The nonperforming assets ratio was 4.61% as of June 30, declining from 5.48% the previous quarter and 5.26% a year earlier. The net charge-off ratio for the second quarter was 4.87%.

    Through its direct investment programs, the company said it raised $939 million in common equity during the first half of 2010. The tier 1 leverage ratio was 7.72% and the total risk-based capital ratio was 13.85% as of June 30.

    Stock Ratios

    The shares were changing hands at 0.5 times tangible book value as of Wednesday's close, according to SNL.

    Analyst Ratings

    Out of nine analysts covering the company, three rate United Community's shares a buy, while six analysts recommend holding the shares. Guggenheim Securities analyst Jeff Davis has a neutral rating on the shares, although his 12-month target of $3.50 would be a 34% gain from Wednesday's close.

    Company Profile

    Shares of Citizens Republic Bancorp ( CRBC) of Flint, Mich. closed at 80 cents Wednesday, up 16% year-to-date.

    Following a regulatory examination of the bank, the company entered into an agreement with the Federal Reserve Bank of Chicago and state regulators requiring it to submit plans to improve its capital strength, asset quality and various other risk management activities and assess the quality of its management.

    Income Statement

    The company reported a second-quarter net loss to common shareholders of $44.7 million or 12 cents a share, improving from a first-quarter loss of $90.3 million or 23 cents a share and a net loss to common shareholders of $352.6 million or $2.73 a share when the company recorded a $256 million non-cash goodwill impairment charge. Operating losses have mainly resulted from elevated provisions for loan losses.

    Balance Sheet

    Citizens Republic had $10.8 billion in total assets as of June 30. The company owes $300 million in TARP money and reported a tier 1 leverage ratio of 8.72% and a total risk-based capital ratio of 14.17% as of June 30.

    The company's nonperforming assets ratio was 4.10% as of June 30, improving from 4.51% in March and 4.73% a year earlier. The net charge-off ratio for the second quarter was 3.83%.

    Stock Ratios

    The shares traded for 0.5 times tangible book value as of Wednesday's market close.

    Analyst Ratings

    Out of five analysts covering Citizens Republic, four have hold ratings and recommends buying the shares.

    Company Profile

    Shares of Whitney Holding Corporation ( WTNY) of New Orleans closed at $7.93 Wednesday, declining 13% year-to-date.

    Income Statement

    Whitney Holding Corp. reported a second-quarter net loss to common shareholders of $22.1 million or 23 cents a share, following a first-quarter loss of $10.3 million or 11 cents a share and a loss of $25.4 million or 38 cents a share during the second quarter of 2009, with elevated provisions for loan losses being the main drag on earnings.

    Balance Sheet

    Whitney reported total assets of $11.4 billion as of June 30. The company owes $300 million in TARP money and main subsidiary Whitney National Bank has been operating under regulatory requirements to maintain a tier 1 leverage ratio of at least 8% and a total risk-based capital ratios at least 12%. The bank was in compliance with these requirements as of June 30, reporting a tier 1 leverage ratio of 8.37% and a total risk-based capital ratio of 12.94%.

    On the holding company level, nonperforming assets were still rising and comprised 4.84% of total assets as of June 30, compared to 4.44% the previous quarter and 3.98% a year earlier. The net charge-off ratio for the second quarter was 2.64%.

    Stock Ratios

    The shares were trading for 0.8 times tangible book value at Wednesday's close.

    Analyst Ratings

    Out of 11 analysts covering the Whitney, 8 recommend holding the shares, while 2 recommend selling and 1 has a buy rating on the shares.

    Company Profile

    Shares of The South Financial Group of Greenville, S.C. closed at 28 cents Wednesday, down 57% year-to-date.

    Shares have been pretty much staying around 28 cents since the company agreed in may to be acquired by Canada's Toronto-Dominion Bank ( TD) for that price. The merger has been approved by regulators but is still subject to a vote by The South Financial Group's shareholders, scheduled for September 28.

    Income Statement

    The South Financial Group posted a second-quarter net loss to common shareholders of $314.9 million or $1.46 a share, with the company recording a non-cash goodwill impairment charge of $214.1 million. In comparison, the net loss to common shareholders for the first quarter was $85.8 million or 40 cents a share and $111.5 million or $1.23 a share in the second quarter of 2009.

    Balance Sheet

    The South Financial Group had $11.6 million in total assets as of June 30. The company owes $347 million in TARP money, although the Treasury has agreed to allow Toronto-Dominion to redeem the preferred shares at a heavy discount of $130.6 million upon completion of the merger.

    On April 30, main subsidiary Carolina First Bank was ordered by the FDIC to achieve and maintain a Tier 1 leverage ratio of 8% and a total risk-based capital ratio of 12% within 120 days. The bank subsidiary's Tier 1 leverage ratio was 5.90% and its total risk-based capital ratio was 9.85% as of June 30.

    Stock Ratios

    The shares were trading for 0.2 times tangible book value as of Tuesday's market close, according to SNL Financial.

    Analyst Ratings

    Three of four analysts covering The South Financial Group recommend holding the shares according to Thomson Reuters, and one has a sell rating.

    The South Financial Group's merger deal with Toronto-Dominion shows that owing TARP money doesn't preclude a merger, although the Treasury and U.S. taxpayers have certainly sweetened the pot for the acquirer.

    Company Profile

    Shares of Synovus Financial ( SNV) closed at $2.22 Wednesday, up 9% year-to-date.

    Income Statement

    The company reported a net loss to common shareholders of $242.6 million, or 36 cents a share, for the first quarter, following a loss of $229.8 million, or 47 cents a share, the previous quarter and a net loss of $601.2 million, or $1.82 a share, a year earlier, as it continued making large provision for loan losses.

    Balance Sheet

    Synovus had $32.4 billion in total assets as of June 30. The company owes $968 million in TARP money. After raising $769 million through a common stock offering completed in May and an additional $266 in regulatory capital raised as part of a $334 million offering of $25 tangible equity units, comprised of a prepaid stock purchase contract and an amortizing note, the company was strongly capitalized as of June 30, with a Tier 1 leverage ratio of 10.12% and a total risk-based capital ratio of 16.91%.

    Nonperforming assets comprised 4.90% as of June, improving from 5.79% in March and 5.09% a year earlier, although the net charge-off ratio for the second quarter was quite high at7.15%.

    Stock Ratios

    Shares were trading for 0.7 times tangible book value at Wednesday's market close.

    Analyst Ratings

    Out of 21 analysts covering Synovus, 4 recommend buying the shares, 2 recommend selling and 15 have hold ratings on the shares.

    In a report supporting a neutral rating on the shares, Guggenheim Securities analyst Jeff Davis said his firm views a sale by Synovus as "a reasonable possibility in a few years once asset quality stabilizes and TARP is addressed given the damage incurred to the franchise."

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    -- Written by Philip van Doorn in Jupiter, Fla.

    >To contact the writer of this article, click here: Philip van Doorn.

    >To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

    >To submit a news tip, send an email to: tips@thestreet.com.
    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 TheStreet.com 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.

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