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As the failed bank list continues to grow the struggle to survive becomes more intense for small banks.  The potential for mergers, private investors making a high risk investments or the bank taking even higher risks through toxic investment firms.  All last ditch efforts to keep the FDIC out of their offices.  Maintaining their Tier-1 capitalization through whatever means they can think of is their goal.  If it falls below a certain percentage the risk of getting a “cease and desist” restriction becomes greater and then what I call “smart money” takes out their backing. Say good bye to the institutional funds and potentially their own insiders and directors. Say hello to downgrades and possible defaults.  Finding banks close to this dramatic battle of survival that have the potential to survive and bring themselves back to adequate solvency is quite a feat.   I offer fair warning, the stocks that I put on my watch list are in no way an indication that they will survive and prosper.

A couple on my watchlist,

 Hampton Roads Bankshares Inc. (NasdaqGS HMPR) which is a holding company for a couple banks was recently delisted to the Global Select from the Nasdaq Capital market.   I have had a price target of around .43 on this puppy since they were required to raise capital earlier this year.  This company has also just issued a new prospectus trying to raise more capital and clearly said they will reverse split if necessary to regain compliance by May 2, 2011.

Superior Bancorp (NasdacGM: SUPR) as the holding company for Superior Bank that provides various banking and related services to individual and corporate customers in Alabama and Florida.  Superior is under a cease and desist order, received its delisting notice and has been downgraded.   Superior Bank is a multi billion dollar company.  I am following Superior Bancorp as a story stock after it filed a $35M damage claim through the Gulf Coast Claims Facility.

Its been good for (NASDAQ: BIOD) for couple of days, until it was Tuesday the 21th of September 2010. Suddenly, the shorts came in and toasted BIOD for now, but the battle isn't over yet, and never will be.