An Illinois trade group plans to act as matchmaker between capital-rich community banks and bankers searching for cash.
Community Bankers Association of Illinois is launching a program that will give bankers in need of capital-and particularly those trying to raise money to stay independent-a list of community banks willing to invest.
Robert J. Wingert, executive director of the trade group, said the 650- member organization has informally referred bankers to potential investors in the past. It will kick off the formal program in November.
Historically, bankers or investment groups have approached the association for suggestions when they needed capital to start a bank or to buy all or part of an existing bank. The capital seekers have included bankers wanting to buy out majority shareholders to avert a sale.
In most cases, the cash-strapped bankers didn't have the resources to accumulate enough capital on their own. Many needed to find the funds quickly or risk losing a deal, Mr. Wingert said.
"It's a service that keeps community banks in the community," said Ronald L. Slater, president of Bankers' Service Corp., the investment banking arm of the Bankers' Bank of Wisconsin in Madison.
Under its program, the Illinois trade group will distribute a list of potential investors to companies searching for funds. The capital-poor group can seek a match on the list.
"Our role will be very, very arms-length," Mr. Wingert said. "We're only serving as a link or a matchmaker."
James R. Shafer, who has been chairman of the trade group's committee on the matchmaking fund, said the program should be used as a last resort.
"We expect that applicants have already beat the street in their community," said Mr. Shafer, president and chief executive of First National Bank of Tremont (Ill.).
And potential investors won't be told who is on the list.
"We don't want the party that's seeking capital to be hounded," Mr. Wingert said.
Mr. Wingert said the association isn't sure how much demand there will be for the program. But he said he expects that some banks that sign up as investors may do so primarily to aid fellow community bankers-not to earn high investment returns.
"It's not necessarily the greatest investment in the world," Mr. Wingert said.
Mr. Shafer, who participated in one of the association's informal match- ups, said he expects $40 million-asset First National of Tremont will be on the list of potential investors.
He's aware that such deals aren't always profitable for the investors.
In Mr. Shafer's case, First National's holding company paid $57,000 for 1,000 shares of a community bank that was short of capital in 1994. When another investor bought the shares 18 months later, Mr. Shafer said, his bank got $58,500-a $1,500 profit.
"It wasn't a great deal, but it wasn't a terrible deal," he said. "The most important thing is, now the bank is a very, very viable, growing community bank."
Industry observers like Ellen Lamb, a spokeswoman for the Conference of State Bank Supervisors, said they haven't heard of similar referral programs. However, Ms. Lamb said there may be considerable interest in the program since many community banks have excess capital they want to use.
"A service that tells people who has" capital available "sounds like a good idea to me," Ms. Lamb said.u