The market for bank stocks has been tough, but Greater Bay Bancorp of Palo Alto, Calif., can't complain. It recently raised $20 million in equity, evidence of Wall Street's appetite for the high-flying company.

Greater Bay, which has $2.3 billion of assets, said it will use the funds to bolster capital and sustain its high growth rate. Internal revenue growth alone has averaged 30% a year in the past three years, excluding increases from five acquisitions in the period. The company may soon tap the debt market for $50 million, sources said. Those funds would be raised in the form of trust-preferred securities and counted as Tier 1 capital.

Greater Bay is not, however, hurting for capital. The company, which operates six banking subsidiaries in the San Francisco Bay Area, is considered "well-capitalized" under regulatory standards. But observers say it is better to be safe than sorry.

"It helps to build a war chest, especially in a difficult stock market," commented Joseph K. Morford 3d, an analyst at Dain Rauscher Wessels in San Francisco.

Under the terms of the private placement transaction, more than a dozen institutional investors bought 535,000 restricted shares of Greater Bay at $37 each, roughly a 10% discount to the company's stock price when the deal was consummated late last month. Keefe, Bruyette & Woods Inc. in New York and U.S. Bancorp Piper Jaffray in Minneapolis were placement agents.

Some of the investors included Banc Funds Co. in Chicago, Sandler O'Neill Asset Management in New York, and Miller & Jacobs Capital in Philadelphia, according to Securities and Exchange Commission documents.

Greater Bay's reputation attracted the new money despite a general flight from banking to technology stocks, said chief financial officer Steve Smith. The company has satisfied Wall Street with steady earnings, its asset quality remains solid, and it continues to acquire small banks, he said.

"We have a good story to tell," Mr. Smith said. "And with growth estimated at about 20% this year, we should exceed our peer group."

Greater Bay's stock price surged 27% surge during the fourth quarter, for one of the largest gains among U.S. banks in the period.

The company's 1999 profits through September were up 35%, at $19.6 million, or $1.66 a share, before merger-related expenses. Analysts estimate that Greater Bay will report earnings of $2.30 a share for 1999. The figure is expected to be released this week.

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