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Donald Marron, whose Lightyear Capital LLC agreed to inject $40 million into Cascade, said that his team has met with roughly 150 management teams at midsize community banks in the past year.
November 2 -
NBH Holdings in Boston said it aims to amass $12B in assets. It could apply for a shelf charter, which would let it bid on failed banks that have been taken over by regulators, or it could buy healthy institutions.
October 22 -
Even if the line to buy failed banks grows longer, Tom C. Nichols and Don E. Cosby say they'll stay on it.
June 11 -
Gerald J. Ford made his reputation — and much of his fortune — buying up damaged banks and thrifts during the savings and loan crisis, fixing them, and selling them for top dollar.
October 10
A new group formed to buy failing banks is targeting states from Colorado to Texas.
Community Bank Partners announced its first deal this week, for the $55 million-asset Palisades National Bank in Palisade, Colo.
Led by Scott Jackson, who worked side by side with the billionaire bank-builder Gerald J. Ford in the early 1990s, the group plans to use the tiny, well-capitalized Palisades as a springboard for acquisitions of distressed banks in Colorado and neighboring states, as well as in Texas.
"We aren't hunting for elephants," Jackson said in an interview. "I think there is somewhat of a vacuum for bidders for some of these smaller community banks."
Most of the dozens of groups formed in recent months to buy failing banks are focused on the Southeast — where more closings are expected and population and economic growth are projected to be above the national average.
Jackson's strategy of using a small bank to grow quickly is similar to the one J. Christopher Flowers had in mind when he acquired the $14 million-asset First National Bank of Cainesville in Missouri last year. But Flowers, a well-known private-equity investor, has yet to buy a failed bank with the "inflatable" charter he acquired.
Dan Bass, a managing director at the investment bank Carson Medlin Co., said finding suitable targets will be a challenge because the banks in danger of failing are concentrated in Florida, Nevada, California.
"There aren't as many opportunities in the central part of the country right now," Bass said.
Jackson said he believes Community Bank Partners will find plenty of opportunities.
"Ideally, we would like to have two or three operations," he said. "We are looking at major metros in Texas and the Front Range in Colorado. We are looking at other places, too. … There are an amazing number of troubled banks in Kansas."
Community Bank Partners did not disclose the price of the deal for Palisades, and Jackson would not say how much capital he plans to raise, except that it would be "significant." The deal is expected to close next quarter.
Industry watchers said another obstacle will be persuading regulators to let a $55 million-asset bank bid on failed banks in such a wide swath of the country.
"They are going to have to prove they have the team and capital to be able to do that," said Larry Martin, the president of Bank Strategies LLC in Denver. "They are going to be limited in the size of acquisition they can do, because the bank they are acquiring is not that large and the FDIC may be reluctant to let them do acquisitions that are bigger."
Observers stressed the importance of having an experienced management team in place before regulators allow roll-ups.
One group that got the nod is led by Joe Evans, who once ran a $1.8 billion-asset bank in Atlanta. This year Evans orchestrated a $300 million capital infusion for State Bank and Trust Co. in Pinehurst, Ga., so that it could absorb six failed banks that had been part of Security Bank Corp. in Macon. State Bank had just $36 million of assets, but it took on $2.4 billion of Security's $2.8 billion in assets.
For any would-be buyer from outside the banking industry, "the first obstacle is getting it closed, because things are taking longer now," Bass said. But starting with Palisades should give Jackson's group an edge. "Having a charter will put him ahead of a lot of people," Bass said.
Jackson, who hasn't worked in banking since 1995 — in the interim he spent 10 years running a manufactured-housing business — said he is still adding members to his team. The current management at Palisades would continue to run that bank after it is purchased.
His team includes Bob McCambridge, who has worked in electronic payments, most recently at KeyCorp in Cleveland; Scott L. Gesell, another former Ford team member from the early 1990s, now the chief counsel for Community Bank Partners; and John Sprengle, a managing partner with experience raising capital and doing acquisitions.
In August the Federal Deposit Insurance Corp. announced guidelines that require private-equity owners buying banks to maintain a 10% Tier 1 leverage ratio. Private-equity bidders have complained that the rule is a handicap, preventing them from earning the same returns as other bank investors.
Jackson said he hopes to use a structure that will spare his group from having to abide by those higher capital levels.
No group will own a stake larger than 4.9% and no individual, beyond management, will own more than 9.9%.
"We aren't anticipating raising money from any private-equity shops," Jackson said. "We anticipate we will be treated like a bank, since we will be a bank. … We are building it to run it. Our business plan isn't to buy and flip. It is to buy, fix it and run it as a well-managed bank operation."
