Patriot Financial Partners LP has money to invest, but before community bank executives pick up the phone to request a meeting they should know what the private-equity firm wants and doesn't want.

"We receive 10 to 15 calls a week and a lot of them we shut down," says W. Kirk Wycoff, a managing partner at the Philadelphia firm.

"If it is less than $500 million, it isn't going to work for Patriot. If it is more than $5 billion, it is not going to work," Wycoff says flatly. "If nonperforming assets are 6% or higher, it isn't going to work. If it is in a geographic area that doesn't have any density or growth, it isn't going to work. Before management, before price, before deal structure, those are the non-starters."

With an initial $300 million to invest, Patriot is certainly not the largest private-equity firm, but Wycoff sees firms like his as being in a great position to play in an underserved market.

"We are not Fortress or Wilbur Ross. Those groups can't make a $15 million investment in a community bank. It is too labor intensive. If you manage big pools, you can't make those numbers work," he said. "That is what creates the opportunity for the Patriots, the Castle Creeks, the Hovdes of the world. I'd say that all the firms in our size have about $1 billion in capital combined for an industry that needs $15 to $20 billion."

That kind of disparity provides groups like Patriot the pick of the community bank world. Wycoff said Patriot looks at about 25 opportunities each month and has already deployed some $225 million into 15 banks in the last few years.

Once a prospective client has garnered a further look, the company spends some time with management to assess their strengths and weaknesses. With credit being the banner topic of the last few years, there is also a deep dive into the loan portfolio.

"We take a week on site and several weeks off site. We do our own review and sometimes bring in outside credit specialists," Wycoff said. "We cover about half the portfolio and all of the classified assets."

Wycoff draws heavily off his professional experience. He was the chairman and chief executive of Progress Financial Corp. from July 1991 until April 2004, when the $1.2 billion-asset company sold to FleetBoston Financial Corp. for $211 million. He is also the chairman of Continental Bank in Plymouth Meeting, Pa., where he once was the president and CEO.

Although Patriot avoids companies with large pools of nonperforming assets, two of the banks in its portfolio are under credit pressure. He declined to identify them specifically, but said one had problems when the money was injected; problems arose at the other bank after a capital infusion. In those cases, Wycoff said Patriot is sticking by its investments.

"We are not afraid of it. We are not a hedge fund; we don't cut and run," he said. Patriot is even willing to kick in some additional capital, he said, if it is needed.

Patriot made the majority of its investments in 2009 and 2010, and the plan is to hold them for four to six years, so the current topsy-turvy nature of the stock market isn't worrying the firm.

"The current illiquidity in the markets is really irrelevant to our strategy. We don't care if they are up or down, we care how well our companies are doing. If they are keeping credit quality strong," Wycoff said. "On average, we are holding them for five years, so what matters today is what are the opportunities and what are the stresses in their market."

Still, the volatility has made deploying the remaining funds difficult.

"Nobody has come to market in the last 60 days. The KBW Regional Index was down something like 17% in the third quarter. When you have that kind of downward pressure, you don't look for capital," Wycoff said.

Patriot, which raised its money in 2007, has until 2013 to become fully committed. With investments across the country, he said the company is particularly focused on finding targets in places like Boston, southern California, New York or several of the major cities in Texas.

Further, the firm wants places that have "reasonable population growth, above average median income per household and market rate or lower unemployment," Wycoff said. Also, Patriot wants its portfolio banks to be able to achieve core deposits of 20% of all deposits.

Patriot's most-recent deals include a $22.5 million investment as part of a $75 million recapitalization of ECB Bancorp Inc. in Englehard, N.C., in a deal that should close by year-end. Last week American Chartered Bancorp in Schaumburg, Ill., named Patriot as an investor in its $50 million capital raise.

Wycoff said Patriot wants companies that can achieve return on assets of at least 1% and return on equity of 12%. "Some of them are already there and others just need some capital to continue to execute on their business plans," he said.

The investments almost always come with some representation on the board. Patriot helps the company to focus on portfolio risk and improve efficiencies.

"We just add another set of hands. We have good management teams that already get this," Wycoff said. "We are former CEOs that have worked in the industry and are always willing to share that information."

To be sure, he said the banking industry has a tough few years ahead of it, with anemic loan growth, a reduction in the housing market and the swing of the regulatory pendulum. Still, Wycoff is particularly optimistic about community banking. For starters, community bank margins have held up better than those at big banks. Smaller banks "have more road to lower deposit rates," he said.

"That's the first reason I am bullish," he said. Also, news of big banks charging for checking should cause customer turnover. "The opportunity for community banks to gain customers is very large."

While community banks might be aching from the Dodd-Frank Act in the near term, Wycoff sees the pendulum "coming back to the middle for small banks."

Sometimes Patriot assigns homework to the management team before agreeing to an investment.

Gregory Dingens, an executive vice president and the head of investment banking at Monroe Securities, a Chicago firm that worked on the American Chartered deal, said his client began talking to Patriot at the beginning of this year.

"We were making calls in February. In April and May we met with them and they gave us a couple of to-dos, such as an independent loan review and some other things to tighten up," Dingens said.

Dingens also offered some hope to other would-be targets. "They are not hard to reach, so long as you have a credible product. Then they call you back pretty quickly," he said.

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