Robert Keller has $25 million that is burning a hole in his pocket.
The longtime community banker with a track record of delivering returns for investors now runs an investment fund that buys stakes in small banks seeking cash to help fund their growth.
Triumph Investment Fund, created a year ago with investments from 60 wealthy individuals, has invested roughly $2.5 million in three community banks, and Mr. Keller is itching to deploy the rest.
“If they meet our criteria and need money to buy a branch or do an acquisition, we can be there for them and act very quickly,” he said in an interview this week.
Mr. Keller said that since the beginning of the year he and Triumph’s other founder, John Clarke, have visited about 70 banks across the country. To spread Triumph’s name, they are also talking to investment banks that work with small banks.
Triumph’s criteria are very specific. It seeks out young commercial banks — but not start-ups — in attractive markets. They must have assets of $100 million to $1 billion, with 300 to 400 shareholders, and they must be privately owned or traded over the counter.
The fund does not invest in family-owned banks, Mr. Keller said.
He said commercial banking is what he knows best and that he believes it has the best potential for returns.
“I’ve been in commercial banking for over 30 years,” he said, “and I know there is a lot of opportunity out there in this segment of the market.”
The Triumph fund has invested $700,000 to $950,000 in three banks and is giving four more prospects a close look, Mr. Keller said. Once all the money is disbursed, he said, he hopes the fund will produce returns of 20% to 25% a year over its seven-year life.
Mr. Keller’s fund, based in Bedford, N.H., is one of just a handful that invest exclusively in community banks.
Hovde Financial LLC of Washington started its first bank investment fund, Financial Institution Partners, in 1994. When it closed, in 1999, the fund had more than $100 million and was producing a return of about 30% annually. Hovde has since started two similar funds, though they do not exclusively invest in banks.
Kirk Rostron, Hovde’s chief operating officer, said bank investment funds are relatively scarce because few people have enough expertise to invest in little-known banks. Eric D. Hovde, who manages the financial institutions fund, has worked alongside banks as an investment banker over the past three decades; he founded Hovde Financial in 1987 after helping to start another investment bank.
“To manage it, you really have to know banks inside and out,” Mr. Rostron said.
Triumph’s co-founders both have extensive banking experience.
Mr. Keller began his career at Indian Head Bank in Littleton, N.H., and held the titles of chief financial officer and chief administration officer before Fleet Financial Group acquired Indian Head in 1989. He led an investor group that acquired three failed banks in New Hampshire in 1991 and created New Dartmouth Bank, which was sold in 1994 to the former Shawmut National Corp. in Boston for $155 million – yielding a 400% return for the initial investors. (Shawmut later was sold to Fleet.)
In 1995, Mr. Keller and another group of investors acquired five community banks in California. The five were consolidated into a new company, Eldorado Bancshares Inc. of Laguna Hills, that was sold in 2001 to Zions Bancorp. of Salt Lake City for $195 million.
Mr. Clarke has started two community banks and is a co-founder of Baldwin & Clarke Cos. of Boston, which is involved in investment management and corporate finance.
