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Suffolk Bancorp is looking to grow after a large purge of nonperforming assets under CEO Howard Bluver.
September 20 -
Camco Financial (CAFI) in Cambridge, Ohio, is looking to raise up to $10 million through a common shares rights offering to existing shareholders.
July 17 -
Eagle Bancorp (EGBN) of Bethesda, Md., could raise up to $35 million for general corporate purposes, including potential acquisitions and organic growth.
May 1
Some banks are out raising capital so they can grow; others are looking to raise money because they finally see an opening to do so.
Eagle Bancorp (EGBN) in Bethesda, Md., and Camco Financial (CAFI) in Cambridge, Ohio, announced capital raises last week, though they were turning to investors for entirely different reasons. Eagle raised $45 million to support organic growth opportunities, while Camco's $10 million rights offering should
"The amount of capital being raised is remarkably low, but for the banks that are doing it, they tend to fall into two categories," says Wesley A. Brown, a managing director at St. Charles Capital, a Denver investment bank.
"There are those who are experiencing outstanding growth and need to shore up capital beyond just retained earnings," Brown says. A "second group is the relatively sick banks that have firmed up their asset quality issues."
The $3 billion-asset Eagle's capital raise, by design, took several months,
"While the capital position of EagleBank was already very strong, the company is pleased to complete these transactions in a favorable market," Ronald Paul, Eagle's president and chief executive, said in a press release last week. "The issuances are accretive as compared to the tangible book value per share of $11.97" at Sept. 30.
At-market offerings can be tricky because investors don't always understand them and there must be enough liquidity to support the additional shares, says Chris Marinac, an analyst at Fig Partners in Atlanta. Eagle's plan "worked exactly the way they mapped it out in April," Marinac says.
Eagle did not immediately return a call for comment on Monday, but the company has said that the proceeds would be used to support organic growth.
The company will likely focus on building out its operations in northern Virginia, Casey Orr, an analyst at Sandler O'Neill & Partners, wrote in a Monday note to clients.
Orr noted that Eagle has grown its loans and deposits by 18% compared to a year earlier. "We wouldn't completely rule out a small acquisition," she added.
The $754 million-asset Camco, said its $10 million rights offering was implemented to support its Advantage Bank, which has been adequately capitalized since mid-2010 because of asset quality issues. The rights offering is fully subscribed but has not been officially completed.
Advantage Bank's nonperforming loans peaked at around 6% of its total loans in 2010 but have moderated to reach 3.8% at the end of the third quarter. The bank has been profitable since the third quarter of 2011, and it has slowly rebuilt its capital ratios with those retained earnings.
Companies such as Camco have likely reached a place where they can get existing investors to pledge more money to clean up any remaining capital issues, says Matthew C. Schultheis, an analyst at Boenning & Scattergood. The market has also rewarded companies that have managed to purge their problems after raising capital, he says.
"Investors are willing to fill the credit hole if they really do believe that it will handle all of the problems," Schultheis says. "The alternative can be languishing for years."