Nov 22 - The American Bankers Association – through its subsidiary the Corporation for American Banking – has exclusively endorsed capital investments made by StoneCastle Financial Corp. as a source of capital for its members.
StoneCastle Financial is an SEC registered, closed-end investment company established to serve as a direct investor in community banks seeking capital for growth opportunities, share repurchases and other refinancing activities. In accordance with its investment objectives, StoneCastle Financial seeks to invest in privately held and publicly traded community banks through preferred equity, subordinated debt and, to a lesser extent, common equity.
“StoneCastle Financial is the first investment company specifically created to make permanent, passive Tier 1 and Tier 2 capital investments in healthy community banks. It bridges the gap between investors and community banks, allowing banks direct access to the capital they need to grow and satisfy regulatory needs,” said Joshua Siegel, StoneCastle Financial chairman and CEO. “We intend to make direct bank investments in the form of preferred equity, subordinated debt and common equity based on our analysis of a bank’s profile.”
“The ABA recognizes that StoneCastle Financial’s investment strategy provides an additional source of permanent capital for community banks, especially for privately held community banks across the country,” said John Wolff, ABA executive vice president. “Community banks have historically been unable to tap the capital markets, and StoneCastle Financial comes at an auspicious time as banks are seeking sources of capital to grow and serve their communities.
StoneCastle Financial will target for investment well-capitalized and profitable institutions with stable balance sheets and attractive deposit franchises.
“These small banks typically have long operating histories, robust market share and customer loyalty – and are led by strong management teams that successfully navigated the banking crisis,” said Siegel. “Well-run community banks have traditionally delivered steady returns, even throughout challenging markets, which can provide knowledgeable and patient investors with stable and consistent income over long periods of time.”
Community banks historically have had a solid business model – they take local deposits, make local loans and have strong ties to their local customers and communities, helping to drive the growth of small business. According to the FDIC, small banks have provided nearly 60 percent of the nation’s small business loans, despite representing less than 20 percent of the banking industry’s assets.
“StoneCastle Financial was created to fill what we perceive as a significant need — a way for retail and institutional investors to invest in healthy, private and thinly traded public, community banks with secondary market liquidity provided by its listing on the Nasdaq exchange. It provides community banks with access to Tier 1 capital at “capital markets” pricing available to only the larger publicly traded banks” said Siegel.