The American Bankers Association—through subsidiary Corporation for American Banking—recently endorsed capital investments made by StoneCastle Financial as a source of capital for member community banks.
“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,” ABA Executive Vice President John Wolff said. “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 is an SEC-registered, closed-end investment firm that seeks to serve as a direct investor in community banks seeking growth capital, share repurchases and other refinancing.
“StoneCastle Financial is the first investment company specifically created to make permanent, passive Tier 1 and Tier 2 capital investments in healthy community banks,” StoneCastle Chairman and CEO Joshua Siegel said. “It bridges the gap between investors and community banks, allowing banks direct access to the capital they need to grow and satisfy regulatory needs. 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.”
Community banks take local deposits, make loans to local businesses and consumers and help drive the growth of small business. Data from the FDIC shows that community banks have provided nearly 60 percent of all U.S. small business loans, though they only represent 20 percent of the banking industry.
“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,” Siegel said. “It provides community banks with access to Tier 1 capital at ‘capital markets’ pricing available to only the larger publicly traded banks.”