Buyers scarce for small banks

July 20, 2010 | By Jim Kim

Not too long ago, many thought that small troubled banks represented a gusher of opportunity for savvy investors. But, as Reuters notes, to date, fewer than two dozen of the more than 236 banks shut by the FDIC since January 2009 have been sold at auction to investment groups sponsored by private equity firms, hedge funds and wealthy financiers.

"Hundreds of small banks across the country are struggling to keep their doors open, but the industry's overseers in Washington, D.C. are more wary than ever about the breed of high-rollers that inhabit Wall Street, who come bearing bags of cash and the promise of an easy fix."

Regulators have tried to craft fairly specific rules for private equity firms (private equity news), which the agency wants to prevent from flipping properties. As for hedge funds (hedge fund news), there's concern as well. Just ask hedge fund manager Jason Ader. He would like to acquire Service 1st Bank of Nevada, a small community bank in Las Vegas with just $210 million in assets, but has yet to receive approval.

There are some investment vehicles that have been sanctioned to do bank deals, but they are on the sidelines for now also. More may be pondering deals that do not require FDIC assistance. Wilbur Ross among others have explored this route. This may not be a sure shot, however.

For more:
- here's the article