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Alternative Market Briefing

Private capital lines up behind community banks

Thursday, May 29, 2014

Bailey McCann, Opalesque New York:

Community banks across the world are facing a barrage of changes as new regulations come into force. However, those regulations weren’t originally aimed at them, they were aimed at the too big to fail multinational banks. For community banks, which by their nature have smaller resources meeting compliance requirements, cleaning up toxic assets and managing non-performing loans is a daunting task. Observers of the industry have also noted other factors including a wave of retirement from top management of many of these banks, and growing consolidation.

Taken together, it may well look like we could be facing a world without community banks. But new financial firms are stepping in to line up private capital behind community banks in a variety of ways. These companies are buying portfolios of non-performing loans, acquiring community banks as management retires, and setting up joint ventures to help manage the load.

Signature Group Investments is one such firm, it recently purchased a pool of non-performing and performing loans from a New York City based community bank. When firms like Signature step in, community banks can remove portfolios of business that could keep them from being in compliance with new financial regulations or could just be a drag on the overall profile of the bank. In turn, firms like Signature can use their expertise to deal with the non-performing loans and rebuild returns. In this purchase, Signature ......................

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