Local Banks Raise Capital to Fund Growth

By Andy Meek

When banks pass the hat, rounding up new capital from investors to finance future growth, it tends to be a sign those banks believe the economy is getting better.

Banks in Memphis that have been doing that of late include First Alliance Bank, which is in the midst of a capital raise now. First Alliance recently launched that capital raise in the form of a debt offering of up to $5.35 million.


Most of the money raised, said bank president and CEO Hunt Campbell, will be put to use as growth capital, helping the bank achieve goals that include expanding its lending capacity, enhancing its ability to attract and keep qualified loan officers, and facilitating the bank’s emergence from regulatory intervention.

The offering is currently set to wind down at the end of December, with a provision that it could be renewed for an additional three months. That could stretch the offering into March.

“Prior to any contributions of that capital to the bank, our leverage ratio is 8.8 percent right now,” Campbell said. “So we’ve got a good capital ratio, we’re just using the additional (capital) to grow.”

According to documentation supporting the debt offering, First Alliance management believes the Memphis banking market remains attractive. And by bringing in new capital, First Alliance can execute “market penetration plans” that include continued lending to financially strong real estate projects and an expansion of its commercial lending.

The new capital also could help pay the cost of personnel and technology enhancements, and it would help the bank grow its assets and become more profitable by spreading the costs of the bank’s fixed assets and expenses over a larger base.

“We believe the bank’s principal markets will rebound strongly over the coming years,” documentation for investors reads. “Our management has identified growth opportunities in our market areas.”

First Alliance’s parent company and bank experienced operating losses from 2008 through 2012, which it has attributed to the economic slump. Total losses during that period were $3.3 million, a major piece of which was due to the bank’s focus on commercial real estate loans prior to the recession, but the bank has changed its focus and now concentrates less on real estate loans.

First Alliance opened in Cordova in the fall of 1999. Its second location came in 2003 with a location in Uptown Memphis, then a third office in Oakland, Tenn., in 2007, and a fourth in East Memphis in 2008.

Meanwhile, Metropolitan Bank is in a different position.

Metropolitan just completed a capital raise of about $5.5 million. That’s capital to support future growth for the bank, which has raised more than $57 million in total capital since its inception in 2008.

“We didn’t want to raise too much or too little,” Metropolitan president and CEO Curt Gabardi said. “Just enough for organic growth purposes, because we were already well-capitalized by regulatory standards.”

Its short, five-year existence notwithstanding, Metropolitan has grown considerably in that time to now having assets of about $775 million across eight banking offices. The bank also recently notched its 16th straight quarter of increased earnings.

Metropolitan celebrated its fifth birthday earlier this year.

“We continue to be well-pleased and proud of the year-to-date performance in spite of the economy and record low interest rates,” Gabardi said.