Belvedere Capital, a San Francisco-based private equity firm that invests in US financial institutions, is raising its third fund with a target of $500 million (€358 million).
Registered as a bank holding company under the US Bank Holding Company Act – which prohibits investors with control positions in US banking institutions from owning non-banking businesses – Belvedere focuses its investments on small and middle market financial services firms.
The fundraising effort comes amid rising interest in how private equity firms can participate in investing in the banking sector, despite the US Bank Holding Company Act rules. To date – including Belvedere – at least four private equity firms have set up shop as bank holding companies, with a fifth one, JC Flowers, reportedly establishing an entity for the same purpose.
Last year, former comptroller of the currency Eugene Ludwig founded CapGen Financial, which closed its debut fund on $500 million in capital commitments and recently agreed to fund a $100 million private placement of shares in San Diego-based PacWest Bancorp for a 12 percent stake.
In 2006, former bankers Timothy Anonick and Laurence Fentriss founded Community Bank Investors of America, a Virginia-based private equity fund, to invest in small community banks. They recently filed for regulatory approval to buy $5 million-worth of shares in Florida-based Freedom Bank.
To date, Belvedere has invested in 18 banks, ranging from co-investments to control positions and even 100 percent stake acquisitions. It currently has five banks in its second fund, which closed in June 2006 on $150 million and is 80 percent invested. Several of these are owned by Belvedere SoCal, a publicly-traded holding company Belvedere created to aggregate community banks in Southern California.
Its first fund closed with $160 million in capital commitments in 1998 and has been completely exited. Between 1997 and 2004, it invested in eight community banks in Southern California, which it integrated under a single bank holding company – Placer Sierra Bancshares – and listed on the NASDAQ under the ticker PLSB. Wells Fargo acquired PLSB in 2007 for $645 million.
The firm was among the first private equity funds to register as bank holding companies when the Federal Reserve changed the rules to allow private equity firms to register as such in the mid-1990s. It was formed in 1994 by Richard Decker, who served on the board of the San Francisco Federal Reserve until 2006, and Anthony Frank, former postmaster general of the United States, and made its first investment in 1997.
Rival California-based Castle Creek Capital, which to date has invested in 42 banks and currently has $192 million in assets under management, claims to have pioneered this strategy when it invested in its first bank in 1995.