Chicago Thrifts Luring Investors with Initial Public Stock Offerings
Vogelstein, Fred, American Banker
Chicago Thrifts Luring Investors With Initial Public Stock Offerings
Initial public stock offerings by depositor-owned thrifts have surged in Chicago, attracting investors nationwide in search of big gains.
In the past three weeks four thrifts have announced plans to issue stock, and more announcements are expected. Thrift executives said a desire to participate in the banking industry's current merger wave is fueling the activity.
More Deals Expected
"I think you'll see a rash more of these coming down the road," said Thomas McCabe, senior vice president and treasurer of NS Bancorp, a $1.3 billion-asset thrift that issued 10 million shares last Dec. 19.
With assets of $1.8 billion, Bell Federal Savings Bank is the largest of the thrifts to recently announce plans to go public. The others are Liberty Federal Savings Bank, Security Federal Savings and Loan, and Calumet Federal Savings Bank, each with less than $500 million in assets.
The trend has brought some skepticism along with attractive returns.
Many thrifts, particularly in New England, have failed or fallen on hard times after using capital from initial public offerings to make risky condominium and office building loans.
Experts question whether newly converted thrifts will avoid squandering their new capital on bad loans as other thrifts have done in the past.
"It's a very interesting question [as to whether they will be able to control themselves]," said Bruce Harting, an analyst at Salomon Brothers Inc.
The pace of thrift conversions is up nationwide. Experts say Chicago is likely to remain the epicenter because roughly 150 of Illinois' 250 depositor owned thrifts are based there. This concentration is a throwback to the days when branch banking was forbidden in the state, and each Chicago neighborhood had its own ethnic roots and its own thrift.
A rising stock market for bank and thrift issues and successful offerings by Cragin Financial Corp. on June 6 and NS Bancorp sparked the current round of conversions in Chicago, experts said.
Up from Offering Price
Cragin's stock has risen to $21.125 from its offering price of $10 a share, and NS Bancorp's stock has risen to $17.375 from its offering price of $8 a share.
But beyond that, experts say there is a sense among the management of these banks that they can't be players in banking consolidation if they remain depositor owned.
"You need to be a stockholder-owned company to acquire other institutions," said Donald Holton, Cragin's chief marketing officer.
Reid Nagle, president of SNL Securities, said thrift public offerings have an additional appeal to thrift managers in that they can become wealthy overnight. "They typically buy lots of the offering and get options. …