Investors Show Love to Banks Big and Small

Larger banks aren't the only ones trying to raise money in the public markets. Community bank 1st United Bancorp on Wednesday raised $70 million in an initial public offering, the banking industry's first IPO in two years.

As we wrote earlier this week, a number of regional (and super-regional) banks are reaching out to investors for capital. Huntington Bancshares, Regions Financial, Synovus, Washington Federal and Zions have all recently launched secondary offerings. Big players are also getting in on the act, with Bank of America raising $13.5 billion, JPMorgan Chase $5 billion and Wells Fargo $7.5 billion in stock offerings earlier this year. Sensing a score, foreign companies, too, are buying in. Japan's Nomura, for instance, said today it plans to raise up to $5.6 billion at home and overseas.

Smaller players are also returning to the well -- in droves. In recent weeks there's been a flood of follow-on offerings: Eagle Bancshares, which raised $51.8 million; Heritage Financial ($43.4 million); HomeBancShares ($98.2 million); Flushing Financial ($90.5 million); National Penn Bancshares ($153.1 million); The Bancorp ($57.5 million); Umpqua ($245.6 million); Union Bancshares ($62.5 million); and numerous others. More are on deck.

Banks of all sizes need capital, although often for different reasons. The giants need to pay back their TARP debt and gird for projected losses, as well as sock money away for the day federal capital requirements rise. Regional players, too, are preparing for harder times, and also making acquisitions to position themselves for a possible industry shake-out.

Small, healthier banks such as 1st United also are seeking growth. As their lending-related revenues atrophy, that often means purchasing financially troubled rivals. The Florida bank last year bought local competitor Equitable Bank for roughly $55 million and plans more deals. Unlike the other minnows listed above, 1st United launched an initial, rather than a secondary, offering, moving its stock from the pink sheets to Nasdaq.

Whatever their motives for selling stock, all these banks are capitalizing on renewed investor faith in the sector. After plunging in the first quarter, the KBW Bank Index has climbed 60 percent after tumbling to $18.62 in early March. Whether that faith is justified is anyone's guess. Government "stress tests" of the largest banking companies, along with the the implicit guarantee extended to the giants, appear to have restored market confidence.

As usual, caveat emptor, especially with commercial loans fraying. But as long as investors are buying, more banks will seek to cash in. Another banking company, Plains Capital, is on the runway with a planned $140 million IPO. Me, I haven't got the stomach for it.