SPAC-ish Group Sets its Sights on More Failed Banks

Porticoes Capital has an FDIC-approved gateway to acquire lenders that are shutting down.

Photo of an open bank vault
Photo by John McGehjee via CC0 1.0

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Normally, bank runs are something investors run away from. Not this group. 

Porticoes Capital, a blank-check company, is seeking to buy failed lenders that are closed by the Federal Deposit Insurance Corporation, according to regulatory filings reported on by the Financial Times

Run, Bank, Run

Last spring wasn’t the best stretch for US regional banks. Not only were smaller lenders taking on too much risk via uninsured deposits, but like everyone else, they were also facing rising interest rates and falling commercial real estate asset values. When anxious clients withdrew deposits from one bank, the panic spread to others. 

In a matter of weeks, Silicon Valley Bank, First Republic Bank, and Signature Bank all collapsed. By the end of the year, Iowa’s Citizens Bank and Kansas’ Heartland Tri-State Bank had folded as well. (The latter’s demise was also helped by the CEO’s alleged “pig butchering” scheme.)

Porticoes’ structure is much like a SPAC, in that it’s not an operating company and is simply looking for a bank to buy. On the other hand, it’s not looking to go public and its only FDIC-approved path is to buy failed banks. While all those that failed in 2023 are no longer on the market, Porticoes wants to be ready if 2024 sees a repeat:

  • Federal Reserve Chair Jerome Powell recently said the decline in the value of commercial real estate will continue to hurt banks. “This is a problem we’ll be working on for years more, I’m sure. There will be bank failures,” he told the Senate Banking Committee. “It’s not a first-order issue for any of the very large banks. It’s smaller and medium-sized banks that have these issues.”
  • Though an extreme outcome, one study conducted by CBRE last year reported that if the commercial real estate market continues to fall, it could result in 300 banks failing in the near future, most of which are community lenders but there is at least one major institution in there as well.

You Just Made the List: As of the end of last December, 52 lenders were on the FDIC’s “Problem Bank List,” an increase of eight from the previous quarter. Names are kept confidential to not cause a panic and even more runs, but the process of elimination can tell you some of the banks not on the list. The 52 banks have a combined asset value of $66.3 billion, so despite worry over New York Community Bank’s future, it can’t be on the list because it had $116 billion in total assets at the end of 2023. They’re safe… for now.