Patient Capitalist: Castle Creek's John Eggemeyer Doesn't Sell-Or Buy-A Bank before Its Time

Bank investor, acquiror, and investment fund chief John M. Eggemeyer III takes a classical sport fisherman's viewpoint of bank investing. Anyone who has ever done more than dangled a line knows prime requirement isn't equipment or even bait, patience. Eggemeyer, head of Castle Creek Capital, Rancho Santa Fe, Calif., made a name early in his bank investing career as a turnaround player, with an emphasis on quick gains from selling rehabilitated institutions. But that is a dated portrait. (Working for another company, Eggemeyer also played a major role in Chemical Bank acquisition of Chase, before going on his own.) Today, some fish Eggemeyer declines to cast for at all--they're not to his taste and never will be. Some he hooks, then plays Sometimes this goes on for years, even a decade or more, Eggemeyer letting them grow to a viable size--with his active help--before he lands them. When he does so, it's to reap profits for himself, his team members, and his investors. Buy it and fix it make our money as operators, explains Eggemeyer, who, after taking a controlling investment in a bank, often sits on board or even in chairman's chair, for a time. Lieutenants and associates often step into key operating slots. tend to be very disciplined and focused on what we do. There's no flash and dash about us. We have a particular vision of industry and we continue to grind it out. Eggemeyer has one more similarity with fisherman. always has an eye out for the big one. And such fish, Eggemeyer waits for, watching through weeds, as it were. You can't be impatient, says Eggemeyer, because there may be only one that is right fit for his team. You can say that your number-one priority is to be in Denver market, says Eggemeyer, but until that right opportunity presents itself, you may invest in two or three other markets before opportunity comes along in market you most want to be in. His kind of town, Chicago is A good example is Chicago market. Eggemeyer has liked it for some time. It is large, Eggemeyer prefers. It enjoys a growth rate exceeding national trend, and has very fragmented, diverse competition. Eggemeyer notes that there are currently more than 200 independent banks in Chicagoland. This combination of factors is ideal for Eggemeyer's preferred methodology. His firm of Castle Creek Capital consists of two main parts, Castle Creek Capital LLC and Castle Creek Financial LLC, plus multiple investment arrangements and relationships. Castle Creek looks for undermanaged banks that can be acquired, or heavily invested in, on a cooperative basis, then revamped. The Eggemeyer touch stresses concentration on business and commercial real estate lending and pushing out high-cost deposits. The initial acquisition is augmented by additional, in-market rollup acquisitions that build it to a size and market share that will someday be attractive to a buyer. Eggemeyer and longtime Chicago banker John G. Eck had been talking for some years about a deal they could work together. Eggemeyer wanted to find right opportunity and Eck wanted to get into more entrepreneurial side of banking than he was in while at LaSalle Bank, N.A., where he had worked for many years. Eck kept bringing possibilities to Eggemeyer, nothing clicked. Finally, as Eggemeyer tells it, Eck had to take a banking job to pay rent. The position he took at Labe Bank, a thrift turned commercial bank of $513.5 million-assets, involved problem loan cleanup. It also entailed helping Labe shift towards more business customers, which are our bread and butter, says Eggemeyer. Before long, Eck was on phone. He called and told me, 'I think I've got bank for us', Eggemeyer says. Eggemeyer liked story this time, and set his hook. …