A heavy concentration in commercial real estate is an asset when Warburg Pincus comes calling.
The New York private-equity firm has invested in three banks recently. Its $150 million investment in National Penn Bancshares Inc. seems counterintuitive given the Boyertown, Pa., company's strong commitment to commercial real estate lending as others put more emphasis on commercial and industrial loans.
But it was that plan that caught Warburg's eye. "While there are opportunities in C&I … to be a community bank you have to be in the CRE business, and you have to do it in a way that you can control the risk," Michael Martin, a managing director of Warburg's financial services group, said in an interview last week. "That is very much in sync with our view."
Warburg invested $63.3 million in National Penn on Oct. 6 and plans to invest the rest by yearend. Weeks earlier, Warburg invested $170 million in Sterling Financial Corp. as part of the Spokane, Wash., company's recapitalization. Warburg also invested $115 million in Webster Financial Corp. of Waterbury, Conn., in October 2009.
For the $9 billion-asset National Penn, the funds will accelerate plans to leave the Treasury Department's Troubled Asset Relief Program and pursue acquisitions as activity heats up in the Northeast.
Although the National Penn investment comes later in the cycle, the approach is still the same for Warburg. "Find good, durable regional franchises, supply them with capital so they can stabilize their business and shore up their balance sheet, and then watch them and help them grow through acquisitions, or otherwise, going forward," said Martin, who will join National Penn's board.
