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Why You Need to Know Scott Reed

The partner at Bankcap Partners is dedicated to growing midsized banks.
By Jeff Bounds |
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Why You Need to Know Him:


Because he, along with business partner Brian Jones, runs the day-to-day operations of one of the few private equity firms in the country dedicated to investing in new and growing midsized banks. Reed and Jones are the guys at Dallas-based BankCap Partners who do the legwork—raising capital to invest, finding potential deals, structuring transactions, and overseeing banks in which their firm has acquired ownership stakes. If you want to do a deal with BankCap, Reed and Jones will be the people you will talk to primarily.


BankCap got its start in 2005, when Reed and Jones worked as investment bankers specializing in the financial services industry in the Dallas office of Bear Stearns. A client, Jody Grant, approached Jones about forming an investment shop to help duplicate the business model of his Texas Capital Bancshares in other markets. Reed came aboard shortly thereafter.


Launched in 1998 with $80 million in startup capital and Grant at the helm, Texas Capital is one of the nation’s premier regional banks targeting middle-market companies. Grant now serves as chairman emeritus of the bank, which at the end of 2015 had about $18.9 billion in assets, 1,329 employees, 12 full-service locations, an operations center in Illinois, and relationships or sales offices in other states for its various business lines. 


“We’re in the process of realizing our investments from our initial funds.”

Scott Reed
BankCap raised its first fund, worth $100 million, in 2007. It has since invested in about 10 firms nationwide, including a 2015 infusion in Lubbock’s Vista Bank, according to Reed. BankCap typically invests $5 million to $20 million into a given bank, and has put its capital to work in firms from Georgia and Illinois to California, Kansas, and Virginia.


Whether by investing solo in a new bank or by joining other investors, BankCap’s ultimate goal is to help build up fledgling businesses to have roughly $1 billion to $10 billion in assets. At that point, hopefully within a three- to five-year time-frame, BankCap seeks to cash in on its investment—whether through a merger, acquisition, or public stock offering in the bank it has supported. 


“We like banks that can be valuable on a stand-alone basis, and that don’t require [M&A transactions],” says the 45-year-old Reed. “We’re in the process of realizing our investments from our initial funds, and we are currently investing the capital we subsequently raised.”


Opportunities in Banking


Although the formation of new banks has largely ground to a halt nationwide, the industry is still a great place to invest, says Grant, a partner at BankCap. “It is through banks that the loans and capital are provided to businesses that make the economy tick,” he says.


BankCap seeks to make money by investing in small banks that it believes can grow to be prominent midsized regional players, similar to what Texas Capital has done. While it may be tough to unseat giants like JPMorgan Chase or Bank of America, BankCap’s leaders believe the United States still has geographic pockets where a strong management team can build a good brand. 


“Texas Capital was unique when it started,” Reed says. “They had a limited branch model and focused primarily on corporate customers. There are still a range of ways to make money in the banking industry. We want teams that can differentially execute.”


BankCap targets banks in economically robust regions, generally the 50 largest metropolitan areas of the country. The institution should have a business model to separate itself from others in its market, such as focusing on a specific type of lending or customer segment, and proven executives in charge.


Although Reed has flourished at his big-company gigs, including Bear Stearns and Bain & Co., the shift to running a small operation is a familiar one. Growing up in San Diego, he had a role model in entrepreneurship in his father, an immigrant from New Zealand who had his own radio manufacturing business. Reed has citizenship in three countries: the U.S., New Zealand, and Ireland, the birthplace of his mother. And while stressing that he loves his career, Reed says he’s also passionate about history.


“I’m probably a frustrated teacher or professor in waiting,” he says. “History is exciting and interesting on its own. But students of history also better understand the world today. If we don’t understand it, it appears like things today are new. The reality, though, is we’re not all that different from before.” 


Being a Civil War buff in particular, Reed’s stint as an undergraduate at the University of Virginia in Charlottesville put him within driving distance of many battlefields and monuments. He didn’t even  need to leave the campus to see wonders from the past, though. Thomas Jefferson founded the university and designed its Academical Village. “When you see places that Jefferson helped create, history comes alive,” Reed says.  

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