A white-hot stock market could prompt a new wave of initial public offerings within the banking industry.

The broader IPO market has soared, already prompting more banks to go public. Five banks have held IPOs this year, compared to just one through the first five months of 2012. The pace has picked up lately. A dozen banks have conducted IPOs since last July; only two banks went public in the prior 10-month period.

Plenty of banks could beweighing their options, including the $26 billion-asset OneWest Bank in Pasadena, Calif. Several others that nixed IPOs in recent years could revisit the issue, including the $3.2 billion-asset Bond Street Holdings in Weston, Fla., and the $6.5 billion-asset PlainsCapital Bank in Dallas.

A "middle zone" of banks, those with $1 billion to $20 billion of assets, is a "rich vein to be mined in the IPO market," says James Bauerle, a lawyer at Keevican Weiss Bauerle & Hirsch in Pittsburgh.

Investors are looking at "the well-run, strongly profitable, but not crazy profitable banks," says Bauerle, who advised the $2.1 billion-asset TriState Capital Holdings (TSC) on the Pittsburgh company's May 9 IPO. Community banking "is not as sexy as technology, but it's not as risky either."

Magna Bank in Memphis, Tenn., which has a strong capital base, went private last year to cut costs, says Kirk Bailey, the $494 million-asset bank's chairman, president and chief executive. Still, other banks with weaker capital positions might find an IPO attractive, he says.

"If you are going to need capital … and you don't have the ability to raise capital, then the IPO market would be attractive," Bailey says. "The market is much more receptive for IPOs than it has been in the past four to five years."

Successful IPOs can give banks an effective form ofcurrency for acquisitions, Bailey says. Additionally, some private equity funds that invested in small banks near the onset of the financial crisis may be pushing IPOs as a way of reducing their stakes.

There are a large number of banks along the West Coast and in the Southeast that are backed by private equity and are still working on internal problems, says Alan Avery, a lawyer at Latham & Watkins. That could slow the pace of IPOs, he says.

"From the private equity side of things, there's still perhaps a mismatch in expectations," Avery says. "In some parts of the country, there might be more of an appetite than others because of the relative health of the banks."

Still, it takes more than a hot equities market to spur bank IPOs. Recent debuts have had mixed results.

Most of the banks that have gone public in recent months have yet to see their shares soar in value. Shares of at least three banks — ConnectOne Bancorp (CNOB), Capital Bank Financial (CBF) and National Bank Holdings (NBHC) — are trading below their IPO prices.

Some bankers may also find investor interest disappointing. Low daily trading volume was one reason Magna Bank decided to go private, Bailey says. "We learned of the phrase 'orphan stock' — the stock just sits there and nobody pays any attention to it," he says.

Small banks worried about trading volume should also consider one of several methods of going public on a gradual basis, says Cromwell Coulson, chief executive of OTC Markets Group.

For instance, banks can slowly provide liquidity by making once-restricted shares available for trade on OTC platforms. Such an approach can help banks boost liquidity "organically" while avoiding the higher costs of a traditional IPO, Coulson says.

Ultimately, a community bank will pursue an initial public offering when it determines that it is the best way to increase revenue, Bauerle says. "There is a growing recognition for the garden-variety community banks of $300 million in assets, that it's hard to compete in this landscape," Bauerle says.

Raising capital with an IPO will help banks "that don't have either the capital base, or the business infrastructure to move beyond their limited scope of operations," Bauerle adds.

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