BankBlackwell, whose headquarters are located at 580 Harrison Ave. in Boston, is working with a California company to allow investors to use their individual retirement accounts to purchase stock in the bank.

With $17.5 million of common stock being offered until the end of September, Boston-based BankBlackwell has found a new way for individual and institutional investors to purchase stock in the startup bank by using their own individual retirement accounts.

A California-based bank subsidiary called Trust Administration Services Corp., or TAS, is working with BankBlackwell, whose headquarters are located at 580 Harrison Ave., to secure funding through investors’ IRA accounts.

“This has been a critical funding source for new banks, as well as a great alternative investment vehicle for local entrepreneurs looking to diversify the assets within their IRAs or who don’t have personal cash on hand to invest,” said Jim Wagner, chief executive officer of TAS, a subsidiary of First Regional Bank in California. “This option provides new banks with the ability to raise funds more quickly than going through traditional avenues.”

TAS, which specializes in self-directed retirement accounts, custodial accounts and a variety of personal trust services, typically gets business from attorneys, brokers and companies working with startup banks. Wagner said when de novos are in the formative stages, TAS will hold seminars to inform investors about the option of investing through their IRA.

“A lot of people don’t know that,” Wagner said.

If an investor decides to invest in a bank through his or her IRA, that person contacts TAS directly and directs the firm to buy stock in that particular bank. Most investors will transfer a portion of their existing IRA to TAS, which then maintains the account.

“I don’t know of any other firm right now that is facilitating fund-raising for start-up banks through investor IRAs,” Wagner said.

So far, Wagner said several investors have used their IRAs to invest in BankBlackwell. According to its Web site, BankBlackwell intends to operate as a savings bank focused on offering selected financial services over the Internet to black individuals. The bank received approval from the Office of Thrift Supervision earlier this year to organize a federal savings bank. BankBlackwell plans to offer savings accounts, CDs, mortgages and home equity loans, especially to the growing number of black households earning $50,000 or more. Faith-based organizations also are being targeted. BankBlackwell is the first black bank to obtain a federal bank charter in more than a decade. Net proceeds will be used primarily for general corporate purposes, including initial working capital and support of loan and deposit growth, according to the Web site.

‘An Effective Tool’

In most cases, between 25 and 100 investors will invest through their IRAs per bank, which accounts for $2.5 million to $3 million raised for most banks. TAS also has helped some community and independent startup banks raise secondary and tertiary rounds of funding. Over the last three years, TAS has partnered with more than 60 banks, primarily in California. More than 1,000 investors have invested in those startup banks, contributing to the more than $1 billion in assets TAS currently holds under administration, including alternative assets such as trust deeds, real estate, partnerships and private equities. The firm also is working with financial institutions in Washington state, Texas and Kentucky.

“Banks are viewing this [method] as an opportunity in assisting them in money-raising efforts,” Wagner said.

James Mundy, the bank’s chief executive officer, president and lead organizer, said while researching ways to raise funding for the de novo bank, he heard about investors using their 401(k) accounts and IRAs to invest in bank stock, calling it “another tool in the arsenal.”

It wasn’t an entirely easy decision, however. Mundy said there was an internal debate on whether it was an appropriate means for investors because a de novo bank is a high-risk proposition.

“Is it an appropriate vehicle for someone’s retirement fund?” Mundy said.

Ultimately, Mundy and the bank’s organizers decided that an investor should be allowed to make such a choice on an individual basis. The bank provides a package explaining investor options.

According to TAS, investing through IRAs gives investors the ability to broaden their options beyond traditional stocks and bonds. The trend of investing in alternative assets, such as bank stock, has been on the rise as more investors become aware of the option. Investing in alternative assets gives an investor an opportunity to diversify his or her portfolio.

Mundy said so far, the bank has seen success using the new method with several investors.

“It’s an effective tool,” Mundy said. “It seems more and more de novos are doing it.”

It has speeded up the money-raising process, as well, Mundy said. Another benefit has been scoring investors that otherwise might have passed.

“We’ve gotten investors we otherwise wouldn’t have,” Mundy said.

While bank funding through an investor’s IRA seems to be working for BankBlackwell so far, not everyone is confident that it is such a good idea.

Sean Mahoney and Stanley Ragalevsky, attorneys at Boston-based law firm Kirkpatrick & Lockhart Nicholson Graham, said investors should be wary when investing in a startup bank.

Mahoney said it is important to decide what type of investment is prudent when using a retirement account, noting that many investors lost money during the Internet boom.

“It is a matter of what an [investor] can bear,” Mahoney said.

Ragalevsky said IRAs are intended for an individual’s retirement and wonders if investors should take a chance in a venture that is speculative.

“It seems a bit edgy,” he said.

Most IRA funds, he added, tend to go into less risky things.

“This isn’t a Fortune 500 company,” Ragalevsky said.

Typically, people tend to invest in things like bonds or bank deposits.

“The risk is diversified,” Ragalevsky said.

However, Mahoney said there are some benefits for investors if the bank in question turns out to be successful. If someone invested in a bank that becomes profitable, he noted, there can be tax benefits for the investor.

Ultimately, Mahoney said, the investor has to be clear on what type of investment they are making.

“You’d really have to know what you’re doing to take that risk,” he said.