Better Trading, Better Valuation For Community Banks

Posted On August 13, 2015 | by Kristine Walczak

“Banks are really all the same”. This is the last thing any of us want to hear about our business.

 

The beauty of a community bank is that it is all about the community. Typically your board of directors and most of your shareholders are all part of the community. Together you have invested in the community, built your careers in the community and raised your families in the community.

 

Therefore, many community banks have a shareholder base in the geography they serve. Because of the nature of a community bank’s business, it can be difficult for investors outside the service area to find and learn about community banks. As a result, community bank stocks tend to trade in small volumes, which can “lock in” shareholders and “lock out” other interested buyers.

 

However, community banks offer an investment opportunity that is attractive to many institutional investors! Building awareness for your community bank’s stock is crucial to building your name, credibility and eventual trust with the shareholders you serve.

 

One way to enlarge a community bank’s investor base is to concentrate on investment firms which can buy blocks of stock in these banks as they become available.

 

It’s amazing what you accomplish when you plan!  Start by targeting the appropriate investors to enlarge your audience of prospective shareholders. Consider investor days and non-deal roadshows as well as investor conferences with community bank interest. In fact, we recommend every publicly traded community bank should be on the road at least two times per year to meet with institutional investors, in both the major metropolitan areas near you as well as the cities that house the greatest numbers of small funds, such as New York, Chicago, San Francisco and others.

 

Any by increasing the number of institutional investors in your community bank’s stock, you can increase the trading liquidity of your stock, allowing investors to buy in more easily, and improve the ability of the Bank to access the capital markets.

 

A colleague, from Investor Relations firm, DresnerAllenCaron, recently teamed up with the OTC Markets Group for a discussion on building a successful investor relations program for community bank stocks. Best practices for engaging shareholders through strategic targeting and communication were discussed.

 

To see the webinar, go to www.otcmarkets.com.  The link to the webinar is on the opening page – scroll down on the right.

Photo courtesy of nj.com

Photo courtesy of nj.com

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