As Q1 earnings release and annual shareholders’ meetings begin wrapping up, I’ve been approached by a few banks asking if I wouldn’t mind re-running a piece I first prepared a few years ago. The requests seemed to largely center on the desire to share with their management teams and/or directors the views of an objective external party on steps that might be taken to enhance their visibility (and, ideally their stock’s liquidity) within the investor community. I’m often asked about possible steps/actions institutions can take to improve or enhance the trading activity of their stock, and candidly, performance continues to be the end-all-be-all with regard to investor focus. Deliver a steady, consistent, healthy bottom line with attractive operating metrics, and you’ve won half (if not more) of the battle. However, what I sometimes notice in traveling around the state and absorbing a slew of press releases each quarter, is that sometimes these critical (and in some cases, only) points of communication with your shareholders and the investment community can be a bit lacking in terms of some simple, yet enlightening performance metrics and standard industry ratios.
This is not to say that every institution should immediately aspire to generate voluminous quarterly earnings releases and/or investor presentations that mirror the communications often seen at our nation’s largest banks. Rather, simply craft or augment your earnings announcement in a manner that ensures some basic operating components are captured, helping readers to get a better sense of your performance and operating dynamics. Succinctly, these communications provide you with four distinct opportunities a year to tell your story to existing and prospective investors:
Simple and straightforward, but not necessarily skeletal in content, take advantage of the communication to accurately and adequately convey both your performance and vision. Let transparency frame your message. Sometimes an innocent act of “omission” has the potential to be inappropriately interpreted as an act of “commission” designed to hide or disguise a possible weakness in the franchise. And while transparency can be your guide, integrity should be your standard.
ProBank Austin does not make markets in bank stocks, nor do we have a trading desk providing liquidity for bank securities. The thoughts offered here are simply suggestions that will hopefully serve to inform (cultivated via extensive experience in these matters), and ideally enhance the liquidity, transparency, and visibility of your stock. In doing so, we all collectively “win,” because it’s ultimately good business and the right thing to do. It’s at the core of what ProBank Austin has spent the past five decades building—doing what’s right for our clients and the community banking sector. It’s the tone from the top exhibited by our leadership teams in Toledo, Louisville, and Nashville, and it is vigorously embodied, and fiercely protected by the talented professionals that walk the firm’s hallways.
There are many talented professionals and investors across Michigan and the Midwest that have built their careers in this space, and their firms bring different skill sets and myriad experiences to the table. Market making, equity research, retail and institutional distribution, etc. Get to know them. Let them get to know your bank. A more visible profile and an assiduous attention to transparency serves the community banking sector well, and during difficult times may make the process to secure capital resources and/or strategic guidance just a little bit easier for all involved.
During this time of year, I try to carve out time to stop by many of the annual shareholder meetings around the state. It typically brings back a lot of good memories of doing the same circuit during my Roney years, while reminding me that we have many talented men and women leading Michigan’s community banking sector. In years past, my visits had multiple purposes, but candidly and selfishly I wanted to invest the time to get to better know the leadership of the organization, and attain a deeper feel for the community(s) they service. I also wanted to try to get a sense for a critical component/question in my equity research process: when times get tough and the CEO is challenged, would he/she be a stand-up leader and address the issue(s) in a forthright and transparent manner, or would it initiate a series of duck-and-cover maneuvers that would then have me wondering what was really going on within those four walls.
Years later, my approach focuses on many of the same objectives (absent the equity research and attendant stock recommendations): Who is leading this organization? How are they likely to respond when things turn? And since economic cycles have not been repealed, things will surely turn south again at some point in time.
Recently I attended an in-state annual meeting. The institution had been led by a now-retired CEO that successfully guided the bank through the “Great Recession,” making difficult, yet critical decisions to ensure both its survival and that the foundation for future success remained firmly intact. The current CEO, in a sincere and genuine manner, acknowledged the invaluable guidance of the prior occupant of the corner office, while also expressing immense gratitude for both the sacrifices of the bank’s talented staff and the supportive oversight of the board. It was clear that such attributes were now helping foster a return to prudent growth and attendant profitability. But I found the most powerful component of the commentary centered on the symbiotic relationship the organization had with its community. Both clearly benefited from a shared vision to help nurture and cultivate success at the business and personal levels. And both seemed to fully understand the inherent value of never abandoning one another in difficult times.
Sounds like it could have been words spoken at any number of bank shareholder meetings around Michigan in recent years, doesn’t it?
Liquidity, visibility, and transparency. Framed and guided by integrity. It’s an approach that has served us all well, and truly is at the foundation of so many of our best run institutions across the state.
ProBank Austin brings a multitude of experience, expertise, and market knowledge to the table for our clients, spanning broad geographic swaths of the banking industry across this country….and the strong desire to continue to deliver that insight and value-add to all of you in the future.
In closing, attached please find our monthly summary of Michigan’s financial institutions. As you and your board take your organization forward, please do not hesitate to reach out to me and/or my colleagues at ProBank Austin if we can be of any assistance in helping you assess the competitive landscape. My best wishes for continued success as you move through 2019.
MAY 2019 MICHIGAN BANKING SUMMARY
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