The OTCQX Banks Index, a benchmark for community banks traded on the OTCQX market, gained 30 percent in the past 12 months, compared to 15 percent for the S&P 500. How can community banks leverage this positive trend and deliver greater value to their shareholders?
With interest rates expected to increase, an administration focused on domestic issues and reducing regulation – community bank stocks are in high demand. In a recent article featured in Bank Director, we took the opportunity to share our perspective on how community banks can harness this demand to increase shareholder value.
Achieving fair valuation of their shares
Achieving fair valuation ensures that a publicly traded community bank yields the highest value for shareholders. Determining fair market value for a publicly traded stock is relatively straightforward and can be done by, for example, taking the average of the highest and lowest selling prices for the stock that day. This becomes a much more difficult process for private banks – where the process for determining valuation can be both opaque and inefficient.
Reducing the risk of owning the security
Trading on an established public market reduces risk to shareholders as they can freely get into and out of its stock. Market standards, like those in place for our OTCQX and OTCQB markets, also help lower risk. This demonstrates that banks have gone through a verification process to ensure they are in compliance and meet the standards for the market they trade on.
Embracing technology
As the shareholder base for community banks continues to age, embracing technology helps connect with a younger audience, who demand information in real time. Keeping them informed of your bank’s news and ensuring that it is widely distributed and accessible across screens is essential for attracting millennials .
You can read the complete article here: “Three Ways to Increase Shareholder Value”
