Most community banks view their communities merely as a market to serve. The very smartest community bankers know that the community bank customer also may provide an excellent source of equity.
Case Study: The Bank that Added Instant Value
I worked with one bank whose share price was trading at a significant discount to its current valuation. Part of the bank's strategic plan focused on increasing its share price by marketing the stock to the local marketplace that included the bank's customers.
Curiously, many members of the community do not know that they can own part of their local bank. They even may believe that your bank is part of a big bank. That's too bad because many individuals in your community may want to own a piece of your bank.
In this bank's case, after initiating the program, the stock price climbed above the bank's valuation. The surprising part was that it only took one month for this to occur. Why not market your bank's stock to possible investors in the community. Let everyone know you are locally owned. Market this fact in your lobby, at your drive-through locations, on your Web site, and in all your advertising.
Raising New Equity from the Community Can Boost Share Value
BNK looks at raising new equity as a method to increase share value. Raising equity is a marketing force because it focuses interest on the bank and can increase the bank's share value in the long run. I am a founding director of a new bank in Bethlehem, Pa. Our mantra is: "Every shareholder is a customer and every customer is a shareholder."
With Customer Relationships, More is Better!
As a director of a community bank, your bank should want more and more relationships with the customers. This is what I want for my bank. Your bank should go after the business relationship and the many different products in that business relationship. Target the employees of the business and their banking relationships with multiple products into each one of them. You should aim to have each of them be a shareholder of the bank.
Moreover, if the bank is considering raising equity, BNK thinks the bank should structure the offering to increase relationships. Think about the possibilities that a new loan customer presents for a community bank. As the loan officer makes the loan, she also should extend an offer to the owners and management of the business to become shareholders of the bank. The bank gets a customer and an equity owner, and the customer gets a feeling of ownership in the process. As with anything involving your bank's stocks, any tactics should be reviewed with legal council.*
Putting the community back into community banking gives you a big edge over your bank competitors. Quick, ask yourself: What other competitor does this?