Bankers Finding Less Reason to Appeal Delisting

American Banker, November 29, 2011 | Go to article overview

Bankers Finding Less Reason to Appeal Delisting


Byline: Andy Peters

A growing number of community banks facing removal from a major stock exchange are showing ambivalence over their possible eviction.

At least a half-dozen community banks this year have declined a right to appeal delisting from the Nasdaq or the New York Stock Exchange. To industry observers, the reason is quite simple: If a bank is having extreme difficulty raising money in the public markets, why bother with a public listing?

"To a bank in this kind of shape, the appeal of having a publicly listed stock gets less and less," said David Wood, an accountant at Porter Keadle Moore LLP who advises banks on reporting requirements.

Dearborn Financial Bancorp Inc. in Michigan is set to become the latest community bank to leave the Nasdaq. The $845.8 million-asset company opted against an appeal, stating in a Nov. 23 regulatory filing that it favored the "cost savings" that would accompany delisting.

Dearborn faced delisting because it has not released second-quarter earnings. The delay is due to an ongoing dispute with the Federal Deposit Insurance Corp. on asset valuations at unit Fidelity Bank.

While Dearborn mentioned cost-savings for its passing on its right to appeal, Wood said a bank is not relieved of its regulatory obligations under the Sarbanes-Oxley Act if it's delisted. Stocks are delisted because of an exchange's internal rules, which is separate from any dealings with the Securities and Exchange Commission.

Still, some banks can reduce expenses by delisting, largely through lower administrative costs. But delisting also has risks; it can sometimes disqualify a bank from having its shares purchased by mutual funds, removing a captive market, said Lawrence Kaplan, a lawyer at Paul Hastings LLP.

Delisting can also hurt a shareholder's ability to sell his shares, said Frank Bonaventure Jr., a partner at Ober, Kaler, Grimes & Shriver and a former lawyer with the Office of the Comptroller of the Currency. "Most public bank holding companies are looking for whatever methods they can utilize to increase liquidity for shareholders and delisting is not going to do that," he said.

A delisting will also make it more difficult for a bank to raise capital a the very thing many struggling banks need, Wood said. Still, he added, if a bank is in danger of having its shares delisted, it was already in such dire straits that a Nasdaq listing probably wouldn't help it much anyway. …

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