'Nothing to report' is the best news before mergers, too.

When people ask me what is the most important news in a community bank, I usually reply "The most important thing is that there is nothing to report."

Were I to write a column on the most significant developments in Schmidlap National (our prototype independent bank for this column) I would reply:

* Last week Schmidlap handled 5,679 transactions with only 67 errors, all of which were corrected on the first complaint.

* Schmidlap responded to 754 requests for credit in a maximum of four days per request. (I did not say that Schmidlap approved them. All I can say with certainty is that potential borrowers feel a quick "no" is appreciated more than a slow "yes," because this gives them the opportunity to go elsewhere before it's too late if the answer is in the negative.

* The platform people and tellers recognized by face 34% of the customers coming into the bank and called them by name. That's what community banking is all about. No news is the best news.

What brings this to mind today is how well the executives of United Counties Bancorp. of Cranford, N.J., handled its acquisition by Meridian Bancorp. of Reading, Pa.

For if you followed the price of United Counties' stock right up to the day of the announcement, you would have felt that nothing was happening at all. We now know that plenty was happening.

United's stock was trading at about $105 all August, with volume, even on the day of the afterhours announcement, at only 100 shares.

Next day them was some movement, as you would expect: Meridian offered stock valued at $173 a share for each United share!

United Counties closed that day up $47 on a volume of 30,600 shares.

Both Meridian's top management and directors and those of United Counties obviously kept this deal quiet and prevented any of the insider profits that so often accompany an acquisition.

This can be no mean feat. Board members and officers frequently forget, out of ignorance or stupidity, that they have learned privileged information whose use for profit is a legal offense.

The revelation of terms or even the hint "Buy United Counties" to friends and relatives would have caused the type of runup in price that we have seen in so many other companies prior to the publication of the offering agreement. But not here.

Thus applause is in order for both parties. For until the proper moment of announcement came, the news from each corporation was "life is routine."

It would be nice to say that this admirable response stemmed solely from a complete attitude of highest ethics on the part of all involved.

Cynics might add, though, that this tone of ethical behavior was catalyzed by the fear of governmental investigation and suits which have followed so many other acquisitions in which insiders did make good profits.

One might also add that in today's computerized world, it is hard to keep those who want and need to find out who was the buyer of every share of even infrequently traded community banks from finding out who bought it and at what time of what day. This is a Big Brother aspect of the computer's role in security trading that has both good and bad implications.

But to all community bankers, the United Counties-Meridian story should be good news.

For we know that a community bank wants and needs local ownership of its stock. The motto "Put your money where your money is" in trying to sell stock in town is a positive and profitable approach.

Yet too many local people are unwilling to invest in their own bank's stock because they feel they have little chance of being treated fairly - that the insiders get the good opportunities to buy and they are only approached when no one else wants to invest.

The fact that up to the minute of announcement there was no action in United Counties' stock thus not only proves once again that in community banking "no news is good news," but it should add confidence to all who are interested in investing in their local bank, just so long as there is a level playing field and they can get as good a deal as those who run the bank do.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER