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 — 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.

"Being delisted would make it harder to raise capital, but in these cases, the degree of how much harder is almost negligible," Wood said. "A bank in this kind of trouble is going to have trouble raising capital whether it's listed or not."

Some community banks have decided it will be easier to raise capital if they're not distracted by a delisting appeal.

Anchor BanCorp Wisconsin Inc. in Madison, Wis., declined to appeal its delisting. In explaining the decision, Chris Bauer, the $3.2 billion-asset company's president and chief executive, said in a press release that, "We feel strongly that our time and resources would be better spent on our capital raising efforts."

To be sure, not all community banks facing delisting are going down without a fight. Suffolk Bancorp in Riverhead, N.Y., has appealed Nasdaq's decision to delist its shares. The $1.5 billion-asset company ran afoul of the exchange because of delinquent quarterly reports. Suffolk, which has a hearing scheduled for Jan. 19, said in a press release that it "intends to file these documents as soon as practicable."

Banks have appealed delisting decisions and won, often if they can point out a technical reason the company has been out of compliance with an exchange's rules, Kaplan said.

Lately, it seems that more community banks are looking to avoid the fight.

Lee R. Keith, the president and chief executive of Mercantile Bancorp Inc. in Quincy, Ill., said in a Nov. 14 press release that "the costs and administrative burdens associated with being a public company have substantially increased in recent years … the advantages of being a public reporting company are outweighed by those costs and burdens."

Mercantile, an $874.8 million-asset company, voluntarily agreed to have its shares delisted from the NYSE Amex. It expects the delisting to take place early next month.

A number of banks that have recently been delisted from Nasdaq have shifted their listings to electronic marketplaces operated by the OTC Markets Group Inc. But an over-the-counter market is not considered a public listing, because "really any stock can be traded over the counter," Wood said.

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