Hoping to reap the benefits of a more prestigious market, two community banks are moving to the New York Stock Exchange from Nasdaq's National Market System.
Community Bank System Inc., DeWitt, N.Y., said it expects to begin trading on the Big Board on Dec. 31. And Triangle Bancorp, Raleigh, N.C., anticipates its shares will be listed on Jan. 2. The banks cited the exchange's clout and its stability for shareholders as reasons for the switch.
However, analysts warn there may be as many cons as pros to the change. They say the $1.5 billion-asset banks risk becoming small fish in a big pond.
"At that size, a lot of Street houses may not think it is worth it to follow you," said Samuel Beebe, bank analyst with William R. Hough & Co., St. Petersburg, Fla.
But the two say they are ready to trade on the Big Board.
"We are looking for the advantage that comes from switching from a dealer market to an auction market," said David G. Wallace, senior vice president and chief financial officer of Community. "Nasdaq is less efficient, with more price volatility, and the spreads are wider. We think this improves our stock for our shareholders."
For Triangle, shareholder value was important, but so was the stock's perception among other banks, especially for acquisitions.
"We are trying to broaden the scope of our company," said Michael S. Patterson, president, chairman, and chief executive officer of Triangle. "Some of the companies we are competing against for acquisitions are members of the New York exchange. The perception, whether real or not, is that they have more liquidity."
Mr. Patterson said Triangle was kept from bidding on a bank that was for sale because the board of that bank would only speak to New York-listed acquirers.
But analysts are not convinced. They cite guaranteed investment coverage as a strong advantage of staying with Nasdaq.
"The best thing about Nasdaq is the market makers have a vested interest in following your company," Mr. Beebe said. "The specialists who replace the market maker on the New York exchange may not do the same research."
If that happens, the bank runs the risk of losing the audience it had instead of gaining a larger one, one analyst said.
"I am always puzzled when a ($1.5 billion-asset) bank leaves the Nasdaq exchange," said Kenneth F. Puglisi, a principal at Sandler O'Neill & Partners, New York.
Mr. Patterson said that with a market capitalization of about $400 million, Triangle will be a midsize fish, and not a small one. That, coupled with the dynamics of the banking industry, should get his company some attention.
"Following all these bank acquisitions, there are less companies on the exchange," he said. "As companies are acquired, analysts are looking for new banking companies with exciting stories to tell."
Another perceived downside is that it is more expensive to be listed on the New York Stock Exchange. Mr. Wallace said Community would pay $16,200, about $4,000 more per year, for the new listing. The initial fee of about $95,000 was substantially more than the comparable Nasdaq fee of $37,500. But he said the extra cost would be worthwhile if the value to shareholders increases with the switch.
