Stock issues of smaller, community-based financial institutions have hit the mainstream market at an unusual pace in recent weeks.
These banks and thrifts are seeking to attain the broader shareholder base and resulting liquidity that bigger institutions have garnered from their longer-established listings. And the markets seem quite accommodating.
Since last December, 11 financial institutions, ranging in asset size from $46 million to $3.3 billion, have obtained Nasdaq listings, either on the national system or the small-capitalization division.
When Desert Community Bank in California moved from the lower-profile bulletin board trading system to Nasdaq last October, it seemed an isolated case. But in June alone, four others made the same type of switch.
Also in June, one bank migrated to the American Stock Exchange from the pink sheets, and another from bulletin boards. No bank had taken either route to an Amex listing since May 1993.
The American Stock Exchange said four other very closely held, "emerging-company market" banks converted to its list over the last year.
The trend indicates a desire to gain broader recognition and market legitmacy that the banks may not have had when trading was illiquid and often controlled by chief executive officers.
Community bank executives said they had not been satisfied with the returns on narrowly traded shares.
"If they're not on an exchange, they're trading by appointment out of the president's desk, and that is not consistent with building value," said John Carusone, president of Bank Analysis Center in Hartford, Conn.
And officials at AMEX say the interest in such a move is growing among other banks as well.
"We're talking to a lot of banks," said Janet Rogenstein, senior vice president of market development for the American Stock Exchange. "A lot of smaller banks are responding to calls and they're receptive to talking with us."
Banks listed on the pink sheets and bulletin boards are concerned that investors don't get enough information about them, Ms. Rogenstein said, and a national market listing would assure better analyst coverage.
It would also also enhance an institution's ability to complete acquisitions and borrow against its stock.
By contrast, the stock price of an unlisted bank is based primarily on the dividend policy or merger speculation, which limits the potential for increasing value, Mr. Carusone said.
Typically, Center Bancorp of Union, N.J., one of the June converts to Nasdaq, was dissatisfied with the results of local market-making in its stock. "It didn't seem to make much difference whether profits were up or whatever," said president John J. Davis.
"The reason you (switch) is to increase your liquidity, to get market makers' support," said Martin S. Friedman, thrift analyst at Friedman, Billings, Ramsey & Co., Arlington, Va. "A lot of times these companies are closely held and are keeping (stockholder) lists in desk drawers."
But some community bankers may not want to pay the price of upgrading and exposing themselves to aggressive investors or acquirers: "It's traumatic for a closely held bank, because once listed on an exchange, it's a little like opening your kimono and making yourself available to predators," Mr. Carusone said.
Qualification for Nasdaq may not be instant or automatic: An institution must have at least $4 million in equity, $400,000 in net income, at least 500,000 shares not held by insiders, and a market value of $3 million.
For the American exchange, the minimum requirements are equity of $4 million, pretax income of $750,000, a share price of $3, and market value of $3 million.