Independent Banker - January 2025 - 51

of the costs associated with being a
public company.
The bank noted that it expected
to incur additional legal expenses
associated with becoming a public
company of up to about $750,000 in
the third quarter of 2024. These costs
include additional personnel, legal,
consulting, regulatory, insurance,
accounting, investor relations and
other expenses that the bank did not
incur as a private company.
THE INCENTIVES FOR LISTING
Even so, banks that list on an
exchange often have express reasons
for doing so. Chain Bridge, for
example, completed an initial public
offering in October, receiving net
proceeds of about $33.6 million. The
$1.6 billion-asset banking company
used a portion of the net proceeds to
fully repay the $10 million outstanding
principal balance on its unsecured line
of credit with a correspondent bank,
according to a press release.
Chain Bridge said it intends to use
other proceeds primarily for general
corporate purposes, which may
include supporting continued organic
deposit growth and funding potential
strategic expansion.
CNB Bank & Trust is in the
process of weighing its options. One
advantage to listing on an exchange
would be greater market visibility and
marketability for its shares. It might,
for instance, be eligible for inclusion
in the Russell 3000 Index, which
would mean mutual funds would
be buying the stock, which would
increase demand for shares and the
price. " That's a huge asset for your
shareholders, " Davis says.
Though listing on an exchange
remains a long-term goal for CNB
Bank & Trust, it's not ready to
pull the trigger yet, in part due to
the $500,000 initial expense and
$250,000 ongoing annual expense it
is expecting such a move to cost.
" All banks right now are fighting
margin compression, and this is dead
expense, " Davis says. Unlike the
decision to add a new product line,
" there is no top-line revenue with
this, " he adds.
Cheryl Winokur Munk is a writer in
New Jersey.
There's no magic number
for the size you need to be
to list on an exchange, but
many banks that take this
step are already in the range
of $10 billion or more, or
have big growth aspirations,
says Phillip Buffington, a
partner at law firm Balch &
Bingham LLP in Birmingham,
Miss., who helps banks weigh these decisions.
For banks looking to grow substantially, there's
prestige to being publicly traded. If your goal is to
be in the $1 billion to $5 billion level, maybe you
don't need to spend the money quite yet, he says.
This, too, is a bank-by-bank decision, because some
smaller banks do list on an exchange.
Before moving ahead, community banks need
to think about everything that's involved in being
an exchange-registered company. This includes
having the personnel in place to do internal
accounting and ongoing reporting, as well as
shareholder communications and proxy materials.
There are also special requirements related to
board size, internal compensation for directors
and more. There's significant advanced planning
needed, a process that can take 18 months to
two years, Buffington says. " There really is a lot of
work involved. "
Alex Vari, chief accounting officer of MainStreet
Bank in Fairfax, Va., suggests bankers lay out their
anticipated timeline and communicate with the
board, management auditors, regulators and other
stakeholders before proceeding, so everyone has
a clear understanding of where the bank is headed
and how to get there. " Being methodical and
thoughtful about the process will make the whole
thing smoother, " he says.
Some community banks might decide it's more
than they bargained for and change course, he
continues, and that's OK too. " Going public is not
going to be the right decision for every company. "
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