Small Banks Deregister in Droves Thanks to JOBS Act
Regulators are flooded with share deregistration filings as small banks take advantage of relaxed securities registration requirements following passage of the JOBS Act, according to a report by Harish Mali of SNL Financial.
The Jumpstart Our Business Startups Act, signed into law April 5, increased the threshold under which a bank or bank holding company may terminate registration of a security to 1,200 shareholders of record from 300. It also raised the threshold requiring companies to register under the Exchange Act to 2,000 shareholders from 500 earlier.
The new law sparked action from many small banks that wanted freedom from reporting requirements under the Securities Exchange Act of 1934. Since the JOBS Act was signed, 61 banks have filed to deregister their common stock and suspend securities reporting requirements, greater than the total number of banks that have deregistered in the last 16 quarters. The filings carry a 90-day waiting period before the deregistration becomes official.
SNL Financial reports that most of the deregistering banks were relatively small in size. Forty-nine of the 61 banks had less than $500 million in total assets, and only three banks had more than $1 billion in assets. The three banks with more than $1 billion assets were Frontenac, Mo.-based Reliance Bancshares Inc.; Miami Lakes, Fla.-based Great Florida Bank; and Indianapolis-based National Bank of Indianapolis Corp.
The deregistration rush might not stop here, according to SNL Finanicial, as more small banks might join the race in the coming days. On May 25, Hallstead, Pa.-based Peoples Financial Services Corp. issued a press release saying it intends to deregister its common stock as the incremental cost of compliance with general SEC regulations and Sarbanes-Oxley and other reporting requirements does not provide a discernible benefit to its shareholders. The company expects to save $150,000 annually after deregistration, which it expects to complete during the third quarter.
Mountain Grove, Mo.-based First Bancshares Inc. issued a news release May 17 announcing its plan to delist its common stock from the NASDAQ Global Market and to deregister its common stock with the SEC. R. Bradley Weaver, Chairman and CEO of the company said in the release, "We expect to achieve an estimated $200,000 in annual cost savings."
According to SNL data, there are 336 public banks and thrifts in the U.S. with fewer than 1,200 shareholders at a record date later than Dec. 31, 2010, and that filed their securities with a filing agency. More than two-thirds of them have less than $1 billion in assets. Of the 336, 308 file their reports with the SEC and 15 file with the FDIC. Of the remaining 13 companies, eight file with the OCC and five file with the Federal Reserve Board.