The IR team at community banks is often made up of just two figures: the CEO and the CFO. Last month we spoke with a CFO – Lauren Ranalli of First Resource Bank – about her IR work. This month, we turn our attention to the top position and catch up with Ciaran McMullan, CEO of Suncrest Bank.
Founded in 2008, Suncrest serves the Central Valley area of California. It launched to support the local community at a time when larger financial firms, shaken by the financial crisis and recession, were pulling back support. The local community is a source not only of business but also of potential shareholders, says McMullan. ‘Let the local communities know they can actually invest in your organization, and they will!’ he says.
Suncrest’s IR efforts saw the bank nominated for best IR by a micro-cap company (less than $500 mn in market cap) at the IR Magazine Awards – Small Cap 2019. Here, McMullan explains his approach to targeting, corporate access, sell-side research and social media.
Who makes up the IR team? Do you use an outside IR firm?
You are talking to half the IR team! It’s really just me and our CFO, Jean Carandang. We are still a relatively small company and have only around 120 staff in total, so Jean and I do all the prep work and write the earnings releases. We both have a Big Four professional services background and have been pretty well trained on how to effectively communicate financial results, so I didn’t see the value-add of bringing in an outside IR firm just yet.
In addition, in the community banking arena in the US, there are plenty of investment banks that run bank-investor conferences that will also be happy to facilitate investor presentations. So we are never short of opportunities to go on roadshows and meet investors.
As a local bank, do you target investors from the local community?
Community banking is about being local and serving our local community. I think that is a very powerful message and has become even more powerful since the global financial crisis. We’re starting to get out there within each of our local markets with a message saying, ‘Hey, did you know you can do more than just bank with us? You can buy our stock and trade it on this thing called the OTCQX’. That’s a little bit specific to community banking and maybe not talked about enough when it comes to what makes good IR strategy.
Do you attend investment conferences?
We try to attend investment conferences at least two or three times a year – these are like speed-dating meetings for investors where you have a series of back-to-back, one-on-one meetings of between 20 and 40 minutes. They are usually set up by investment banks – such as DA Davidson, Sandler O’Neill and FIG Partners – and are designed especially for bank investors. They can take quite a bit of time, so two or three a year feels about right for an organization of our size.
Have you tried any generalist conferences?
We did try one non-bank investor conference, which was the first time I’d ever done that. I have to say it was challenging because of the level of understanding of the investors that attended. For the most part, they just weren’t sufficiently familiar with how a bank makes money and what the key metrics are to make a truly informed decision about our organization.
Does the sell side write research on you? Is it something you encourage?
Not on a regular basis, but a number of analysts have written one-off pieces about us in the past. They don’t tend to write research on anyone that is not traded on a major exchange but, here and there, they have covered us and it’s been helpful.
We’ve been performing very well for an OTC-traded stock. We have average volumes ranging from 4,000 to 6,000 a day, which of course is nothing compared with many Nasdaq-traded banks, but is actually very high compared with most of the OTC competitors. Our investors get a ‘real’ price and can trade on it, so we think it’s in the interest of some investment banks to write some level of research on us. For our part, we try to make sure that both investors and analysts understand our story. They can then make their own judgments as to whether it’s worth putting some of their clients into our stock.
Would you consider company-sponsored research?
I have been thinking about it and there are various companies here in the US you can engage that will write what is ostensibly independent research. I’ve seen the output and it’s good, so we might do that in the spirit of being one of the leading non-Nasdaq-traded banks in terms of transparency and how we communicate. We already provide a comprehensive earnings release, comparable to many larger banks, and indeed in some categories we provide even more information, particularly relating to credit metrics. We are also one of the very few smaller banks that actually hold a live and interactive quarterly webcast where investors can ask questions of me and my executive team. And we do it in a pretty non-traditional way, spending part of the call delving into a particular hot topic in the industry and how that impacts our organization.
Do you make use of social media to target investors?
We’ve started to make a lot of use of LinkedIn, less so Facebook. Everything we do in terms of press releases gets replicated and shared widely on LinkedIn. I purposely try to connect with as many retail investors and fund managers as I can, so they can see everything we are doing, not just financially but also in our communities and with our staff. I’ve become quite a fan of that platform in the last six months.