October 10, 2017
Authored by: Bryan Cave Leighton Paisner
On Thursday, October 12, 2017, Atlanta Partner, Robert Klingler, will be presenting a webinar on the Pros and Cons of Bank Holding Companies. The webinar is hosted by Strafford and will begin 1:00pm Eastern on October 12, 2017.
In April of this year, Bank of the Ozarks, a $20 Billion, NASDAQ-listed, bank holding company, announced its plan to eliminate its holding company, which was completed in June. In July, BancorpSouth, a $15 billion, NYSE-listed, bank holding company, announced its plan to eliminate its holding company. With the inclusion of BancorpSouth Bank, only four of the 115 banks with more than $10 billion in assets don’t have a holding company; but that number has doubled in the last six months.
Eliminating a holding company can often be done without limiting the permissible activities of the organization, with the potential for reduced regulatory oversight, simplified financial reporting, and consolidated governance. However, the holding company structure can also offer significant capital flexibility, particularly for institutions under $15 billion with trust preferred securities or institutions under $1 billion that can take advantage of the Small Bank Holding Company Policy Statement. Depending on the status of the applicable banking statutes, a holding company structure can also provide significant corporate governance benefits, including facilitating stock repurchases and avoiding super-majority voting thresholds for certain transactions.
For many institutions, the decision of whether to have a holding company may be quite straight forward and easily answered. For others, there are a number of pros and cons that should be analyzed by management and the board of directors before making a decision. As Rob states, “For all institutions, it’s a worthwhile exercise as part of strategic planning to analyze the appropriateness of the organization’s corporate structure. Even if a change in corporate structure is not appropriate for an institution, understanding the benefits and disadvantages of the structure may encourage critical questioning of both the strategic direction and tactical operations to achieve the best outcomes for shareholders. I believe this webinar will help institutions engage in those discussions.”