How's the Bank? Best Practices for Shareholder Relations and Communications

How’s the bank? Those of us in banking hear that question often from shareholders. It is asked of us frequently, not unlike the proverbial “How are you?” is asked commonly among Americans. The difference is those asking us “How’s the bank?” today really want to know the answer — and in great detail. In today’s ever-changing banking world and with our 24/7 media coverage, ongoing communications with shareholders may be one of the most important tasks in which bank leadership and directors are engaged.

Why Does it Matter?

Whether you are a recent start-up or a mature institution, now, more than ever, shareholders are curious and a bit anxious about the value of their investment in the bank. They are concerned about the security of their deposit accounts, the bank’s ability to keep lending to them and whether the bank will need more capital. The offer and acceptance of TARP money is a new wrinkle in the banking world.

In addition, most shareholders look to the bank’s CEO as a true expert on the financial marketplace and the most credible source of local economic information they know.

Although we may be doing all the right things for our customers and shareholders to thrive during these difficult economic times, we may be less focused on actually telling our key constituents, our shareholders, about what we are doing and why we are doing it in the context of the current financial markets.

As board members and bankers, we live in the world of our bank investment all day, every day, yet our shareholders don’t. And most are not seeing the world as bankers … thank goodness. They are attending first to the issues of their families, their businesses and their communities. Even in today’s tumultuous times, it is unrealistic to assume that most are watching all the key metrics and changes in the financial world that our bank CEO must. They also may not know the thinking our CEO and board are using to make strategic decisions about the bank.

What Can be Done?

An ongoing, well-executed com­munication plan can be an inex­pensive, yet powerful, way to share the news, manage shareholders’ expectations, and make them real partners as customers, investors and ambassadors.

Here are four elements to a well-executed communications plan for bank shareholders:

Responding at Critical Moments

Given the fast pace of financial news these days, when critical events are reported in the media (the takeover of a bank, the changing limits of FDIC insurance, reports of poor bank earnings, the effect of foreclosures, details of the TARP money) determine how you would respond to a question from a shareholder about one of these events. Prepare an answer describing what this event means in layman, business­like terms. Make sure your answer also addresses how this event might be relevant or doesn’t apply at all to your bank or how it may affect or not affect your shareholders or customers. Share these timely media reports and your responses with your investors.

Letter or E-mail from the CEO

A letter from the bank’s CEO on a regular basis can make a tremendous difference in shareholders’ commitment to their current investment, and their willingness to keep referring others to the bank and responding favorably to the next capital raise. What they do know is that times are tough for banks. Reassure them with the wise steps you are taking to manage the risks. Describe the ongoing strategic moves of the bank. Speak to your investors as if they were sitting across the table from you — keeping your shareholders well informed and more connected to the bank with simple, truthful language.

Town Halls

Inviting shareholders to quarterly conference calls or in-person meetings allows them to ask any question on their minds. Our financial world is moving so fast that waiting for the Q & A period of the annual meeting is not rapid enough. You can leverage the results of these town hall sessions by excerpting parts of them for the written communications with the shareholders. Those who were present at the town hall will have the information confirmed for them. Those shareholders who were unable to attend will appreciate receiving the news in writing.

Maximize Your Annual Meeting

This year, more than ever, presents a valuable opportunity to connect with shareholders at the bank’s annual meeting. Enroll members of the bank’s board, advisory board and leadership to reach out and engage key influencers in your shareholder base to attend. Use this meeting opportunity to spend significant time on how the bank is focused on key metrics for success this year — perhaps your ongoing attention to the loan portfolio, the quality of the balance sheet, efficiency measures you aretakingand howyoumay be ensuring that you maximize the recruitment and customer-acquisition possibilities these times are presenting us.

Remembering that shareholders are also very interested in knowing that the leadership of the bank continues to be the right team for today’s rough seas, the annual meeting presents a wonderful opportunity to convey your understanding of what is happening in the marketplace and basic strategies for how all businesses can be successful in such times. A hearty dose of your perspective on the greater financial picture will be appreciated. And this is the time to encourage a robust question-and­answer session. A dress rehearsal with staff and board members, asking all the questions they think may come up, will be a way to become comfortable and confident for the annual meeting. It will also serve to align all of you on the best responses to all questions — whether asked in the annual meeting or over the backyard fence.

A Final Word

Ongoing shareholder communica­tions fosters a culture of no surprises to shareholders. They know your bank’s accomplishments in a timely manner and grow trust in the bank’s manage­ment and its board to manage the risks in today’s financial flux. As they feel more informed, their relationship with the CEO and board naturally grows.