📣 Access KKR's latest Health Care Growth private equity fund!

Securitize Logo

How Dividend Reinvestment Enables Community Banks to Efficiently Raise Capital

And How Your Transfer Agent Can Help

by Bill Saeger, SVP of Bank Stock Transfer Services at Securitize Transfer
Nov 3, 2022

“If you want to go fast, go alone. If you want to go far, go together.”

— African proverb

The evolution of banking services is trending towards digital-first interaction with personalization as the differentiating factor. Not all community banks are all fully digital yet, but they’re headed in that direction. And some are moving faster than others. To go farther together, community banks will need technological guidance, personalized support, and ample capital.

Efficiently raising capital can be difficult when financial conditions are tight. While it may seem outside of the box, transfer agents are often the best place to start. 

Good transfer agents manage stock registration and transfer needs. Great transfer agents free up resources and enable banks to personally engage with more community members and local businesses. Having a great transfer agent can help community banks grow alongside their communities. And using time-honored plans like dividend reinvestment can help community banks efficiently raise capital to fuel growth or support the price of the stock.

Dividend Reinvestment Plans

One solution that I’ve seen work time and time again is  dividend reinvestment. Also known as a dividend reinvestment plan or DRIP, this strategy often provides an efficient way to raise capital or support the price of a stock. Plainly, dividend reinvestment can enable investors to turn cash dividends into additional shares of stock.

DRIPs benefit community banks in one of two ways. By slowly selling a small percentage of a bank’s authorized unissued stock to existing shareholders and reinvesting the capital raised back into the bank to improve the bank’s capital ratio. Or, by creating demand by having the transfer agent purchase shares in the open market, and eliminating excess stock trading on the street. As the total supply of trading stock shrinks the stock prices typically go up. Like a rising tide lifts all boats, DRIPs present an opportunity to raise capital, or push up the price, in a way that can benefit all parties involved.

Automating Repeat Labor

Having established meaningful relationships with more than 1,000 community banks from coast to coast over the course of 30+ years, it’s safe to say that I’ve probably seen it all. From mergers and acquisitions to selling authorized unissued shares of stock as part of a dividend reinvestment plan, I know that there are many ways to raise capital. And they all involve trust. That's why finding a great transfer agent that can automate the parts of your business that don't require personalized touch is key to client success.

Relationships revolve around trust, which takes time and presence to establish. 

Once trust is established, great transfer agents can create new efficiencies by automating routine tasks. For instance, putting ownership records on the blockchain makes automating DRIPs possible for businesses seeking efficient ways to raise capital. It also makes losing or damaging ownership records extremely difficult. With digitally native DRIPs, your transfer agent will no longer need to connect the dots across multiple parties just to track down or settle transactions. They won’t need to sign medallion guarantees either. Records will be transparent to the owner, verifiable by the issuer, and automatically searchable. By reducing the number of intermediaries and traditional third parties needed to execute DRIPs, digital services enable community banks and transfer agents to work together to scale business needs as they grow.

Old Friends, New Services

Finding the right transfer agent that can service your bank’s particular needs is often difficult. But having friends in the right places can help. That’s partly why I got so excited when Securitize acquired Pacific Stock Transfer (PST).

At PST, we built our reputation around trust and execution. Securitize did the same. So when Securitize acquired us, I knew it was a great opportunity to extend the service we already provided to more community banks across the country.

Now with Securitize, we are able to deliver a personalized touch using digital services that reduce repeat labor. This efficiency frees up internal resources and lets us focus on what matters most – client success.

To learn more about efficient ways to raise capital using a transfer agent, talk to sales.

Talk to Sales

© 2022 Securitize, LLC
All rights reserved
info@securitizemarkets.io
Check the background of Securitize Markets on Finra BrokerCheck.

Securities are offered through Securitize Markets, LLC, (“Securitize Markets”) a registered broker-dealer and member FINRA/SIPC. Neither Securitize Markets, nor any of its affiliates provide any investment advice or make any investment recommendations to any persons, ever, and no communication through herein or in any other medium should be construed as such. Securities offered on the Securitize Markets ATS have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Assets listed herein, such as digital assets or tokens using blockchain, are speculative, involve a high degree of risk, are generally illiquid, may have no value, have limited regulatory certainty, are subject to potential market manipulation risks and may expose investors to loss of principal. Investments in private placements, start-up investments in particular, are also speculative and involve a high degree of risk. Investors must be able to afford the loss of their entire investment. Eligibility to buy and sell securities on the Securitize Markets ATS is determined by Securitize Markets in its sole discretion. Offers to sell, or the solicitations of offers to buy any security can only be made through official offering documents that contain important information about risks, fees and expenses associated with the applicable securities available for trading on the Securitize Markets ATS. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed herein, and are encouraged to consult with a financial advisor, attorney, accountant, tax advisors, and any other professional that can help you to understand and assess the risks associated with any investment opportunity. Past performance is not indicative of future results. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided herein or through any references/links herein. Any financial projections or returns shown herein are provided by the issuer of the relevant security and Securitize Markets has not verified the accuracy. Further, there can be no assurance that any valuations provided by issuers are accurate or in agreement with market or industry valuations. Securitize Markets and its affiliates make no representations or warranties as to the accuracy of such information. Securitize Markets may collect certain information about you that helps us comply with various securities regulations and rules and the USA PATRIOT Act, a Federal law that requires all securities firms to obtain, verify, and record information that identifies each applicant. The information also helps us more fully understand your investment profile and identify what types of investments or strategies may be suitable for you. The term “Investors” used on this website, typically refers to accredited investors where applicable. Please note: if we cannot verify the information you provide, we may be required to restrict or deny your account. Trading during Extended Hours Trading Sessions carries unique risks, such as greater price volatility, lower liquidity, wider bid/ask spreads, and less market visibility, and may not be appropriate for all investors. There is no guarantee that a diversified portfolio will enhance overall returns, outperform a non-diversified portfolio, or prevent against loss. By accessing this site and any pages thereof, you agree to be bound by our Terms of Service and Privacy Policy.