By Evan SparksThe American Bankers Association marked the 20th anniversary of the ABA Nasdaq Community Bank Index (ABAQ) by ringing the closing bell today at the Nasdaq MarketSite in New York City. The ABAQ index was up 5.49%, and the Dow Jones Industrial Average reached a record high, amid signals from the Federal Open Market Committee that it expects to cut rates multiple times in 2024.
ABA President and CEO Rob Nichols was joined by executives from Nasdaq-listed community banks and ABA board members to commemorate the occasion. The ABAQ is designed to help raise awareness of community banks among analysts and investors and, as of Dec. 1, includes 261 community banks with $179.7 billion in market capitalization.
While the index has fewer banks than it did when it launched—a result of consolidation—most of that consolidation has taken place among banks with less than $250 million in assets. The number of banks in the $250 million-$1 billion asset range and the $1-10 billion asset range have grown as those banks realize more efficiencies, ABA Senior Director Tyler Mondres said. “Those efficiencies can be seen in the rising value of the ABAQ index as a whole.”
Index showcases resilience amid challenges
“For 20 years, the ABAQ has provided investors with an important snapshot of how the community banking sector is performing,” ABA President and CEO Rob Nichols said during the ceremony. “The good news: community bank performance remains strong today, even as our industry has faced a period of rising interest rates, heightened economic uncertainty, and a growing list of new regulations.”
However, Nichols was transparent about many of the regulatory challenges facing community banks among banks of all sizes: “a tsunami of new rules and requirements are coming from Washington.” In particular, he highlighted the CFPB’s Section 1071 final rule, the Basel III “endgame” proposal,” interchange fee caps and proposed routing restrictions and the Community Reinvestment Act final rule.
“ABA is deeply concerned that the cumulative effect of all these new regulations will be to make it harder for community banks to serve their customers and communities and support the broader economy,” he said. “That’s why we are working hard to make sure that lawmakers in Congress—and the people at the agencies writing the rules—understand that this tsunami of new regulation will fundamentally change the business of banking… and will have real, costly implications for American consumers. I can tell you that no banker in America wants to see that happen.”
ABAQ raises visibility for community banks
When ConnectOne Bank went public on the Nasdaq in 2013, it was the first financial institution to go public since 2011 amid what Frank Sorrentino—founder, chairman and CEO of the $9.6 billion-asset New Jersey-based community bank—referred to as a challenging time for banks. Being listed on the Nasdaq and indexed on the ABAQ “provides a live data point that demonstrates the strength and value of our industry,” Sorrentino said.
“It has allowed us to showcase our strengths in good times, and more importantly, in challenging times,” he added. “It’s easy for pundits and media to get distracted by metrics that don’t drive value, and this index has been a metric that demonstrates the value creation of banking. . . . The strength of the U.S. is a direct result of the wide range of banks that exists to serve our diverse economy.”
Nichols concluded on an optimistic note. “We want to make sure that our financial system remains the envy of the world,” he remarked. “We want to make sure that banks have a policy environment that supports economic growth, instead of restricting it. And we want to make sure that 20 years down the road, we’re back here again celebrating the continued success of America’s community banks. With the right policy environment, I know we can do that.”