The ESOP Handbook for Banks

Exploring an Alternative for Liquidity and Capital While Maintaining Independence

by Mercer Capital and Corporate Capital Resources

Format: Paperback
Price: Complimentary
Page Count: 96 pages
Publication Date: October 2011

This handbook addresses an important omission in the current financial environment: the lack of a broader, strategic understanding of the possible roles of Employee Stock Ownership Plans, or ESOPs, as a tool for managing a variety of issues facing banks.

Banks proportionately make more use of ESOPs than any other industrial classification in the U.S.

While an ESOP is not suitable in all circumstances, an ESOP may provide assistance in resolving the following issues, either by itself or in conjunction with other elements of a well-rounded strategic plan:

  • Augmenting capital, particularly for profitable institutions facing limited access to external capital. Though an ESOP strategy generally builds capital more slowly than a private placement alternative or a public offering, it provides certain tax advantages and may result in less dilution to existing shareholders;
  • Facilitating stock purchases by creating an “internal” stock market. The ESOP offers the further advantage of providing a vehicle to own shares that is “friendly” to the existing board of directors; and,
  • Providing employee benefits. ESOPs provide a beneficial tool in rewarding employees that add to the institution’s long-term value.

Written by Corporate Capital Resources, LLC and Mercer Capital, this handbook describes the function of ESOPs in the real world of banks and bank holding companies.

Bank directors and managers can use the information in this handbook to make solid, initial decisions regarding the potential merits of an ESOP.

Before embarking on a particular strategy to deal with the various challenges facing small- to mid-size banks, the decision makers in profitable institutions may wish to consider how an ESOP can assist in addressing issues such as shareholder liquidity, employee ownership and compensation, and capital management.