Farmers joins MSCI Micro Cap Index
By Jamison Cocklin
Farmers National Bank now will count itself among a third globally recognized stock index after being added to the MSCI Micro Cap Index.
The MSCI measures the performance of the micro-cap segment of the U.S. equity market. Known formerly as Morgan Stanley Capital International, the index selected 37 new companies after conducting its quarterly assessment in November. At last count, it consisted of 902 companies.
Farmers trades under the FMNB symbol on the Nasdaq.
Monday’s move means greater exposure for Farmers, which last week announced a special dividend after strong earnings through the first nine months of 2012, while also continuing steady growth and being named to American Banker Magazine’s list of the 200 best community banks earlier this year.
“It’s going to help our stock price and the volume of shares traded,” said Amber Wallace, senior vice president of marketing at the bank. “That’s the activity we’ll be watching the market for on Monday.”
An index tracks market changes by combining the stocks it consists of into one value, allowing investors a comparable benchmark against their own portfolio returns.
MSCI provides support and helps about 6,200 clients make investment decisions worldwide. It serves everything from large pension plans to boutique hedge funds, according to the company’s website.
Mutual funds, often consisting of portfolios constructed to match or track the components of a market index such as MSCI, could now rebalance their portfolios based on the 37 new additions. As a result, Farmers shares might see a bump in trading activity on the Nasdaq, Wallace said.
Micro-caps typically are defined as having a market value of between approximately $50 million and $300 million. The MSCI is limited to companies with a market value of $500 million or less.
Generally, a larger market capitalization, as its referred to, means less risk and a lower return on investments, whereas a smaller market capitalization indicates greater risk with potential for higher returns.
Farmers has a market capitalization of $116 million, with 18.8 million shares outstanding. Earlier in the year, the company was included on both the Russell 2000 and Russell 3000, bellwether indexes linked in tracking U.S.-traded stocks with various market capitalizations.
Financial-service providers account for more than 34 percent of the MSCI, which comprises stocks from 10 separate industry-sectors.
Altogether, Farmers holds about $1 billion in banking assets and $1 billion in trust assets.
The bank’s addition to MSCI became effective immediately after the market’s close Friday, when its share price closed down by 3.32 percent to finish at $6.12 in a mixed day of trading for a market still uneasy over budget negotiations in Washington.
By Monday afternoon, the stock was up, trading around $6.20 per share.