I just attended an annual shareholder’s meeting for Security Bank (SBKC). Like most banks their shares are down sharply; more than some, less than others.

Several shareholders wanted to know why they did not see it coming. The fact that nearly every bank was caught in the same downdraft was not a satisfactory answer.

Here is the problem. If the bank did position itself years in advance, which would have kept them out of any residential development and out of the Atlanta market, these same people would have likely wanted to know why the bank was underperforming other competitors during those good years?

The individual investors could have taken two steps to soften the blow. First, be adequately diversified so that a drop of 70% in the stock price and a cut in the dividends would not materially affect them; and secondly place a stop on the stock that would have stopped you out before the carnage became too great.

But the bank can not be so conservative to avoid such dramatic hard to foresee events and give the investors the results they want in the good years. It must take some risk. And if you eat like an elephant you will shit like an elephant.

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