27 Sep, 2024
State of the Pipeline – September 2024
By Robert Clark and Xylex Mangulabnan
This feature has the latest news from the mutual bank conversion sector. As of Sept. 26, four conversions were in the pipeline.
The standard conversion offerings for Tipp City, Ohio-based Monroe Federal Bancorp Inc. and New Orleans-based FB Bancorp Inc. expired Sept. 19 and Sept. 20, respectively.
On Sept. 12, Security Midwest Bancorp Inc., the proposed holding company for Springfield, Ill.-based Security Bank SB, filed a registration statement for a mutual-to-stock conversion.
In the filing, the company said, "In 2018, we implemented a cannabis-related business ("CRB") Program, offering deposit and cash-management services to licensed cannabis-related businesses. We currently offer depository accounts to customers operating licensed cannabis businesses in the States of Illinois, Michigan, and Ohio. In December 2022, we initiated lending to cannabis organizations and their associated real estate entities."
As of June 30, Security Bank held $54.8 million of deposits from CRB customers, representing about 27% of total deposits, as well as $20.3 million of loans to CRB customers and associated real estate entities, comprising about 19% of total loans. One individual customer accounted for just over half of the CRB deposits. Additionally, fee income related to CRB deposit accounts has made up more than 50% of total noninterest income during the last 18 months.
The company said in the filing that it intends to grow the CRB program "modestly going forward."
Kaukauna, Wis.-based EWSB Bancorp Inc. has completed its standard conversion, raising $7.5 million in gross proceeds. The deal priced slightly above the minimum of the offering range.
The company filed its initial registration statement March 11, in which it disclosed that East Wisconsin Savings Bank entered into a confidential memorandum of understanding with the Federal Deposit Insurance Corp. and the Wisconsin Department of Financial Institutions in July 2023.
The memorandum of understanding required the bank to address certain practices and conditions identified during regulatory examinations, such as levels of capital, earnings, liquidity, investments and IT, as well as enhance board oversight, asset/liability management and risk management.
East Wisconsin Savings Bank's net worth ratio was 4.31% as of June 30, according to its second-quarter Form 10-Q, which was lower than the 6% requirement for Wisconsin-chartered savings banks.
"If our net worth ratio continues to be less than 6%, the [Wisconsin Department of Financial Institutions] may direct us to adhere to a specific written plan established by the department to correct the deficiency, as well as a number of other restrictions on our operations, including a prohibition on the payment of dividends," the company said in a July 8 prospectus for the sale of common stock.
East Wisconsin Savings Bank has lost money for 10 consecutive quarters. At June 30, its tangible common equity ratio was 3.80% and its leverage ratio was 5.90%.
Also noteworthy is the termination of East Wisconsin Savings Bank's planned merger of mutuals with Lake City, Minn.-based Lake City Federal Bank on Sept. 30, 2023. Lake City Federal Bank subsequently announced another merger of mutuals in December 2023 with Marshfield, Wis.-based Forward Bank, which closed May 3.
On Aug. 27, Magnolia Bancorp Inc., the proposed holding company for Metairie, La.-based Mutual Savings and Loan Association, filed a registration statement
Mutual Savings has recorded a net loss for the last two quarters. "Because of declines in our net interest income and reduced demand for our fixed-rate loans, we currently expect to incur a net loss for the year ending December 31 2024," the company said in the Form S-1 filing.
The bank, which had just one loan officer as of June 30, said in the application, "We believe we will need to hire additional loan officers and grow our loan portfolio before we can return to sustained profitability, which will take time and increase our non-interest expense in the short term."
Download a template showing the conversion pipeline, the market performance of recent conversions, the valuations of mutual holding companies and a list of conversion candidates.
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Other news stories about mutuals, mutual holding companies, recent conversions and activist investors
Warsaw Federal Savings & Loan discloses initial closing of capital offering
Chicago-based Mutual Federal Bank, Pulaski Savings Bank to merge
ESL FCU to acquire substantially all of Generations Bank's assets, liabilities
Generations Bancorp NY to delist common stock from Nasdaq
FDIC gives 2 banks 'needs to improve' Community Reinvestment Act ratings
Clinton Savings Bank president/CEO to retire; successor named
Kentucky First Federal writes off all goodwill after stock slump
Kentucky First Federal Bancorp names chairman
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