Many former mutual banks looked for and found an exit strategy in 2018.
Twenty of the standard and second-stage mutual bank conversions completed between 2000 and 2015 were acquired last year. Another seven former mutuals are pending merger targets.
Regulators generally prohibit banks from selling the company for at least three years following a mutual conversion, so investors eagerly anticipate that three-year anniversary.
Athens Bancshares Corp. was one of the year's big winners. It had completed a standard conversion in January 2010, pricing at 58.8% of pro forma tangible book value. More than eight years later, the bank announced a sale to Nashville, Tenn.-based CapStar Financial Holdings Inc. with a deal value to tangible common equity of 228.0%. Athens Bancshares' total return from its initial public offering price to its closing price on the merger announcement date was 383%. The SNL Bank and Thrift index was up 163% during the same period.
Delanco Bancorp Inc. was the only converted bank in the group to sell below tangible book value. After four years as a fully converted company, it announced a sale to Hamilton, N.J.-based First Bank at 98.7% of tangible common equity.
Sunshine Bancorp Inc. waited just a month after its three-year anniversary to announce a sale to Winter Haven, Fla.-based CenterState Bank Corp. MW Bancorp Inc. and Clifton Bancorp Inc. also announced sales before their fourth anniversaries. The former sold to Corbin, Ky.-based Forcht Bancorp Inc. in an all-cash deal, while the latter merged with Fairfield, N.J.-based Kearny Financial Corp., which had not reached its own three-year anniversary at the time.
Two of the largest mutual bank conversions this decade by gross proceeds are pending merger targets. Philadelphia-based Beneficial Bancorp Inc. raised more than $500 million in a second-stage conversion completed in January 2015. Approximately 3.6 years later, Beneficial Bancorp agreed to merge with Wilmington, Del.-based WSFS Financial Corp. Gross proceeds were $277.7 million for Norwood, Mass.-based Blue Hills Bancorp Inc.'s standard conversion in July 2014. The bank announced a sale to Rockland, Mass.-based Independent Bank Corp. in September 2018.
Most converted mutuals ultimately end up as part of another institution. For example, only 10 of the 54 companies that completed a standard or second-stage mutual bank conversion between 2000 and 2004 remain independent. Even the more recent conversion classes have experienced a substantial amount of merger activity. Just two conversions of 2011 vintage — Watseka, Ill.-based IF Bancorp Inc. and Sykesville, Md.-based Carroll Bancorp Inc. — have not announced a sale or entered into a merger of equals. Activist investor Joseph Stilwell and related entities own more than 6% of the common shares outstanding of IF Bancorp.
Excluding MW Bancorp and Beneficial Bancorp, eight companies have reached their three-year anniversary since 2018. Kearny Financial is by far the largest institution, with $6.66 billion in total assets as of Sept. 30, 2018. Rolla, Mo.-based Central Federal Bancshares Inc is the most overcapitalized bank in the group, with a tangible common equity to tangible assets ratio greater than 36%. The Joseph Stilwell Group's ownership stake in Central Federal is 9.4%.
Another six companies, all of which hold less than $1 billion in total assets, will become eligible for acquisition by the end of 2019. The Joseph Stilwell Group owns a 9.3% passive stake in Collinsville, Ill.-based Best Hometown Bancorp Inc. Activist investor Lawrence Seidman and related entities hold a 6.4% stake in Fairport, N.Y.-based FSB Bancorp Inc.
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