A majority of depositors voted to approve Beverly Bank’s plan to convert to a public institution, but the bank did not quite win the two-thirds approval it needed to push forward with its plan.
Michael Wheeler, president of Beverly Bank, said that 238 out of 443 depositors voting on the proposal favored the plan. The bank would have needed 57 more votes to attain depositor approval.
"We’re evaluating our options right now from both the legal perspective and the community perspective," he told Banker & Tradesman, adding that the bank had not made any determination yet as to the next step.
Indeed, the next step is a bit unclear at this point. Theoretically, the bank could still move ahead with its conversion plans. A representative from the state Division of Banks said there is no regulation governing the next steps a bank must take if it fails to win depositors’ approval for the conversion.
"In general, federal regulations require at least a majority of depositors to vote in favor for a conversion to occur. If a majority of depositors reject the plan, then the mutual-to-stock conversion will not be permitted," FDIC Spokesman David Barr told Banker & Tradesman by email.
But, Barr said, if state law is inconsistent with federal law, then the bank may apply to the FDIC for a waiver of the depositor vote requirement.
"In such cases, a mutual institution must demonstrate (1) good cause and (2) that the requested waiver would not be detrimental to the safety and soundness of the institution, entail a breach of fiduciary duty on part of the institution’s management, or otherwise be detrimental or inequitable to the institution, its depositors, any other insured depository institution, the Federal deposit insurance fund, or to the public interest," he wrote.
The bank’s board of trustees approved the plan in March, when Beverly Bank first announced its intent to go public.
The $324 million mutual bank held an all-day vote last Thursday. Eligible account holders, which some estimates put around 10,000, had to vote in person on the plan. Wheeler said that specific voting procedure was regulatory-driven.
Beverly Bank had planned to raise anywhere from $31 million to $47 million in its initial public offering. In registration documents filed with the Securities and Exchange Commission, the bank said it planned to use the proceeds from its IPO to make more commercial real estate loans, invest in technology and invest in short-term investments and securities, as well as fund an employee stock ownership plan and contribute to a charitable foundation.
Beverly Bank was the fifth mutual bank in Massachusetts this year to announce that it would go public. While proponents of mutual-to-stock conversions tout the infusion of extra capital as vital to make more loans, invest in technology and generally expand the bank’s franchise, critics point out that banks that convert from mutual to stock often sell after a mandatory three-year waiting period, thus ceding local control of a community bank to an out-of-town buyer.
