Is it something in the air?
Not one, not two, not even three, but four Massachusetts banks have filed for IPOs with the Securities and Exchange Commission (SEC) so far this year, and rumor has it that at least one more may be on the way.
Blue Hills Bank in Hyde Park made headlines last week when it filed registration documents with the SEC that said the bank intended to go public "as soon as practicable."
On the same day, Pilgrim Bank in Cohasset and Melrose Cooperative Bank also filed registration documents notifying the SEC of similar intentions.
Pilgrim Bancshares hopes to raise $17.7 million when it offers up to 1.89 million shares of common stock at the price of $10 each. Fully half of the capital raised will go back into the bank, 9 percent will be contributed to an employee stock ownership plan, 1.5 percent will be contributed to the bank’s charitable foundation and Pilgrim Bancshares will retain the remaining 39.5 percent.
Melrose will offer up to 3.4 million shares of common stock with the intent of raising somewhere between $20.8 million and $28.5 million. Of that capital raised, the company said in an SEC filing that 50 percent will be retained by Melrose Cooperative Bank, 8.8 percent will fund its employee stock ownership plan, 1.2 percent will be contributed to its charitable foundation and Melrose Bancorp will retain the remaining 40 percent.
And earlier this month, Meridian Interstate Bancorp, the holding company for East Boston Savings Bank, filed its own plan of conversion with the SEC. Currently, East Boston Savings Bank is partially public, but it informed the SEC early in March that it intends to sell the remaining 52.9 percent of shares of common stock held by its mutual holding company, which will then cease to exist. East Boston Savings Bank opened three new branches in 2013, and recorded a 90 percent rise in profits in the fourth quarter of last year versus the same quarter in 2012.
Four, maybe five, IPOs in one year is unusual, though. So what gives? Maybe it’s a matter of timing.
"The environment is decidedly more auspicious than it was a year ago to do this," said John Carusone, president of the Bank Analysis Center in Hartford, Conn.
Banks that might have been considering a public offering now may be feeling they can acquire a greater level of capital for a lower level of dilution – and possibly make up for several years of lackluster performance.
Of course, that doesn’t discount the great "mutual versus stock" debate that inevitably follows these conversions. Proponents of mutual institutions often charge that shareholder-owned banks prioritize shareholder returns at the expense of their customers and communities.
While he didn’t pass judgment on the "which is better" question, Carusone said there’s no doubt the culture is different between mutual and shareholder-owned institutions. The latter have to contend with quarter-to-quarter earnings and a greater level of reporting requirements, among other issues.
"A shareholder-owned institution has to strike a balance between maximizing profits and maintaining good customer relations," he said. "It’s a more difficult environment in which to manage competing interests."
Email: lalix@thewarrengroup.com
