What one might call a critical mass of depositor-voters at Beverly Bank delivered what resulted in a “no” verdict last month to a plan by its executives to convert the mutually-owned, four-branch, $332-million bank public. A two-thirds majority was needed to approve the plan; the final tally was 238 yes and 205 no.
According to filings dated July 25, 2014, the bank had hoped to raise $47 million selling up to nearly 4.9 million shares, including over-allotments, at $10 per share. It offered depositors a chance to buy stock in advance of a public offering, but cautioned them that they couldn’t put the purchase on their home equity line of credit or borrow against any bank-based IRA to do so. Wise move.
Future rewards for depositors who surrendered their mutual ownership were far less promising than the potential of the departure packages that bank upper management usually receives in the next step on the bank chessboard, when a newly-public bank is acquired by a bigger, publicly-owned entity.
The depositors’ vote was taken last month, during the same period that the executive power struggle at the Tewksbury-based Market Basket supermarket chain was at its height. No direct cause and effect there, but the supermarket fight might have had some impact on public opinion.
Beverly Bank CEO Michael Wheeler told The Boston Globe that he understood the possibility of anti-conversion sentiment. Beverly has lost several smaller free-standing banks in recent years.
The difference between the actual vote and the two-thirds majority needed to relinquish depositor ownership may be a measure of how many depositors wanted to retain their stake in a community bank. Or, it may be a reflection of their unwillingness to take the risk of owning stock in an entity as yet untried in the universe of publicly-owned banks.
Since the turn of the century, never mind since the 2008 financial crisis and the advent of basement-level interest rates and more stringent regulations, the number of Massachusetts-based banks has declined by 25 percent, with most of the casualties being mutually-owned community banks.
Thirty years ago, many mutual banks in New England converted to shareholder-owned institutions. They quickly found that shareholders wanted them to put their new capital to work right away, so many of them invested in new real estate developments, either multi-unit condo complexes or big homes. The New England landscape is replete with developments from that era, in which the telltale peaky faux roofs and fanlight windows might as well be an historic plaque reading “Constructed in the 1980s.” It took many years to recover from a sudden influx of property in a market that hadn’t recovered quickly enough from the devastating inflation of the late 1970s. Not unsurprisingly, the stock of many mutually-converted banks at that time also took a hit.
Maybe the decisive voters at Beverly Bank had memories long enough to remember that time. Or maybe they just wanted to say that they value their community bank a lot more than the possible non-FDIC-insured returns that they might realize from holding stock.
