S-1/A: EWSB Bancorp Eyes Public Markets with Amended S-1 Filing for Stock Conversion

EWSB Bancorp, the proposed holding company for East Wisconsin Savings Bank, files an amendment to its S-1 registration statement, signaling progress towards its mutual-to-stock conversion and public offering.

Summary

• EWSB Bancorp, Inc., the proposed holding company for East Wisconsin Savings Bank, is offering shares of common stock in connection with the conversion of Wisconsin Mutual Bancorp, MHC from a mutual holding company to a stock holding company.
• The company is offering up to 1,006,250 shares of common stock at $10.00 per share, with a minimum of 743,750 shares required to be sold to complete the offering.
• Due to demand or market changes, the company may sell up to 1,157,188 shares without resoliciting subscribers.
• Eligible members of the MHC (eligible depositors) and the Bank's tax-qualified employee benefits plan will have priority in the subscription offering.
• Shares not purchased in the subscription offering may be offered to the general public in a community offering, with preference given to residents of communities served by the Bank.
• Performance Trust Capital Partners, LLC will assist in selling the shares and serve as sole manager for any syndicated community offering.
• The company incurred net losses of $378,000 and $194,000 for the three months ended March 31, 2024 and 2023, respectively, and net losses of $935,000 and $4.2 million for the years ended December 31, 2023 and 2022, respectively.
• The Bank entered into a confidential memorandum of understanding (MOU) with the FDIC and the Department in July 2023, agreeing to maintain a net worth ratio of at least 6%.
• At March 31, 2024, the company had a net worth ratio of 4.31%.
• The company estimates offering expenses, excluding marketing agent fees and expenses, to be $1,407,500.
• The company estimates marketing agent fees and expenses to be $360,000.
• The company intends to retain $100,000 of the net conversion proceeds at New EWSB Bancorp and enough of the net proceeds to fund the loan to the ESOP.
• The remainder of the net conversion proceeds will be contributed to the Bank.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the conversion and offering are positive steps towards strengthening the company's financial position, the recent net losses and regulatory requirements raise concerns.

Positives

• The conversion aims to increase capital to improve the regulatory capital position and support future operations and profitability.
• The conversion provides greater flexibility to access the capital markets compared to the existing mutual holding company structure.
• The conversion enhances the company's ability to manage risk.
• The conversion enhances community ties by providing customers and community members with the opportunity to acquire an ownership interest.
• The company intends to increase the proportion of assets consisting of loans.
• The company intends to control operating expenses.
• The company intends to continue its historical emphasis on residential mortgage lending.
• The company intends to continue to improve asset/liability management.
• The company intends to continue to manage credit risk to maintain a low level of non-performing assets.
• The company intends to continue its community-oriented focus.

Negatives

• The company incurred net losses in recent periods, impacting its net worth ratio.
• The Bank is operating under a confidential memorandum of understanding (MOU) with regulators, requiring a net worth ratio of at least 6%.
• The conversion will have an adverse impact on operating results due to additional expenses to be incurred in connection with and as a result of the conversion.
• The company may be unsuccessful in executing its business plan and may not be able to return to profitability in the timeframe expected, or at all.

Risks

• The company's results of operations are significantly impacted by oneto four-family residential lending.
• The company's emphasis on oneto four-family residential mortgage lending exposes it to credit risks.
• The geographic concentration of the company's loan portfolio and lending activities makes it vulnerable to a downturn in the local economy.
• The company's business may be adversely affected by the credit risk associated with jumbo real estate loans.
• Future changes in interest rates could reduce the company's profits and asset values.
• Inflationary pressures and rising prices may affect the company's results of operations and financial condition.
• The Bank has entered into a confidential memorandum of understanding (the MOU) with the Department and the FDIC.
• As a Wisconsin-chartered savings bank, the company is subject to a 6% net worth ratio requirement.
• The company has experienced net losses in recent periods, and it may not return to sustained profitability in the future.
• The company may not be able to realize the value of its deferred tax assets.
• The company faces significant operational risks because of its reliance on technology.
• The company outsources critical operations to third-party service providers.
• The company's business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
• The company depends on its management team to implement its business strategy and execute successful operations and it could be harmed by the loss of their services.
• The company is a community bank and its ability to maintain its reputation is critical to the success of its business.
• If the company is unable to maintain its balance of deposits, it may have to rely more heavily on wholesale funding strategies for funding and liquidity needs.
• Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect the company's operations and/or increase its costs of operations.
• Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
• Monetary policies and regulations of the Federal Reserve Board could adversely affect the company's business, financial condition and results of operations.
• The company is an emerging growth company, and any decision on its part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make its common stock less attractive to investors.
• Strong competition within the company's market areas may limit its profitability.
• The company's size makes it more difficult for it to compete.
• Changes in management's estimates and assumptions may have a material impact on the company's consolidated financial statements and its financial condition or operating results.
• Changes in accounting standards could affect reported earnings.
• The company's future net income will be dependent in part on secondary market revenues, which are highly dependent on macroeconomic factors and United States real estate market, mortgage market and financial market conditions.
• Legal and regulatory proceedings could adversely affect the company.
• The company may close the offering at the minimum of the offering range.
• The future price of the company's shares of common stock may be less than the $10.00 purchase price per share in the stock offering.
• There will be a limited trading market in the company's common stock, which would hinder your ability to sell the company's common stock and may lower the market price of the stock.
• A significant percentage of the company's common stock will be held by its directors and executive officers and benefit plans.
• The company's failure to effectively deploy the net proceeds may have an adverse effect on its financial performance.
• The cost of additional finance and accounting systems, procedures, compliance and controls in order to satisfy the company's new public company reporting requirements will increase its expenses.
• The company's stock-based benefit plan will increase its expenses and reduce its income.
• The implementation of a stock-based benefit plan may dilute your ownership interest.
• The company's stock value may be negatively affected by applicable regulations that restrict stock repurchases.
• Various factors may make takeover attempts more difficult to achieve.
• The company's articles of incorporation provide that, subject to limited exceptions, state and federal courts in the State of Maryland are the sole and exclusive forum for certain stockholder litigation matters.
• You may not revoke your decision to purchase the Company common stock in the subscription offering or in any community offering after you send us your order.
• The distribution of subscription rights could have adverse income tax consequences.

Future Outlook

The company's future operating results will be significantly dependent upon its ability to increase its net interest margin as well as its originations of oneto four-family loans, including in particular loans available-for-sale, which drive mortgage banking income.

Management Comments

• Our future operating results will be significantly dependent upon our ability to increase our net interest margin as well as our originations of oneto four-family loans, including in particular loans available-for-sale, which drive mortgage banking income.
• In addition, we have taken a number of steps to increase our core deposits and increase our residential loan volume, both of which should enhance our goals of increasing both loan originations and our net interest margin.

Industry Context

The announcement reflects a trend of mutual holding companies converting to stock holding companies to gain greater access to capital markets and enhance their ability to manage risk and grow.

Comparison to Industry Standards

• The appraisal peer group consists of 1895 Bancorp of Wisconsin, Inc., Catalyst Bancorp, Inc., Cullman Bancorp, Inc., Generations Bancorp NY, Inc., HMN Financial, Inc., Home Federal Bancorp, Inc. of Louisiana, IF Bancorp, Inc., NSTS Bancorp, Inc., PB Bankshares, Inc., TC Bancshares, Inc., and Texas Community Bancshares, Inc.
• Compared to the average pricing of the peer group, EWSB Bancorp's pro forma pricing ratios at the midpoint of the offering range indicated a discount of 28.8% on a price-to-book value basis and a discount of 29.5% on a price-to-tangible book value basis.

Stakeholder Impact

• The conversion will provide customers and members of the community with the opportunity to acquire an ownership interest in New EWSB Bancorp and the Bank.
• The conversion will not affect the normal business of the Bank of accepting deposits and making loans.
• The conversion will not affect the deposit balance, interest rate and other terms of deposit accounts.
• The conversion will not affect the amount, interest rate, maturity and security for each loan.
• Depositors of the Bank are currently members of, and have voting rights in, the MHC, as to all matters requiring a vote of members.
• Upon completion of the conversion, depositors will no longer have voting rights.
• The stockholders of the Company will possess exclusive voting rights with respect to the common stock of the Company.

Next Steps

• The plan of conversion must be approved by at least a majority of the votes eligible to be cast by members of the MHC.
• The plan of conversion must be approved by the MHC, the sole stockholder of Old EWSB Bancorp.
• The company must receive and accept orders to purchase at least the minimum number of shares of common stock offered.
• The company must receive all required final approvals of the Department and the Federal Reserve Board to complete the conversion and the offering.

Key Dates

Keywords

stock offering, mutual-to-stock conversion, EWSB Bancorp, East Wisconsin Savings Bank, subscription rights, community offering, financial institution, capital, net worth, regulatory, depositors, shares, stock