S-1/A: EWSB Bancorp Seeks Public Offering to Bolster Capital and Fuel Growth

EWSB Bancorp, the proposed holding company for East Wisconsin Savings Bank, aims to raise capital through a stock offering tied to its conversion from a mutual holding company.

Summary

• EWSB Bancorp, Inc., is planning a stock offering in conjunction with its conversion from a mutual holding company to a stock holding company.
• The company is offering up to 1,157,188 shares of common stock at $10.00 per share, with a minimum offering of 743,750 shares required to complete the offering.
• The offering consists of a subscription offering to eligible depositors and the Bank's employee benefits plan, followed by a community offering and potentially a syndicated community offering.
• The primary goals of the conversion and offering are to increase capital, improve regulatory standing, enhance risk management, and strengthen community ties.
• Recent operating losses have impacted the company, with net losses of $378,000 for the three months ended March 31, 2024, and $935,000 for the year ended December 31, 2023.
• The Bank is also operating under a confidential memorandum of understanding (MOU) with regulators, requiring it to maintain a net worth ratio of at least 6%; at March 31, 2024, the ratio was 4.31%.
• The company intends to contribute at least 50% of the net proceeds to the Bank, retain $100,000 at the holding company level, and fund a loan to the ESOP.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company is taking steps to improve its financial position through the conversion and stock offering, it faces challenges related to recent losses, regulatory requirements, and market conditions. The sentiment is neutral, reflecting both opportunities and risks.

Positives

• The conversion aims to provide greater flexibility in accessing capital markets.
• The offering provides an opportunity for customers and community members to acquire an ownership stake in the bank.
• The capital raised will support increased lending and improve the bank's capital position.
• The company is taking steps to increase core deposits and residential loan volume.
• The company has been effective in limiting the increase in its expenses.

Negatives

• The company has experienced recent net losses, impacted by rising interest rates.
• The Bank's net worth ratio is below the minimum required by regulators.
• The conversion will result in additional expenses related to becoming a public company.
• The company's stock-based benefit plan will increase expenses and reduce income.
• There is no current intention to pay cash dividends to stockholders.

Risks

• The company's results are significantly impacted by oneto four-family residential lending, which is sensitive to interest rates.
• The geographic concentration of the loan portfolio makes the company vulnerable to downturns in the local economy.
• Future changes in interest rates could reduce profits and asset values.
• The Bank is subject to a confidential memorandum of understanding (MOU) with regulators.
• The company may not be able to realize the value of its deferred tax assets.
• The future price of the shares may be less than the $10.00 purchase price.
• There will be a limited trading market in the common stock.

Future Outlook

The company's future operating results will depend on its ability to increase its net interest margin and loan originations. The capital raised in the conversion will support this effort, but the conversion will also have an adverse impact on operating results due to additional expenses.

Management Comments

• Management believes that its efforts to implement the provisions of the MOU are generally on track and it continues to update and coordinate with the FDIC and the Department on the status of its efforts.
• Management believes that its efforts to implement the provisions of the MOU are generally on track and it continues to update and coordinate with the FDIC and the Department on the status of its efforts.

Industry Context

The announcement reflects a trend of mutual holding companies converting to stock holding companies to access capital markets and enhance their ability to compete in the financial services industry. The company faces competition from larger banks, credit unions, and fintech companies.

Comparison to Industry Standards

• The appraisal peer group consists of 11 publicly traded savings and loan and bank holding companies, including 1895 Bancorp of Wisconsin, Inc., Catalyst Bancorp, Inc., and HMN Financial, 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.
• Due to the company's recent net loss, its calculated price-to-core earnings ratio at the midpoint was not meaningful and, therefore, not subject to comparison with the peer group.

Stakeholder Impact

• Shareholders: Opportunity to acquire ownership in the bank, but face risks related to stock price volatility and potential dilution.
• Depositors: No immediate changes to deposit accounts, but voting rights in the MHC will be lost.
• Employees: Potential benefits from the ESOP and stock-based benefit plan.
• Customers: Continued access to existing banking services.

Next Steps

• Obtain approval of the plan of conversion by the members of the MHC.
• Obtain approval of the plan of conversion by the MHC, the sole stockholder of Old EWSB Bancorp.
• Receive all required final approvals of the Department and the Federal Reserve Board to complete the conversion and the offering.
• Update the independent appraisal before completing the offering.
• Implement a stock-based benefit plan no earlier than six months after completion of the conversion, subject to stockholder approval.

Key Dates

Keywords

stock offering, mutual holding company, conversion, EWSB Bancorp, East Wisconsin Savings Bank, capital raise, regulatory capital, Feldman Financial Advisors, Performance Trust, ESOP