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, is offering up to 1,157,188 shares of common stock in connection with a mutual-to-stock conversion to increase capital and enhance its market flexibility.

Summary

• EWSB Bancorp, Inc., the proposed holding company for East Wisconsin Savings Bank, is undertaking a mutual-to-stock conversion.
• The company is offering up to 1,006,250 shares of common stock, subject to an increase to up to 1,157,188 shares.
• The offering price is $10.00 per share, with a minimum purchase of 25 shares.
• Eligible members of the MHC (eligible depositors) and the Bank's tax-qualified employee benefits plan 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 specific Wisconsin counties.
• The company incurred net losses of $378,000 for the three months ended March 31, 2024, and $935,000 for the year ended December 31, 2023.
• The primary reasons for the conversion are to increase capital, improve the regulatory capital position, enhance the ability to manage risk, and enhance community ties.
• The company intends to contribute at least 50% of the net proceeds from the offering to the Bank.
• Feldman Financial Advisors, Inc. estimated the pro forma market value of New EWSB Bancorp to be $8.8 million as of May 14, 2024, forming the midpoint of a valuation range from $7.4 million to $10.1 million.
• The company expects its common stock to be quoted on the OTCQB Market upon completion of the conversion and stock offering.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the conversion aims to improve the company's financial position, the recent losses and various risks outlined suggest a cautious outlook. The sentiment is neutral, reflecting both opportunities and challenges.

Positives

• The conversion aims to increase capital to improve the regulatory capital position and support future operations and profitability.
• The transition to a stock holding company structure provides greater flexibility to access capital markets.
• The conversion is expected to enhance the company's ability to manage risk.
• The offering provides an opportunity for customers and community members to acquire an ownership interest in New EWSB Bancorp and the Bank.

Negatives

• The company has incurred net losses in recent periods, impacting its financial performance.
• The conversion will result in additional expenses related to becoming a public company and implementing employee benefit plans.
• There is no assurance that the company will successfully execute its business plan and return to profitability.
• The future price of the shares of common stock may be less than the $10.00 purchase price per share in the stock offering.

Risks

• The company's results of operations are significantly impacted by its oneto four-family residential lending, which is sensitive to interest rates.
• The geographic concentration of the loan portfolio and lending activities makes the company vulnerable to a downturn in the local economy.
• Future changes in interest rates could reduce profits and asset values.
• The Bank has entered into a confidential memorandum of understanding (the MOU) with the Department and the FDIC, which imposes restrictions on its operations.
• 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.
• Strong competition within the company's market areas may limit its profitability.

Future Outlook

The company's future operating results will be significantly dependent upon 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

• 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 comes amid a challenging environment for community banks, with rising interest rates and increased competition for deposits impacting profitability. The conversion to a stock holding company aims to provide EWSB Bancorp with greater flexibility to navigate these challenges and pursue growth opportunities.

Comparison to Industry Standards

• The independent appraisal uses a peer group of eleven 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 recent net losses, EWSB Bancorp's 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: Potential dilution from stock-based benefit plans and fluctuations in stock price.
• Employees: Opportunity to participate in the ESOP and potential benefits from stock-based benefit plans.
• Customers: No immediate impact on deposit accounts or loan terms.
• Community: Potential for enhanced community ties through local ownership.

Next Steps

• Obtain approval of the plan of conversion by the members of the MHC (eligible depositors of the Bank).
• 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 appraisal before completing the offering.

Key Dates

Keywords

stock offering, mutual-to-stock conversion, EWSB Bancorp, East Wisconsin Savings Bank, capital raise, financial institution, community bank, OTCQB, Feldman Financial Advisors, Performance Trust