PORT ANGELES — A first-time offering of more than 10 million shares of First Federal stock is now open, while depositors have been asked to vote to approve the institution’s conversion from a mutual form of organization, or depositor-owned, savings and loan to a bank owned by stockholders.
Depositors also have the first rights to purchase stock and are being asked to vote to approve the funding of the First Federal Community Foundation.
Slightly fewer than 25,000 voting member proxy cards — which represent about 42,000 First Federal accounts — have been mailed to depositors to determine if the institution will change its structure.
If the move is approved by a majority vote of the bank’s depositors, the only locally owned community bank on the North Olympic Peninsula, 91-year-old First Federal will go public, with common stock publicly traded on the NASDAQ Capital Market under the symbol “FNBC.”
The vote results will be announced Jan. 6 at a meeting at the Red Lion Hotel in Port Angeles.
If the conversion is approved, stock on sale now would go to purchasers shortly after that date.
First Northwest Bancorp, the holding company for First Federal, is offering a prospectus and stock order form for the sale of up to 10,580,000 shares of stock through 5 p.m. Dec. 16 to residents of Clallam, Jefferson and Kitsap counties, where Port Angeles-based First Federal operates banking offices, as well as nationwide.
Depositors have been mailed the prospectus and order form. Others can request mailings through calling the bank’s stock information center.
Each share will be sold for $10. The bank requires a minimum stock purchase of 25 shares, a cost of $250, with purchases limited to 20,000 shares per person ($200,000), or 40,000 shares ($400,000) for those acting together, such as a married couple or domestic partners.
If the stock is popular, the number of shares could increase to 12,167,00, the maximum the bank could offer, according to state and federal regulations.
“It’s really about demand,” said Larry Hueth, president and CEO of First Federal.
“It’s really about how much interest there is in the community.”
The prospectus issued by First Northwest Bancorp is based on an independent appraiser’s determination of the present value of the institution.
The final pricing will be determined by several factors, including the number of orders received and stock market conditions in January, explained Louis Paar, partner in Sandler O’Neill & Partners LP, a national investment banking firm and broker-dealer headquartered in New York City that is assisting First Federal in selling the stock.
The minimum amount of stock that must be sold is 7,820,000 shares.
All can put in an order, but orders will be filled first for depositors of First Federal who have had qualifying accounts since March 31, 2011.
Second in line would be the employee ESOP.
Third in priority would be First Fed depositors with accounts opened between April 1, 2011, and Sept. 30, 2014.
Fourth in line would be other depositors and borrowers of First Fed as of Nov. 10, 2014.
Any stock left would be for sale in a community offering.
Depositors who had active accounts with First Federal as of Nov. 10 both are offered stock and get ballots to vote on two issues: to approve the conversion and to fund a new charitable foundation.
“Only those that maintained an account on Nov. 10, 2014, have the right to vote,” Paar said.
Large account holders have more votes than those with small accounts.
Community meetings about the proposed conversion and the new foundation are scheduled Monday in Port Townsend, Tuesday in Port Angeles, Dec. 10 in Forks and next Thursday, Dec. 11, in Sequim. All meetings are at 5:15 p.m.
For meeting locations and to make a reservation — or to receive a prospectus and stock order form — call the bank’s stock information center at 844-731-2610 between 10 a.m. and 4 p.m. Mondays through Fridays.
The call center, which opened Monday, “had a lot of activity,” Hueth said.
He said bank officials do not anticipate “getting any mail back until the end of this week” and so does not know at this point how sales are progressing.
If it is approved, some of the capital raised will go to the First Federal Community Foundation, which has been formed but not funded.
The 501(c)(3), which would give money to various entities within the communities the bank serves, “continues our long tradition of participating in community events,” Hueth said.
The three-member board of the foundation is made up of Stephen E. Oliver and David T. Flodstrom, both directors of First Federal, as well as Karen McCormick, former president and CEO of First Federal.
The new charitable foundation would be funded with $400,000 in cash and the remainder in shares of common stock to total 8 percent of the offering.
The estimated contribution to the foundation would total between $6.3 million and $9.7 million.
“There are two separate votes, one for conversion and one for the formation of a charitable foundation,” Hueth said.
It is possible to vote and not buy stock, he added.
“There is no obligation to buy stock, and there is no obligation to vote,” Paar said.
Proxy cards number fewer than accounts because some accounts belonging to the same person have been consolidated in a manner in line with federal insurance regulations, Paar said.
First Federal, which had assets of more than $795 million as of June 30, stands to gain $78 million to more than $100 million from its stock offering.
“We are not investment advisers, but we are encouraging people to vote for the conversion,” Hueth said.
“The capital that will be raised will benefit the local economy, the bank and the community in total,” he added.
Under the conversion, First Northwest Bancorp would own 100 percent of First Federal, which is known officially as First Federal Savings and Loan Association of Port Angeles.
First Federal’s current board of trustees would serve as trustees of First Northwest, with Hueth also serving as president and CEO of First Northwest.
Eight percent of the stock would be sold to a First Federal ESOP, or employee stock ownership plan, in which First Fed employees would receive stock as part of their annual compensation.
The influx of capital also will allow the bank to grow, Hueth said.
“The capital will allow us to expand deposit and lending efforts, allow us to grow into neighboring communities and continue to add to employment in our communities,” he added.
Growth will not change First Federal, Hueth said.
“The board’s commitment is to remain a Peninsula-based organization” and remain based in Port Angeles, he said.
“Who First Federal is will not change in the process” of conversion, he said.
First Federal, which began in 1923, is based in Port Angeles and has branches there as well as in Sequim, Port Townsend, Forks and Kitsap County’s Silverdale, plus a lending center in the Whatcom County city of Bellingham. It has almost 180 employees.
________
Managing Editor/News Leah Leach can be reached at 360-417-3531 or at leah.leach@peninsuladailynews.com.
Editor and Publisher John Brewer contributed to this report.
