PORT ANGELES — First Federal stock is so popular that it is already oversubscribed, with orders from “first tier” depositors — many of these longtime North Olympic Peninsula customers of the bank — for 12,167,000 shares of stock, the maximum the bank can offer.
This guarantees that First Federal would gain about $121 million after costs as part of its planned jump from being a mutual, or depositor-owned, savings and loan to a bank owned by stockholders.
But while voting for the proposal “is trending very positively” in favor of conversion, according to the CEO of 91-year-old First Federal, the bank isn’t ready yet to make the conversion or issue the stock at $10 a share.
In a surprise decision at a much-anticipated depositors’ meeting Tuesday, First Fed will continue to accept votes on the proposed conversion until Jan. 28.
First Federal President and CEO Larry Hueth proposed the postponement at the meeting and also announced the sell-out of the stock orders.
“While the votes received to date reflect strong support for the conversion, the holidays have delayed the process, and we have not yet received the votes of a significant number of our depositors,” Hueth told the meeting.
Hueth said the conversion was such a major decision that First Federal wanted as many of its account-holders to vote as possible.
He said he did not know how many ballots had been received since the start of the vote in late November.
He said he did know that “close to 700 ballots” were received Monday.
Almost 25,000 account-holders are eligible to vote.
Only 59 account-holders attended Tuesday’s meeting.
Depositors will now have until 10 a.m. Jan. 28 to vote in person, by mail or online. Also eligible to vote on the conversion are the bank’s loan recipients.
Until Jan. 28, the bank will remain as is, with no stock issued.
Voting on the conversion began shortly before Thanksgiving and was to conclude at the meeting Tuesday.
In addition to voting, account-holders had the option of ordering stock and paying for it by Dec. 16. Minimum order was 25 shares for $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.
“I am happy to report that the offering has been oversubscribed,” Hueth said, adding that did not know “to what degree it exceeded” the 12 million shares available.
The $121 million paid for the stock is being held in escrow, pending the vote on the conversion.
The available stock will go only to Tier 1 depositors, those with First Federal accounts as of March 31, 2011.
They more than bought out the stock offering.
Bank officials said many of these are long-term First Fed customers who live in Clallam and Jefferson counties.
Because the offering is over-subscribed, stock will be issued using a federally approved formula, one factor of which is how much money was in the depositor’s account as of the March 31, 2011, cutoff.
The larger the account, the more likely the depositor will receive the amount of stock ordered.
The minimum amount of stock that First Federal had to sell by Dec. 16 was 7,820,000 shares at $10 per share.
Since the stock was so popular, the number was increased from a planned 10,580,000 shares to 12,167,000, the maximum the bank could offer, according to state and federal regulations.
Sales were prioritized, with depositors of First Federal who had qualifying accounts since March 2011 told they were first in line to get the stock.
Second would be First Fed’s employee stock-ownership plan.
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 have been sold to others in a “community offering.”
Money paid for stock will be refunded if the conversion is not approved.
Those in the other tiers who ordered and paid for stock will get refunds after Jan. 28.
The money in the escrow account is accruing at the bank’s standard savings account interest rate of 0.03 percent.
First Fed had assets of more than $795 million as of June 30, its last official reporting date.
“The capital that will be raised [from the stock sale] will benefit the local economy, the bank and the community in total” by allowing the bank to expand its deposit and lending efforts, Hueth has said in the past.
Approved at meeting
The continuation of voting until Jan. 28 was approved by all but one of the 59 account-holders at Tuesday’s meeting.
The bank’s bylaws call for account-holders to vote in person on these kinds of decisions.
The new meeting — in which the final vote will be announced — will be held at 10 a.m. Jan. 28 at the Port Angeles Red Lion Hotel, the site of Tuesday’s session.
Nearly 25,000 voting member proxy cards, which represent about 42,000 First Fed accounts, were mailed by First Northwest Bancorp, the holding company for First Fed, in late November along with stock order forms and a prospectus on the stock.
A note reminding account-holders to vote went out in early December.
Hueth said those who haven’t yet voted will get a new mailing of ballots and background information.
In addition to the conversion, voters are also being asked to approve the funding of a new First Fed community foundation, a 501(c)(3) nonprofit that would give money to charities and other local community groups.
If the conversion is approved, First Northwest Bancorp, newly formed by First Federal, would own 100 percent of First Federal, which is known officially as First Federal Savings and Loan Association of Port Angeles.
First Fed’s current board of trustees would serve as trustees of First Northwest.
At Tuesday’s meeting, several depositors expressed concerns over what they said was a lack of information before November from First Federal about the stock and conversion proposal.
Hueth and other bank officials said the proposal has been the subject of public meetings in Port Angeles, Forks, Sequim and Port Townsend, and had been publicized since 2012, when the bank filed a legal notice of its intention to convert.
Stockholders will receive their stock effective Jan. 28 if the conversion is approved on that date, First Federal lawyer John Breyer of McClean, Va., said after Tuesday’s meeting.
The stock would be publicly traded on the NASDAQ Capital Market under the symbol “FNBC.”
First Federal, which began in 1923, has branches in Port Angeles, Sequim, Port Townsend, Forks and Silverdale, plus a lending center in Bellingham.
It has almost 180 employees.
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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 5060, or at pgotlieb@peninsuladailynews.com.
