PORT ANGELES — First Federal will begin offering millions of shares of stock for sale next week as it gets ready to change its banking structure.
The only locally owned community bank on the North Olympic Peninsula, 91-year-old First Federal will go public if the move is approved by a majority vote of the bank’s depositors who, along with the bank’s borrowers, also will have the first opportunities to buy the stock.
The change — converting from a mutual, or depositor-owned, savings and loan to a bank owned by stockholders — has been in the works since 2012 and has now received final approvals from state and federal regulators.
First Northwest Bancorp, First Federal’s proposed new publicly owned holding company, would offer for sale between 7.82 million and 10.58 million shares of common stock at $10 a share.
The vote on the change will be announced at a meeting at the Red Lion Hotel in Port Angeles on Jan. 6, and, if approved, the stock would go to purchasers in various priorities shortly after that date.
Observers expect the conversion to be overwhelmingly approved by depositors since it gives them the opportunity to become owners of the bank with the expectation that their shares will increase in value as the stock is publicly traded.
The bank would require a minimum stock purchase of 25 shares, a cost of $250.
Purchases would be limited to 20,000 shares per person ($200,000).
A married couple, or domestic partners, could purchase a maximum of 40,000 shares ($400,000).
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 Fed’s current board of trustees would serve as trustees of First Northwest.
Larry Hueth, president and CEO of First Federal, also would be president and CEO of First Northwest.
Eight percent of the stock would be sold to a First Federal ESOP, or employee stock ownership plan.
This means First Fed employees would receive stock as part of their annual compensation.
First Federal is well-known for its support of nonprofit groups, community development and civic projects.
Establishment of a new charitable foundation by the bank also would be part of the conversion, “and this will maintain our focus on future community-giving,” said Hueth.
National trend
First Federal’s plans follow a national trend in which many mutuals have converted to stock ownership to raise millions in new capital.
The money can be used to build new branches, expand lending and investments and offer new services.
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.
“On or about” next Tuesday, Nov. 25, “offering materials will be mailed to First Federal’s depositors and borrowers eligible to purchase shares in a subscription offering, and proxy solicitation materials will be mailed,” the bank said in a statement Wednesday.
In addition to offering them stock, depositors will get ballots to vote on two issues — to approve the conversion and to create the new charitable foundation.
Votes will be weighted — large account holders will have more votes than those with small accounts.
The shares will be available for sale first to 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. 20, 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” to residents of Clallam, Jefferson and Kitsap counties.
Dec. 16 deadline
The four “subscription offerings” to depositors and borrowers and the “community offering” to residents of the three counties would expire at 5 p.m. Dec. 16.
Stock purchases — including payment — must be made by those in the five classes by that deadline. (If the conversion is not approved, the money would be returned to the purchaser.)
In sixth priority, any shares still available after Dec. 16 would be available for sale to members of the general public “in a syndicated or firm commitment underwritten offering.”
After these offerings, and approval of the conversion, First Federal stock would be publicly traded on the NASDAQ stock exchange.
In addition to approval of depositors — those voting must have First Fed accounts as of Nov. 10, 2014, and certain borrowers can also vote — a minimum of 7.82 million shares must be sold to validate the offering.
As a result of the demand for shares or changes in market and financial conditions, the amount of common stock for sale could be increased to 12.167 million shares, a prospectus said.
The change to stock ownership will not affect terms governing the bank’s savings and checking accounts and loans.
Information center
Questions about the stock or requests for offering materials can be directed next month to First Federal’s Stock Information Center at 844-731-2610. The center will open Monday, Dec. 1.
The bank’s new charitable foundation, the First Federal Community Foundation, would be funded initially with $400,000 in cash and the remainder in shares of common stock so the total amount contributed is equal to 8 percent of the gross offering proceeds the company receives in the offering, a total ranging between $6.3 million and $9.7 million.
“The conversion to stock form will enable us to raise capital through the sale of common stock by First Northwest,” said Hueth.
“This capital will give us the financial strength to better serve our existing customers, support our future growth and expansion, maintain our philanthropic endeavors through the formation and funding of the First Federal Community Foundation, retain and attract qualified personnel and provide our customers with an opportunity to become owners of First Federal, and structure our business in a form that will enable us to have more flexible access to capital markets in the future.”
First Federal, which began in 1923, is based in Port Angeles and has branches there, Sequim, Port Townsend, Forks and Silverdale in Kitsap County plus a lending center in the Whatcom County city of Bellingham.
It has almost 180 employees.
In addition to total assets of $795,292,000, it reported deposits as of June 30 of $600,399,000 and equity of $80,995,000.
Sandler O’Neill & Partners LP, a national investment banking firm and broker-dealer headquartered in New York City, will assist First Fed in selling the stock.
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Publisher and Editor John Brewer can be reached at 360-417-3500, or at jbrewer@peninsuladailynews.com.Minimum purchase is $250.
