Newtown Savings Bank (NSB) is seeking to become a holding company, in a move that the bank’s President and CEO John Trentacosta said was designed to allow it access to capital that it cannot secure under its current status as a mutual bank.
Subject to an affirmative vote by a majority of its depositors, the reorganization would make NSB a Connecticut-chartered stock savings bank, wholly owned by Maryland-based NSB Holdings Inc., which in turn would be wholly owned by NSB Mutual Holding Co.
When asked if the move could be seen as a precursor to NSB going public, Trentacosta said: “A lot of people may see it that way, but from our standpoint it is not. This is not about common stock but about capitalization. We have every intention to stay mutual.”
Going public would require another depositors’ vote, he added.
NSB CFO and senior vice president William McCarthy noted that the bank is currently considered under federal bank regulatory statutes as “well capitalized,” meaning that it must have a Tier 1 capital ratio of at least 6 percent; a combined Tier 1 and Tier 2 capital ratio of at least 10 percent; a leverage ratio of at least 5 percent; and cannot be subject to a directive, order, or written agreement to meet and maintain specific capital levels.
“We are not having any financial difficulties,” McCarthy said. “This is meant as a forward-looking action which will allow us access to additional capital if we need it.”
The executives pointed to an Oct. 6 letter sent to its depositors to further explain the move. “As a mutual savings bank without a holding company, our only source of regulatory capital is earnings,” the letter stated. “The reorganization will permit the company to issue subordinated debt or stock to the public or in a private placement and to infuse the proceeds into the bank should the need for such capital arise.
“The mutual holding company structure could also facilitate acquisitions of other commercial banks or savings banks,” it continued. “At the same time, the bank’s mutual form of organization and its ability to provide community-oriented financial services will be preserved in the mutual holding company. The bank is committed to being an independent community-oriented institution, and to meeting the financial and credit needs of the communities in which it operates. The board of trustees believes that the mutual holding company structure is best suited for this purpose.”
Trentacosta said the reorganization had been discussed for more than a year.
The bank has also sent a number of emails encouraging its depositors to vote in favor of the reorganization. “Not voting is the same as voting ‘no’,” he said.
As many as 4.6 million votes could be cast, he added, primarily through proxy cards attached to the letter. Votes can also be submitted via phone or at proxypush.com/NSB.
“A lot of our customers have already called,” McCarthy said, “and we’re doing all we can to answer them. If there’s something that our call center or regular staff can’t answer, our management team will.”
Chief among depositors’ concerns is whether the day-to-day operations of NSB will change. “We’ll have the same name, the same employees, the same way of doing business, the same products and services,” Trentacosta said. “There will be no change to the corporate structure.”
He said that the bank expects “an overwhelming majority” to approve the reorganization. Results are expected to be announced at a Nov. 21 meeting at the bank’s main office at 39 Main St. in Newtown. Depositors may cast their vote at that meeting, though Trentacosta said the bank expects few actual votes to take place then.
Voting was open to any depositors as of Sept. 23, with each depositor permitted to cast one vote for each $100, or fraction thereof, of the withdrawable value of such depositor’s deposit account(s) as of Sept. 23. No depositor may cast more than 1,000 votes per account ownership type.
If approved by depositors, the issue would then be sent for approval by the Federal Reserve, which is expected to approve it within 30 to 60 days, Trentacosta said.
Should the depositors vote against the move, Trentacosta said, “We’d have to try again.”