First Seacoast Bank plans to shift from mutual bank to stockholder-owned

The holding company for First Seacoast Bank – headquartered in Dover with branches in Barrington, Durham, Portsmouth, and Rochester – is preparing to a shift from mutual ownership to becoming a stockholder-owned bank.

First Seacoast Bancorp’s board of directors announced Aug. 12 that it has adopted what is called a “Plan of Conversion and Reorganization,” a step toward converting from its current mutual holding company structure to a stock holding company structure.

The process is expected to be completed within the first quarter of 2023. Until then, its president and CEO, James Brannen, and all other company officers are in a so-called “quiet period” of not talking about the shift to avoid any appearance of providing insider information to investors. It is a practice mandated by the Securities and Exchange Commission in any deal involving initial stock purchases.

Mutual banks are owned by their depositors rather than by shareholders, giving individual members a means to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result.

First Seacoast is owned by a holding company, which, according to the FDIC, means depositors own the holding company, which in turn owns a majority of the stock issued by a subsidiary bank.

Many mutual banks over the years have converted to a stock form of ownership — either to raise money, to expand operations, to enhance employee benefit options, or for some combination of these or other reasons. A host of federal and state banking laws govern “mutual-to-stock” conversions of banks and savings associations, including the rights — and responsibilities — of depositors. Similarly, state insurance laws govern insurance company conversions.

Approval process

First Seacoast Bank, one of 12 remaining mutual institutions in New Hampshire, was established in Dover in 1890, originally opening under the name of the Dover Co-Operative Savings Fund and Loan Association. The bank’s name was changed to Federal Savings Bank in 1983 to reflect a growing customer base in areas outside of Dover, and, according to the bank’s history, changed its name in 2019 to First Seacoast Bank to better reflect its longstanding commitment to positively impacting Seacoast communities.

According to a company statement, First Seacoast Bancorp, MHC currently owns approximately 55.7 percent of the outstanding shares of common stock of First Seacoast Bancorp, which it acquired in connection with the reorganization of First Seacoast Bank into the mutual holding company structure and the related initial public offering by First Seacoast Bancorp in July 2019.

The proposed new stock holding company for First Seacoast Bank would be named First Seacoast Bancorp Inc.

It will sell shares of its common stock, representing First Seacoast Bancorp MHC’s ownership interest in First Seacoast Bancorp, to depositors of First Seacoast Bank and others in a subscription offering and, if necessary, a community offering and/or a syndicated community offering.

The proposed shift from depositor- to investor-owned is subject to regulatory approval, approval by the members of First Seacoast Bancorp MHC (i.e., depositors and certain borrowers of First Seacoast Bank), and approval by the stockholders of First Seacoast Bancorp, including by a separate vote of approval by First Seacoast Bancorp’s minority stockholders.

Account holders as of the close of business on June 30, 2021 will have first priority non-transferable subscription rights to subscribe for shares of common stock of First Seacoast Bancorp Inc.

An independent appraiser will determine the value of the stock at its initial offering.

The company said detailed information regarding the proposed transaction, including the stock offering, will be sent to stockholders of First Seacoast Bancorp and members of First Seacoast Bancorp following regulatory approval.

Luse Gorman is serving as legal counsel to First Seacoast Bancorp MHC First Seacoast Bancorp and First Seacoast Bank.

Keefe, Bruyette & Woods Inc. will act as marketing agent in the stock offering.