Territorial Savings Bank in Honolulu is planning to go public, and Community Bank in Brockton, Mass., is calling off its offering for now, in what has been a choppy market for mutual thrift conversions.
Only 13 conversions have been completed this year, compared with 26 for all of last year, according to Mike Shafir, an analyst at Sterne, Agee & Leach Inc.
The $1.2 billion-asset Territorial said it would conduct a standard conversion, selling all of its stock at once.
Community Bank had a standard conversion in the works, but it did not generate enough investor interest to complete the deal. It said Wednesday that it would return the money it has raised and try again next quarter.
Territorial aims to raise between $80.8 million and $125.6 million, which it would use to make more loans, build or acquire branches, or buy other financial services companies. It has 24 branches and plans to open at least two more over the next two years.
It also intends to repay trust-preferred securities with some of the money, according to a Securities and Exchange Commission filing Nov. 14.
Analysts said one of Territorial's selling points is its pristine asset quality; its nonperforming loan ratio is zero.
Territorial must sell at least 8,075,000 shares at $10 each to complete the offering, but it could sell up to 12,563,750 if demand is high enough.
At the minimum level, the share price would equal 48% of Territorial's tangible book value — a figure that Theodore Kovaleff, an analyst at Granta Capital LLC, said could make the offering attractive for investors. "This is a good time to be an investor, because you're going to get a lower price to book," he said.
Mr. Shafir said Territorial's asset size — it is larger than most of the recently converted thrifts — also adds luster. "In general, larger institutions get greater interest than smaller institutions."
Mr. Kovaleff agreed with that assessment and said, "In a case like this, you could attract institutional investors," who might help the deal get done and buoy the stock after it starts trading.
Community Bank had planned to raise at least $17 million in the conversion it announced in September. It created Campello Bancorp Inc. to be its holding company and facilitate the transaction.
But it could not sell the minimum 1.7 million shares that regulators required, even after extending the offering to the general public.
"The volatility of the stock market, the significant downturn in the economy, and the highly publicized problems in the financial services sector all combined to dampen confidence and constrict the level of participation, and particularly local participation, in our offering," David W. Curtis, Community Bank's president, said in a press release.
Mr. Kovaleff said the bank's size — $387 million of assets and six branches — likely made the deal more of a challenge in the current market.
Like all banking stocks, shares of recently converted thrifts have been sagging. Of the dozen that have completed standard conversions since Jan. 1, 2007, shares of only five were trading above the initial offering price as of early last month, according to Territorial's SEC filing.
