United Community Bancorp (UCBA) of Lawrenceburg, Ind., is suspending the payment of dividends on its common stock until the company completes a pending second-step conversion.
The $494 million-asset company, which announced plans in March 2011 to convert to a completely public company, said Thursday it would discontinue the quarterly cash payments as a result of the cost and uncertainty associated with the ability of its parent mutual holding company to obtain permission from regulators to waive the payment's receipt.
United Community said it would declare and pay a one-time special cash dividend following the conversion, which it expects to complete by March 31, 2013.
Though the mutual holding company that owns 59% of United Community Bancorp's common stock has waived its right to receive dividends on its shares previously to allow the company to pay higher dividends to its public shareholders, the mutual holding company would need to obtain approval of the Federal Reserve for future waivers, the company said in a regulatory filing recently.
Through June 30, United Community has incurred roughly $1.3 million in expenses related to the conversion, according to the company.
United Community's mutual holding company structure limits the bank's ability to raise capital. With its current structure, the bank cannot issue stock in an amount that would cause the mutual holding company to own less than a majority of United Community's outstanding shares.