AUGUSTA — Kennebec Savings Bank is in the process of changing its organizational structure to better weather future financial crises and to give the bank more flexibility to acquire or create additional financial institutions.

The mutual savings bank has no plans to acquire any other entities, but the new structure would allow the bank to do so in the future, said Mark Johnston, the bank’s CEO and president.

The change also won’t have any effect on the rates and the services offered to customers, he said.

“At the end of the day, after the conversion, to the public or to our customers or to our employees or to anybody, we’re not going to look any different,” Johnston said.

The bank applied with the Maine Bureau of Financial Institutions, the Federal Deposit Insurance Company and the Federal Reserve to convert to the new structure, which will create a mutual holding company and a mid-tier holding company that will own all the stock of Kennebec Savings Bank.

The public comment period for the state regulator is open through April 20.


Kennebec Savings Bank is a mutual savings bank, meaning it is owned by its depositors, not by private stockholders. The bank’s main office is in Augusta, and it also has branch offices in Farmindale, Waterville and Winthrop.

The change will help keep the bank mutual, Johnston said, because it will allow the bank to raise money in a financial crisis without selling the majority of the control to stockholders.

Other mutual savings banks have converted to stock-owned banks as a way to raise capital, especially when in financial straits such as having a significant number of loans default, Johnston said.

The mutual holding company structure, first permitted at the federal level in 1987, according to the American Bankers Association, allows banks to sell up to a minority percent of the stock in the mid-tier holding company to raise money.

The bank doesn’t plan to sell stock, and it would only do so in some type of capital crisis, said Andrew Silsby, executive vice president and chief operating officer of the bank.

“There are absolutely no intentions to do that, but it is in our capital plan for those stormy days if we got into our difficulties,” he said.


The bank is doing the conversion now because Silsby said it’s important do it while the bank is in a strong financial position, and it was one of Johnston’s goals before he retires next year.

Silsby will be named president of the bank in June and become the CEO a year later.

“We’re preserving mutuality,” Johnston said. “We’re trying to make sure we preserve who we are as an organization and who we have been in our history.”

Traditional mutual banks make up about 6 percent of the total banks in the U.S., according to information provided Kennebec Savings from K&L Gates LLP, an international law firm. Banks with the mutual holding company structure and no stock issued total less than a quarter of the roughly 600 total mutual savings backs in the country.

Half of the 14 state-chartered savings banks in Maine have done the conversion Kennebec Savings Bank is proposing, according to the Maine Bureau of Financial Institutions. Most recently, Sanford Institution for Savings converted to the structure in 2009.

Under the new structure, a bank can also create or acquire other entities, such as another bank or an insurance company, and keep the new bank as a separate entity. Otherwise, mutual banks must merge with other institutions, assuming one name and structure as part of the acquisition.


For instance, Kennebec Savings Bank and Waterville Savings and Loan Association merged in 1995, combining assets and becoming one entity.

The new structure would have also made a proposed merger between the bank and a credit union five years ago easier, Johnston said.

Kennebec Savings Bank attempted to merge with KV Federal Credit Union, but members of the credit union rejected the proposal in 2009.

“I’m not saying the outcome would have been different, but it would have been easier if we had it in place already,” Johnston said.

He said there are no current plans to acquire any institutions and any decision like that wouldn’t occur until years down the road.

Depositors at the bank will have to vote on the structure change after federal and state regulators approve it, which Johnston expects to happen by the end of May.

The bank will be sending out information packets with voter cards and holding an informational meeting once it reaches the voting stage of the process, Johnson said.

He said the conversion will likely be completed by July if depositors approve it.

Paul Koenig — 621-5663 [email protected] Twitter: @paul_koenig

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