A shareholder at Reading-based Massbank Corp., whose Massbank branch in Medford is shown above, has nominated himself and two other shareholders to positions on the bank’s board of directors, saying he’s dissatisfied with the performance of the institution.
A shareholder at Massbank Corp., the holding company for Reading-based Massbank, has nominated himself and two other shareholders to positions on the bank’s board of directors, citing dissatisfaction with the institution’s performance.
Lawrence B. Seidman said that at Massbank’s upcoming annual meeting, he intends to run a proxy contest by putting himself and MetroWest businessmen Welles C. Hatch and Thomas G. Goggins up against other directors seeking election.
“They’re doing a poor job [managing the bank],” said Seidman. “If I am a board member, I am going to review [that performance].”
The meeting has not been scheduled but likely will be held in April.
Seidman, a New Jersey investment manager who since May 2007 also has been a director at Union, N.J.-based Union Center National Bank and its holding company, Center Bancorp, hopes to get himself, Hatch and Goggins elected to the board to force the $801 million Massbank to act more like a bank and less like a securities dealer, he said.
“They have way too much in the way of securities,” he said, adding that the bank does very little lending compared to others.
In 2006, Massbank had $208.9 million in outstanding loans, compared to $191.6 million last year. The bank’s assets also have fallen – from $862 million in June 2006 to $801 million last December.
In a Nov. 1, 2007, letter to Massbank Chairman and Chief Executive Officer Gerard H. Brandi, Seidman wrote that in the third quarter of last year, 63 percent of Massbank’s pre-tax income was from securities gains.
“That’s a joke. Are you trying to become the trading desk of a brokerage firm? Are you considering switching charters?” he wrote. “If this is all you’ve got, you have a fiduciary obligation to step aside and let a real banker run [Massbank].”
Brandi declined to comment on Seidman, but defended Massbank’s performance as “exceptional” in important areas such as stock price, return on assets, return on equity, earnings per share, dividends and book value, a measure by which he said the bank is at an “all-time high.”
“Do your own research,” he said.
Massbank shares were trading at $38.48 per share on Feb. 8. However, before July 2007, when Seidman filed a Form 13D with the Securities and Exchange Commission indicating he owned more than 5 percent of the bank’s shares, they were trading at closer to $33.
A local financial industry consultant, who declined to be identified since he was commenting on a specific bank, said the bank performs well against its peers on other important measures.
Through September 2007, he said, Massbank compared favorably to other Bay State banks that had between $500 million and $1 billion in assets on important measures including return on assets, return on equity, efficiency ratio and assets per employee.
“They look relatively healthy compared to their peer group,” the consultant said.
But Seidman said Massbank’s performance doesn’t match his expectations as an investor.
For example, he said, its quarterly earnings dropped each year between 2000 and 2006, even though the economy was doing well. They fell from a high of about $57.6 million in 2000 to about $41.4 million in 2006, he added.
However, Massbank’s annual reports show its earnings increased from $1.8 million in the fourth quarter of 2003 to $2.1 million in December 2007.
In a letter to Massbank last August, Seidman wrote, two other publicly traded Massachusetts thrifts with similar profiles to Massbank’s have done better than the bank in the past 10 years.
Seidman, who owns about 8 percent of Massbank’s stock, is one of the company’s largest shareholders. One that has even more invested – Naples, Fla.-based Private Capital Management, which Seidman described as “one of the largest hedge funds in the country,” owns 9.55 percent.
PCM Chief Executive Officer Bruce S. Sherman penned a letter to Massbank’s board last August, asking that it “move expeditiously to independently review and address the issues raised” in Seidman’s Form 13D.
“Like Mr. Seidman, we have fundamental concerns regarding current management’s commitment and ability to manage the company in the best interest of its shareholders,” he wrote.
What will happen at the next shareholder meeting remains to be seen. Richard Schaberg, a Washington, D.C.-based attorney at Thacher Proffitt & Wood who has defended other banks against Seidman’s efforts in the past, said Seidman has compelled some banks to sell – thereby generating a profit for himself and other shareholders – using similar tactics.
“He sends out a proxy statement to the shareholders which details his perspective as to why the bank is underperforming Â… it can get very nasty,” Schaberg said.
Seidman’s directorship at Center Bancorp may not have come easily, either. He joined the board in May 2007 despite a bank announcement several months earlier that the board had unanimously declined his request to join.
The board cited “Mr. Seidman’s lack of a specific plan to deliver superior value to shareholders, and the disruptive effect” that adding him to the board could have, according to a September 2006 report on StreetInsider.com.
