BankFinancial, Burr Ridge, IL (BFIN)

An 18-Year Old Prodigal Bank Conversion

Under the leadership of Chairman and CEO Morgan Gasior, BankFinancial has been squandering assets with the arrogance of inherited affluence for nearly two decades.

Despite his repeated promises, in no year has Gasior produced "peer-like" returns, and this prodigal son shows no signs of changing his ways. 

Clearly, BankFinancial's Board of Directors needs a serious kick in the pants, which any shareholder who meets the SEC Rule §240.14a-8 criteria can deliver by submitting a proposal recommending the bank be sold to a more mature operator. 

Per BankFinancial's April 2023 Proxy, the deadline to submit a shareholder proposal is December 13, 2023.

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Disclosure: As of this posting, I own shares of BFIN and may subsequently either dispose of them or purchase more.

Prospective Buyers	Any of these neighboring banks would have no trouble putting BankFinancial's assets to better use if they could acquire the franchise at a small premium to book value. Byline Bancorp, Chicago, IL (BY) Old Second Bancorp, Aurora, IL (OSBC) Wintrust Financial, Rosemont, IL (WTFC)
Financial Snapshot †as of 09/30/2023	Total assets: $1.5B† Tangible book value per share:    $12.25† NPAs to assets: 1.6%† Price to book: 74% Market cap: $113M Dividend yield: 4.4% Trailing 12-month ROA: 0.69%† Trailing 12-month ROE: 7%†
Scoundrels	F. Morgan Gasior, Chairman, President, and CEO John M. Hausmann, Director since 1990 Terry R. Wells, Director since 1994 Glen R. Wherfel, Director since 2001
Red Flags	In preparation for publishing this review, I re-read all 18 years of transcripts from BankFinancial’s quarterly conference calls.    In those transcripts, Gasior tosses glowing projections for future performance like a kid with confetti.  Over the past 18 years, Gasior took nearly $13M in total compensation from BankFinancial. That money was real. The projections — mostly fairy dust.  Since BankFinancial’s conversion in 2005, both its stock price and book value have declined. Share price is down 34%. Book value per share is down 5%. During that same period, the NASDAQ Bank Index has climbed by 15%. Under Gasior, BankFinancial has flagrantly underperformed its peers, year after year after year.  All of this surprises me so much less now that I know Gasior was just 19 years old when his father, CEO Frank Gasior, made him a Bank Director, and just 24 years old when Dad appointed him COO. It's also no mystery now why Gasior has kept BankFinancial's Board of Directors so small. Perhaps Gasior can't be expected to treat this publicly traded institution responsibly, but that's why banks have Boards of Directors.  BankFinancial is publicly traded. Its board has a legally binding fiduciary responsibility to its shareholders. BankFinancial directors are accountable for hiring and firing the bank's CEO. Given BankFinancial's dreadful performance, its directors are obligated to either replace the CEO or sell the bank.
Sources	BankFinancial website BFIN Earnings Call Transcripts SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with shareholders and analysts

Ponce Financial Group, Bronx, NY (PDLB)

A New York Case of Self-Serving Bank Conversion

Ponce Financial Group stands out amongst its peers in the northeastern US, but not in a good way.

Despite receiving $225M of preferred funding (i.e., no interest for two years) in June 2022 from the U.S. Emergency Capital Investment Program (ECIP),  PDLB remains unprofitable. Meanwhile, Management's deployment of capital has been as unusual as it is self-serving.

PDLB is a walking invitation for shareholders who meet the SEC Rule §240.14a-8 criteria to submit proposals recommending that Management put Ponce Bank up for sale first chance it can (i.e., January 2025). 

Per Ponce Financial's April 2023 Proxy, the deadline to submit a shareholder proposal is December 29, 2023.

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Disclosure: As of this posting, I don't own any shares of PDLB.

Prospective Buyers	Any of these area banks should be able to cut costs and better utilize Ponce Bank's assets by acquiring Ponce near book value: Apple Bank, New York, NY (private) Dime Community Bank, Bronx, NY (DCOM) Emigrant Savings, New York, NY (private)
Financial Snapshot †as of 09/30/2023	Total assets: $2.62B† Tangible book value per share:    $10.99† NPAs to assets: 0.6%† Price to book: 84% Market cap: $220M Dividend yield: 0% Trailing 12-month ROA: 0%† Trailing 12-month ROE: 0%†
Scoundrels	Steven A. Tsavaris, Chairman Carlos P. Naudon, President and CEO Sergio Vaccaro, CFO
Red Flags	It's easy to see how Ponce Bank has lost $37M since its January 2022 second step stock offering. It's less easy to understand Management's unusual capital investments and self-serving compensation strategies. Just months after raising $122M in the stock offering, Ponce reported an $8M quarterly loss due to a fraudulent microlending program called Grain. Not to be deterred, Ponce then partnered with unproven fintech startups SaveBetter LLC and LendingFront Technologies.  Last October, Ponce spent $3M to purchase an interest in Latin American (!) payment processor Bamboo Payment In spite of their poor performance and creative capital destruction, Tsvaris and Naudon paid themselves $4.9M over the past two years.  PDLB WMPN MGYR NECB Assets $2.6B $830M $907M $1.7B Stock +/– – 10% + 25% - 2% + 70% Earnings* -$27.1M +$7.2M +$14.2M +$58.9M * Since PDLB's January 2022 conversion
Sources	Ponce Bank website 2022 Form 10-K Q4 2022 Quarterly Report May 2022 S&P Global Article SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 U.S. Emergency Capital Investment Program (ECIP) Confidential interviews with shareholders and analysts

1895 Bancorp of Wisconsin, Greenfield, WI (BCOW)

A Wisconsin Case of Self-Serving Bank Conversion

My nomination for The Most Self-Serving Recent Bank Conversion? PyraMax Bank's conversion into 1895 Bancorp of Wisconsin (BCOW). 

Every BCOW shareholder who meets the SEC Rule §240.14a-8 criteria for Who Can Submit a Shareholder Proposal should seriously consider doing so. It's a simple step toward protecting one's own investment while helping to strengthen America's banking system.

Per 1895 Bancorp's April 2023 Proxy, shareholder proposals are due by January 15, 2024. 

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Disclosure: As of this posting, I own shares of BCOW and may subsequently either dispose of them or purchase more.

Prospective Buyers	At the right price (a slight discount to book value), PyraMax Bank would boost earnings for any of these three Southeastern Wisconsin franchises: FFBW, Inc, Brookfield, WI (FFBW) Waterstone Financial, Wauwatosa, WI (WSBF) Westbury Bancorp, Pewaukee, WI (WBBW)
Financial Snapshot †as of 06/30/2023	Total assets: $553M† Tangible book value per share: $12.04† NPAs to assets: 0.2%† Price to book: 51% Market cap: $34.9M Dividend yield: 0% Trailing 12-month ROA: -0.13%† Trailing 12-month ROE: -0.96%†
Scoundrels	Darrel A. Francis, Chairman David Ball, President and CEO Richard Hurd, Executive VP Strategic Planning (Former President and CEO)  Monica Baker, COO
Red Flags	1895 Bancorp of Wisconsin is the biggest Money Grabber and Money Loser, not only among recent bank conversions, but compared to its peers in Wisconsin. Last year, 1895 Bancorp paid its directors over 5x what its peers paid theirs. Its executives received $500K more over a two-year period than even the next highest compensated of their peers.  Don't let Management kid you. They're not paying themselves for performance. This is pure grift: BCOW's PyraMax is the only bank in the list to have lost money since January 2019 when it began its conversion. BCOW NSTS MBBC FFBW Assets $553M $251M $238M $327M Stock +/– – 39% - 12% - 24% + 10% Board Members    5   6 8 8 Average Comp Directors (2022) $175K $32K $21K $34K Average Comp Top 2 Executives (2021 & 2022) $1.2M $550K $736K $633K Earnings* - $8.1M + $500K + $4.8M + $8.1M * Since 1895 Bancorp's January 2019 Mutual Holding Company conversion
Sources	1895 Bancorp website June 2023 Form 10-Q SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 BCOW April 2023 Proxy FBBW June 2023 Proxy MBBC October 2023 Proxy NSTS April 2023 Proxy Confidential interviews with other shareholders

NSTS Bancorp, Waukegan, IL (NSTS)

An Illinois Case of Self-Serving Bank Conversion

In my opinion, Illinois’ NSTS Bancorp is one of the Top 3 worst recent bank conversions along with 1895 Bancorp of Wisconsin (BCOW) and Ponce Financial Group of New York (PBLB).

Is there an NSTS shareholder who meets SEC Rule §240.14a-8 criteria for Who Can Submit a Shareholder Proposal willing to deliver the kick in the pants North Shore Trust and Savings apparently needs to do the right thing and sell the bank? 

North Shore can't legally sell before the three anniversary of their conversion comes up in January 2025, but its upcoming May 2024 annual meeting would be the perfect time to put your proposal up for a shareholder vote as needed to get Management in line sooner vs later. 

Per North Shore's latest Proxy, the deadline to submit a proposal is December 16, 2023.

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Disclosure: As of this posting, I own shares of NSTS and may subsequently either dispose of them or purchase more.

Prospective Buyers	I suspect any or all of these Illinois banks would be interested in submitting a bid to buy North Shore Trust and Savings when its three-year moratorium on a sale expires in 2025: First Mid Bancshares, Matoon, IL (FMBH) HBT Financial, Bloomington, IL (HBT) Tri-County Financial, Mendota, IL (TYFG)
Financial Snapshot †as of 06/30/2023	Total assets: $257M† Tangible book value per share:    $14.53† NPAs to assets: 0.3%† Price to book: 59% Market cap: $48M Dividend yield: 0% Trailing 12-month ROA: -0.06%† Trailing 12-month ROE: -0.27%†
Scoundrels	Stephen G. Lear, Chairman, President, and CEO Nathan E. Walker, CEO North Shore Trust Thomas Ivantic, Director (longest serving)
Red Flags	North Shore Trust and Savings is run by weak operators with a flawed operating model delivering a negative return on equity. Two years after taking NSTS public, Management has failed to successfully deploy the money they raised. They're buying back stock, but not anywhere near as aggressively as they should. Instead of cutting costs, NSTS hired a team of seven mortgage lenders, raised Management salaries by 14%, and paid CEO Stephen Lear average compensation of $340K per year. In contrast, the annual salary for the average bank CEO in the US is $184K,* and the average bank has been earning a 12.9% ROE.**
Sources	North Shore Trust and Savings website 2023 Proxy Statement SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with other shareholders  * How much does a bank CEO make? (by Comparably) ** Return on Equity (ROE) of US Commercial Banking Industry (by Statista)

24 Underperforming Bank Stocks

Stuck Owning Stock in a Bank that Should be Sold?

Happily, if you’ve owned some of the bank’s stock for awhile,* there’s a legal process whereby you can strongly encourage management to sell the bank. 

Specifically, according to SEC Rule §240.14a-8, you can write a shareholder proposal that the bank’s board of directors must include in the next proxy statement they send to all shareholders.

Submitting individual shareholder proposals to bank management has gotten easier since 2010, but it appears that interest in supporting such proposals is just starting to be “a thing.” Personally, I’d like to see it become an even bigger thing, because there are a couple dozen community banks in the country that could use a public kick in the pants, ideally dealt from a shareholder in their own back yard.

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Disclosure: As of this posting, I own shares in all but one of the 25 banks mentioned in this post and may subsequently either dispose of them or purchase more.

How It Works	*WHO Can Submit a Proposal According to SEC rules, if you’ve owned the following dollar values of a given bank stock for the following durations, then you can submit a proposal to management that the bank must both include in its next proxy statement, and present to your fellow shareholders for a vote. $2K for three years $15K for two years $25K for one year HOW To Submit a Proposal  Basically, to deliver this sort of kick, you write a proposal outlining your reasons for believing it’s high time management sell the bank, submit your proposal to the bank with a letter that conforms both to SEC rules and the bank’s previous proxy statement, and follow up with bank management as needed to see it through to a proxy vote.  See https://www.sec.gov/divisions/corpfin/rule-14a-8.pdf  WHAT to Expect Management may ignore you (if you let them) in an attempt to run out the proxy deadline clock. They may try to talk you out of it, challenge your right to make the proposal, or claim your proposal is deficient in some way.  Note that even if your proposal is deficient, there’s a deadline for the bank to make this claim, and the bank is required by SEC rules to afford you time to cure the deficiency, for example, by amending your proposal or submitting documentation supporting your claims.
Good Example	Mid-Southern Bank Management Gets a Kick in the Pants Since the day it went public in July 2018, Indiana’s Mid-Southern Bancorp (MSVB) has been mismanaged and underperforming. Unsurprisingly, Mid-Southern’s performance invited pressure from shareholders losing money on the stock.  On August 3, 2021, Mid-Southern silenced its loudest shareholder critic by buying him out at a premium not afforded to other MSVB shareholders.  On December 22, 2023, another shareholder of Mid-Southern Bancorp submitted a formal proposal recommending the bank be sold. Apparently, Mid-Southern deemed this shareholder too small to be worthy of a premium buy-out offer, but as required by law, the bank did publish the shareholder’s proposal in the proxy for its annual meeting. The proposal won 56% of the shareholder vote, in spite of self-serving opposition by bank Management and proxy advisors.  Was the kick enough to make Mid-Southern respect shareholders' demands to sell the bank? Time will tell. But it was a well-deserved and well-delivered kick that should inspire confidence in shareholders seeking to protect their investments from being squandered.
24 Invitations	Banks Deserving a Kick in the Pants Here’s a shortlist of community banks I believe are worth far more in a sale than the market will accord them under current Management.  Managers of these banks are a walking invitation for a good kick in the pants. Were I to see a shareholder proposal recommending the sale of any of these banks in a proxy statement, I would very likely vote for it.  1895 Bancorp of WIS (BCOW) Ameriserv Financial (ASRV) BankFinancial (BFIN) Broadway Financial (BYFC) California Bancorp (CALB) Citizens Community Bancorp (CZWI) Community Bank of Santa Maria (CYSM) Community First Bancorporation (CFOK) First Commerce Bancorporation (CMRB) First US Bancshares (FUSB) FVCBankcorp (FVCB) Horizon Bancorp (HBNC) LCNB Corp (LCNB) Lewis & Clark Bancorp (LWCL) MainStreet Bancshares (MNSB) North Dallas Bank & Trust (NODB) NSTS Bancorp (NSTS) Oregon Pacific Bancorp (ORPB) Pathfinder Bancorp (PBHC) Ponce Financial (PDLB) Provident Financial Holdings (PROV)  Third Century Bancorp (TDCB)  Touchstone Bankshares (TSBA) Town Center Bank (TCNB)
Sources	SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Mid-Southern Bancorp April 2023 Proxy Statement Mid-Southern Bancorp Statement in Opposition to Shareholder Proposal May 2023 Mid-Southern Bancorp Form 8-K