Cullman Bancorp, Cullman, AL (CULL)

A Case of a Bank Going Dark

Unless one of my readers knows something more positive about what the leaders at Cullman Bancorp are up to that I don’t — and is willing to share it with the rest of us, I think it’s safe to say, we investors aren’t going to find the switch that needs to be flipped to power CULL back up. 

 

Cullman’s leadership is keeping investors in the dark for reason. For that reason, I declare CULL a stock to avoid if you can, and to sell if you can’t.

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

Prospective Buyers	This is neither here nor there, because Cullman Bancorp is not about to let anyone take a shot at it, but there at least four area players that would do a better job of managing and growing Cullman's assets. Peoples Bank of Alabama, Cullman, AL (private) SouthPoint Bancshares, Birmingham, AL (SOUB) Traditions Bank, Cullman, AL (private) United Community Bank, Blairsville, GA (UCB)
Financial Snapshot †as of 09/30/2024	Total assets: $435M† Tangible book value per share:    $14.69† NPAs to assets: 0.5%† Price to book: 0.66% Market cap: $61.2M Dividend yield: 1.3% Trailing 12-month ROA: 0.8%† Trailing 12-month ROE: 4.8%†
Scoundrels	John A. Riley III, Chairman, President, and CEO T'aira Ugarkovich, COO and borrower Paul Bussman, Director for 31 years
Red Flags	Cullman Bancorp and Cullman Savings Bank have issues.   Compensation Issues  Gross overcompensation of leadership teams is a major red flag in any enterprise. CEO John Riley III runs a rinky dink bank that's performing at the bottom among its peers, but he landed on Capital IQ’s 2023 list as the third most highly compensated CEO of any publicly traded bank in the US with assets under $1B.  In 2023, Cullman's top three executives took home $2.3M while reporting a mere $3.9M in earnings and driving the price of their stock down by 9%. For point of reference, that's nearly twice the compensation the top three executives at William Penn — a bank twice the size of Cullman – took home after increasing their stock price by 7%. Given Cullman's recent efficiency ratios in the over 70% range, Cullman Savings Bank will not be able to improve its 5%-and-below returns on equity as too much of the bank's profit margin goes to executive salaries and board fees.  Insider Dealing Issues   Insider dealing is a major red flag in any organization. Cullman insiders are borrowing money from the bank at a fraction of the rate that they're charging their customers. Mortgage rates nationally run around 6% for most Americans.  In stark contrast, insiders like Cullman's COO Ugarkovich -- who borrowed $636K to finance her home — received the funds at a special Riley's Friends and Family Rate of 1.75%. CEO Riley loaned himself even more, $895K, but somewhat *respectably* charged himself the same friendly rate of 1.75%. Capital Management Issues This shouldn't need to be said, but capital management issues are a major red flag in any financial institution. Smart bank management teams with excess capital like Cullman enjoys, aggressively repurchase shares when they're trading at a significant discount to book value as a way to increase value. CULL is trading at 66% of book value today and at a discount to the $10/share price sold to investors in the IPO three years ago, yet as of the bank's last filed 10Q in March, Management had only repurchased 35,593 shares that quarter (0.4% of the shares available for repurchase). Transparency Issues Transparency issues are a major red flag for investors in any management team and company. Cullman is actively pursuing the freedom to operate with as little transparency as it can legally get away with. Until July 18, 2024, Cullman Bancorp was SEC registered as required by FDIC conversion rules. (A bank is required to be registered for 3 years after conversion.) Since then, the bank has "gone dark." Cullman did not release the customary quarterly 2024 10-Qs investors rely upon to ascertain a bank's performance. Going forward, CULL shareholders should understand, the bank is no longer required to disclose even simple matters such as stock ownership amongst management and directors, executive salaries and board stipends, or insider loans and interest rates. Control Issues As a general rule, it's wise to avoid relationships with control freaks who do everything they can to limit your knowledge, influence, and well-being. Cullman Bancorp has aggressively and intentionally decimated what is effectively every bank stock holder's last leverage over banks abusing the privilege of shareholder capital. Since Maryland Proxy Rules now prevail over Cullman Bancorp's operations instead of SEC Rules, Cullman Bancorp can now forever prevent shareholder proposals from being properly disclosed and voted on by fellow shareholders at the bank's Annual Meetings. Simply put: Cullman Bancorp is not in a right relationship to its shareholders and has put itself in a position of such power over us, we’re completely at their mercy. The only sane response in such a relationship is to run.
Sources	Cullman Savings Bank website Q3 2024 Consolidated Balance Sheet and Income Statement August 2024 Capital IQ article William Penn Bancorporation's October 2024 Proxy William Penn Bancorporation's 2024 10-K Confidential interviews with shareholders and analysts

MainStreet Bancshares, Inc, Fairfax, VA (MNSB)

Wannabe Tech Bro Tricks Investors into Funding a Tech Co

Maybe Jeff Dick is “on” to something with his vision for taking an embedded banking product to market via a subsidiary company he's funded by pilfering $18M of MainStreet's assets over the past three years.

 

From my perspective, it’s neither here nor there. Avenu.bank is a LARP. Dick’s “vision” for it does not right the wrong of risking the bank's assets on ventures that conflict with his promises to investors in the last few capital raises. 

 

For that matter, in Tech Bro lingo, Dick's blown what equates to three rounds of startup funding without bringing a Minimum Viable Product successfully to market. So even if we were willing investors in “his" tech co, we’d have to declare: Game Over! 

That's why I’ll be submitting a shareholder proposal for the 2025 Annual Meeting recommending that MainStreet's Board sell MainStreet Bancshares and Avenu.bank.

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

Prospective Buyers	Atlantic Union Bankshares, Glen Allen, VA (AUB) Burke & Herbert Financial Services, Alexandria, VA (BHRB) United Bancshares, Inc, Charleston, WV (UBSI)
Financial Snapshot †as of 06/30/2024	Total assets: $2.09B† Tangible book value per share:    $23.72† NPAs to assets: 1%† Price to book: 63% Market cap: $128M Dividend yield: 2.4% Trailing 12-month ROA: 0.86%† Trailing 12-month ROE: 8%†
Scoundrels	Jeff W. Dick, Chairman and CEO Terry M. Saeger, Vice Chairman Patsy I. Rust, Founding Director Please note, as of this posting, we have no reason to believe the Avenu software, or even the idea behind it are flawed in any way.    Avenu staff appear to be competent and well-meaning professionals. Sadly, they’re employed by a reckless Bank CEO and Board instead of a true tech company where they could be awarded stock options and the opportunity to benefit from an IPO someday.
Red Flags	Promises, Promises  In 2017, as inducement to raise $18M at $16/share, Dick told prospective investors he would use the funding to grow and sell the bank in three years.  In 2018, as inducement to raise $45M more at $19/share, Dick reiterated this promise to prior and new investors. Investors in this round are losing money today.  Even if the three-year clock restarted upon the 2018 promise, Dick was beholden to sell the bank in 2021.   Opportunity Cost and Lost  In Q1 2021, MNSB was trading at $21/share and could have garnered over $30/share in a sale, based on industry M&A pricing at time.  Instead of selling as promised, which would have delivered investors an ROI of over 50%, Dick began funneling the bank's assets into a high risk tech venture.  Six years after Dick reiterated his promise to sell in three, MNSB is trading at just over $16/share —13% below the 2018 offering price.  To add insult to injury, Dick raised his $666K salary to $1,583,000 total compensation in 2023.  Comedy of Errors  Note, Dick is a decent banker. He successfully raised capital from bank investors and grew a startup bank into a valuable franchise.  Dick is not a software engineer. He’s never run a tech company. He never raised venture capital from willing and witting investors looking to build their stock in tech ventures.  Dick has spent three years and $18M to build a sandbox and allegedly contract seven prospects to "start" integration.  Dick’s sandbox is a non-performing asset.* Based on like ventures in the fintech space, it’s fair to assume it will require at least as much new money to make up for lost ground and turn a true profit.  As Chairman of the Board, Dick pursued this costly, risky endeavor without ensuring the Board had the competencies needed to manage all the new categories of risk the venture entails.  We understand, Dick is having the time of his life. See Dick smile. He’s soooo much smarter than Synapse’s Sankaet Pathak and Unit’s Itai Damti.   Opportunity Ahead?  Is Avenu.bank a promising venture? Who knows? Dick hasn’t felt the need to provide MainStree's investors a proper opportunity to vet the idea. The first we heard of it was Q4 2021 via one paragraph buried at the end of an earnings release.  Investors were shown no pitch deck explaining Avenu's business model, how the NewCo fits into the competitive marketplace precisely, what its projected funding needs and operating cost structure are, how the revenue engine really works, or when Avenu is shooting to break even in its own right.  Is Avenu en route to being America's Revolut, except via a reverse path and homegrown? A hybrid between Revolut and Chime, but for an exclusively B2B market? Something between Revolut and Unit, but with a pared down set of services and functionality? A seasoned tech investor can make some inferences, but Dick isn’t saying.  Who are Avenu’s Seven Mysterious Prospects? Dick hasn’t bothered to provide even the most generic descriptions of the customers he’s allegedly already contracted. How big are these organizations, where are they located, how much revenue is he anticipating from each one, over what period of time, and by what logic is he estimating it?  For that matter, what happened to the 26 customers Avenu supposedly had back in 2022 when Dick reported the venture had brought $67M of deposits to the bank? What happened to the deposits?  We Have Questions! However, it’s too late to ask them, and we know everything we need to know:   Dick is not the kind of Tech Bro CEO you give more money and runway, and MainStreet’s Board has proven incapable of managing the risks of his technology plays.
Sources	MainStreet Bank website April 2024 Proxy Statement Q2 2024 Earnings Release Q2 2024 Financial Highlights Q3 2022 Financial Highlights` Q3 2021 Earnings Release SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with shareholders and analysts

UPDATE: First Commerce Bancorp, Lakewood, NJ (CMRB)

A Case of Being Run Off the Road

It's been five years since I reviewed First Commerce Bank, and I'm sorry to say it wasn't the good buy I thought it was. The Board's high ownership stake failed to incentivize doing the right thing the way it normally does. (See April 2019 Timyan Bank Alert post "A Case of Growing Too Fast.")

The photo I selected for the CMRB review series strikes me very differently today. This kid didn't fall off his bike. He was shoved.

Experts say the best way to deal with characters as self-serving and shameless as the folks running First Commerce is to Run The Other Way. Do Not Engage. Do Not Look Back. Someday I will learn.

CMRB is a Sell.

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Disclosure: As of this posting, I no longer own shares of CMRB and definitely have no plans to purchase any ever again.

Prospective Buyers	This list has getting shorter and more paltry, because First Commerce squandered its best opportunities for a sale. The three remaining prospects listed here are overcapitalized underperformers that likely can't pay a premium: Blue Foundry Bancorp, Rutherford, NJ (BLFY) Columbia Financial, Fair Lawn, NJ (CLBK) SR Bancorp, Bound Brook, NJ (SRBK)
Financial Snapshot †as of 03/31/2024	Total assets: $1.5B† Tangible book value per share:    $8.13† NPAs to assets: 1.3%† Price to book: 74% Market cap: $135M Dividend yield: 2.7% Trailing 12-month ROA: 0.8%† Trailing 12-month ROE: 6.3%†
Scoundrels	Thomas P. Bovino, Chairman Abraham M. Penzer, Vice Chairman Donald Mindiak, President and CEO
The Skinny	Why I'm calling CMRB a Sell The prospects for acquisition at a meaningful premium are bleak Although First Commerce could still fetch an offer near today's book value of $8, I don't believe there's anything that would actually compel Management to take the franchise to market No shareholder proposal has a prayer in this case, because Board ownership is still too high for it to garner enough votes The stock is going nowhere due to mismanagement Since my 2019 review of First Commerce  The Board has waged two coups First they ousted Chairman Abe Opatut, the bank's largest shareholder  Then they voted successor Chairman Benedict Romeo and three other Directors off the board Bank operations are suffering Deposit costs are rising faster than loan yields Reliance on office and other commercial real estate is too high Nepotism is a likely factor One of Director Gershon Beigeleisen's first moves upon joining the Board was to install his son on a speed-track from Teller to First Commerce Loan Officer Per the rumor mill, there are more install-my-kid initiatives in the works There's more self-dealing in the mix here than normal Director Salvatore Alfieri bills the bank $200K per year for legal work through his firm Vice Chairman Abe Penzer's only income is from title work he does on First Commerce Bank's loans, which has funneled $350K to $600K a year his way New Chairman Thomas Bovino is allegedly campaigning hard to triple his own compensation There's no White Knight to save shareholders from the CMRB Board New Chairman Thomas Bovino has no banking experience (although his uncle James "Jimmy the Bank Killer" Bovino does) Newly installed Vice Chairman Abe Penzer's claim to fame is having been caught for paying bribes in 1994 Director and CEO Donald Mindiak has little stake in the stock and appears to need the job too badly to do the right thing
Sources	First Commerce Bank website March 2024 Proxy Statement Q1 2024 Earnings Release 2023 Annual Report September 2013 Herald Tribune article June 1994 New York Times article Confidential interviews with shareholders and analysts

ES Bancorp, Staten Island, NY (ESBS)

Evading Shareholder Proposals, Non-SEC Filer Edition 

For the most part, you can expect that a bank receiving a shareholder proposal will pull whatever tricks it can to avoid giving other shareholders an opportunity to vote on the proposal. That's the nature of the beast — banks deserving of shareholder proposals are by definition typically not run by Managers who naturally do the right thing by their shareholders.

Since my Timyan Bank Alert October 2023 post on the topic of SEC Rule §14a-8, I've delivered three shareholder proposals of my own, and am learning that the specific tricks a bank will pull can vary more than I had imagined.

My third shareholder proposal so far was to ES Bancorp / Empire State Bank. As a Non-SEC Filer, ES Bancorp had a special trick to pull, and has elected to withhold my proposal from the Proxy for their Annual Meeting this month. See below for The Skinny.

If you are an ESBS shareholder who isn't thrilled about being robbed of the opportunity to vote on Timyan's shareholder proposal, let Finkelstein and Guarnieri know.

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

Prospective Buyers	All four of these area banks have shown recent interest in growing via acquisition and would make better use of Empire State Bank's assets going forward than its current managers ever have, ever could, or ever will. BCB Bancorp, Bayonne, NJ (BCBP) Northfield Bancorp, Woodbridge, NJ (NFBK) Spencer Savings Bank, Elmwood Park, NJ (private) Unity Bancorp, Clinton, NJ (UNTY)
Financial Snapshot †as of 03/31/2024	Total assets: $628M† Tangible book value per share:    $6.67† NPAs to assets: 0.2%† Price to book: 76% Market cap: $35.3M Dividend yield: 0.0% Trailing 12-month ROA: 0.1%† Trailing 12-month ROE: 2%†
Scoundrels	Andrew G. Finkelstein, Chairman Philip Guarnieri, President and CEO Michael P. Ostrow, Director
The Skinny	Why Timyan Submitted a Shareholder Proposal to ES Bancorp For a full quarter of a century, ES Bancorp's operators, Finkelstein and Guarnieri, have failed to earn even a modest return for shareholders.  Management never lived up to its 1999 IPO projections, nor either of its later recap projections. Finkelstein and Guarnieri spurned a 2021 indication of acquisition interest by BCB Bancorp that was well above today’s ESBS stock price. And the pair is always chock full of excuses, blaming Covid, interest rates, local market forces — y'know, things every other banker in the nation faces. In a merit-based world — which publicly held companies are supposed to be operating within — these guys should have been canned decades ago. How ES Bancorp Got Around SEC Requirements to Publish Timyan's Proposal SEC Filers that want to exclude your proposal from their proxy statement need to submit a formal No Action Request to the SEC and succeed in proving their case for exclusion.  ES Bancorp is not an SEC Filer, so Maryland State Law dictates what's required and allowed in response to the bank's receipt of a Shareholder Proposal.  Although Maryland State law on this matter is similar to SEC rules in most material regards, it requires no official ruling on grounds for exclusion of a proposal from the upcoming proxy statement.  To enforce inclusion would require additional legal action, which is too late to pursue given the Annual Meeting is this month. Word on the street has it that Finkelstein and Guarnieri are pretending the reason for excluding my shareholder proposal from the bank's proxy statement is that I allegedly withdrew it myself. On this matter, nothing could be further from the truth. My shareholder proposal to ES Bancorp is neither deficient, nor withdrawn. How to Determine Whether a Bank is an SEC Filer The best way to tell whether a bank is an SEC Filer is to use the CIK Lookup page on the SEC Edgar website.  Visit https://www.sec.gov/edgar/searchedgar/companysearch  Enter the stock symbol for the bank to see if a record is found All SEC Filers have a Central Index Key (CIK) tied to their stock symbol. Non filers don't, and won't show up in a CIK Lookup.
Sources	Empire State Bank website April 2024 Proxy Statement Q1 2024 Earnings Report 2023 Annual Report SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with management, shareholders, and competitors

UPDATE: AmeriServ Financial, Johnstown, PA (ASRV)

On the 10-year anniversary of my January 2014 Timyan Bank Alert™ Review of AmeriServ Financial, I'm disheartened to report that this bank is being run into the ground by a bunch of bumbling money grubbers.

ASRV is still flying under the radar in terms of coverage it gets from industry analysts and reporters, and I would still very much like to see it get on the radar, albeit for different — and less friendly — reasons.

My sincerest apologies to readers of my original post and/or 2017 Updated Review of AmeriServ. My only consolation is this: if you meet SEC Rule §240.14a-8 criteria, you could try submitting a Shareholder Proposal to change the bank's bylaws to make it easier to nominate a more independent slate of directors. 

Per AmeriServ's April 2023 Proxy, the window for submitting shareholder proposals is between January 27 and Feburary 26, 2024.

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

Prospective Buyers	AmeriServ has a unionized workforce, which likely acts as a poison pill for potential acquirers.  The only acquisitive bank I can imagine might not be put off by this is Amalgamated Bank, which is also unionized. Amalgamated Financial Corp, New York, NY (AMAL)
Financial Snapshot †as of 09/30/2023	Total assets: $1.361B† Tangible book value per share:    $5.11† NPAs to assets: 0.4%† Price to book: 55% Market cap: $55.9M Dividend yield: 3.7% Trailing 12-month ROA: 0.22%† Trailing 12-month ROE: 2.82%†
Scoundrels	Jerome Michael Adams, Jr, Chairman Jeffrey A. Stopko, President, CEO, and Head of Investor Relations Allan R. Dennison, Former Chairman and CEO
Red Flags	The red flags about AmeriServ and ASRV are too many, for too long, to enumerate succinctly, but here are a few summative and recent highlights.  With an efficiency ratio that's consistently running over 50% higher than the average bank (i.e., 85% vs 55%, respectively), AmeriServ is just too inefficiently managed to have a prayer of earning a competitive return on equity or assets under current leadership. Note: AmeriServ can't blame its disastrous efficiency ratio on its unionized workforce — Amalgamated has a unionized workforce, too, and boasts a better-than-average 52% efficiency ratio. In the first 9 months of 2023, AmeriServ blew over $2M just to keep shareholders from having the opportunity to vote on qualified candidates for the Board that a fellow shareholder with expertise in the banking sector (Driver Management) had recruited and recommended. Had AmeriServ simply invested that $2M in a stock repurchase, they could have retired 4% of the company's shares, yielding an immediate 50% return to shareholders.
Sources	AmeriServ 2023 Proxy Statement Driver Management 2023 Proxy Statement April 2020 Form 8-K February 2006 American Banker article June 2003 Form 10-Q SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 Confidential interviews with management and analysts

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)

Town Center Bank, New Lenox, IL (TCNB)

Illinois Clan Throws Founding Shareholders Under the Bus

If you're ever tempted to invest in a de novo bank, I really hope you'll consider the case of Town Center Bank, which sold founding shares of TCNB for $10 in 2006 only to dilute trusting shareholders by 19% six years later, mismanage the bank for another eight years, and leave its patient founders holding a stock that's down 62%. Cumulative losses are half of all the money raised in the IPO. Splat!

Based on the recent sale of Ben Franklin Financial (BFFI), a similarly situated Chicagoland bank, also run for the benefit of its management, Town Center Bank could probably sell today for $7. If the bank doesn't sell, I can't see TCNB trading above current $6 DTA-enhanced book value any time soon.

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

Prospective Buyers	I don’t even know if any of the following banks in the area of New Lenox, Illinois would care to buy TCNB and pull shareholders out from under the bus, but I know I would be better off and would gladly swap my TCNB shares for theirs. Bank Financial, Burr Ridge, IL (BFIN) Marquette National Corporation, Chicago, IL (MNAT) Old Second Bancorp, Aurora, IL (OSBC)
Financial Snapshot †as of 12/31/2019	Total assets: $106.8M† Tangible book value per share:    $6.09† NPAs to assets: 0.2%† Price to book: 60.7% Market cap: $8.6M Dividend yield: 0% Trailing 12-month ROA: 0.2%† Trailing 12-month ROE: 2.4%†
Scoundrels	Michael D. Perry, Chairman and CEO, former bus company owner Daniel Regan, President and Chief Lending Officer All 8 "Independent" Bank Directors* currently on the bus *In a first for Timyan Bank Alert, I’m calling the entire clan of directors at Town Center Bank scoundrels. They loaded this bus up with absurd loss levels, parked it over their shareholders, and picked their hostages pockets. Since the bank's founding, these scoundrels have granted and re-granted themselves options to buy over 18% of TCNB at a fraction of the price they charged shareholders.
Red Flag	Besides being a good reminder to think twice before investing in a de novo bank, Town Center Bank presents a textbook case of poor corporate governance. I have serious issues with the drivers of this bus and how the bus is being driven. ✔  This isn't the only bus Perry and his clan are driving The CEO of Town Center Bank is also CEO of 21CFS Innovative Banking, which has provided data processing technology to at least a couple of banks since he took the driver's seat there. Coincidentally, Perry became CEO of 21CFS in 2006, the same year he participated in the founding of TCNB. Reported revenues insofar as anything can be gleaned about them seem mysteriously close to the amounts billed to Town Center Bank — $278K in 2017 and $251K in 2018. Only in an auditor's note in Town Center Bank's annual report can you discover that some of the bank's directors are also shareholders and directors of 21CFS, but nowhere does the bank or 21CFS disclose which ones or for how much. ✔  Michael Perry is a reckless and self-serving driver Town Center Bank CEO Michael Perry owned a bus company in Minnesota named Positive Connections at the time he was helping to organize TCNB. He had no other banking experience as far as shareholders could discern, but we now know he happened to be acquiring a banking tech services company at the time. Perry proceeded to install himself as Chairman of Town Center Bank's Executive Committee, Nominating Committee, Capital Planning Committee, and Loan Committee. He also "sits on" the bank's Asset / Liability Committee. Then, according to plan, apparently, Perry converted Town Center Bank into a profit center for his bank technology business, and cut other directors in on the action. Town Center Bank's board can exercise no oversight of this CEO under these circumstances. ✔  Current and prior drivers exaggerated on their resumes  Former Town Center Bank President Andrew Bernhardt still claims on his LinkedIn page to be not "an," but "the" Owner of Town Center Bank, which in actual reality is publicly traded. Former Director Lino Canaria is listed in the 2006 offering prospectus as owner of Brian Keith Advertising, "the largest specialty advertising firm in the Midwest." BKA has no website and looks like a very small business to me. In 21CFS marketing material, Perry makes a delusional claim about Town Center Bank's performance under his leadership: “through economic storms and regulatory pressures," he says, "Town Center Bank remains strong and responsive to the community needs.” Truth is, half the money the bank raised in its IPO has been squandered. In spite of their carefully crafted resumes, this entire clan of Frankfort, Illinois bankers has only been able to attract 3% of their own town's deposits for Town Center Bank. ✔  They took TCNB on a joyride with total disregard for passengers Right out of the gate, de novo Town Center Bank was leaking oil. Losses grew to over $4M a year by the end of four years. Six years into the ride, NPAs exceeded 10%, even after the bank recorded large chargeoffs. That's when this clan got the bright idea to cut the strike price of their options on 432,000 shares from the $10 they charged their founding investors to $3, thereby stuffing 19% of shares outstanding into their own lunch boxes. Ten years into the ride, the clan's ill-gotten options were supposed to expire, so they extended the maturity on them another 10 years out. Today, even in these best of times for the US economy, in a “good” quarter, Town Center Bank earns barely 0.2 % on assets and 2% on equity.
Sources	Town Center Bank website April 2019 Proxy Statement 2018 Annual Report Dun & Bradstreet for 21CFS Undated Article in 21CSF Innovative Banking (a publication owned by Town Center Bank Chairman and CEO Michael Perry) August 28, 2015 Article in Chicago Tribune S&P Global Market Intelligence Confidential interviews with shareholders and analysts

Oxford Bank Corp, Oxford, MI (OXBC)

Another Case of Book-ish and 10x

If you read my October review of Central Federal Corp, you heard that I've been seeing a number of well-run banks where investors can buy shares at book value, 10x earnings, or both, and reasonably anticipate doubling their money in three or four years.

Oxford Bank Corp is just one of these. It hasn't been particularly well-run historically, but the side story of its top shareholders has me excited for the next chapter.

In three years, I see OXBC's book value approaching $30 per share, earnings $3.50, and trading price $40.

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

Prospective Buyers	I can name eight banks that would find Oxford Bank's leading market share in several Michigan cities appealing. Here are the three I believe can most afford to book a deal. Independent Bank Corp, Grand Rapids, MI (IBCP) Horizon Bancorp, Michigan City, IN (HBNC) Waterford Bancorp, Toledo, OH (private)
Financial Snapshot †as of 06/30/2019	Total assets: $461M† Tangible book value per share:    $18.91† NPAs to assets: 0.50%† Price to book: 1.08% Market cap: $47.2M Dividend yield: 0% Trailing 12-month ROA: 0.96%† Trailing 12-month ROE: 10.69%†
The Crew	Karen Mersino, Chairman David P. Lamb, President and CEO Richard K. Thompson, Director, largest shareholder
The Skinny	There are a few scoundrels in the Oxford Bank Corp story, but Director Richard Thompson's history in bank stocks investing and governance gives me hope for a happy ending. The Oxford Bank Corp Story In recent chapters, OXBC insiders have crossed some lines. December 2014 - Oxford Bank Corp is accused of self-dealing after selling shares mostly to its own directors at a depressed price of $8 per share when OXBC book value per share was $18. Chairman Mersino alone bought a quarter of the shares sold. December 2015 - The bank expanded its self-dealing sale of OXBC stock to include friends, again at the depressed price of $8 per share, again excluding other shareholders. March 2018 - Oxford entered into a Cease and Desist Order for BSA violations. The Order stated that Oxford Bank Corp was to immediately notify OXBC shareholders. The bank did not. Clearly, its board has little regard for the law. June 2019 - The bank entered a Consent Order for violation of Consumer Protection and Compliance, which again required OXBC to notify shareholders. In the bank's August quarterly earnings press release, which typically includes management's commentary and would have been the right and expected place and time for this notification, there is an oddly blank page. To date, Oxford Bank Corp Management has ignored all inquiries from me and other OXBC shareholders about these matters. In the next chapter, OXBC shareholders should put the heat on Oxford's Board. Technically, Oxford Bank Corp has another chance to notify shareholders of its Consumer Protection and Compliance violations. Let's see if they tell us in their "notice or proxy statement preceding the Bank's next shareholder meeting" (scheduled for May 2020), as the Consent Order requires. The Thompson - Clemente Side Story The tale of OXBC's two largest shareholders of gives me hope for the future of the stock. In 2015, Richard Thompson was one of the lucky friends invited to buy OXBC. He bought 201,000 shares in that $8/share deal, took a board seat, and picked up another another 118,000 shares in the open market. Today, Thompson has a 14% stake in OXBC and is the bank's largest shareholder. At current OXBC trading levels, his stake is worth $6.5M. Thompson and OXBC's second largest shareholder, Robert Clemente, have been governing businesses together for over 25 years. In 1993, 26-year old Thompson served on the board of Secom, where Clemente was Chairman and Thompson's father was the largest shareholder. Together, Thompson and Clemente own 25% of OXBC. (The next largest insider, Chairman Mersino, owns a mere 2%). Thankfully, OXBC is neither the first nor only bank stock in the pair's portfolio. Thompson and Clemente also own 18% of First National Bank in nearby Howell (FNHM), where Clemente has a board seat. The two also have a combined 39% stake in nearby Clarkston Financial Corporation (CKFC), on whose board Thompson serves. The pair's involvement with Clarkston pre-dates their relationship with OXBC by at least three years. This past June, Thompson and his fellow Directors at Clarkston, agreed to sell their bank to Waterford Bancorp for 189% of book value. That merger is in progress. Applying the same 189% valuation to Oxford Bank Corp would yield a sale price of $35.70 per share, increasing the value of Thompson’s stake in OXBC to $11.4M. Clearly, OXBC's largest shareholders are professional businessmen, directors, and investors with a thorough understanding of their area banking marketplace. I believe it safe to assume they are profit motivated advocates of good governance. In the final chapter, they will be the heroes of the Oxford Bank Story.
Sources	Oxford Bank website August 2019 Quarterly Press Release June 2019 Consent Order 2018 Annual Report 1996 Secom Proxy Statement S&P Global Market Intelligence

LETTER: To Peoples Financial Corp, Biloxi, MS (PFBX)

Time step up the heat on Swetman.

It's not just the July weather that has me hot and bothered. Since my February 28, 2019 update on Peoples Financial Corp, new information has come to light revealing a serious lapse at the Board level and an urgent need to clean house at The People’s Bank.

Hence, I have decided to take a more proactive approach on behalf of all shareholders invested in PFBX.

Below is a letter I am sending to the Independent Directors of The People's Bank. If you are a shareholder who agrees with my assessment, I encourage you to send your own letter, too.

Letters may be emailed to gbatia@thepeoples.com

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

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My Letter to Peoples Financial Corp

To the “Independent” Directors of Peoples Financial Corp

• T. Dan Magruder, Vice Chairman
• E. A. "Drew" Allen
• Rex E. Kelly
• Jeffrey H. O'Keefe Sr.
• George J. Sliman III

Howard and Lameuse Avenues
Biloxi, MS 39533


Dear Directors,

I am a long-term shareholder in Peoples Financial. I own more shares than any director not named Swetman.

It has been painful to witness the abysmal performance of the bank.

You owe shareholders the fiduciary duty to explore a merger. Your results will not justify a stock price anywhere near what you could obtain in a sale in any of our lifetimes. If you want Peoples to remain independent, you should pass the hat in the community, pay the outside shareholders a fair price, and go private.

Given recent prices paid for your neighbors, Charter Bank and First Florida Bank, and in spite of your lousy 0.06% ROA and 0.4% ROE, I believe you could garner as much as $30 per share in a sale, due to the cost savings an acquirer could achieve.

The recent SunHerald article highlighting loans The Peoples Bank made to crooked lawyers demonstrates the Board’s complete lack of control and failure to oversee inept management. And this is only what the reporter was able to find out. What other improper loans are there that we don’t know about? Further, what malfeasance did you commit to incur the June settlement payout of $200,000?

Since April 3, 1996 (the first date for which I can find a trade in PFBX stock), the value of PFBX — including dividends reinvested — has DECLINED by 8%. In contrast, the S&P has advanced by almost 600%. All on your and Chevis Swetman’s watch. In my opinion, the Board should fire Swetman for cause. What other publicly held bank CEO has made nefarious loans like this, spent 40 years destroying shareholder value, and still has a job? As “Independent" Directors, you are personally liable for your failure to properly govern Peoples Financial.

In conclusion, you have not earned the right to maintain control of this bank, and you are not abiding by your own corporate Code of Conduct. Please exercise your fiduciary duties to shareholders and sell The Peoples Bank to the highest bidder before any more value is dissipated.

Respectfully,

Philip J. Timyan
PFBX Shareholder