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

LCNB Corp, Lebanon, OH (LCNB)

Shareholder Proposal Shenanigans at LCNB

As an investor stuck owning shares of several banks that deserve a kick in the pants, I took my own advice and delivered a few shareholder proposals of my own, as recommended in Timyan Bank Alert's October 2023 post.

Sadly, one of my proposals wasn't sufficiently air tight. Bad faith actors look for loopholes and technicalities to exploit. In my shareholder proposal to LCNB Corp, I made it too easy for LCNB to do what was perfectly predictable it would do.

If you are a qualified shareholder looking to submit your own proposal to an underperforming bank, please read my summary below of the weak link in my LCNB proposal, so your own proposal has a higher chance of success.

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

Prospective Buyers	There's no shortage of competently managed, acquisitive banks that would happily and skillfully put LCNB's assets to better use for shareholders, customers, and communities. I'd be thrilled to see the bank sold to any of these three, in particular:  First Financial Bancorp, Cincinnati, OH (FFBC) Park National Corp, Newark, OH (PRK) Peoples Bancorp, Marietta, OH (PEBO)
Financial Snapshot †as of 12/31/2023	Total assets: $2.3B† Tangible book value per share:    $11.16† NPAs to assets: 0.0%† Price to book: 84% Market cap: $199M Dividend yield: 5.85% Trailing 12-month ROA: 0.6%† Trailing 12-month ROE: 6%†
Scoundrels	Spencer S. Cropper, Chairman Eric J. Meilstrup, President and CEO William G. Huddle, Director
The Skinny	How Banks Respond to Shareholder Proposals When you submit your shareholder proposal to a bank, the bank has a legal right to report any deficiencies it sees in your proposal via a No Action Request to the SEC. If you're submitting a shareholder proposal, you should be prepared for this possibility. Banks operating in Good Faith won't bother. They'll put your proposal in the proxy for the next annual meeting and shareholders will get to vote. Banks like LCNB will spend tens of thousands of dollars to find or invent "deficiencies" they hope will excuse them from legal obligation to allow the proposal to proceed to a shareholder vote. Where Timyan's Shareholder Proposal to LCNB Went Wrong Ultimately, one paragraph made it easy for LCNB to get around having to present my proposal for a shareholder vote. The "deficiency" my proposal provided LCNB's outside counsel was a loophole that allowed the bank to pretend it had already met the Substantially Implemented Rule 14a-8(i)(10) by hiring an investment bank to – allegedly – "begin evaluation of the potential outcome of a sale or merger," rendering the need for a shareholder vote presumably unnecessary. In reality, LCNB hired an investment banker to do exactly the opposite of what the bank represented to the SEC. LCNB has not begun and has no plans to begin "evaluation of the potential outcome of a sale or merger." It hired an investment banker only to pursue acquisition opportunities. Two weeks after receiving my proposal, LCNB announced the acquisition of Eagle Financial Bancorp. Remarkably, CEO Eric Meilstrup is now unabashedly broadcasting to reporters that his stated mission is decidedly NOT to pursue a sale of the bank as my proposal recommended and as he personally represented to the SEC, but to remain independent and to grow the bank via acquisitions. The scoundrel is quite gleeful to have deceived the industry's highest regulatory body and robbed LCNB shareholders of an opportunity to vote on the bank's strategic direction. Stronger Language Timyan's Proposal Should Have Used The loophole my proposal gave LCNB, was the "out" of being able to say it had already "[begun] evaluation of the potential outcome of a sale or merger." As written, my proposal made it easy for LCNB to lie in its No Action Request to the SEC, in which the bank pretended its step of hiring an investment banker was sufficient action toward fulfilling the intent of my proposal, when the assignment LCNB gave the investment banker was directly counter to the proposal. My shareholder proposal to LCNB included this paragraph: RESOLVED, that the Stockholders of LCNB Corp recommend that the Board of Directors immediately engage an investment banking firm experienced in community bank mergers and acquisitions to guide the Company in promptly taking steps to merge or sell LCNB on terms that will maximize stockholder value. Future shareholder proposals I present will include language more like this to preclude false claims of "substantial implementation": RESOLVED, that the stockholders of the Company, believing that the value of their investment in the Company can best be maximized through a sale of the Company, hereby request that the Board of Directors promptly proceed to effect such a sale by (i) retaining a nationally recognized investment banking firm for the specific purpose of soliciting offers to acquire the Company by way of merger, asset sale or otherwise and (ii) establishing a committee of the Board of Directors consisting of directors, who are not current or former officers or employees of the Company or related by blood or marriage to a current or former officer or employee of the Company, and who otherwise qualify as independent directors, to consider and recommend to the full Board of Directors for approval the best available offer to acquire the Company.
Sources	LCNB Corp website LCNB's No-Action Request to the SEC 2024 Proxy Statement 2019 Proxy Statement November 2023 RTT News article March 2024 Cincinnati Business Courier article SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 September 2008 Ohio Revised Code re: Cumulative Voting Confidential interviews with shareholders, analysts, and Ohio bankers

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)

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