The most active bank activist investor no one has heard of has struck again.
Lawrence Seidman, founder of Parsippany, New Jersey–based Seidman & Associates, just disclosed that he owns 5.46 percent of Polonia Bancorp, a Huntingdon Valley, Pennsylvania–based holding company for Polonia Bank with seven banking offices and $305 million in assets. The stock jumped more than 4 percent Thursday following the regulatory filing the previous evening. This is Seidman’s fourth initial 13D filing this year alone. Meanwhile, in his third-quarter 13F filing of stocks his firm owns, Seidman put another bank in his crosshairs.
In the Polonia filing, Seidman said the stock was “undervalued and represented an attractive investment opportunity.” He said that on November 12 he told Paul Rutkowski, the interim chief executive officer, that selling the company would be “the best way to maximize shareholder value.” Seidman also says the board of directors should retain Rutkowski and not seek to hire a new CEO. The filing also says the board and Rutkowski “should devote their resources to satisfying” regulatory deficiencies outlined in an October 21 agreement between Polonia and the Office of the Comptroller of the Currency (OCC).
Seidman says that on November 17 he told the same things to Polonia chairman Robert Woltjen, who “agreed to keep the lines of communication open and to speak to each other as the need arises.”
On October 3, Polonia announced that during a routine regulatory examination, the OCC identified a number of deficiencies, most significantly related to the bank’s compliance with the Bank Secrecy Act/Anti-Money Laundering regulations of the Currency and Foreign Transactions Reporting Act of 1970. . As a result, Polonia said it must take corrective measures, including the hiring of additional personnel, to oversee and implement a compliant BSA/AML program.
Under the agreement, Polonia says in a regulatory filing that it is deemed to be in “troubled condition” and is not considered an “eligible institution.” As a result, the bank must obtain approval from the OCC prior to changing any directors or senior executive officers. It is also restricted from paying any capital distributions without prior approval of the OCC.
Seidman’s stepped-up activist activity this year coincides with a surge in bank deals in general. Through October 15, banks and thrifts announced 70 branch acquisitions involving a total of 410 branches, according to Charlottesville, Virginia–based SNL Financial, a business intelligence firm.. This compares with 73 deals for 288 branches in all of 2013.
Seidman has been specializing in buying undervalued small- and micro-cap banks and thrifts since 1983. Generally, he goes after targets that are selling below tangible book value and tries to encourage them to either sell to another institution or at least repurchase their shares. Polonia now trades for about $10 per share, more than 16 percent below its roughly $12 per share in tangible book value, according to Alpha’s calculations.
Seidman is a former attorney with the Securities and Exchange Commission. From November 1991 to December 2005, he was president and general counsel to Menlo Acquisition Corp., a now-defunct holding company for an environmental consulting business and a laboratory company.
In the past 20 years, Seidman has been involved in about 40 activist situations with small banks, according to regulatory filings. He has initiated or been a part of roughly one dozen proxy fights. More than 20 of the bank companies were acquired by another institution after Seidman took a position. Seidman also has served on the board of directors of at least six of the companies, while associates of his sat on the boards of a number of other companies.
Seidman, who filed his first 13F in February, disclosed he had $139.6 million in U.S. equity assets at the end of the third quarter, down from $185 million in June and $161.5 million in March.
In the third-quarter filing, Seidman implicitly put another bank on notice. His largest position was also a new investment — ConnectOne Bancorp, the holding company for ConnectOne Bank, an Englewood Cliffs, New Jersey–based company with 23 banking offices. On July 1, ConnectOne merged with Center Bancorp. The investment accounts for 20 percent of Seidman’s assets.
