Thrift Going Public Earmarks 3% of Its Shares for a Charity

As it enters a new phase by going public next week, Roslyn Bancorp is making an extra effort to remember its roots.

The Roslyn, N.Y.-based holding company will endow $12.7 million - roughly 3% of its shares - to the Roslyn Savings Bank Foundation, a charitable organization.

The initial public offering, valued at $414.6 million by analysts, will be the biggest since Greenpoint Financial went public in January 1994, a conversion valued at $13 billion.

For thrifts undergoing conversion, setting up such a foundation is a good way to immediately deploy capital, reach out to the community, and put stock into friendly hands, analysts said.

Mark Fitzgibbons of Sandler O' Neill added that the funds "reward the community and help them share in the success of the thrift it invested in, in addition to alleviating concerns about control of the bank."

Roslyn, which had no comment for this article, becomes the third thrift to establish such a foundation.

Ocean Federal Savings Bank of Brick Township, N.J., whose conversion was completed in June, placed 7.4% of its stock in the Ocean Charitable Foundation.

"We wanted to distinguish ourselves from our competition, and this foundation gave us the wherewithal to do that," said John R. Garberino, president and chief executive officer of Ocean Financial Corp. "As New Jersey was picked over by consolidation, we felt like we are the last surviving community bank in our market."

Mr. Garberino added that the community response to the foundation has been "tremendous."

First of America of Fall River, Mass., which expects to close its conversion this week, will also contribute 8% of its shares to First Federal Charitable Foundation.

Although the early reviews of the foundations have been positive, some resistance to the idea remains among thrift executives thinking of going public.

"There was some nervousness rooted in a fear that this would become mandatory," said Doug Faucette, partner with Muldoon Murphy & Faucette, a Washington-based law firm, and council for Ocean Federal.

Others feel that setting up a foundation is like "giving away a piece of the bank," another analyst said. Even though the stock given to the foundation is never offered, some consider it dilutive, he explained.

"Once you cease to be a mutual, there is more internal pressure to maximize earnings, and the thrifts want to stay profitable," the lawyer explained. "Also, there is an exaggerated fear that the stockholders will always be second-guessing you.

"The foundation became a way to unite the community, to endow a private corporation without harming the company," Mr. Faucette said.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER