Jay Sidhu has stepped down as the chairman of Atlantic Coast Financial (ACFC) because he believes the Jacksonville, Fla., company was failing to “mitigate or significantly reduce risks facing the bank.”
Sidhu wrote in a letter dated April 27 that “our stock is down 75 to 80% over the past year, and our financial performance speaks for itself.” The company has lost money in 15 consecutive quarters and is operating under an agreement with regulators to maintain a Tier 1 core capital ratio of 7%. At March 31, Atlantic Coast’s Tier 1 leverage ratio was 5.71%.
Atlantic Coast said in a filing with the Securities and Exchange Commission on Thursday that it had accepted Sidhu’s resignation, which was effective Monday. He stepped down from the bank’s board, as non-executive chairman of the company and as chairman of the risk committee.
Sidhu said that he will remain on the holding company’s board until his term ends in 2014 but would not seek reelection.
Members of the board have blocked the implementation of recommendations with “debate centered on issues of speed of implementation and style rather than performance, shareholder value creation and good governance,” Sidhu wrote in his letter. This lack of action by the board has “a tremendous diversion of focus and wastage of energy and resources at the bank at a time we can least afford it,” he added.
Atlantic Coast in its filing defended its management of risk, noting that it formed a separate risk committee in 2011 to assist the board. It said that it has “disclosed its risk management process accurately and is managing risk consistent with applicable banking regulations.”
Recommendations to the board were not implemented because “they were not in the best interests of all shareholders and did not reflect the appropriate strategic direction for the company and the bank,” the company said.
Sidhu wrote that he still believes Atlantic Coast could be “profitable in the near future” through either a sale or by remaining independent. Atlantic Coast said in November that it had hired an investment bank to explore its options and reiterated in its first-quarter earnings that it was still considering a possible sale or capital raise.
Sidhu, a former chairman and chief executive of Sovereign Bank, is currently chairman and CEO of Customers Bancorp in Wyomissing, Pa., which recently set a price for its initial public offering.
The Jacksonville Business Journal first reported Sidhu’s resignation.