Board Members, CEO At Former CU-Turned-Bank Fight Wall Street
Three long-time directors of Synergy Financial who engineered the former credit union's conversion to savings bank are fighting to hold off a hostile bid for their seats from a Wall Street investment firm.
PL Capital, which has amassed a 9.9% stake in the former credit union, is pushing the Synergy management to pay down some of its $95-million in capital to pay for an increase in stock buy backs or engage in other measures to enhance shareholder values. "The company has too many shares outstanding and too much capital for its size. Banks like Synergy should have about 6.5% capital (Synergy has about 10%)," said Richard Lashley, the "L" in PL Capital.
The group, now Synergy's largest shareholder, says the management and directors of the credit union-convert have paid themselves handsomely since going public three years ago, citing more than $14 million in stock and cash compensation earned by insiders since then. Synergy's President John Fiore, who engineered the 1999 conversion from credit union, was paid almost $4 million in compensation since then and has compiled an ownership stake of almost $3 million in stock, including $1.6 million in stock grants over the last two years.
"Now that they got paid it's time to take care of the shareholders," said Lashley, whose group has been involved in as many as 10 other proxy contests at small banks or thrifts.
The group is seeking to place two of its representatives on the Synergy board, which has three vacancies this year, in order to push its agenda. But Synergy has rejected the group's overtures and refused to share a shareholders list that would enable PL Capital to communicate with other shareholders. Instead, Synergy is calling on shareholders to reelect its three long-time incumbents, including Fiore, Nancy Davis and Phil Scott, all of whom helped shepherd the conversion from credit union.
Synergy FCU was chartered in 1952 to serve employees of Schering-Plough Corp., and made the full switch to mutual savings bank in January 1999. In 2002 the company sold a minority of shares in a mutual holding company that controlled the savings bank to the public, and the company went fully public in January 2004.
In proxy materials sent to all shareholders, Synergy management said, "We believe that Synergy's Board of Directors acts in the best interests of all stockholders and that these hostile actions are unnecessary, disruptive and may delay or impede our efforts to maximize the investment of all of Synergy's investors. It is important that you vote this year." Company officials could not be reached for comment.
PL Capital has asked a state court in New Jersey to order Synergy to turn over a shareholders list to facilitate its proxy battle. A hearing on the matter is scheduled for this week in Union County Superior Court.
The Wall Street group originally asked Synergy to expand its nine-member board by one and give its group the additional seat on the panel, but Synergy refused, according to disclosures both parties filed with the Securities and Exchange Commission. So PL Capital decided to push for two of the three vacancies, instead, Lashley said.
"It would have been a lot easier for them with the one extra seat; It would have cost them $25,000 (directors fees). Now it's going to cost them a lot more," he said, referring to legal and other fees related to the proxy fight.