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The activist investor Richard Lashley believes that the mutual holding company structure should be extinct and that all mutuals should operate as fully public companies.
May 11
Under pressure from its largest shareholder to beef up its capital base, Polonia Bancorp in Huntingdon Valley, Pa., has announced that it is planning to become a 100% stock-owned company.
A mutual holding company since 2007, the $280 million-asset Polonia said in a news release Wednesday that it intends to pursue a second-step conversion in which it would sell the roughly 58% of its shares that are not already publicly traded.
Polonia's announcement comes a little more than three months after its largest shareholder, PL Capital LLC, sent a letter to the board demanding that it pursue a second step to create more liquidity for the stock, provide more capital for future growth and improve its regulatory capital ratios.
PL Capital, an active investor in community banks and thrifts, owns more than 251,000 of Polonia's stock, or 18.8% of the public shares outstanding.
In the letter, PL Capital principals Richard Lashley and John Palmer also said that weak earnings and Polonia's December acquisition of the failed Earthstar Bank have left the company with minimal cash for stock buybacks and dividend payments. They said that the market for second steps has been more favorable of late and that they would expect the shares to be valued at between $8.30 and $9.30. Polonia's stock was trading at $7 midday Thursday.
"Frankly, we see no reason for the board to delay a second-step transaction," Lashley and Palmer wrote in the May 6 letter. "In our opinion, failing to take advantage of this window of opportunity to effect a second-step transaction would be negligent on the part of the board."
Polonia said it expects the stock sale to begin in the fourth quarter at an offering price to be determined by an independent appraisal.
