The management of Independence Federal Savings Bank has succeeded in blocking a bid by its largest shareholder to take control of the Washington thrift’s board, but its chief executive, Thomas Batties, is not resting easy.
Morton A. Bender already owns 21% of the stock and still has an application pending with the Office of Thrift Supervision to acquire 30% more of it. If the application is approved, Mr. Bender can immediately begin soliciting Independence’s shareholders to sell him their shares.
Moreover, Mr. Bender, who also owns the $114 million-asset Colombo Bank in Rockville, Md., said last week that he was considering filing a lawsuit contesting last month’s shareholder vote, in which only one of his two nominees was elected to the thrift’s board.
Mr. Batties said in an interview last week in his downtown Washington office that he keeps hoping Mr. Bender “will just go away.” But “one thing I’ve realized is an inability to forecast his attitude or behavior. He does not necessarily follow a rational course.”
There is no love lost between Mr. Bender and Mr. Batties.
For three years the men have sparred over the direction of the $166 million-asset thrift, which is largely African-American-owned. Mr. Batties claims that Mr. Bender wants to take control of Independence, merge it with Colombo, and rid it of its minority ownership and minority focus.
But Mr. Bender, who is white, says that he has no such intentions and that he has been seeking control of Independence because he believes it is poorly run.
Despite the setback at last month’s shareholder vote, Mr. Bender, said in an interview last week that he remained as determined as ever to oust Independence’s management and its allies on the nine-member board.
“I have a large investment in it, it’s not performing and not making any money, and the management keeps screwing things up,” he said. “So what am I expected to do?”
Independence has not yet reported its third-quarter earnings, but it lost money in eight of the 10 previous quarters. It turned a profit in the second quarter, but its efficiency ratio was a whopping 128% — nearly double the average for thrifts its size — according to Federal Deposit Insurance Corp. statistics.
Mr. Batties blames the thrift’s financial woes on Mr. Bender, arguing that legal fees it has paid to thwart his proxy battles and takeover attempts have eaten into earnings. He said that tussles with Mr. Bender have also distracted management from its plan of remaking Independence into a commercial bank and that Mr. Bender’s public criticisms have scared off potential customers and employees.
“Our restructuring and branching activities have been hampered to an extent because of the negativity created by Mr. Bender,” Mr. Batties said. “Mr. Bender has been loud in the marketplace, demeaning the institution and its management. That has put a cloud over the ownership and impedes our ability to bring in good people and customers.”
The OTS earlier this year requested that Independence delay its annual meeting, which had been scheduled for mid-May, so that investors could sort out what the OTS said was “misleading” information being put out by Mr. Bender.
After months of delays, the meeting was held in late October. Before the meeting, Mr. Bender’s allies held three of the nine board seats, and if his two nominees had been elected, he would have essentially gained control of the thrift.
Mr. Batties said the voting results prove that shareholders support his, not Mr. Bender’s, vision for the company.
“We think that the record turnout of shareholders and the way they voted is a key indicator of their disdain for Mr. Bender and his efforts to take control of the institution,” he said.
Mr. Batties also said that Mr. Bender had a chance to buy Independence outright after its deal to sell to the $619 million-asset Carver Bancorp Inc. in New York fell through last year, but that Mr. Bender is trying to take it over on the cheap and then merge it with Colombo.
“He is attempting to gain control of the institution without paying anything,” Mr. Batties said. “And what we are attempting to do is try and prevent our shareholders from getting screwed out of a premium.”
Mr. Bender, for his part, said he is still investigating the shareholder vote and strongly hinted that he would file a lawsuit to challenging it.
Reiterating his promise not to merge Independence with Colombo, Mr. Bender also questioned Independence’s commitment to serving African-Americans in the District of Columbia. He pointed out that the last branch it opened, in 1998, was in the wealthy and predominantly white Maryland suburb of Chevy Chase.
“I think the minorities in the city are entitled to a quality bank,” he said. “This bank has claimed to be a minority bank but has done nothing to court minorities.”
