A former executive at Hanover Bancorp is calling on the Mineola, N.Y., company to separate the roles of chairman and CEO.
Paul Hagan, who was Hanover’s chief financial officer from April 2011 to May 2017, claimed in a June 29 letter to the $566 million-asset company's lead independent director that conflicts of interest prevent Michael Puorro from taking the necessary steps as chairman to improve shareholder value.
Puorro is also Hanover’s president.
“A primary responsibility of the chairman is to represent the interest of the shareholders, something that Mr. Puorro has not done since he is conflicted with protecting his job in management and not exploring opportunities in the capital markets to maximize shareholder value and enhance liquidity in Hanover’s stock,” Hagan wrote.
Before joining Hanover in 2012, Puorro helped found Madison National Bank in Hauppage, N.Y. Madison sold itself to FNBNY Bancorp. Puorro also served as chief financial officer at New York Community Bancorp and Roslyn Bancorp.
Hagan, who said he owns 3% of Hanover’s outstanding shares, called on Hanover to create a “liquidity event” by listing its shares on a stock exchange, conducting an initial public offering or selling itself.
Hagan claimed Hanover’s present market value of $55 million is significantly undervalued — by as much as $45 million — compared to similar sized community banks. He also objected strongly to issuing new shares.
Puorro “is diluting existing shareholders by continuing to issue new stock at levels way below the peer group community bank market levels,” Hagan said in an email to American Banker.
While he agrees about the need for a liquidity event, Puorro said he disagrees with Hagan over the timing.
“It’s always been in the plan,” said Puorro, who noted that he holds about 6% of the company's stock. “No one disagrees with the need to give our investor base a type of liquidity event, but in order to do so we need a certain size. ... There aren't too many successful IPOs of community banks under $1 billion.”
Hanover would have a thinly traded stock that would ignored by investors and analysts if it pursued a listing now, Puorro said. “That’s not in the best interest of all the shareholders.”
Hagan, who said he left the company after it offered to buy out his contract, added that he is pleased with Hanover's financial performance.
Hanover Community Bank's earnings more than doubled in the first quarter from a year earlier, to $1.4 million. Profit last year increased by 47% from 2016. The bank has reported no nonperforming assets over the past 13 quarters.
The bank will show continued growth and profitability when it reports second-quarter earnings later this month, Puorro said. “I’m extremely confident the market will be pleased with our record of continued growth and robust financial metrics,” he said.
Hanover, founded in January 2009, ran into trouble due to the financial crisis. Hagan and Puorro participated in the company’s 2013 recapitalization in 2013 and its subsequent return to profitability. From 2014 to Hagan’s departure, Hanover earned about $10 million.