A ruling from the Securities and Exchange Commission has cleared the way for proxy challenges to proceed against the management of Onbancorp, a move that could lead to a sale of the bank.
Attorneys representing Syracuse-based Onbancorp had asked the SEC to allow the company to omit various shareholder proposals from proxy materials issued for Onbancorp's April shareholders meeting.
But the commission, in a Feb. 15 letter to the bank's attorneys, Skadden, Arps, Slate, Meagher & Flom, said proposals for a sale of the company should be voted on at the April meeting.
"They have to seek a merger partner to maximize shareholder value," said Onbancorp investor Seymour Holtzman, who is behind one of the proposals.
Onbancorp senior vice president Robert J. Berger said his company is reviewing the SEC letter to determine what should be included in the proxy materials. He also said the company is looking at all its options, including selling the bank.
"We will do what is in the best interests of shareholders," Mr. Berger said.
Mr. Holtzman said he is the company's largest individual shareholder, with 230,000 shares, or 2.2% of the total. And he has experience waging proxy fights. Last October, he led a proxy battle that defeated a stock option plan advocated by management at First Financial Corp. of Western Maryland, a $330 million-asset thrift.
Meanwhile, the Wilkes-Barre, Pa.-based investment firm, Berkshire Asset Management, which has 450,000 shares, or 3% of Onbancorp, has submitted a separate proxy proposal that also asks for a sale of the bank.
The SEC, in its letter to Skadden Arps, noted the proposals from Mr. Holtzman and Berkshire Management "appear to be substantially duplicative of one another," and said it would not object if the Holtzman proposal was omitted from the proxy materials in favor of the one from Berkshire Management.
Mr. Holtzman said he hoped the two proposals could be consolidated. But Berkshire Management president Michael H. Cook said his company preferred to act alone. "There will be no getting together with other groups of shareholders on proxy issues," Mr. Cook said.
Onbancorp, with $5.6 billion of assets, is a former thrift that converted to a bank charter in 1989. It earned $44.7 million last year, for a 0.71% return on assets and 11.8% return on equity, a great improvement over 1994, when a fourth-quarter securities restructuring drove earnings for the year down to $2.7 million.
"The bank has very poor returns," Mr. Cook said. "Their ability to generate the return on equity that can justify independence is not there, in our opinion."