Yardville National Bancorp of Hamilton, N.J., is spending $32,000 for some advice - and some time.
The $2.8 billion-asset company said Friday that it has hired the activist investor Lawrence Seidman to help it select acquisition prospects over the next year.
Mr. Seidman will work as a consultant for Yardville through Jan. 31, 2006. He has agreed not to mount a proxy contest or file any lawsuits against Yardville, and he has pledged to vote his 7.1% stake in concert with the management team.
In other words, Yardville has a year to boost its profitability and satisfy Mr. Seidman, who since 1995 has forced 13 of the 18 companies in which he has invested to sell themselves.
In an interview Friday, Yardville's president and chief executive, Patrick M. Ryan, said he deliberately took an approach different from that of other companies targeted by Mr. Seidman: cooperation rather than confrontation.
"We've taken a different tack than some others in that, with the board's approval, I've reached out to him to see if we could work together to take Yardville to the next level," Mr. Ryan said. "That's the plan for now. He's part of our family, so we have to work on his behalf, like all our other shareholders."
Mr. Seidman was similarly upbeat in a Yardville press release.
"I have the utmost respect for YNB, its management, and board of directors," he said in the release. "I believe this consulting arrangement allows us to work together for the benefit of all … shareholders to enhance the value of the … franchise."
Joseph Fenech, who covers Yardville for Sandler O'Neill & Partners LP in New York, said retaining Mr. Seidman could be a savvy move. Yardville has never made a purchase and is not well known outside its core market of Mercer County.
But the analyst noted that Mr. Seidman's contract specifically permits him to object if Yardville tries to raise more than $15 million of new capital. Friday's agreement may merely delay a confrontation, Mr. Fenech said. "This doesn't provide a longer-term resolution."
Mr. Seidman has become widely known in industry circles for buying large stakes in community banks and then agitating for their sale.
When he began investing in Yardville in July, he said in a Securities and Exchange Commission filing that he would meet with Yardville's board to consider "a comprehensive review and analysis of the value that could be achieved as an independent institution versus its value from a sale to a larger institution."
Yardville has made it clear it prefers to be a buyer, not a seller.
In a Feb. 7 conference call, Mr. Ryan said Yardville was considering raising more capital "to support our branch-growth strategy and provide the opportunity to explore potential acquisitions."
In the interview, Mr. Ryan said new regulations may entice small banks to sell.
"I think there will be opportunities," because community banks are finding the cost of complying with Sarbanes-Oxley, the USA Patriot Act, and other regulations increasingly burdensome, he said.
Yardville has its eye on "small" banks in New Jersey, Mr. Ryan said, but he would not give an asset size.
The company has plans to open four to five branches a year for the next three years. It has 23 branches, all in central and southern New Jersey and suburban Philadelphia.
Yardville forecast 25% to 30% earnings growth for this year, which would boost its profit to more than $24 million. Mr. Fenech said that if it could reach that goal after a solid 2004, when it earned a record $18.5 million, it could make mounting a successful proxy contest difficult.
In a research note published Friday, he maintained his "hold" rating on Yardville's stock.
The stock had been flat for several months before Mr. Seidman's investment last summer. Since then the share price has risen by nearly 40%; in midday trading Friday it was up 2%, to $33.25.
