MASSBANK Inc.
(NDAQ:MASB) shares rose marginally after Lawrence B. Seidman disclosed
a 5.83% and made several suggestions to the company aimed at unlocking
value for shareholders. The activist investor recommended that the
company consider (1) an accelerated share repurchase program, including
considering a dutch auction, (2) a new management team capable of
making proper loans, and (3) a sale of the company.
MASSBANK is
clearly in need of change. A quick look at the balance sheet shows a
clear dropoff in earnings. Total assets have gone down to 15
consecutive quarters, from $1 billion in September of 2003 to $817
million in June 2007. Net loans have declined for 7 consecutive
quarters from $230 million in September 2005 to $197 million in the
most recent quarter. And total deposits have gone down 15 consecutive
quarters, from $899 million in September 2003 to $705 million in the
most recent quarter.
Perhaps more troubling is the company's
sloth-like response to market conditions and weak balance sheet.
Amazingly, net loans only account for 24% of total assets. No other
exchange-traded thrift has a ratio below 32% and most have somewhere
around 71%. Meanwhile, cash and cash equivalents accounts for 27% of
assets! This means a cash to loans ratio of 112%! This is beyond
conservative and bordering sheet laziness on the part of management.
Seidman
also disclosed a rather disturbing conversation that he had with
management. The investor contacted Mr. Brandi - the President and CEO -
to discuss MASB's strategic plans for transforming the balance sheet,
improving earnings, and returning capital to shareholders. Mr. Brandi
then insulted Seidman by saying there was no way he'd ever meet the
board of directors. After quickly dismissing the request, Mr. Brandi
then challenged Seidman to a proxy fight in 2008. The CEO insisted that
the activist investor could never win because shareholders love him so
much.
In the end, this company has several problems that need to
be addressed as soon as possible. The proposals made by Mr. Seidman
make sense and should be considered by the board of directors.
Combined, these factors make MASB a stock
worth watching!
Related CompaniesLSB Corporation (LSBX)JPMorgan Chase & Co. (JPM)BB&T Corporation (BBT)