A Case of Peculiarly Prestigious Non-Performance
Don't let the three sticks behind the CEO of this bank's name fool you: HARI is no Harvard of the banking industry, and the performance of Harvard Savings Bank is far from worthy of its prestigious name. I, for one, will be buying more stock and voting with the Stilwell Group to wrest control of this bank from Duffield J. Seyller III as needed to either turn it around or sell it.
Disclosure: As of this posting, I own shares of HARI and may subsequently either dispose of them or purchase more.
Prospective Buyers | First Midwest Bancorp, Itasca, IL (FMBI) Standard Bancshares, Hickory Hills, IL (private) Wintrust Financial, Rosemont, IL (WTFC)
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Financial Snapshot
(as of 03/31/2013) |
Total assets: | $170M |
Tangible book value per share: | $23.88 |
NPAs to assets: | 4.4% |
Price to book: | 58.6% |
Market cap: | $11.6M |
Dividend yield: | 0% |
Trailing 12-month return on assets: | 0.53% |
Trailing 12-month return on equity: | 4.6% |
TARP: | $0M |
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Scoundrels | William D. Schack, Chairman Duffield J. Seyller III, President and CEO Donn L. Claussen, Executive VP and CFO |
Red Flags | The way I see it, Duffield J. Seyller III and friends are behaving like badly bred pitbulls, biting the hands that feed them, instead of doing their job of guarding the business. I give this team at least four sticks, and zero carrots, for:
- Getting the bank tied up under an MOU. After losing a total of $2.7M in 2008 and 2009, Harvard management was forced to sign an MOU with the Office of Thrift Supervision, severely restricting the bank's opportunities to buy back stock and make other independent bank management decisions.
- Letting the bank "go to the dogs." Under Duffy Three Sticks' leadership, HARI earned a paltry 1.9% return on equity from 2010-2012. During the same period, the average thrift of Harvard's size outperformed HARI by a factor of nearly 3x, earning a 5.4% ROE; and the similarly sized, more responsibly managed institution of Logansport Financial Group (LOGN) delivered an 8.6% ROE.
- Paying themselves extravagantly for trashing the place. Over the past five years, HARI's management team bled a total pre-tax net loss of $1.8M out of the bank. For this pathetic performance, Duffield and Claussen chew off over $200K each per year in "compensation," nearly twice what the high-performing execs at Logansport allot themselves.
- Blowing money and value on a totally unnecessary dog fight. No honest bank should have reason to disallow its largest shareholder representation on its Board. For the $800K or so Harvard is wasting on proxy battles I predict it will wind up losing in the end anyhow, the bank could have bought back nearly 7% of its outstanding shares, and nearly doubled reported earnings per share. That is, of course, had they not first gotten themselves leashed under an MOU. As you can see from the chart below comparing the two scenarios, Team Duffy's game is killing bank value.
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How HARI stock could have performed, had Harvard
avoided getting itself under an MOU and not fought Stilwell
*According to SNL, the average Illinois thrift trades for 16x earnings |
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Sources | |
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