Sandler O’Neill Asset Management reduced its position in Poage Bankshares Inc (NASDAQ:PBSK) to 250,000 shares, from 314,000 shares held at the end of the second quarter, a new filing with the SEC showed. In this way, the fund reduced its position in the company to 8.08%.
At the same time, the president of the fund, Terry Maltese, send a letter to Mr. J. Thomas Rupert, Poage’s Chairman of the Board in which he expressed his discontent regarding Poage’s plans to acquire Town Square Financial.
See the letter below:
“Dear Mr. Rupert:
We are very displeased with the recent announcement of Poage Bancshares intent to buy Town Square Financial.
Poage Bankshares (PBSK) converted in September 2011, creating considerable excess capital and a tangible common equity ratio of 17.9%. PBSK currently has 19.5% tangible common equity, its stock is trading at 78% of tangible book value and you have repurchased less than 5% of PBSK shares since September 2012 (when you were legally able to repurchase shares). Instead of taking the opportunity to retire shares at a large discount to tangible book value, thereby improving shareholder value, tangible book value per share and earnings per share, you plan to issue shares to purchase Town Square Financial at a premium to its tangible book value. Acquiring a troubled commercial bank at a premium to its tangible book value rather than acquiring your own shares at a large discount to tangible book value makes no financial sense. In fact, it is the exact opposite strategy you should pursue.
We strongly disagree with this misuse of shareholders capital. We urge you to reconsider this decision, explore options for terminating the transaction and take steps to aggressively repurchase your own stock. Although a shareholder vote is not required, we suggest you allow your shareholders to be heard and vote on this acquisition.
Additionally, we strongly urge you not to contest the request for Board representation made by one of your largest shareholders. We highly doubt you can win a proxy fight against this shareholder and any attempt to do so would be a waste of shareholder capital.
Please deliver a copy of this letter to each member of the Board of Directors of Poage Bankshares.
We would be happy to further discuss our thoughts with you. Thank you for your consideration.”