Here’s an article sent to me regarding the JOBS Act, privatization and community banks. It makes some sense. Click here.

22 comments on “Privatizing?

  1. Excerpt from the above mentioned article:
    “The JOBS Act also means currently unregistered banks can bring on new investors without as much worry about tripping the registration requirement. Frank Sorrentino, chairman and CEO of North Jersey Community Bank, an Englewood Cliffs lender with eight branches and about $762.9 million in assets, said that’s a relief to his bank, which he said was approaching the limit. The law also will enable it to sell more shares to so-called unaccredited investors, or those who don’t meet certain wealth standards, and expand how it can solicit certain investor groups”. Could this be the end game?

      • As I read it this will allow them to solicit money without running afoul of registration requirements. I don’t think they are going to save much money but they will open up their ability to solicit capital to shore up the bank. Just my opinion.

        • Bob, I don’t believe that SEC registration issues are the main thing preventing the bank from lining up the necessary people to ante up a total of $20M, do you? But if that is their end game, they better hurry.

          I read somewhere that complying with the SEC reporting requirements costs thousands of dollars – besides the money, the bank seems to have difficulty complying accurately and on-time with the reporting requirements due to a depleted accounting department staffed with contract temps, and a temp CFO.

          • Another benefit to the bank by stopping SEC reporting requirements is to avoid, in perhaps the last few weeks, a bunch of potshots from shareholders on this forum, pointing out what is between the lines of the reports ;>)

          • Doug, I truly believe that if the board had voluntarily resigned, or been asked to resign, we would not be in the situation we find ourselves in today. I have not seen one board member step forward and offer up their resignation for the good of Citizen’s. These people have to be living in a vacuum to not realize that they are the cause and the solution to the problem. How they expect to attract financial support by what ever means with this board hanging on for dear life is beyond me.

  2. The lack of integrity constantly displayed by the board is a key reason why this bank got into trouble in the first place. It is common in many of the failed banks.

    • The shareholders, I guess, get what they voted for. They are people that have been totally wiped out of their investment, but some blindly voting for the status quo. Thus is capitalism, I fear. Of course, I’m wiped out too – without even an apology from the board or the management. Disgusting.

      Meanwhile, the board and management collect their paychecks, free dinners, etc.

  3. If a group of private individuals were to buy PNBC or even just Citizens, then the $25 TARP bailout is still on the books, right? If so, I think that alone would eliminate privatization as a very viable alternative.

    If, on the other hand, another bank takes over the bank at the behest of the OCC and FDIC, I suppose everything is negotiable. I believe that in many cases of failed banks, the feds have guaranteed the loans to the acquiring bank and made other concessions. Somewhere I’ve read that the FDIC is leery of running failed banks themselves, although I once did a search, and it happens about 10% of the time.

    If the feds don’t like whatever deal that is offered to them by prospective acquiring banks, then their only fall-back position is to take over and run the bank itself, while selling off the assets, one by one.

    The biggest question in my mind is whether the FDIC will ultimately sue the directors. There is certainly precedent for it.

  4. Unless the FDIC can see fraud clearly, it is unlikely they will sue the management or directors from what I read. Basically you can’t sue someone for doing stupid, inept, greedy, or ignorant things. If the FDIC considers the sorcic/bettasso love nest and subsequent coverup and payoffs by the board as fraudulent, or if there is fraud we don’t know about that is uncovered, then the directors and managers could get sued. If not, it seems unlikely.

  5. Um, I really don’t think that is the case.
    The FDIC named Jim McMahon in the Broadway Bank Lawsuit, because he wasn’t present for critical board meetings. They can and will take officers and board members to court to recover bank losses due to oversight and ineptitude. They currently have 51 actions open in court for the very same issues that PNBC/CFNB has done. If officers/board members past and PRESENT did not fulfill their fiduciary responsibilities, then they should and will be held accountable. Don’t kid yourself, they know these individuals have insurance to cover these issues, and they will take action to recover their losses. They will not come at someone individually, unless they uncover some questionable activities, but they can and probably will come at PNBC. (Even though they are working closely with T.O. and the gang right now. )
    And on the issue of “Going Dark” – Probably to save money and to perhaps slow the development of the Class Action, you have openly proposed.
    Why supply the enemy with ammunition. Make them get it for themselves.

    • I agree that the FDIC will go after the insurance held by each director and managers. But I believe they seldom target personal assets of those same individuals unless fraud is provable. That’s my take.

        • You have read the 2nd quarter results, right. Book value of the common stock is negative…! I can absolutely guarantee that the 3rd quarter results will make that number even more negative. There is reason #3, why they went dark.

      • How about issuing incorrect or misleading financial reports – finally fingered by the bank’s own outside accountants and the OCC? How about using bank funds to cover-up improprieties and scandals?

        • Take a peek at the Directors Book, put out by the OCC. The sections on Risk Management and Work Environment stand out, but this board’s apparent conduct seems to have ignored the majority of the guidelines. It is the best argument as to why the board was just as responsible as management for the problems. The link to that book is on the right OCC Directors Book, or click this link.

          • An earlier poster speculated that the FDIC would only go after individual directors or officers if something like fraud was involved.

            Fraud is a criminal offense – like theft, robbery, or embezzlement. Fraud would be prosecuted by the U.S. District Attorney or the State’s Attorney, and the defendent could be sent to jail, fined, and required to make restitution. I doubt that criminal acts could be proven in this case that directly hurt the stockholders or even the FDIC. Wouldn’t intent be a major factor?

            More likely, what we have here is negligence or failure to exercise a fiduciary duty. Those charges involve civil cases and possible suits for recovery of monetary damages. But civil cases don’t involve jail time.

            But bank officers and directors (past and present) should rely on their own lawyers, which I am not.

  6. Reading those FDIC cases should scare the bejesus out of Citizens directors and officers, including those that have already exited stage left.

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