Investor wants payout or sale Owner of 6.22% of WHG Bancshares assails management

Savings banks

November 10, 1997|By Bill Atkinson | Bill Atkinson,SUN STAFF

A large shareholder of Lutherville-based WHG Bancshares Corp. is urging company executives to either immediately pay a special dividend of as much as $8 a share or sell out.

The shareholder, Jerome H. Davis, owns 6.22 percent of the small savings bank holding company. He attacked management in a letter that called the company's financial situation "deplorable."

He chided executives as not "performing your fiduciary duty."

"You've had control of your company's destiny for long enough," Davis said in the letter filed with the Securities and Exchange Commission.

"You've shown what you can do. Turn over the reins to someone capable of handling a public company, with owners who deserve to have their investment enhanced."

Executives with WHG Bancshares, the parent company of Heritage Savings Bank, did not return phone calls.

Davis filed the letter with the SEC because by law he is required to disclose any plan or proposal that could affect the company's stock.

In his letter, Davis said he wants management to pay a "large special dividend of $6 to $8" a share immediately to reward shareholders and put the company's capital to work.

The company currently pays a dividend of 8 cents a share.

Davis, who resides in Greenwich, Conn., and is an investor in numerous community banks and thrifts, said in the letter that a large dividend would "enhance share value for all shareholders while making the balance sheet much more attractive."

WHG's stock closed Friday at $15.75.

WHG, a small savings bank holding company with $98.6 million in assets, went public just 18 months ago, issuing 1.6 million shares of stock at $10 each.

Its subsidiary, Heritage Savings Bank, was founded about 95 years ago, according to documents filed with the Federal Deposit Insurance Corp., and some of its board members have been directors since 1947.

The company is flush with capital.

It has $19.8 million in stockholder equity, and an equity-to-asset ratio of 20 percent -- more than double the national average for savings and loans, according to Danielson Associates, a Rockville-

based bank and thrift consulting firm. Banks and thrifts put their capital to work by making loans and acquisitions, building branches or paying higher dividends.

And, while WHG's net earnings rose nearly 63 percent for its fiscal year ended Sept. 30, to $746,000 over the prior year, key profit ratios have been weak.

WHG's return on equity was 4 percent for the year, which means that it returns 4 cents for every dollar invested in the bank. Most banks and thrifts shoot for a return of about 15 percent.

"Selling is probably a ridiculous thing, but if you cannot make earnings why not dividend out some of the capital to some of the shareholders? It is a legitimate question," said Arnold Danielson, chairman of Danielson Associates.

That's what Baltimore-based Patapsco Bancorp Inc. did in June when it announced a $12.50-per-share special cash dividend because it had more capital than it needed.

Pub Date: 11/10/97

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