PVF Capital Corp. in Solon, Ohio, could be the target of a hostile takeover by a shareholder who for the past year has been urging it to diversify its loan portfolio and overhaul its management.
Umberto Fedeli, who owns more than 6% of PVF's stock, plans to wage a proxy contest at its annual meeting today in which he will seek to replace half its board. Should that effort fail, he said he and some other shareholders will attempt to buy out other PVF investors with the intention of taking over the $870 million-asset parent of Park View Federal Savings Bank.
"For a year now, I have been reaching out to management, I have brought them candidates, I have proposed all kinds of ideas," Mr. Fedeli said in an interview last week. "They are not even interested in hearing any ideas, nor are they sharing what they plan to do."
PVF's management, for its part, said it is willing to discuss its plans with Mr. Fedeli on the condition that he sign a confidentiality agreement. He has refused, setting up the showdown at today's annual meeting.
Mr. Fedeli first began advocating for a board and management overhaul in May 2007, but he backed off after PVF announced in July that it had agreed to sell itself to United Community Financial Corp. in Youngstown, Ohio, for $130.8 million. The deal hit a snag in December, however, when the Office of Thrift Supervision delayed its approval as it examined United's subsidiary, Home Federal Savings and Loan Co., and on April 1 PVF terminated the agreement.
Since then Mr. Fedeli has exerted more pressure on management to take steps to improve the company's performance or risk a potential takeover.
In a May 15 letter to PVF's board, he said he and his allies "will do whatever else is necessary to realize value for shareholders, including proceeding as and when we see fit with a tender offer."
Mr. Fedeli, who runs an insurance brokerage called Fedeli Group in Independence, Ohio, said he has the means to carry out the takeover and, along with fellow shareholders, has formed a limited liability company, PVF Acquisition.
According to Mr. Fedeli, PVF is not exactly a troubled institution, just an unmotivated one. It posted first-quarter earnings of $301,245, down 75% from a year earlier, which was attributed to a 15% drop in net interest income and a loan-loss provision of $819,000.
PVF's shares were trading at $9.80 late Friday, nearly 40% below their 52-week high.
Beyond its lukewarm earnings, Mr. Fedeli said PVF is putting itself at risk by concentrating its loan portfolio in real estate and needs to add commercial and industrial loans. According to the company's annual report filed with Securities and Exchange Commission, 95% of the $717 million portfolio is secured by real estate. One-to-four-family mortgages and commercial real estate loans each made up about a quarter of the portfolio.
Mr. Fedeli said PVF is missing out on a major opportunity for growth, particularly in commercial and industrial loans, as larger banking companies such as National City Corp. wade through credit-quality problems.
"This is a real chance for them to compete against the bigger guys that have more cumbersome problems," he said in the interview.
Mr. Fedeli has said, though, that PVF cannot take advantage of the unless it makes changes to its board and executive team.
"Without new board and management strength," his May 15 letter said, "I believe that Park View will simply remain just another thrift that lacks clear direction, with no real business strategy, with few options and a continuing declining stock price."
A year ago Mr. Fedeli proposed investing $13.5 million to $22.5 million in the company in exchange for its hiring a new president and heads of various business units. Mr. Fedeli said the offer, which also would give him the right to appoint three new board members, still stands.
PVF saw Mr. Fedeli's offer as dilutive and instead struck the ill-fated deal with United.
It appears PVF would be willing to sell itself if the right deal comes along. In a May 16 letter to shareholders, chairman and chief executive John R. Male said PVF had hired the KBW Inc. investment bank Keefe, Bruyette & Woods Inc. to help it explore its strategic options.
Mr. Male said PVF's earnings decline was mainly a result of weak economic conditions, particularly in northern Ohio, and he assured shareholders that the company would weather this downturn as it has every other one since 1920.
C. Keith Swaney, PVF's president and chief operating officer, said that it has attempted to share its plans with Mr. Fedeli but that he would not sign a confidentiality agreement.
"We've never shared our business plan with anyone," Mr. Swaney said. "We asked him to sign the agreement, but he hasn't been willing."
Mr. Swaney declined to comment further on Mr. Fedeli or his effort to gain control of PVF. When asked about the strategy it has set in the wake of the collapse of the United Community deal, Mr. Swaney said "when we are ready to divulge it, we will divulge it."
