![]() March
16, 2010
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ATTORNEYS
AT LAW
777
EAST WISCONSIN AVENUE
MILWAUKEE,
WI 53202-5306
414.271.2400
TEL
414.297.4900
FAX
foley.com
CLIENT/MATTER
NUMBER
041754-0133
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Re:
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CFS
Bancorp, Inc. (the “Company”)
Preliminary
Proxy Statement on Schedule 14A
Filed
March 4, 2010 by
John
W. Palmer, PL Capital, LLC, et al.
Soliciting
Materials filed pursuant to Rule 14a-12 on May 7, August
3,
August
24, November 27, December 7, 2009 and February 9, 2010
Filed
by John W. Palmer, PL Capital, LLC, et al.
John
W. Palmer, PL Capital, LLC, et al.
File
No. 000-24611
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BOSTON
BRUSSELS
CHICAGO
DETROIT
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JACKSONVILLE
LOS
ANGELES
MADISON
MIAMI
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MILWAUKEE
NEW
YORK
ORLANDO
SACRAMENTO
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SAN
DIEGO
SAN DIEGO/DEL
MAR
SAN
FRANCISCO
SHANGHAI
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SILICON
VALLEY
TALLAHASSEE
TAMPA
TOKYO
WASHINGTON,
D.C.
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·
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the
facing page of the Schedule 14A lists 13 filings
persons;
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·
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page
1 of the proxy statement indicates that the filing is the “proxy
statement” of the PL Capital Group;” discloses that PL Capital Group
is soliciting proxies to elect Mr. Palmer and refers readers to
page 17 for a list of persons that comprise the “PL Capital
Group”;
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·
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page
17 of the proxy statement indicates that PL Capital Group is comprised of
sixteen persons (the following persons are listed on page 17 but not
on the facing page of the Schedule 14A: Dr. Robin Lashley, Mr.
Lashley as Custodian of UTMA for Danielle Lashley and the PL Capital
Defined Benefit Plan);
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·
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Appendix
A of the proxy statement identifies 15 persons as members of
PL Capital Group (the following persons are listed in Appendix A
but not on the facing page of the Schedule 14A: Dr. Robin
Lashley, Mr. Lashley as Custodian of UTMA for Danielle Lashley and the
PL Capital Defined Benefit Plan;
the following person is listed on the facing page of the Schedule 14A
but not in Appendix A: Danielle
Lashley).
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·
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“We
believe that our nominee to CFS Bancorp’s board of directors, Mr. Palmer,
will add a sorely needed strong independent voice to the current board.”
(page 1) Based on the preliminary proxy statement filed on
February 25, 2010, it appears that the board of directors of the
Company has affirmatively determined that all of the directors, other than
Mr. Thomas F. Prisby, are independent under the applicable NASDAQ
requirements and the board of directors makes a determination of director
independence annually.
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·
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“We
believe the entire board of directors, including nominees Frank Lester and
Thomas Prisby, should be held accountable for allowing the Company and the
Bank to engage in related party dealings.” (page 7) Please
refer to our comments 5 and 6 below when responding to this aspect of this
comment.
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·
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“While
less objectionable to us than paying bonuses for ‘losing money,’ we also
question why shareholders should pay bonuses to executives to reduce
non-performing assets that were created while these executives were in
charge.” (page 10) It is our understanding that the non-performing assets
which PL Capital references involves loans that were made prior to the
employment of Daryl Pomranke in 2008, Dale Clapp in 2008 and Daniel Zimmer
in 2007.
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·
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“Despite
the dismal performance of the Company during the past five years, the
compensation committee, on which director Frank Lester served from 2005 to
2009, increased Chairman Thomas Prisby’s salary by approximately 11%,
while the stock price declined by approximately 75%.” (page
8). It is our understanding, based on the preliminary proxy
statement filed by the Company on February 25, 2010, Mr. Prisby did not
receive a salary increase in 2009. The difference between Mr.
Prisby’s salary in 2009 and 2008 appears to be the result of an additional
pay period in 2009 (26 vs. 27 pay periods) rather than a base salary
increase. As a result, it appears that Mr. Prisby’s salary
increased by only 6% from 2005 to
2009.
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·
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“The
reserve for loan losses as a percentage of NPAs is only 29% at
December 31, 2009, well below the average of the Company’s peers in
the SNL Bank and Thrift Index, as shown in the chart that follows.” (page
4). It is our understanding that the SNL Bank and Thrift Index
is a proprietary index of SNL Financial which contains all banks and
thrifts listed on the New York Stock Exchange, NASDAQ and NYSE-Amex
regardless of asset size, market capitalization, geographic location or
charter type. It is therefore unclear how a reasonable basis
exists to make a statement suggesting the figures provided in this chart
are that of the Company’s peers.
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“CFS
Bancorp’s Return on Avg. Equity (ROAE) vs. Peers for the Past 5
Years.” (caption preceding the chart on page 6). See the
preceding bullet point regarding the reference to
peers.
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The
information contained in the chart entitled “CFS Bancorp Loan Loss Reserve
to NPAs (%) vs. Peers” on page 5. It is our understanding that
the ratio of loan loss reserves to non-performing assets for the Company
at December 31, 2009 is 34%, not 29%, as indicated in the
chart.
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“In
addition, under the Agreement, both the Company and the Bank cannot,
without the prior approval of the OTS...[i]ncur or renew any debt without
the OTS’ approval.” (page 6), It is our understanding that only the
Company, and not the Bank, is subject to this
limitation.
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“Given
his age (67 at the time), significant other compensation, an employment
contract and the fact that Mr. Prisby has worked his entire career at the
Company, we do not believe he needed to be incentivized to stay.” (page
9). Based on disclosure in the Company’s preliminary proxy
statement, it does not appear Mr. Prisby worked his entire career at the
Company.
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“[Mr.
Palmer] is considered a “financial expert” as that term is defined by the
Sarbanes-Oxley Act, an important distinction for a member of a publicly
traded bank board of directors.” (page
13).
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Very
truly yours,
/s/
Peter D. Fetzer
Peter
D. Fetzer
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cc:
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John
W. Palmer (w/o enclosures)
Richard
J. Lashley (w/o enclosures)
PL Capital
Group
Phillip
M. Goldberg (w/o enclosures)
Foley & Lardner
LLP
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