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Ousted directors question Bank of Lodi management's decisions

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Posted: Friday, July 18, 2003 10:00 pm

Amid Lodi's already blistering summer heat, three ousted directors of the Bank of Lodi are raising the temperature even higher.

White-haired and soft-spoken, Angelo Anagnos, 68, is a developer and property owner; Steve Coldani, 49, with dapper good looks and a persuasive, easy manner, is a Realtor; and Kevin Van Steenberge, 45, sandy-haired and sincere, is the president of Lodi Iron Works.

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Angelo Anagnos

The trio of deposed bank directors have sparked an intense backroom dispute about the decisions and practices of the senior management at the Bank of Lodi. The bank's managers say they have answered every question and are baffled by the actions of the trio.

The three describe themselves as earnest, vigilant overseers of a bank they say is troubled.

In turn, bank leaders say the three are troublemakers who may want to see the bank sold to a rival institution.

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Steve Coldani

In the complex world of banking, the accusations and rebuttals involve nuances of a few percentage points here and there, an alphabet soup of acronyms and a plethora of "standards" on which few seem to agree.

A hostile takeover?

The Bank of Lodi was founded in 1983 by a group of Lodi area investors. Despite a steady increase in deposits, the bank has a generally poor record of profitability compared to similar banks.

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Kevin Van Steenberge

Recently, however, there has been a spike in the stock price due to talk of a takeover by Farmers and Merchants bank, the Bank of Lodi's larger cross-town rival.

F&M, with roughly four times the assets of the Bank of Lodi, has indeed been making overtures toward the smaller bank. In fact, F&M has recently been purchasing stock in the Bank of Lodi, F&M's President Kent Steinwert told the News-Sentinel in June.

Such an attempt could qualify as a "hostile takeover," in which one company is taken over by another despite resistance by the target firm's management and board of directors.

The three dissident directors strongly assert that they oppose the sale of the bank to F&M, and say that their concern is for the Bank of Lodi's shareholders.

All three have strong ties to Lodi's banking community.

Both Anagnos and Steve Coldani's father Ray are founding members of the bank's board - When Steve's father retired, Steve took his father's position on the board. Van Steenberge's mother for a time was on the board of the Farmers and Merchants bank.

The three were voted off the bank's board in April. However, they continue to serve as directors of First Financial Bancorp, the umbrella corporation for the bank.

The three lost their positions of the bank board because "They did not conduct themselves with respect to their fiduciary duties," Zimmerman said. He would not elaborate.

That left the 10-member bank board with only seven members, and Lodi Police Chief Jerry Adams was nominated and placed on the bank board by a unanimous vote of the First Financial board, including the three dissident directors. Two positions on the bank's board remain open.

To make their point, they have hired their own outside company to evaluate the bank's performance. It is headed by Gary Findley, of Brea, who now acts as the group's attorney.

Findley is also the head of the Findley Reports, a company that evaluates the performance of banks. In 2002, Findley Reports called the bank a "premier performer," though now Findley is strongly critical of the bank's numbers.

Findley said that in 2002 his organization had substantially lowered the bar for evaluations. These standards have since been raised, he said.

The controversy flared last month, when the three directors sent a five-page letter to the bank's 980 shareholders laying out their concerns.

Raising concerns

In their June 23 letter, they voiced several criticisms of the performance and management of the bank.

They say the bank has a "lack of leadership," and has used "intimidating tactics" toward them.

Among the issues that the group and their attorney raise are:

First, that compared to similar, or "peer" banks, the Bank of Lodi's financial numbers rank consistently lower. They say they have repeatedly requested an independent review of the overall management and future plans of the bank, but have been rebuffed by senior management.

"All that my three guys have asked is to bring in an independent third party," said Findley, the group's attorney. Those requests have been denied by the bank's executive committee, he said.

Second, they question the salaries and other compensation received by top management at the bank, and the amount of bank-owned life insurance for its senior managers and board members. They claim the amount is more than double the amount recommended by federal regulators, and puts the bank at risk.

Lastly, but not their only other concern, is that the bank's managers have not been open with the directors about offers made to buy the bank.

Eager to respond

But bank officials are eager to respond.

In a July 8 response to the directors' June letter, signed by CEO Leon Zimmerman and board Chairman Benjamin Goehring, bank officials said the directors' letter contained "outright lies, half truths and innuendo character assassination and deliberately misleading statements."

"We are mystified by their actions," Zimmerman said Wednesday. "It makes you scratch your head."

While he agreed that the bank's performance was below that of its peer banks, he laid the blame on the decision of the bank's directors more than a decade ago to build the bank's large and expensive headquarters building, located on Ham Lane.

When the bank's assets rise to around $350 million, the costs of the building will cease to be such a large percentage of the bank's yearly expenses, he said. The building expenses cause a drag on the bank's profitability, he said. In 2002, the bank's assets were around $255 million.

Zimmerman said the bank is in the middle of a growth pattern that has been under way since shortly after he took over as CEO in 1995. The bank has been adding branches, and is planning to open its first Sacramento office.

Bank of Lodi Chief Financial Officer Allen Christenson agreed.

"Judge us from the time the plan was implemented, and we have a great story to tell," he said.

The two bank executives claim that the bank has shown steady growth, both in increased assets and in stock price, since the strategic plan was put into place in 1996.

Regarding the life insurance, Zimmerman said the bank's purchase of the insurance was examined by an analyst firm and its attorneys, who found it to be reasonable and legal.

The only thing certain about the future of the dispute is that discussions will continue, both in public and behind closed doors.

"The shareholders will determine what happens next," Coldani said.


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