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Independence Federal Savings Bank (No. 13 on the BE BANKS list with $167 million in assets) is facing a lawsuit by its largest shareholder even while it faces demands from regulators to clean up its act.
Morton A. Bender, a vocal critic of Independence who controls 21% of the bank’s stock, filed the $20 million lawsuit. He is charging that the board of directors misled shareholders about an October 2005 board meeting in which his nominees to the board were rejected.
“The bank looks forward to presenting its facts at trial, likely in November,” says an Independence spokesperson who requested anonymity.
The suit is only part of the thrift’s woes. In late June, regulators ordered Independence to make sweeping changes to its operations or seriously consider a sale to or merger with another institution. The Office of Thrift Supervision demanded that the bank improve management performance, reduce operating expenses, and boost profitability. It also must hire staff to oversee anti-money laundering and Bank Secrecy Act compliance, which requires financial institutions to maintain records of financial transactions that may be useful in criminal, tax, and regulatory investigations and proceedings.
About 50 employees work in the bank’s five branches in Washington, D.C., and Maryland. Independence’s day-to-day activities are being handled by E. Leroy Morris, interim president and CEO. The company’s shares, which trade under the ticker symbol IFSB on the NASDAQ, have lost nearly 20% this year.