CUSIP No. 419352-10-9 Page 1 of 18 Pages
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Amendment No. 2
HAVEN BANCORP, INC.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
419352-10-9
(CUSIP Number)
Phillip M. Goldberg
Foley & Lardner
One IBM Plaza
330 North Wabash Avenue
Suite 3300
Chicago, Illinois 60611
(312) 755-2549
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 8, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
<PAGE>
CUSIP No. 419352-10-9 Page 2 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Financial Edge Fund, L.P.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 513,400 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
513,400 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
513,400 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
5.7%
14 Type of Reporting Person
PN
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CUSIP No. 419352-10-9 Page 3 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Financial Edge - Strategic Fund, L.P.
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: WC, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Delaware
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 513,400 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
513,400 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
513,400 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
5.7%
14 Type of Reporting Person
PN
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CUSIP No. 419352-10-9 Page 4 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
John W. Palmer
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: PF, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States of America
7 Sole Voting Power
6,000 shares
Number of
Shares 8 Shared Voting Power
Beneficially 513,400 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 6,000 shares
10 Shared Dispositive Power
513,400 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
519,400 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
5.8%
14 Type of Reporting Person
IN
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CUSIP No. 419352-10-9 Page 5 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Richard J. Lashley
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: PF, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States of America
7 Sole Voting Power
4,500 shares
Number of
Shares 8 Shared Voting Power
Beneficially 516,400 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 4,500 shares
10 Shared Dispositive Power
516,400 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
520,900 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
5.8%
14 Type of Reporting Person
IN
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CUSIP No. 419352-10-9 Page 6 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Irving Smokler
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: PF, OO
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States of America
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 90,000 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
90,000 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
90,000 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
1.0%
14 Type of Reporting Person
IN
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CUSIP No. 419352-10-9 Page 7 of 18 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification Number of Above Person (optional)
Beth Lashley
2 Check The Appropriate Box If a Member of a Group (a)[X]
(b)[ ]
3 SEC Use Only
4 Source of Funds: PF
5 Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States of America
7 Sole Voting Power
0 shares
Number of
Shares 8 Shared Voting Power
Beneficially 3,000 shares
Owned By
Each Reporting 9 Sole Dispositive Power
Person With 0 shares
10 Shared Dispositive Power
3,000 shares
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,000 shares
12 Check Box If The Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
13 Percent of Class Represented By Amount in Row (11)
0.1%
14 Type of Reporting Person
IN
<PAGE>
CUSIP No. 419352-10-9 Page 8 of 18 Pages
This is Amendment No. 2 to a Schedule 13D filed jointly by Financial
Edge Fund, L.P., a Delaware limited partnership ("Financial Edge Fund"),
Financial Edge - Strategic Fund, L.P., a Delaware limited partnership
("Financial Edge Strategic"), Irving Smokler, John W. Palmer, Richard J. Lashley
and Beth Lashley (collectively, the "Group") on August 26, 1999 (as earlier
amended, the "Original 13D")
This Schedule 13D relates to the common stock, $.01 par value ("Common
Stock"), of Haven Bancorp, Inc. (the "Issuer"). The address of the principal
executive offices of the Issuer is 615 Merrick Avenue, Westbury, New York 11590.
The joint filing agreement of the members of the Group is attached hereto as
Exhibit 1. The following items in the Original 13D are amended to read in their
entirety as follows:
Item 3. Source and Amount of Funds or Other Consideration
The amount of funds expended to date by Financial Edge Fund to acquire
the 391,500 shares of Common Stock it holds in its name is $6,469,000. Such
funds were provided in part from Financial Edge Fund's available capital and,
from time to time, in part by margin account loans from subsidiaries of The Bear
Stearns Companies, Inc. ("Bear Stearns"), extended in the ordinary course of
business.
The amount of funds expended to date by Financial Edge Strategic to
acquire the 31,900 shares of Common Stock it holds in its name is $462,000. Such
funds were provided in part from Financial Edge Strategic's available capital
and, from time to time, in part by margin account loans from subsidiaries of
Bear Stearns, extended in the ordinary course of business.
The amount of funds expended to date by Mr. Palmer to acquire the
6,000 shares of Common Stock he holds in his name is $77,196. Such funds were
provided from Mr. Palmer's personal funds.
The amount of funds expended to date by Mr. Lashley to acquire the
4,500 shares of Common Stock he holds in his name (including shares held in a
custodian account for Mr. Lashley's minor daughter) is $61,580. Such funds were
provided from Mr. Lashley's personal funds.
The amount of funds expended to date by Dr. Smokler to acquire the
90,000 shares he holds in his name is $1,339,000. Such funds were provided in
part from Dr. Smokler's personal funds and, from time to time, in part by margin
account loans from subsidiaries of Bear Stearns, extended in the ordinary course
of business.
The amount of funds expended to date by Ms. Lashley to acquire the
3,000 shares of Common Stock she holds in her name is $37,900. Such funds were
provided from Ms. Lashley's IRA account held at Bear Stearns.
All purchases of Common Stock made by members of the Group using funds
borrowed from Bear Stearns were made in margin transactions on Bear Stearns'
usual terms
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CUSIP No. 419352-10-9 Page 9 of 18 Pages
and conditions. All or part of the shares of Common Stock owned by members of
the Group may from time to time be pledged with one or more banking institutions
or brokerage firms as collateral for loans made by such entities to members of
the Group. Such loans generally bear interest at a rate based upon the broker's
call rate from time to time in effect. Such indebtedness, if any, may be
refinanced with other banks or broker-dealers.
Item 4. Purpose of Transaction
The purpose of the acquisition of the shares of Common Stock by
Members of the Group is to profit from appreciation in the market price of the
Common Stock through the assertion of shareholder rights and influencing the
policies of the Issuer. Members of the Group have previously communicated to the
management and Board of Directors of the Issuer their concerns over the Issuer's
financial performance and prospects as a stand-alone entity in a competitive and
rapidly consolidating banking market. The Group has also encouraged the Issuer's
management and Board to take corrective action to maximize the value of the
Issuer's stock, including seeking the sale of the Issuer to a larger banking
organization.
In connection with those efforts, on several occasions Members of the
Group have requested to meet with the senior management and Board of Directors
of the Issuer. At the written invitation of the Issuer's Board (a copy of which
is attached as Exhibit 8), on September 28, 1999, Messrs. Lashley and Palmer met
at the Issuer's headquarters with Mr. Philip Messina, Chairman and Chief
Executive Officer, Mr. William Jennings, Executive Vice President, and Mr. Mark
Ricca, Senior Vice President and General Counsel of the Issuer. During that
meeting, Mr. Messina and the other representatives of the Issuer declined to
answer any questions or engage in any substantive discussion of the Group's
concerns or Haven's prospects. Despite this, Messrs. Lashley and Palmer
reiterated their concerns over the financial and operating performance of Haven
and its prospects as an independent entity. At that meeting Messrs. Lashley and
Palmer also stated that: (1) they believed the Issuer's Board should immediately
engage an investment banking firm and (2) the investment banking firm should be
given a mandate to seek the highest bid for the Issuer through an orderly sale
to a larger banking organization.
At the September 28th meeting, Mr. Lashley delivered to the Issuer a
written request for the Issuer's most recent shareholder list and other related
items, a copy of which is attached as Exhibit 9.
On September 7, 1999 Messrs. Lashley and Palmer sent a letter to the
Issuer's five outside Board Members, a copy of which is attached as Exhibit 10.
The letter noted that the Board of the Issuer was scheduled to vote, at its next
scheduled meeting at the end of September, on the extension of CEO Philip
Messina's current employment agreement from September 23, 2001, to September 23,
2002. The letter recommended that the Board consider the financial and operating
performance of Haven under Mr. Messina's leadership as the basis for renewing or
denying Mr. Messina's contract extension. The letter also suggested that the
Board engage outside industry experts (e.g., an investment banking and appraisal
firm) to assist the Board in its review. The letter also stated that, in the
opinion of Messrs. Lashley
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CUSIP No. 419352-10-9 Page 10 of 18 Pages
and Palmer, if the Board did an objective review of the Issuer's performance
under Mr. Messina, it would not extend Mr. Messina's contract to September 23,
2002.
In response to the September 7th letter noted above, Messrs. Lashley
and Palmer received, via telefax on September 27, 1999, a letter dated September
22, 1999, signed by the Issuer's five outside Board Members, a copy of which is
attached as Exhibit 11. As of the date of this filing, the Members of the Group
have not been able to ascertain what actions the Issuer's Board took with
respect to the extension of Mr. Messina's contract or whether the Issuer has
engaged an investment banking firm or other experts.
On November 2, 1999, Messrs. Lashley and Palmer sent a letter to the
Issuer's five outside Board Members, a copy of which is attached as Exhibit 12.
The letter discussed the Issuer's recently released third quarter results and
the Group's disappointment with those results, as well as the Group's other
concerns and problems with the Issuer's performance.
As of December 8, 1999, Messrs. Lashley and Palmer have determined
that they intend to nominate two individuals for election to the Issuer's Board
of Directors at the next annual meeting of the Issuer. Messrs. Lashley and
Palmer may engage in a variety of actions in connection with such nomination.
Without limitation, they and other members of the Group may both (a) communicate
and discuss their views on the Issuer and election of directors to the Board
with other shareholders and (b) solicit proxies or written consents from other
shareholders of the Issuer with respect to election of their Board nominees or
other proposals for shareholder action. In addition, members of the Group may
(1) contact financial institutions that may have an interest in acquiring Haven
and (2) make proposals to the Issuer's Board and management (including with
regard to a possible sale of the Issuer).
Members of the Group may make further purchases of shares of Common
Stock. Members of the Group may dispose of any or all the shares of Common Stock
held by them, although they have no current intention to do so. Except as noted
in this Schedule 13D, no member of the Group has any plans or proposals, which
relate to, or could result in, any of the matters referred to in paragraphs (b)
through (j), inclusive of Item (4) of Schedule 13D. Such individuals may, at any
time and from time to time, review or reconsider their positions and formulate
plans or proposals with respect thereto.
Item 5. Interest in Securities of the Issuer
The percentages used in this Schedule 13D are calculated based upon
the number of outstanding shares of Common Stock, 8,967,237 reported on the
Issuer's Quarterly Report on Form 10-Q for the period ended September 30, 1999.
As of the close of business on December 9, 1999, the Group owned beneficially an
aggregate of 526,900 shares of the Issuer's Common Stock. All purchases and
sales of Common Stock reported herein were made in open market transactions on
the Nasdaq National Market System.
(A) Financial Edge Fund
(a) Aggregate number of shares beneficially owned: 513,400
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CUSIP No. 419352-10-9 Page 11 of 18 Pages
Percentage: 5.7%
(b) 1. Sole power to vote or to direct vote: 0
2. Shared power to vote or to direct vote: 513,400
3. Sole power to dispose or to direct the disposition: 0
4. Shared power to dispose or to direct disposition: 513,400
(c) On October 18, 1999, Financial Edge Fund purchased 500 shares of
Common Stock at a price of $14.89 per share for a total cost of
$7,460.
(d) Because they are the Managing Members of PL Capital, which is the
general partner of Financial Edge Fund, Mr. Palmer and Mr. Lashley
have the power to direct the affairs of Financial Edge Fund, including
the voting and disposition of shares of Common Stock held in the name
of Financial Edge Fund. Therefore, Mr. Palmer and Mr. Lashley are
deemed to share voting and disposition power with Financial Edge Fund
with regard to those shares of Common Stock.
(B) Financial Edge Strategic
(a) Aggregate number of shares beneficially owned: 513,400
Percentage: 5.7%
(b) 1. Sole power to vote or to direct vote: 0
2. Shared power to vote or to direct vote: 513,400
3. Sole power to dispose or to direct the disposition: 0
4. Shared power to dispose or to direct disposition: 513,400
(c) On October 11, 1999, Financial Edge Strategic Fund purchased 400
shares of Common Stock at a price of $14.88 per share for a total cost
of $5,950.
(d) Because they are the Managing Members of PL Capital, which is the
general partner of Financial Edge Strategic, Mr. Palmer and Mr.
Lashley have the power to direct the affairs of Financial Edge
Strategic, including the voting and disposition of shares of Common
Stock held in the name of Financial Edge Strategic. Therefore, Mr.
Palmer and Mr. Lashley are deemed to share voting and disposition
power with Financial Edge Strategic with regard to those shares of
Common Stock.
(C) Mr. John Palmer
(a) Aggregate number of shares beneficially owned: 519,400
Percentage: 5.8%
(b) 1. Sole power to vote or to direct vote: 6,000
2. Shared power to vote or to direct vote: 513,400
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CUSIP No. 419352-10-9 Page 12 of 18 Pages
3. Sole power to dispose or to direct the disposition: 6,000
4. Shared power to dispose or to direct disposition: 513,400
(c) Mr. Palmer has made no purchases or sales since the Original 13D.
(D) Mr. Richard Lashley
(a) Aggregate number of shares beneficially owned: 520,900
Percentage: 5.8%
(b) 1. Sole power to vote or to direct vote: 4,500
2. Shared power to vote or to direct vote: 516,400
3. Sole power to dispose or to direct the disposition: 4,500
4. Shared power to dispose or to direct disposition: 516,400
(c) Mr. Lashley has made no purchases or sales since the Original 13D.
(E) Dr. Irving Smokler
(a) Aggregate number of shares beneficially owned: 90,00
Percentage: 1.0%
(b) 1. Sole power to vote or to direct vote: 0
2. Shared power to vote or to direct vote: 90,000
3. Sole power to dispose or to direct the disposition: 0
4. Shared power to dispose or to direct disposition: 90,000
(c) Mr. Palmer has made no purchases or sales since the Original 13D.
(d) Pursuant to an Operating Agreement dated April 29, 1999 between Dr.
Smokler and PL Capital, Dr. Smokler has made certain agreements
regarding Common Stock with PL Capital and its managing members, Mr.
Palmer and Mr. Lashley. Because of this arrangement, PL Capital and
its managing members are deemed to share voting and disposition power
with Dr. Smokler with regard to those shares of Common Stock.
(F) Ms. Beth Lashley
(a) Aggregate number of shares beneficially owned: 3,000
Percentage: 0.1%
(b) 1. Sole power to vote or to direct vote: 0
2. Shared power to vote or to direct vote: 3,000
3. Sole power to dispose or to direct the disposition: 0
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CUSIP No. 419352-10-9 Page 13 of 18 Pages
4. Shared power to dispose or to direct disposition: 3,000
(c) Ms. Lashley has made no purchases or sales since the Original 13D.
(d) Ms. Lashley shares with Mr. Lashley the power to direct the
disposition of the shares of Common Stock beneficially owned by Ms.
Lashley, pursuant to a trading authorization granted by Ms. Lashley to
Mr. Lashley for her account with Bear Stearns, under that company's
usual terms and conditions.
Item 7. Material to be Filed as Exhibits
No. Description
-- -----------
1 Joint Filing Agreement.*
2 Letter from Mr. Lashley to Issuer, dated June 16, 1999.*
3 Letter from Issuer to Mr. Lashley, dated June 28, 1999.*
4 Letter from Messrs. Lashley and Palmer to Issuer, dated July 28,
1999.*
5 Letter from Issuer to PL Capital, LLC, dated July 30, 1999.*
6 Letter from Messrs. Lashley and Palmer to Issuer, dated August 16,
1999.*
7 Letter from Messrs. Lashley and Palmer to Issuer, dated August 30,
1999.*
8 Letter from Issuer to Messrs. Lashley and Palmer, dated September 10,
1999.*
9 Letter from Mr. Lashley to Issuer, dated September 27, 1999.*
10 Letter from Messrs. Lashley and Palmer to Issuer, dated September 7,
1999.*
11 Letter from Issuer to Messrs. Lashley and Palmer, dated September 22,
1999.*
12 Letter from Messrs. Lashley and Palmer to the Issuer's outside
directors, dated November 2, 1999.
- ---------------
*Filed as part of the Original 13D.
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CUSIP No. 419352-10-9 Page 14 of 18 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: December 10, 1999
FINANCIAL EDGE FUND, L.P.
By: PL CAPITAL, LLC
General Partner
By: /s/ John Palmer /s/ Richard Lashley
John Palmer Richard Lashley
Managing Member Managing Member
FINANCIAL EDGE - STRATEGIC FUND, L.P.
By: PL CAPITAL, LLC
General Partner
By: /s/ John Palmer /s/ Richard Lashley
John Palmer Richard Lashley
Managing Member Managing Member
By: /s/ John Palmer By: /s/ Richard Lashley
John Palmer Richard Lashley
By: /s/ Irving Smokler By: /s/ Beth Lashley
Dr. Irving Smokler Beth Lashley
CUSIP No. 419352-10-9 Page 15 of 18 Pages
EXHIBIT 12
[ON LETTERHEAD]
November 2, 1999
The Outside Members of the Board of Directors
Haven Bancorp, Inc.
615 Merrick Avenue
Westbury, NY 11590
Dear Sirs:
Haven's recently released third quarter earnings were disappointing. While most
thrifts and banks in Haven's market area reported record or near record
earnings, Haven reported marginal results (for the third year in a row). We
noted numerous concerns and problems, as follows:
o Haven earned a Return on Assets of only 0.41%, less than one-half of it's
peers;
o The mortgage subsidiary continues to post substantial losses; This problem
needs to be addressed quickly, and you, as outside members of the Board,
have to hold Haven's management accountable for this debacle;
o Haven's book value per share declined, again;
o Haven disclosed that the fully allocated cost of running each supermarket
branch is $49,000 per branch per month, equivalent to $36 million per year
for the 61 unit supermarket franchise; this cost is 25% higher than the
$40,000 per month cost repeatedly disclosed by Haven in the past (e.g. the
$40,000 amount was used as recently as September in a document distributed
at an investment conference sponsored by Friedman Billings Ramsey, which
was also included in a Form 8-K filed by Haven with the SEC on September
7th);
In the September 7th SEC Form 8-K, Haven also disclosed that the
supermarket branches contributed approximately $500,000 in pretax income in
the second quarter; Since the $500,000 pretax income amount apparently was
based upon the $40,000 cost figure, not the $49,000 amount disclosed in the
3rd quarter press release, it appears that the "$500,000 pretax income" was
really a "$1.1 million pretax loss" (i.e. $9,000 extra costs x 3 months x
60 branches=$1.62 million extra costs - $500,000 pretax income= $1.1
million pretax loss);
Additionally, the 3rd quarter press release stated that the supermarket
branches contributed $600,000 pretax income in the 3rd quarter; We believe
the $600,000 pretax income amount is also incorrect in that it is also
apparently not based upon the revised $49,000 cost figure; In our
estimation, if the proper costs (i.e. $49,000) had been allocated for the
full quarter, the supermarket branches actually lost approximately $1.0
million in the 3rd quarter;
As outside members of Haven's Board, you should be concerned that Haven's
management is claiming that the supermarket franchise is profitable, when
in fact it is not;
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CUSIP No. 419352-10-9 Page 16 of 18 Pages
o Haven's overall asset yield declined (7.01% in Q3 vs. 7.09% in Q2) and
mortgage loan yield declined (7.25% in Q3 vs. 7.43% in Q2) despite a rise
in mortgage rates throughout the quarter;
o Deposit growth in the supermarkets slowed (+11% in Q3 vs. +21% in Q2 vs. +
15% in Q1) and the percentage of core deposits declined in the supermarkets
(49.6% core deposits in Q3 vs. 54.8% in Q2), which means that most of the
deposit growth was in CDs;
o Haven's tangible equity to assets ratio decreased to 3.6%, a very low and
potentially unsafe and unsound amount of equity capital;
o Once again, Haven's dividend was not increased (it hasn't increased in 3
years);
o For the third year in a row, Haven is likely to fail to meet its Wall
Street analysts' annual earnings estimate; Core earnings through the first
nine months are $.86, well short of meeting the $1.35 published estimates
for 1999; During the past year, the Wall Street firms who cover Haven have
repeatedly lowered their EPS estimates for 1999 and 2000; One firm
(Friedman Billings Ramsey) originally projected Haven would earn $2.48 in
1999, now, after numerous interim reductions, they project that Haven will
only earn $1.71 in 2000!!; And it appears that the $1.71 projection for
2000 is at risk, as last week, two other firms (Keefe Bruyette and Sandler
O'Neill) reduced their 2000 EPS estimate to $1.45 and $1.50, respectively;
Four years after embarking on the supermarket strategy, Haven's projected
level of profitability in 2000 will still be substantially less than its
peers; and o Haven's expenses are out of control, as illustrated by the
following table:
<TABLE>
<CAPTION>
($'s in millions)
- -------------------------------------------------------------------------------------------------------
Total Total Operating Oper. Exp as Effic. Net
Name Assets Deposits Expenses(1) % of Assets Ratio(2) Income(1)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Astoria $22,863 $9,440 $216 0.94% 35% $220
Financial
- -------------------------------------------------------------------------------------------------------
Roslyn $7,761 $4,101 $79 0.98% 31% $110
Bancorp
- -------------------------------------------------------------------------------------------------------
Flushing $1,210 $643 $22 1.85% 51% $13
Financial
- -------------------------------------------------------------------------------------------------------
Richmond $2,813 $1,641 $48 1.70% 44% $36
County
- -------------------------------------------------------------------------------------------------------
Queens $2,028 $1,133 $20 0.98% 33% $32
County
- -------------------------------------------------------------------------------------------------------
PennFed $1,593 $1,063 $18 1.10% 43% $12
Financial
- -------------------------------------------------------------------------------------------------------
JSB $1,595 $1,092 $27 1.72% 35% $29
Financial
- -------------------------------------------------------------------------------------------------------
Reliance $2,478 $1,555 $37 1.50% 46% $22
Bancorp
- -------------------------------------------------------------------------------------------------------
AVERAGE $5,292 $2,583 $58 1.34% 39% $59
- -------------------------------------------------------------------------------------------------------
HAVEN $2,942 $2,015 $83 2.83% 78% $12
- -------------------------------------------------------------------------------------------------------
(1) Based upon actual Q3 1999 results annualized (2) Measures G&A expenses as % of gross revenues; lower ratio is better
</TABLE>
Haven is spending $83 million per year on operating expenses to generate $12
million of net income, while the peer group generates $59 million of net income
by spending $58 million. Haven spends more on operating expenses than Roslyn,
yet Roslyn is over twice as large and earns nine times more in net income! Penn
Federal, a peer thrift in New Jersey, earns the same amount of money as Haven,
yet only spends $18 million per year on G&A expenses (one-fifth of what Haven
spends!).
<PAGE>
CUSIP No. 419352-10-9 Page 17 of 18 Pages
Haven's weak performance and continued inability to manage its operating
expenses is not due to any external, economic or industry factors. In our
opinion, Haven's problems are due to poor execution by a weak management team.
Since most of Haven's problems are self-inflicted or within Haven's control, we
find this unacceptable and inexcusable. As outside Board members, at best you
should be embarrassed for allowing this to occur on your watch, and at worst you
should be concerned about corporate and personal liability.
Haven's performance is so poor, we do not believe Haven can justify remaining an
independent entity. The potential cost savings for an acquirer of Haven are
tremendous, which will allow an acquirer to pay a significant premium for
Haven's franchise. In our estimation, over $15 million of after-tax cost savings
could be achieved by an acquirer (equal to $1.75 per Haven share, an amount
greater than Haven's current or projected earnings as an independent entity!).
We once again call on you, as outside directors to meet your fiduciary duty by
pursuing an orderly sale of Haven to a larger, more efficient institution.
It is time for you to recognize that you serve on behalf of the owners of the
company, not management. We also encourage you to communicate directly with us
and other large and small shareholders. If the Board believes in the rules and
law of corporate governance, it should be prepared to follow the wishes of the
majority of owners of the company. We would be pleased to meet with the entire
Board at any time to discuss our views.
Sincerely,
/s/ Richard Lashley /s/ John Palmer
Richard Lashley John Palmer
Principal Principal
Distribution List:
Mr. Michael J. Fitzpatrick
c/o Haven Bancorp, Inc.
Msgr. Thomas J. Hartman
Diocese of Rockville Centre for Telicare Television
1200 Glen Curtis Blvd.
Uniondale, NY 11553
Mr. Michael J. Levine
Norse Realty Group, Inc.
2001 Marcus Avenue
Suite W-183
Lake Success, NY 11042
Mr. Robert M. Sprotte
Schmelz Bros. Inc.
7102 Myrtle Avenue
<PAGE>
CUSIP No. 419352-10-9 Page 18 of 18 Pages
Flushing, NY 11385
Mr. George S. Worgul
c/o Haven Bancorp, Inc.
cc:
Mr. Philip Messina, Chairman, President & CEO
Mr. William J. Jennings, EVP
Haven Bancorp, Inc.
