Related-party dealings often involve owner of branch site
Valley National Bank said in its latest filing, for example, that it paid $417,490 in rent last year to Anjo Realty, the landlord for a Totowa branch and offices, which is owned by one of its board members, Robert C. Soldoveri. He owns 25 percent of Anjo, and his father owns 26 percent, according to the filing.
Valley said in its disclosure that the terms "were no less favorable to the bank than could have been obtained from an unaffiliated third party." The rent Valley paid to Anjo increased 6.5 percent from the previous year. The bank and Soldoveri did not respond to requests for comment.
Valley also disclosed that it paid $190,000 in 2012 — the same amount paid in 2011 — to rent a branch in Westbury, N.Y., from Westbury Plaza Associates, controlled by the estate of a board member’s father-in-law.
Lakeland Bank, based in Oak Ridge, leases a branch in Little Falls from Fletcher Holdings, which last year received $153,031 from the bank in "rent and related expenses." Director Stephen R. Tilton Sr. is the chairman and CEO of Fletcher Holdings. That amount was about the same that the bank paid Fletcher Holdings in 2010 and 2011, according to disclosure filings, but 15 percent higher than the $136,000 paid in 2008.
"Typically, our leases are fixed for five years and then bump up," said Thomas Shara, chief executive of Lakeland Bank.
Englewood Cliffs-based ConnectOne Bancorp disclosed in the prospectus for its $48 million initial public offering earlier this year some more complicated branch lease deals involving bank insiders.
Seven of the bank’s nine board members, either directly or indirectly, are landlords of the bank’s Hackensack and Cresskill branches.
Participants include Michael Kempner, founder and CEO of East Rutherford-based public relations firm MWW; Frank Sorrentino III, the bank’s chairman and chief executive; Director Frank Huttle III, who is the mayor of Englewood; and Director Joseph Parisi Jr., mayor of Englewood Cliffs, among others.
According to the prospectus, Sorrentino, Parisi, Huttle and Kempner each own 11.1 percent of the limited liability company that acts as landlord of the two branches, while the other three directors involved have smaller stakes.
All three of the bank’s audit committee members and all but two of the board members own portions of the limited liability company, raising the question of how the bank could put together a quorum of non-conflicted directors to approve the deal, as is customary, according to a review of a number of bank policies.
Bank officials declined to answer questions about the lease arrangement, and board members have declined to comment about their deals with the bank. Speaking generally, Sorrentino said the bank’s related-party transactions have been reviewed by regulators as well as the bank’s auditors.
The rents paid by ConnectOne for the Cresskill and Hackensack branches were approved by the state banking regulator in June 2006 and December 2006 as "fair market rent," the state Department of Banking and Insurance said.
In an emailed statement the company said, "ConnectOne always has been and always will be transparent in its business transactions and is fully compliant with all federal and state statutes."
According to the bank’s prospectus, automatic rent increases of at least 2.5 percent a year are written into the agreements. So since 2006, the rent has risen as of the end of last year by 16.9 percent, to $184,509 for the Cresskill branch, and by 29.7 percent, to $192,017 for the Hackensack office.
ConnectOne’s prospectus assured would-be investors that the rents received by the board members, in light of each directors’ "overall net worth and cash," were not large enough to affect their independent judgment as overseers.
Regulators who review these deals require that any rent or lease payments to a related party be in line with what the bank would pay a company with which it has no insider relationship.