Carver Bancorp TruPS conversion sparks dispute with activist investor

Carver Bancorp Inc.'s agreement to convert trust preferred securities into common stock has drawn the ire of its longtime activist investor, Dream Chasers Capital Group LLC.

Carver announced an agreement with certain trust preferred security holders on March 16 to waive more than $1 million in interest in exchange for shares of the company's common stock. From Carver's perspective, the trust preferred conversion is another step in the bank's turnaround, which is already well underway, and a significant opportunity to reduce its debt burden by having interest expense forgiven, President and CEO Don Felix said in an interview.

"The trust preferred shareholders deciding to take it as common stock, I think, is a significant vote of confidence in what I was brought on to do," Felix said.

But in a press release, Dream Chasers said the conversion was a secret and unauthorized attempt by Carver to dilute shares and "stuff the ballot" ahead of the company's May 21 shareholder meeting. Carver announced the conversion just days after blocking two Dream Chasers nominations to its board, and the activist will not be able to make any further nominations ahead of the annual shareholder meeting.

In a written statement, Dream Chasers accused Carver's board members of blocking the nominees, including Moishe Gubin, who previously led the turnaround of OptimumBank Holdings Inc., to protect their own seats. The activist added that the implications of the trust preferred share conversion go beyond this year's annual meeting.

"This isn't about an 'uncontested' seat today; it's about a permanent barricade against any future change," the activist said. "It is a preemptive strike via preemptive waivers to ensure that even as the bank's value collapses, the board remains untouchable."

Dream Chasers' rejected board nominees were the latest of several failed attempts by the activist investor to gain influence over the company's board. Dream Chasers previously offered to acquire a large minority stake in the company and narrowly lost a proxy fight to the bank's board nominees at the 2024 annual meeting. And, before attempting to nominate board candidates for the 2026 annual meeting, Dream Chasers publicly expressed interest in working with other bidders to acquire a controlling interest in Carver.

The activist has repeatedly criticized Carver's board for the company's underperformance, and reiterated those critiques in its written statement. In the five years ending March 31, Carver's stock fell 84.24%. The company also entered into an agreement to change its strategic planning with the Office of the Comptroller of the Currency in June 2025 after the agency deemed the bank to be in "troubled condition."

While Felix acknowledged Carver's past difficulties, he said the company has been taking the necessary steps to stabilize its future performance since he became CEO in 2024. He cited a board modernization plan and recent appointees to high-level positions, including CFO Lisa Robinson Smith and Senior Enterprise Risk Management Advisor Jason Sisack, who is a former Office of the Comptroller of the Currency official.

"When you're modernizing the board, when you're bringing in new talent, when you are relieving a debt burden for the bank. ... Those are all the right things to be doing," Felix said.

Dream Chasers issued a cease-and-desist letter on the day Carver announced the trust preferred conversion in an attempt to stop it, but that is likely to prove difficult, Lawrence Kaplan, who chairs the bank regulatory group at the law firm Paul Hastings, said in an interview.

"They'd have to convince a judge that something untoward happened here, and that's going to be really challenging," Kaplan said. While diluting shareholders might typically require shareholder approval, Carver likely had up-front approval to convert the trust preferred shares when it issued them, he added.

"They can try, but to me, this is an example of the activists might not have done their proper due diligence," Kaplan said.