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Metro Bancorp has a little more breathing room after an activist investor withdrew one of its two nominees for the Harrisburg, Pa., companys board.
March 23 -
Joseph Stilwell hopes a fourth challenge against Harvard Illinois Bancorp is successful.
March 9 -
The $1.4 billion-asset company said in a press release Friday that it will allow Richard Lashley, a co-founder of PL Capital, to join its board.
February 27 -
Orange County Business Bank in Irvine, Calif., is facing a proxy battle from a Dallas investment firm.
February 9
Surviving proxy season often boils down to knowing which battles to fight and, perhaps more important, the ones to avoid.
Several community banks are preparing to lock horns with dissident shareholders, including MutualFirst Financial in Muncie, Ind., which recently decided to forge an alliance with an activist investor as it braces to do battle with two others.
The $1.4 billion-asset company
The truce with PL Capital was designed to pressure Ancora to back down, said David Heeter, MutualFirst's chief executive. "There's no substitution for good communication and a trusting relationship," Heeter said.
The battle at MutualFirst began when Ancora, a Cleveland investment firm, requested that the bank remove a provision in its bylaws requiring directors to live in the same county. Ancora, which has a nearly 5% stake in MutualFirst, eventually
MutualFirst joins a short list of community banks, including
Shareholder activism remains strong among community banks, despite a sharp decline at bigger banks in recent years, according to a
Activists have been successful using the proxy process to push for consolidation at small banks, which face increasing pressure to raise capital and cut costs. "This strategy has not yet translated into activism at large banks," the report said.
Metro Bancorp is Harrisonburg, Pa., is
Joseph Stilwell, a mainstay during proxy season, has at least two activist challenges under way. The New York investor is seeking a board seat at the $77 million-asset Fairmount Bancorp in Baltimore.
Stilwell's firm also recently launched its
Commerce Street Investment Management, an affiliate of Dallas advisory firm Commerce Street Capital, is
"We're doing what activists traditionally do we're forcing them to make hard decisions," said Mark Ruh, a managing director at Commerce Street Investment Management. "We hope they do that."
Ruh declined to comment on whether his firm plans to pursue challenges at other banks that are in its investment portfolio. Orange County Business Bank did not respond to a request for comment.
As proxy season heats up, however, major players throughout the industry are encouraging management teams and boards to address the concerns of long-term investors outside of the proxy process. Directors at JPMorgan Chase and Ally Financial, for instance, recently joined a group that advocates for
"Engagement between public company directors and their shareholders is an idea whose time has come," the group, known as the Shareholder-Director Exchange, said
So far, no directors from community banks have joined the group, an SDX spokesman said.
Recent research also points to the benefits of working with investors. Collaborative settlements with activist investors have resulted in higher shareholder returns across several industries, according to a report
But negotiations aren't easy. The proxy fight at Orange County Business Bank, for instance, was sparked when the bank's board declined to meet with Commerce Street. Since then, it has caused a bruising public relations battle for the bank that was recently covered in the
"We could have avoided a public fight," if the bank "had agreed to meet, and if we could have privately reached an agreement," Ruh said.
As for MutualFirst, management and the board opted to work with one activist rather than face a fight on multiple fronts. In addition to pairing with PL Capital, the company removed its residence requirement for directors.
Ancora seemed "a little surprised when we took that step" of removing the eligibility requirement, Heeter said. "My perspective is that they were satisfied that we listened to them."
Representatives for PL Capital declined to comment, citing an agreement it signed with MutualFirst. Ancora did not respond to requests for comment.
MutualFirst's efforts paid off. Ancora withdrew
In the process, MutualFirst
"We think we partnered with the preeminent financial institutional investor, and we think he will add to the success of our company," Heeter said.