A self-described long-term shareholder is planning to wage a proxy battle against Friendly Hills Bancorp in Whittier, California.
Frank Kavanaugh, who said he leads a group that controls more than 25% of the outstanding shares of Friendly Hills Bancorp, indicated in a letter released Monday that he would soon be sending proxy materials to the $315 million-asset company’s shareholders.
Kavanaugh’s letter came three days after Jeffrey Ball, who has served as Friendly Hills’ CEO since the company’s founding in 2006, announced he would leave the role at the end of 2021 to serve as CEO of the Orange County Business Council. Ball plans to stay on as a Friendly Hills director.
In his
Kavanaugh called for the election of new independent directors “who will advocate for shareholder rights and interests” but did not explicitly suggest selling the company.
“In our view, any change must start by refreshing the Board with the addition of new, independent members who understand the bank, its history and its mission, and who are committed to make Friendly Hills responsive to its stakeholders,” Kavanaugh wrote.
“The CEO, Chairman, and Vice Chairman have not generated value for shareholders in over 15 years, and they have not been held accountable,” Kavanaugh added.
According to Kavanaugh, Friendly Hills, which reported net income totaling $784,000 through the first nine months of 2021 and $1 million in 2020, has maintained costly, excessive borrowings — in the form of $20.5 million in Federal Home Loan Bank advances — on a balance sheet where the loan-to-deposit ratio is just 35%.
Kavanaugh also described Friendly Hills' recent purchase of three branches from the $1.78 billion-asset, San Diego-based Southern California Bancorp as “poorly conceived” and “strategically flawed.”
In a press release Thursday reporting third-quarter results, Friendly Hills touted the branch acquisitions as helping expand its footprint into Orange and San Bernardino counties, while adding about $81 million in deposits.
Kavanaugh castigated the same deal for triggering a 66-cent reduction in Friendly Hills’ tangible book value per share.
Friendly Hills is the largest bank based in Whittier, whose population was 85,100 in 2019, according to the Census Bureau.
Neither Kavanaugh nor Ball responded to requests for comment Tuesday.
Investor-led proxy contests have posed a recurring challenge for community banks.
In August, Driver Management CEO Abbott Cooper
Codorus Valley’s longtime chairman and CEO, Larry Miller, stepped down as CEO in October. Codorus appointed Craig Kauffman, who was CEO of its bank subsidiary, PeoplesBank, as president and CEO of the holding company, stating the move was part of a long-term succession plan.
Miller said he would remain as Codorus Valley’s executive chairman through Dec. 31.
