Activist investors up stakes in US banks as shareholder pressure rises

Some known activist bank investors upped their stakes and initiated new positions in U.S. banks during the first quarter ahead of an expected increase in activism.

The total value of HoldCo Asset Management L.P. and Basswood Capital Management LLC's bank holdings increased quarter over quarter, while Hildene Capital Management LLC's assets under management increased significantly from mid-2020. Also during the first quarter, several investment firms, including HoldCo and Hildene, engaged in public activism campaigns. Speaking generally, one lawyer said he would advise a bank to put a contingency plan in place if a known activist investor bought a chunk of stock in the company.

"Not to thwart any kinds of things that are in the long-term best interest of the institution, but to not let the tail wag the dog in terms of the activist investor versus the remainder of the holders," said Jeffery Smith, a partner at law firm Vorys Sater Seymour and Pease LLP.

Community banks with performance issues or aging management and boards are more likely to face investor activism. While a wave of shareholder activism related to M&A is still forthcoming, according to Smith, a handful of community banks faced activism during the first quarter.

"There's certainly not a torrent of it so far, but a little bit of a trickle," he said.

American Fork, Utah-based Altabancorp came under pressure during the first quarter when Dale Gunther and Blaine Gunther, members of the Gunther family that own over 30% of the company's outstanding shares, sent another letter to the company's board pushing for a strategic alternative review. The letter claimed that a sale to a larger organization "may be the best way to ensure the realization of Altabancorp's value as a franchise."

The activist shareholders' request came to fruition when Glacier Bancorp Inc. announced on May 18 plans to acquire the $3.52 billion asset bank in a deal that valued Altabancorp at about 2.9x tangible book value.

"We have met with the family. We have spent a lot of time with management. All parties are aligned around this business combination as clearly being the best path forward," Glacier President and CEO Randy Chesler said on a conference call to discuss the deal.

A couple other activism campaigns recently came to a resolution. Brookfield, Wis.-based CIB Marine Bancshares Inc. reached an agreement with Hildene Capital Management after months of back and forth. Hildene nominated two directors to CIB Marine's board in late February and proposed a recapitalization plan in March, both of which CIB Marine opposed. Under the agreement, CIB Marine will repurchase all its preferred stock, one of the sources of contention.

Hildene's assets under management totaled $13.24 billion according to a May 21 filing, up from $9.83 billion in a filing from July 10, 2020.

Also in April, Oakland, Md.-based First United Corp. reached an agreement with activist shareholder Driver Management Co. LLC, which had published three letters between March 2019 and April 2019 urging First United to explore a sale. More recently, in March, Driver Management nominated its founder for election to First United's board. Under the April settlement, First United agreed to buy back Driver's shares, Driver withdrew its founder's nomination to the board and the two parties agreed to not disparage the other and the other's representatives, among other provisions.

Driver Management does not file the regulatory forms that disclose ownership stakes. Another activist investor, HoldCo, had a 1.25% stake in First United at March 31.

The total value of HoldCo's holdings was $608.7 million at March 31, up from $453.1 million at Dec. 31, 2020. The New York-based investment firm increased its stake in Puerto Rico-based Popular Inc. and entered a new stake in Honolulu-based Central Pacific Financial Corp. during the quarter. The firm also increased its stake in Berkshire Hills Bancorp Inc., one of the banks it targeted with a public activism campaign during the quarter. HoldCo reached a cooperation agreement with Berkshire Hills in March.

In addition to pushing Berkshire Hills to sell, HoldCo targeted another Boston-based bank when it opposed Boston Private Financial Holdings Inc.'s sale to SVB Financial Group. Boston Private shareholders approved the deal in May despite HoldCo's opposition campaign.

Like HoldCo, Basswood Capital Management also increased its position in Berkshire Hills, bringing the firm's stake in the company to 1.29%. The total value of Basswood's common stock holdings in U.S. banks was $1.15 billion at March 31, up from $786.1 million at Dec. 31, 2020. The investment firm initiated a handful of stakes in U.S. banks and increased its stake in a number of banks during the first quarter.

Initiations included a 2.08% stake in West Reading, Pa.-based Customers Bancorp Inc., 4.82% stake in Los Angeles-based PCB Bancorp, 1.85% stake in New York-based Amalgamated Financial Corp., 2.07% stake in Easton, Md.-based Shore Bancshares Inc. and a 1.96% stake in Walnut Creek, Calif.-based BayCom Corp.

Among larger banks, Basswood nearly tripled its stake in Comerica Inc., more than doubled its position in Citizens Financial Group Inc. and upped its stake in Wells Fargo & Co. by 65.4%. Basswood decreased its stakes in Bank of America Corp. and JPMorgan Chase & Co.

For community banks, Basswood increased its stake in Timberland Bancorp, Inc. by 414%, bringing its stake in the Hoquiam, Wash.-based company to 1.42%. It also increased its position in Los Angeles-based RBB Bancorp by 177.4%, bringing its stake to 2.19%.