Investor to Seacoast: Board Elections Show 'Profound Dissatisfaction'

Another shot has been fired in the ongoing feud between an investor group and Seacoast Banking Corp. of Florida in Stuart.

New York-based CapGen Financial sent the $4 billion-asset company a letter expressing disappointment with the re-election of five directors at the annual shareholders meeting on May 24. CapGen, which is run by former Comptroller Eugene Ludwig, had called for changes to the board and withheld support for all of the nominees.

John Sullivan, managing director of CapGen, which owns roughly a 20% stake in the bank, wrote the June 8 letter to the board, noting that "no nominee for election as director … received the support of a majority of the outstanding shares."

Seacoast uses a form of plurality voting to elect directors. Any director who fails to receive a majority of votes cast must submit a resignation, which the board's corporate governance committee can refuse to accept.

In this case, all the nominees received a majority of the votes cast. However, CapGen pointed out that three of the five nominees had narrow victories. These results demonstrated that there is "profound dissatisfaction" among the company's shareholders and proved that "real change" was needed, Sullivan wrote.

"We trust that the board and management will reflect carefully on the results of the annual meeting and move with a sense of urgency to bring Seacoast's performance, key financial metrics and governance into line with well-run industry peers," wrote Sullivan, echoing another letter sent to the board before the vote.

Dennis Hudson 3rd, Seacoast's chairman and chief executive, responded Thursday with a brief letter that vowed that the bank would "continue to work diligently to enhance shareholder value."

The feud was sparked when CapGen submitted a letter last month to the board that characterized the bank's results as "anemic," despite several acquisitions, and called for the company to either quickly achieve "meaningful improvement" or find a buyer.

In that letter, Sullivan also called for an overhaul of the company's existing governance and board structure, expressing concern that five of the company's 12 directors had served on the board between 13 and 33 years.

The bank claimed that CapGen's position reflected short-term considerations because the fund that holds the Seacoast investment would expire soon. Hudson wrote that the company outperformed the KBW Bank Index and S&P 500 the past five years, and that its balance sheet has increased by 73% the previous two years.

Seacoast has also faced pressure from investor Basswood Capital Management, which was recently given a nonvoting observer board seat.