A investment group run by former Comptroller Eugene Ludwig is pressuring Seacoast Banking Corp. of Florida in Stuart to improve performance quickly or find a buyer.

CapGen Capital Group III, the biggest investor in the $3.5 billion-asset Seacoast, with a roughly 20% stake, pointed to "anemic" results while making its case for a sale.

"Seacoast's geographic footprint and customer base make it an attractive acquisition target for larger banks," John Sullivan, the fund's managing director, wrote in a letter sent to Seacoast's board on Tuesday. Selling presents "an opportunity to realize a substantial premium."

The fund — controlled by CapGen Financial Group, where Ludwig is the managing principal — initially invested in Seacoast in 2009. The private equity group is a long-term investor that has "waited patiently for several years" for Seacoast to reach "its full potential," Sullivan wrote.

Seacoast's results "remain disappointing" despite several acquisitions, including Bankshares Inc. in 2014, Sullivan said. (CapGen was also a major investor in Bankshares.)

For instance, Seacoast posted a return on equity of 3.4% and an efficiency ratio of 69.8%. Sullivan claimed that well-run financial institutions generally produce returns on equity of 12% to 15% and efficiency ratios below 60%.

"Unless Seacoast is able to achieve meaningful improvement in its operational execution and achieve similar operating metrics to well-run industry peers, we believe it will become imperative for the company to explore all alternatives to unlock value for shareholders," Sullivan said.

Seacoast did not immediately provide a statement about the letter.

Short of a sale, Sullivan pressed for "a thorough overhaul of the company's existing governance and board structure," noting that five of the company's 12 directors have been on the board for at least 13 years. Dennis Hudson Jr., Seacoast's former chairman and the father of its current chairman and CEO, has been on the board for 33 years.

At Seacoast's May 24 annual meeting CapGen, which gave up its board seat last fall, plans to withhold support for the company's slate of five director nominees. The move is largely symbolic because Seacoast has plurality voting and no outside nominees are being considered.

While Seacoast has struggled with performance, it has been making progress recently, Jefferson Harralson, an analyst at Keefe, Bruyette & Woods, wrote in a Wednesday note to clients. "Our take has been that [Seacoast] has already been making significant earnings improvement with its $1 operating earnings push for 2016 and its push towards a 1%" return on assets, he wrote.

CapGen has invested in other Florida banks that have ended up finding buyers, including Jacksonville Bancorp, which agreed in October to sell itself to Ameris Bancorp in Moultrie, Ga.

Seacoast took action to placate another investor by agreeing earlier this year to give Matthew Lindenbaum, a managing member at Basswood Capital Management in New York, nonvoting observer status on its board. Basswood, which has a roughly 6% stake in Seacoast, had previously said it would consider other options, including talking with potential acquirers, to get the company's attention.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.