A quiet New Jersey investment partnership is taking a rare public jab at the lackluster performance of a California bank.
Basswood Partners LP is calling on SC Bancorp of Anaheim to put itself up for sale to compensate shareholders for poor returns.
The firm said there is no "meaningful" way for the bank company to boost earnings, and it cautioned that pursuing costly acquisitions would further sap shareholder value.
Such open criticism of management is unheard of for the Paramus, N.J., partnership, which usually keeps its concerns and communications with management private.
Analysts said the move by Basswood showed that even normally passive investors are growing impatient with poor earnings while the industry as a whole is reporting record returns. And, they predicted, such investors would no longer work behind the scenes if publicity proves more effective.
"We're not Genesis," Basswood general partner Matthew Lindenbaum said, referring to Genesis Financial Partners in Newport Beach, Calif., an aggressive and highly vocal investment partnership. "We very often speak with management, but we've never had any kind of fight with management. And I hope this won't be one either. And I hope we won't have to do it in the future."
But Larry Hartwig, president and chief executive of SC, said the company had already improved significantly from serious problems in 1992 and 1993. And he said the bank has specific plans to boost earnings further, including through acquisitions.
"We always listen to our shareholders and their comments," Mr. Hartwig said, "and we are in fact listening to" Basswood. But "their tactics are their tactics."
The criticism leveled against SC is one of the few attacks against a bank or thrift in California, where many community banks were struggling just to break even until recently. And it's also unusual in this era of shareholder activism because it targets a commercial bank rather than a thrift, as with most recent instances of investor aggressiveness.
In a letter to management, Mr. Lindenbaum said officials don't appear to share his concern about maximizing shareholder value at the $463 million- asset bank. Basswood owns 9.6% of SC stock.
He demanded a copy of the bank's shareholder list so that he could talk with other stockholders about his views.
"We've had nothing but cordial, friendly relations with them," Mr. Lindenbaum said of his past discussions with management. "I just think there's a difference of opinion about what the best way is to maximize shareholder value."
Mr. Lindenbaum said other institutional and individual shareholders are also unhappy with the bank's performance and have relayed their concerns to management. Among major shareholders are Boston-based Wellington Management Co. and Heine Securities, which is run by the well-known dissident investor Michael Price.
"It's hard to imagine that there are any shareholders who are happy," Mr. Lindenbaum said. "I guess it's possible, but I would be amazed."
SC has been reporting mediocre performance for several years. After losing $2.6 million in 1993, it raised $14.2 million in a 1994 rights offering, supposedly to help finance acquisitions. However, nothing's happened since then, while its officials report results "well below their peers," said a West Coast analyst familiar with the company.
Net income for the first six months of 1996 was $1.8 million, and returns on assets and equity were only 0.80% and 8.41%, respectively.