Stuck Owning Stock in a Bank that Should be Sold?
Happily, if you’ve owned some of the bank’s stock for awhile,* there’s a legal process whereby you can strongly encourage management to sell the bank.
Specifically, according to SEC Rule §240.14a-8, you can write a shareholder proposal that the bank’s board of directors must include in the next proxy statement they send to all shareholders.
Submitting individual shareholder proposals to bank management has gotten easier since 2010, but it appears that interest in supporting such proposals is just starting to be “a thing.” Personally, I’d like to see it become an even bigger thing, because there are a couple dozen community banks in the country that could use a public kick in the pants, ideally dealt from a shareholder in their own back yard.
Disclosure: As of this posting, I own shares in all but one of the 25 banks mentioned in this post and may subsequently either dispose of them or purchase more.
How It Works
| *WHO Can Submit a Proposal According to SEC rules, if you’ve owned the following dollar values of a given bank stock for the following durations, then you can submit a proposal to management that the bank must both include in its next proxy statement, and present to your fellow shareholders for a vote.
HOW To Submit a Proposal Basically, to deliver this sort of kick, you write a proposal outlining your reasons for believing it’s high time management sell the bank, submit your proposal to the bank with a letter that conforms both to SEC rules and the bank’s previous proxy statement, and follow up with bank management as needed to see it through to a proxy vote. WHAT to Expect Management may ignore you (if you let them) in an attempt to run out the proxy deadline clock. They may try to talk you out of it, challenge your right to make the proposal, or claim your proposal is deficient in some way. Note that even if your proposal is deficient, there’s a deadline for the bank to make this claim, and the bank is required by SEC rules to afford you time to cure the deficiency, for example, by amending your proposal or submitting documentation supporting your claims. |
Good Example
| Mid-Southern Bank Management Gets a Kick in the Pants Since the day it went public in July 2018, Indiana’s Mid-Southern Bancorp (MSVB) has been mismanaged and underperforming. Unsurprisingly, Mid-Southern’s performance invited pressure from shareholders losing money on the stock. On August 3, 2021, Mid-Southern silenced its loudest shareholder critic by buying him out at a premium not afforded to other MSVB shareholders. On December 22, 2023, another shareholder of Mid-Southern Bancorp submitted a formal proposal recommending the bank be sold. Apparently, Mid-Southern deemed this shareholder too small to be worthy of a premium buy-out offer, but as required by law, the bank did publish the shareholder’s proposal in the proxy for its annual meeting. The proposal won 56% of the shareholder vote, in spite of self-serving opposition by bank Management and proxy advisors. Was the kick enough to make Mid-Southern respect shareholders' demands to sell the bank? Time will tell. But it was a well-deserved and well-delivered kick that should inspire confidence in shareholders seeking to protect their investments from being squandered. |
24 Invitations
| Banks Deserving a Kick in the Pants Here’s a shortlist of community banks I believe are worth far more in a sale than the market will accord them under current Management. Managers of these banks are a walking invitation for a good kick in the pants. Were I to see a shareholder proposal recommending the sale of any of these banks in a proxy statement, I would very likely vote for it.
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