Big Investor Takes Steps to Further Effort to Sell Southern California Bank

A major investor pushing for the sale of Southern California Bank said Wednesday that it will seek federal permission to buy more than 10% of the parent company’s stock and may nominate an opposing slate of directors at the next annual meeting.

Basswood Partners L.P., a Paramus, N.J., investment fund that already controls 9.75% of SC Bancorp, said in a filing with the Securities and Exchange Commission that it will take such steps as part of its effort to sell the Anaheim-based company.

The steps include seeking the approval of the Federal Reserve Bank of San Francisco to buy more stock. The federal reserve system must approve any investor purchases in financial institutions that exceed 10%.

Basswood has been disappointed with Southern California Bank’s lackluster performance and has been talking with other big shareholders about a possible sale, according to previous documents filed with the SEC.

“To the extent that the bank is no longer being hounded by regulators and has cleared up asset problems, that’s good,” Matthew Lindenbaum, a Basswood principal, said Wednesday.

“But survival is no longer the benchmark for performance,” he said. “The bank has just not demonstrated any ability or capacity to perform up to the standards of other banks its size.”

Bank executives could not be reached for comment Wednesday. Previously, they had insisted that the time isn’t right for a sale.

Rebounding from big losses during the long recession and a large write-off for bad loans last year, the company earned $1.7 million for the first six months and held $463 million in loans and other assets, prompting one executive to suggest that “things will continue to improve.”

But Lindenbaum doubts it.

He said Basswood has invested in financial services companies for seven years--it controls nearly 10% of the Bank of Yorba Linda--and has never taken such an active role as it is now in making its voice heard.

Too often, he said, big institutional investors are so passive that they never exercise their right to voice their opinions.

“When things don’t go right, they usually just sell their stock,” he said. “That leaves management and directors unaccountable for their actions. That doesn’t mean shareholders are always right, but they should at least let their voices be heard.”

SC Bancorp will not have its annual meeting until next spring, but Lindenbaum said that a number of steps have to be taken early to be able to nominate other directors and put issues on the agenda.

“Part of what I’m trying to do is show that I want to own more stock--I still think it’s a good company--and that I’m serious about putting it up for sale,” he said. He also wants to show that he will carry through with his efforts: “We’re not going away.”