Restless shareholders seek more control in California banks' boardrooms

In February the Federal Deposit Insurance Corp., regulator of banks and insurer of deposits, reported that revenue from lending and fees was growing at a much faster rate at community banks, whose core clients are often small businesses, than for the banking industry in general.

While this may be an indicator of small business growth and good news for bank investors, some shareholders in California have become concerned that community banks are holding on to capital too long and not growing fast enough. In some cases, investors are launching proxy battles for more control in the boardroom.

Before the Great Recession, investors in smaller California banks didn't expect to wait very long -- maybe five or six years -- before the banks became profitable enough to sell for more than the liquidation value. Of course, things changed with the financial meltdown, but many of those smaller banks could still be sold now, though perhaps for less than what investors expected pre-recession.

Some of the proxy battles currently underway in California are aimed at pay cuts for executives, higher rewards for shareholders, and potential bank sales. One such proxy fight is discussed in a recent article in the Los Angeles Times.

Orange County, which currently has 22 banks, 13 of which are in Irvine, is well known for small business growth. Whether you're a small business owner, a bank shareholder, or a bank executive in the area, it is important that you have top-notch legal guidance to help you avoid costly disputes. At Shulman, Hodges & Bastian, we handle a variety of commercial and business matters, including banking and financial transaction litigation.

To learn more, please see our commercial litigation overview.

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