Alabama bank blasts investors’ request to join board

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United Bancorporation of Alabama on Wednesday slammed a request by two activist investors to join the bank's board.

Aaron Sallen, manager at Merion Road Capital Management, and Jason Blumberg, managing member at Blue Hill Advisors, wrote an open letter to United on Tuesday, asserting the bank had failed to provide them with feedback on concerns they expressed in July .

Sallen and Blumberg urged the $1.4 billion-asset lender, at the time, to make better use of its equity, control its expenses and add more board members with expertise in capital allocation. In particular, the investors called out a $123 million capital windfall from a Treasury Department program and proposed a $40 million stock buyback.

"Despite our long engagement and investor support, we have not seen any tangible progress from the Board in addressing or acting on our proposals," Sallen and Blumberg wrote Tuesday.

Merion Road and Blue Hill together own roughly 2% of United's shares.

"Inaction is not an option," Sallen and Blumberg wrote. "High-level discussions are not a substitute for concrete analysis and decisive action."

United, however, disputed the investors' characterization of "inaction," saying it's "fully committed to acting in the best interests of all stockholders, including the approximately 98% of the Company's investor base unassociated" with Merion Road and Blue Hill.

The bank said it had "engaged constructively on numerous occasions with the Activist Group" – notably, on a video call Aug. 31.

"At no point during our meeting, or in any prior meetings, did Jason Blumberg or Aaron Sallen indicate they both would like to join the Board," the bank said. "Yet, just hours after our August 31st meeting ended, we received an email making this demand and requesting a response within seven days."

United called the request "unreasonable," adding the investors "did not even account for standard processes and timelines associated with director candidate vetting."

Agreeing to Sallen and Blumberg's request "would have been a rash decision and undermined the interests of investors holding the other 98%" of United's shares, the bank said Wednesday.

United also defended the expertise of its board, saying it's "regularly assesse[d] … to ensure that it has the right skills and experience to advance the best interests of all stockholders."

Both sides appeared to associate their actions with recent improvements on the bank's stock performance.