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Five Star Bank board challengers make case to shareholders

An activist shareholder and an ally are urging Financial Institutions shareholders to give them a voice on the board.

“We are seeking board representation due to Financial Institutions’ dilutive acquisition strategy, the board of directors’ disregard for input from major shareholders, and the board of directors’ pattern of disingenuous behavior,” the two candidates said in a regulatory filing.

Johnny Guerry and Terry Philen Jr., who were nominated by an affiliate of Texas-based Clover Partners, are running for seats on the board of Five Star Bank’s parent company, at the annual shareholders meeting in Warsaw on June 3. They stated their case in a regulatory filing, defending their credentials and criticizing the current board’s actions.

Financial Institutions said it expects to spend $1.8 million on the proxy fight, which Guerry in an interview called an “earth-shattering number.” Guerry also questioned why the bank spent $360,000 on the proxy issue in the first quarter, since he was not notified until just days before the quarter ended that the bank was rejecting his request to be named to a board seat. “We didn’t even file our nomination letter until April,” Guerry said.

The Clover affiliate, called MHC Mutual Conversion Fund, said it has spent $35,000 on the proxy contest, out of an expected $325,000. MHC is working with D.F. King & Co., New York City-based proxy solicitation firm.

Guerry, an activist shareholder, has been critical of the bank’s acquisition of Amherst-based insurance agency Scott Danahy Naylon and Courier Capital Corp., a firm with offices in Buffalo and Jamestown. He contends those deals diluted shareholder value, and the earn-back periods for both deals are far too long.

Four board seats, each with three-year terms, are up for election. In another filing expected within a couple weeks, Guerry and Philen will specify which two of the bank-backed candidates they are targeting.

Guerry declined to reveal those two names. The four bank-backed candidates include Martin K. Birmingham, the bank president and CEO.

Guerry and Philen pledged to shareholders that, if elected, they “will be able to work with the company to formulate specific goals and plans to maximize the value of the company for all its shareholders.”

Guerry said in an interview he and Philen “would evaluate all strategic options and choose the one we felt was best at maximizing shareholder value and the best risk-adjusted return for shareholders.” Guerry has previously said a sale of the bank was in the “best interest” of shareholders, but he said in the interview that a sale was not the only option he and Philen would be open to.

email: mglynn@buffnews.com