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Five Star Bank parent faces challenge from Texas for two seats on board

Activist shareholder Johnny Guerry warned the board of Five Star Bank’s parent company that it could face a proxy fight – and he has delivered on that threat.

Guerry, 34, managing partner of Dallas-based Clover Partners, is seeking a seat on the board of Warsaw-based Financial Institutions. Nominated for another seat along with him is Terry Philen, 61, an Allen, Texas-based businessman. Both names were submitted as nominees of MHC Mutual Conversion Fund Group, which is affiliated with Clover.

Clover, a hedge fund, owns about 5 percent of Financial Institutions’ stock.

The terms of four of the 11 members of Financial Institutions’ board are to expire this year, including that of president and CEO Martin K. Birmingham. One of the four, James L. Robinson, announced that he will not seek re-election, but the bank has said Kim E. VanGelder, Eastman Kodak’s chief information officer, will be nominated to replace him.

In a letter last year, Guerry urged Financial Institutions’ board to stop making deals and to sell itself to a larger bank. He cited dissatisfaction with two acquisitions: Scott Danahy Naylon, an Amherst-based insurance agency, and Buffalo-based Courier Capital. Guerry contended that the deals diluted shareholder value and that their earn-back periods were too long.

After Guerry’s feelings were made public, former President and CEO Peter G. Humphrey, whose family was instrumental in the growth of Five Star Bank, advocated for the bank to explore a sale. But a cousin of his, Richard O. Humphrey, who is also a shareholder, urged the board to stay the course as an independent bank.

Guerry has pushed for changes at other banks. Bank Mutual in Wisconsin and Clover agreed that a Clover analyst will be nominated for election to that bank’s board; Clover agreed not to present a rival slate of candidates.

Philen has served as chief financial officer of Custom Extrusions and Holdings since 2014 and has served as a CFO in a variety of industries for the last 30 years, according to the same filing.

Five Star ranked only No. 11 in deposit market share in the Buffalo Niagara region, based on the most recent data from the Federal Deposit Insurance Corp. But it has expressed interest in building up its presence in the Buffalo and Rochester markets. The bank has not disclosed whether it bid for branches expected to be divested as part of a KeyCorp deal for First Niagara Financial Group to satisfy federal antitrust concerns.