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Five Star Bank’s parent company defends record, strategy amid proxy fight

The management and board of Five Star Bank’s parent company say they are “confident” that they are “pursuing the right strategy to enhance value for all shareholders,” in light of an activist shareholder’s criticisms and proxy fight.

Johnny Guerry, managing partner of Texas-based Clover Partners, and Terry Philen Jr., a Texas businessman, are each seeking seats on Financial Institutions’ board. Both names were submitted as nominees of MHC Mutual Conversion Fund Group, which is affiliated with Clover.

The Warsaw-based bank’s statement Thursday served as a rebuttal of sorts to Guerry, an activist shareholder who has urged the board to stop making acquisitions and put the bank up for sale. He was critical of two deals the bank made, saying their earn-back periods were too long and diluted shareholder value.

Financial Institutions said has met with Clover on several occasions since Clover became an investor in the bank. The bank said that its stock price has grown by about 50 percent over the last three years and that its total shareholder return over that period was more than 66 percent. The bank measured total shareholder return by including price appreciation and reinvestment of dividends.

“As always, Financial Institutions is committed to acting in the best interest of all shareholders and remains focused on growing its core business and building long-term shareholder value,” the bank said.

Four board members’ terms are set to expire at this year’s annual meeting on June 3. One of those directors is retiring, but the bank has announced a nominee for the vacancy. Financial Institutions’ board consists of 11 members.

Separately, Financial Institutions said Richard J. Harrison, who retired as executive vice president and chief operating officer March 31, signed a one-year, $100,000 consulting agreement with the bank.

A regulatory filing about the agreement listed a number of consulting services that Harrison would provide, including “mentoring and coaching” executives who assume Harrison’s prior duties as chief operating officer, and “advice and services” related to mergers and acquisitions.