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Five Star, rival board candidates debate qualifications

The competition for seats on the board of Five Star Bank’s parent company is starting to resemble a hard-hitting political campaign.

Warsaw-based Financial Institutions sent a letter to its shareholders challenging the qualifications of two rival nominees and playing up their lack of Western New York ties.

The bank is urging shareholders not to vote for Johnny Guerry, an activist shareholder and managing partner at Clover Partners, or Terry Philen, chief financial officer of Custom Extrusions Holdings. Guerry and Philen are based in Texas and were nominated by a Clover affiliate.

“We do not believe that either of Clover Partners’ proposed nominees would bring to the board any relevant experience, skills or competencies not already present among the current board members and its newest nominee,” the bank said in its message. “We also do not believe that either of Clover Partners’ nominees would help advance our strategic plan to drive the creation of long-term shareholder value.”

Four seats on Financial Institutions’ board are up for election on June 3 at the shareholders meeting. Three of the bank-backed nominees are incumbents, including president and CEO Martin K. Birmingham. Kim VanGelder, a Kodak executive, was nominated to replace a director not seeking re-election.

Guerry said in an interview that both he and Philen would bring valuable business experience to the board, and he noted that Clover Partners focuses exclusively on banks. “This is my sole vocation,” Guerry said.

He also said it doesn’t appear VanGelder has the public board experience and banking background that the bank contends a director should possess.

Along with challenging Guerry’s and Philen’s qualifications, the bank described the two nominees’ lack of Western New York ties as a negative.

“Notably, Clover Partners’ nominees do not have an understanding of the community banking market in Western New York, business connections in this region or ties to the community, which are important resources that help us to generate business,” the bank said. “We take our commitment to the customers and communities that we serve very seriously and have made it a priority to develop your board with this commitment in mind.”

Guerry said he doesn’t believe the fact that he and Philen are from outside the region should rule them out, adding that he was very familiar with the markets in which Five Star competes.

The bank also asserted that Guerry and Philen have “no strategic view for how to create shareholder value at (Financial Institutions) outside of an immediate sale of (the bank).”

The bank said it regularly evaluates how best to enhance shareholder value.

“However, we do not believe that an immediate sale of (Financial Institutions) is in the best interest of shareholders.”

Guerry, in a letter to the bank’s board last year, said selling the bank “would be in the best interest of (Financial Institutions’) shareholders.”

Guerry elaborated on that point Thursday. He said he viewed selling the bank as the “preferred” option if the board stuck to its current strategy. But he said if he and Philen join the board and gather more information, they might support a different option.