Financial Institutions in Warsaw, N.Y., is facing pressure from an activist investor to investigate a sale.

The $3.4 billion-asset holding company for Five Star Bank received a letter on Wednesday from Clover Partners' managing director, Johnny Guerry, saying management has made the wrong decision on two recent deals. Clover owns about 5.2% of Financial Institutions.

The company's two recent acquisition agreements will result in “meaningful tangible book value dilution” for shareholders, Guerry wrote in the letter.

“The earn-back periods for this dilution are outside any acceptable range, and we believe management's rationale for the acquisitions is flawed at best,” Guerry wrote. Thus, it's in the best interests of shareholders for Financial Institutions to seek a buyer.

In May 2014, Financial Institutions agreed to acquire insurance brokerage Scott Danahy Naylon in Amherst, N.Y. Financial Institutions last month agreed to buy investment firm Courier Capital in Buffalo, N.Y., for $11.3 million to $14 million in cash and stock.

Guerry met with Financial Institutions's chief executive, Marty Birmingham, and chief financial officer, Kevin Klotzbach, in October to discuss the Scott Danahy Naylon deal and to “express our disapproval.”

“I believed our discussion was constructive, and management indicated they heard our message loud and clear and would be extra scrupulous before doing any future deals that result in meaningful dilution for shareholders,” Guerry wrote.

Guerry was therefore surprised when it announced the Courier Capital deal, he wrote in the letter.

Guerry said he plans to continue to hold dialogues with Financial Institutions and to press for a sale. Possible buyers could be banks nearing the $10 billion-asset threshold, he wrote in the letter.

A spokeswoman for Financial Institutions said the company is reviewing the letter and she declined to comment.

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