A holder of 5.56% of Hamilton Financial Services Corp., San Francisco, has urged the company's board to seek a merger or sale.

In a letter sent to the board on Monday, Kramer Spellman LP, a Fort Lee, N.J., partnership, said it believes "outside parties would have an interest in acquiring Hamilton at a premium to the current stock price." The letter was attached to a Securities and Exchange Commission filing, Dow Jones reported.

Executives of Hamilton were not available to comment.

The partnership said it believes an "outright sale offer" is the appropriate course of action for the company instead of a defensive merger or acquisition that keeps current management in place.

"The issue is not the underperformance of Hamilton's stock price per se but that shareholder value is steadily eroding," the partnership said.

The partnership said it holds 331,200 shares of Hamilton. The shares, traded on Nasdaq, have been inactive recently, with a bid price of a little over $2 a share. They have traded as high as $4.125 this year and have been as low as $1.875.

Hamilton took itself off the sales block in March after an unsuccessful five-month search for a buyer. It had hired Keefe Bruyette & Woods as an adviser. Hamilton made the March announcement at the same time it reported a loss of $3.15 million for the fourth quarter of 1994.

The company had been hit by losses on loan sales into the secondary market as well as on originations, its chairman William Kirschenbaum, said. Acute price competition put many mortgage lenders into the red during 1994.

In January of this year, Hamilton announced a restructuring and cost- reduction program under which it cut 120 jobs and closed retail and wholesale offices nationwide, and planned to take a $1.5 million charge to earnings in the first quarter as a result. It has continued in the red so far this year.

Hamilton continues to be a subservicer of mortgages and has been trying to expand that business. In June, it announced it had received a five-year contract to subservice $120 million of loans for an unnamed company. It said it would handle the tasks at its servicing center in Scottsbluff, Neb.

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