Poage Bankshares (PBSK) in Ashland, Ky., and an activist investor have sent competing letters to shareholders ahead of next month's annual meeting.

Joseph Stilwell wants the $439 million-asset company to sell itself. Poage, which views itself as a consolidator, bought Town Square Financial in March in a deal that Stilwell has constantly criticized.

Stilwell, in an April 14 letter, claimed that Poage could have sold for more than $20 a share if it had not acquired Town Square. Stilwell, who owned 8.2% of Poage's common stock at March 27, also argued that the company could fetch more than $18 a share if priced at the same valuation as its own acquisition.

"To my understanding, what our board did was either a 'bush-league' mistake made by an impatient and inexperienced group of men or an arrogant mistake made by an insular group of men," Stilwell wrote, using rhetoric that is common in his letters to fellow investors. "Either way, it's time to add a qualified outsider who will fight for the shareholders' best interests."

Stilwell has nominated Stephen Burchett, an Ashland lawyer, to join the board.

Poage's board is standing its ground in a proxy battle that the company said in a regulatory filing could cost it $250,000 this year.

The board "has produced over a 40% total return to stockholders since our inception as a public company in September 2011," Poage's directors wrote in an April 8 letter to shareholders. "We believe we have positioned your bank for future growth and profitability. … We are not convinced that a forced sale driven by a hostile proxy contest is the most effective means to maximize the value of your investment."

The Town Square acquisition "is reflective of our desire to grow operations and increase profitability," the company added in an April 11 regulatory filing.

Other investors are upset with the Town Square deal. Terry Maltese, president of Sandler O'Neill Asset Management, sent a letter to J. Thomas Rupert, Poage's chairman, in October, stating that he was "very displeased" with the acquisition. "We strongly disagree with this misuse of shareholders' capital," he wrote at that time.

Sandler O'Neill, which owned about 6.3% of Poage's stock at March 25, also urged the company to avoid fighting Stilwell over the board seat. "We highly doubt you can win a proxy fight against this shareholder and any attempt to do so would be a waste of shareholder capital," Maltese wrote.

Poage's shareholders will meet on May 20.

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