The push for Pennsylvania's First Keystone Financial Inc. to sell has intensified.
Genesis Financial Partners, Newport Beach, Calif., gave notice last week that it will seek shareholder votes at First Keystone's January annual meeting for its proposal forcing management to seek a larger buyer.
Genesis, which owns 5.92% of the $278 million-asset Media, Pa., thrift, also threatened a proxy fight to replace the current board.
"The company is worth quite a bit more if sold than if the bank were to remain independent," Stephen H. Gordon, president of Gen Fin Inc., Genesis' general partner, said in an interview.
Shareholder activists like Mr. Gordon were far from scarce at many thrift companies last year, pushing for changes and sales to enhance their investments. This year, judging by the First Keystone action, could be a repeat.
"This sort of is the theme song of Genesis in their other holdings," said James E. Moynihan Jr., an analyst with Advest Group in Boston. "In some cases they're right, in some cases they're wrong. In this case, I think it's premature" to sell.
After problems with commercial real estate loans, First Keystone is "getting back into very good health," he said. "Their performance ratios could be better ... but they're getting there. While book value was at $17.83, the company stock traded at $18 on Tuesday, he said.
First Keystone president and chief executive Donald S. Guthrie could not be reached for comment.
Genesis, however, has lambasted First Keystone's performance, noting the thrift's 7% return on equity for the first three months of its fiscal 1996, which ends Sept. 30.
"Genesis does not believe the shareholders should support the present independent course which has generated such mediocre returns," the investment partnership said in its notice of the shareholder proposal sent on Aug. 20, which calls for a "sale, merger, or other acquisition" of the company.
Genesis, which invests in middle-market financial institutions, was meeting last week's filing deadline for the company's January annual meeting, Mr. Gordon said.
Genesis said it believed such a sale could be structured within 90 days after the annual meeting.
"Genesis is considering submitting a series of additional proposals under state law, as well as potentially nominating an alternative slate of director nominees, although no final determination in that regard has been made," Mr. Gordon said in a prepared statement.
The proposal was not surprising. Mr. Gordon and other activists have pushed First Keystone to change its ways since last year.
In December, First Keystone acquiesced to some of Mr. Gordon's suggestions, including cutting staff, initiating a stock buyback program, and reclassifying some assets. It also hired an investment banker.
After publicly praising the changes, Mr. Gordon said he eventually became frustrated with how long First Keystone took to accomplish the stock buyback.
Then, the thrift - like dozens other financial institutions - announced exposure to investments from the bankruptcy of Syracuse-based Bennett Funding Group, a lease securitization company.
"That's when I really kind of hit my level of lost support, when I no longer supported the bank," Mr. Gordon said.
In May, he and professional depositor Jerome Davis - First Keystone's largest shareholder - both publicly urged a First Keystone sale.