A Dallas hedge fund is causing Texas-size headaches for a small thrift in Springfield, Mass.

Clover Partners, which has made clear its desire that the $653 million-asset Hampden Bancorp (HBNK) should sell itself, has initiated a proxy fight to elect two representatives to the company's board. In a Sept. 5 letter to shareholders, Clover, which owns 6.5% of Hampden's common stock, claims the company underperforms its peers and pays executives too much.

The battle will take place at Hampden’s Nov. 5 annual meeting. Clover nominated Johnny Guerry, one of its principals, and Garold Base, a former president and chief executive of Viewpoint Financial (VPFG) in Dallas, to join the board.

Guerry and Base offer an interesting blend of youth and experience. Guerry, 31, joined Clover shortly after graduating from Southern Methodist University. Base, 65, has 40 years of experience at financial institutions.

Clover has invested in more than two dozen banks, but it has been devoting a great deal of its time to Springfield recently. In regulatory filings, Clover labels the Springfield area a mature, slow-growth market where banks should consolidate.

Springfield has "low growth and limited opportunity," says Guerry, who has not been shy about stirring the pot. In addition to Hampden, Clover has also urged the $591 million-asset Chicopee Bancorp (CBNK) in nearby Chicopee, Mass., to consider selling.

Clover's proxy fight with Hampden represents its first foray into full-fledged shareholder activism. The firm was reluctant to make its objections so public, but "communications with the company have been broken down for quite a while now," Guerry says.

Clover was especially disappointed by Hampden's refusal to act on a nonbinding resolution, passed at last year's annual meeting, that urged management to explore strategic alternatives. "When shareholders ask for one simple thing and they are ignored, that does not play well," Guerry says.

Hampden earned $3 million, of 54 cents a share, in the 12-month period that ended June 30. Its return on assets and return on equity were less impressive, at 0.46% and 3.41%, respectively.

Chicopee earned $1.3 million in the first half of 2013. It had a return on assets of 0.45% at June 30, and return on equity of 2.9%.

In comparison, thrifts with $500 million to a $1 billion of assets averaged a return on equity of roughly 5% in the first half of this year, according to the Federal Deposit Insurance Corp.

Financial performance aside, the companies are well-capitalized and would attract a good deal of attention if they accepted offers, Guerry says. "There are a number of companies that could come in and pay a very nice premium," he says.

Calls to Hampden and Chicopee were not returned.

Springfield has several banks viewed as consolidators, including $5.2 billion asset Berkshire Hills Bancorp (BHLB) in Pittsfield, Mass., and the $31 billion-asset Peoples United Financial (PBCT) in Bridgeport, Conn.

Clover has not launched a proxy campaign against Chicopee because "there has been a much more constructive and active dialogue" with management, Guerry says, though he declined to discuss specifics.

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