Sierra Bancorp stock plan faces opposition

Jun 06, 2009 (The Fresno Bee - McClatchy-Tribune Information Services via COMTEX) -- BSRR | Quote | Chart | News | PowerRating -- A proposal to allow Sierra Bancorp directors to issue 10 million shares of preferred stock is running into a challenge from the bank's two largest shareholders.

Sierra Bancorp is the parent company of Porterville-based Bank of the Sierra. Patricia Childress of Visalia and her sister, Carol Bates of Porterville, own or control more than 1.4 million of the company's 9.6 million shares of common stock.

At a stockholder meeting last week, the pair voted against a measure that would authorize the bank's eight-member board to issue preferred stock.

The proposal was falling short of the 4.8 million or so share votes needed to pass at the May 27 shareholder meeting. The meeting was adjourned to June 9 as directors try to wrangle additional proxy votes. Earlier this week, Sierra Bancorp CEO James Holly said he misspoke when he said the meeting would be continued to June 14.

Bank officials said they have no plans to actually issue the stock, but said the authorization would give them flexibility to use preferred stock to raise capital if it's needed for expansion, acquisition or other demands.

But Childress cited a proxy analysis by ISS Corporate Services recommending a "no" vote by shareholders on the stock proposal. The analysis said the potential for "management entrenchment," by placing stock with board-friendly interests, outweighs the benefits. The report suggests that preferred shares may dilute the voting power and equity interest of owners of common stock.

"The timing of this proposal on the heels of last year's proxy contest is a thinly disguised attempt to ensure that no one ever runs for the board again," said Childress, who ran unsuccessfully last year for a board seat.

Holly disagreed. "I don't get that argument," he said. "I don't see how the ability to offer preferred stock has any effect on the board or election process."

Preferred shareholders, he said, "only have voting power in unusual circumstances, such as if the bank is in arrears on their dividends."

Childress said she would support a proposal that didn't give directors a "blank check" to give voting power to preferred shares. But, she added, "their choice to ignore that type of support reveals their desire [or] intent to control voting."

Childress "has every right to voice her concern," Holly said.

Holly said he expects Tuesday's reconvened shareholder meeting to be delayed again as the board continues to seek support for the stock proposal.

Four directors on the bank's eight-member board were re-elected last week, but one who was on the ballot -- Robert Tienken, 89 -- died after the proxy ballots were mailed. Holly said the remaining directors have not yet determined how to fill the vacancy left by Tienken's death.

The reporter can be reached at tsheehan@fresnobee.com or (559) 441-6319.

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