Activist Circulates Photo of Napping Chairman in Fight with Ill. Bank

Joseph Stilwell recently shared a Kodak moment with fellow stockholders of Harvard Illinois Bancorp (HARI).

The activist investor, who is waging a proxy battle against Harvard Illinois for the third consecutive year, included a photo of former Chairman William Schack snoozing behind a table at the $170 million-asset company's 2013 annual meeting. A banner that says "Winning with Teamwork" is visible in the background.

"None of the other board members bothered to wake him up," Stilwell deadpans in a caption below the photo in his April 8 filing. "If you, like me, believe it's time to bring a fresh influence to our bank's board of directors, please vote... Mark Saladin."

Saladin, a partner of the law firm Zanck, Coen, Wright & Saladin, is Stilwell's nominee for Harvard Illinois' board. The activist is targeting the seat currently held by John Rebhorn, who has reached the company's mandatory retirement age. Harvard Illinois has nominated Rebhorn's son, Brian, to succeed his father as a director.

Stilwell failed to get Saladin on the company's board last year, falling short by less than 141,000 votes. He has spent recent years pressuring Harvard Illinois to sell itself; he owned 9.3% shares of the company as of March 3.

"We believe it is now time to find a better-run community bank to buy [Harvard Illinois] in an effort to maximize shareholder value," Stilwell wrote in a March 31 letter to the company's shareholders.

Harvard Illinois' board noted in an April 11 letter to shareholders that the picture of Schack, who is now vice chairman, was taken during a "multihour adjournment" of last year's meeting.

"This is misleading to our stockholders and an affront to our prior chairman's character," the letter said. "Mr. Stilwell, we don't want to wage this proxy contest in the gutter — let's focus on the merits."

The company's current chairman is Duffield Seyller 3rd, who retired as president and chief executive in February. Seyller was succeeded as CEO by Donn Claussen, who had been the chief financial officer.

"This is the third year that he has run an active proxy fight and the company has prevailed by a wide margin in the previous two," Claussen said in an interview. "We had anticipated that he would be more aggressive this year and I guess that is what the picture represents. We'd prefer to discuss the performance of the company and the stock."

Harvard Illinois has been aggressively defending its performance to shareholders in advance of the annual meeting.

Directors wrote in an April 4 letter to shareholders that management had decreased nonperforming loans last year by nearly 45%, to 2.3% of total loans. They also noted that the Federal Reserve Board had lifted a memorandum of understanding against the company.

Harvard Illinois produced a 23% total return to shareholders in 2013, and the special dividend increased last year to 20 cents a share, the letter said. "In our opinion, we believe our nominees deserve your vote in recognition of our... recent accomplishments," the letter said.

Harvard Illinois' shareholders will meet on May 22 at the Harvard Police Station, returning the same venue that hosted last year's meeting.