Posted on Sunday, 13th June 2010 by Christopher Allen

Shareholders won’t know for two weeks the outcome of the contested battle for board seats at First Franklin Corp., the Blue Ash-based company’s CEO said at its annual shareholders meeting Monday.

Sycamore Township-based Lenox Wealth Management Inc. CEO John Lame is running for a board seat. He’s challenging the two incumbent board members up for election – ­ director and retired CEO Tom Siemers and new CEO Jack Kuntz.

The outside company that is tabulating and certifying the votes will report back with official results at a June 28 board meeting, Kuntz said at the annual meeting.

Indications of votes cast so far are that it will be close, Lame said. He figures it’ll be a margin of about 3 percent or so, but he expects to come up just short.

He and fellow Lenox executive Jason Long, who had also been running for a board seat until pulling out last week, also put a nonbinding measure on the ballot that would urge the company to put all of its board members up for re-election each year. Its five directors are now split into three groups that serve staggered three-year terms.

Lame said that measure will easily pass.

“That will put a lot of pressure on the board (to eliminate board classes),” he said.

It’s all aimed at Lenox’s push to enact changes at First Franklin (Nasdaq: FFHS), parent of Franklin Savings and Loan Co. Lenox owns 9.9 percent of the shares and wants to make management changes, create more independence on the board, raise capital and possibly even to sell the company in an effort to boost shareholder value. In fact, it has offered shareholders $18 a share in Lenox stock to buy out the company.

While the annual meeting didn’t yield results, it did feature plenty of chances for shareholders to air their views about the battle.

“We think we can help the financial performance, provide independent management and raise capital,” Lame told shareholders during the meeting. “The board has lost its independence.”

Shareholders have mixed feelings

Jim Bien, a Symmes Township shareholder, criticized management for its high expenses. Its ratio of expenses to revenue has hovered near 90 percent the past few years, he said. Peers have been around 70 percent.

“That shows you’re overspending,” he said.

But Charles Allen, a Johnson City, Tenn., shareholder, said he has invested in several companies Kuntz has run.

“He draws up a plan for success and then he executes it flawlessly,” he said.

He also criticized Lenox’s buyout offer, saying it should be for cash instead of Lenox stock.

CEO plans turnaround

Kuntz, who had been a board member but just took over as CEO April 1 after Siemers retired, outlined his plans for turning around the company. First Franklin has lost more than $1 million each of the past two years. It suffered from loan losses that caused it to take millions in loan-loss reserves. It dropped its shareholder dividend last year. And regulators have told it to increase capital.

He plans to improve profits, partly by cutting costs. The company sold its headquarters building in May, got rid of its box at Xavier University’s Cintas Center in April and is eliminating company cars for executives in July, he told shareholders.

The company formed a special committee to improve asset quality. It will look at selling assets to get them off the books, even if its net income takes a hit.

Siemers said Kuntz is on the right track to turning around the company’s results.

“I’ve known Jack for 40 years and I have the utmost confidence in him,” he said after the meeting.

Now shareholders await the results of the vote.

“It’s a long process,” Lame said after the meeting. “I feel we learned a lot and came awfully close, and might even be fortunate enough to win. I think it’s a good thing that the facts are coming out.”

Regardless of the vote’s outcome, Lame said he’ll still be pushing for change.

“We are going to come back,” he said.

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