SCHEDULE: Stilwell Group Trims Kingsway Stake After Value Gains

Stilwell Group has reduced its beneficial ownership in Kingsway Financial Services Inc. to 12.7% after successfully profiting from share price appreciation through activist engagement.

Summary

• The Stilwell Group, comprising several investment partnerships and Joseph Stilwell, reported a beneficial ownership of 3,703,073 common shares in Kingsway Financial Services Inc., representing approximately 12.7% of the outstanding shares.
• This ownership includes 105,263 shares convertible from Class C Preferred Stock and 52,631 shares convertible from Class D Preferred Stock.
• The Group sold a total of 1,750,000 common shares on December 17, 2025, at an exercise price of $8.25 per share, generating $14,437,500, through previously established option agreements.
• An additional 10,429 common shares were sold on December 16, 2025, at $12.80 per share, totaling $133,491.20.
• The Group's stated purpose for acquiring shares was to profit from market price appreciation by asserting shareholder rights, believing asset values were not adequately reflected.
• Joseph Stilwell has continuously served on Kingsway Financial Services Inc.'s board of directors since April 23, 2009.
• Stilwell Value LLC, a member of the Group, consented to an SEC cease and desist order on September 25, 2024, for failing to timely file beneficial ownership reports, incurring a $75,000 civil monetary penalty.

Sentiment

Score: 7

Explanation: The filing indicates a successful activist campaign for Kingsway Financial Services Inc., with the Group realizing profits and intending to reduce its position. The extensive history of successful activism across numerous companies is a strong positive. The SEC violation, while a negative, has been addressed and is historical.

Positives

• The Stilwell Group successfully profited from the appreciation in Kingsway Financial Services Inc.'s market price, achieving its investment objective.
• The Group has a long history of successful activist positions, having engaged with 78 publicly-traded companies since 2000, often leading to sales, mergers, or shareholder-friendly capital allocation.
• Joseph Stilwell has maintained a continuous board presence at Kingsway Financial Services Inc. since April 2009, indicating sustained influence.

Negatives

• Stilwell Value LLC, a key entity within the Group, was subject to an SEC administrative cease and desist order on September 25, 2024, and a $75,000 civil monetary penalty for failing to timely file beneficial ownership reports.

Risks

• Stilwell Value LLC faced regulatory action from the SEC for non-compliance with beneficial ownership reporting requirements, resulting in a cease and desist order and a $75,000 penalty.
• The Group's stated intent to gradually reduce its position in Kingsway Financial Services Inc. could signal a potential decrease in activist oversight or a shift in investment focus.

Future Outlook

The Stilwell Group intends to gradually reduce its position in Kingsway Financial Services Inc. over time, having achieved its objective of profiting from share price appreciation. For other companies, the Group continues to actively seek board representation and work with management to maximize shareholder value through various strategies, including share repurchases, special dividends, second-step conversions, or company sales.

Management Comments

• Our purpose in acquiring shares of Common Stock of the Issuer was to profit from the appreciation in the market price of the shares of Common Stock through asserting shareholder rights. We have succeeded and intend to gradually reduce our position over time.
• In each instance (of activist positions), our purpose has been to profit from the appreciation in the market price of the shares we held by asserting shareholder rights. In addition, we believed that the values of the companies' assets were not adequately reflected in the market prices of their shares.

Industry Context

This filing highlights the ongoing role of activist investors, particularly in the financial services sector (banks, insurance companies), in driving corporate change and unlocking shareholder value. The Stilwell Group's history demonstrates a consistent strategy of identifying undervalued companies, asserting shareholder rights, and advocating for capital allocation strategies such as share repurchases, special dividends, or outright sales/mergers. The success rate detailed in Schedule A underscores the potential impact of such activism on company valuations and strategic direction within the industry.

Comparison to Industry Standards

• The Stilwell Group's track record of engaging with 78 publicly-traded companies since 2000, with a significant number resulting in sales, mergers, or shareholder-friendly capital allocation, positions it as a highly successful activist investor compared to general industry averages for activist campaigns.
• The Group's strategy of seeking board representation and advocating for specific financial actions (e.g., share repurchases, second-step conversions) is a common tactic among activist funds, but its consistent success in achieving these outcomes, as detailed across various financial institutions, suggests a high level of effectiveness.
• The SEC's cease and desist order against Stilwell Value LLC for reporting violations, while a negative, is not uncommon in the complex regulatory landscape of investment management, though the prompt remedial actions and cooperation are positive indicators of addressing compliance issues.

Management Changes

Corporate Governance

Legal Proceedings

• Stilwell Value LLC consented to an SEC administrative cease and desist order on September 25, 2024, for failing to timely file beneficial ownership reports, resulting in a $75,000 civil monetary penalty.
• Stilwell Group sued Oregon Trail Financial Corp. (OTFC) in Baker County, Oregon, over a shareholder list demand, winning the case and sanctions against OTFC.
• Stilwell Group sued two OTFC directors for residency requirement violation and perjury; suits dismissed pre-trial but one appealed and other re-filed.
• OTFC sued Stilwell Group in Portland, Oregon, to invalidate proxies; court denied OTFC's motion.
• Stilwell Group sued SCPIE Holdings Inc. (SKP) in Delaware Chancery Court to compel production of shareholder list.
• Stilwell Group sued Prudential Bancorp, Inc. of Pennsylvania (PBIP), its MHC, and directors in federal court in Philadelphia to prevent MHC from voting on management stock benefit plans; claims sustained against MHC for breach of fiduciary duties, case went to trial, then voluntarily discontinued to pursue derivative action.
• Stilwell Group filed a notice to appeal portions of the lower court's order in the PBIP lawsuit.
• Stilwell Group sued NECB in federal court in New York to compel inspection of its shareholder list, resulting in production of the list.
• Stilwell Group filed a lawsuit in New York state court against NorthEast Community Bancorp, Inc. (NECB), its mutual holding company, and their boards for breach of fiduciary duty related to a second-step conversion.
• Stilwell Group filed a motion to compel production of books and records against Seneca-Cayuga Bancorp, Inc. (SCAY) in U.S. District Court for the Western District of New York, which was granted.
• Stilwell Group filed a complaint in the Delaware Court of Chancery against HopFed Bancorp, Inc. (HFBC) and its directors, asking the Court to declare a prejudicial bylaw invalid and that directors breached fiduciary duties; court granted attorneys' fees of $610,312 to Stilwell Group.
• Stilwell Group formally demanded HopFed Bancorp, Inc. (HFBC) board take action against its attorneys for legal malpractice seeking damages in excess of $1 million.
• Stilwell Group sued Malvern Bancorp, Inc. (MLVF) directors in Chester County, Pennsylvania, demanding the court order directors to properly consider pursuing a second-step conversion; lawsuit withdrawn after MLVF announced conversion intention.
• Stilwell Group filed two lawsuits against First Financial Northwest, Inc. (FFNW) arising from the invalidation of votes at the 2012 election, both settled.
• Stilwell Group filed suit in the Superior Court of California (San Diego County) against Silvergate Capital Corporation (SICP) to enforce shareholder records inspection rights, and the court ordered production.
• Stilwell Group filed suit in the Maryland Circuit Court against Silvergate Capital Corporation (SICP) to compel an annual meeting, which was granted and upheld on appeal.
• Silvergate Capital Corporation (SICP) filed for Chapter 11 bankruptcy protection and moved the Bankruptcy Court for a temporary restraining order to enjoin the Maryland Circuit Court order, which was denied.
• Stilwell Group filed a complaint in the Chancery Court of Harrison County, Mississippi, against Peoples Financial Corporation (PFBX) to compel production of books and records, which was partially granted.
• Stilwell Group filed a derivative complaint on behalf of Peoples Financial Corporation (PFBX) against its directors for breach of fiduciary duty, seeking damages in excess of $50 million; motion to dismiss denied, discovery allowed, and interlocutory appeal denied by Mississippi Supreme Court.

Related Party Transactions

• Stilwell Value LLC entered into three Option Agreements on March 31, 2025, with certain buyers to sell Kingsway Financial Services Inc. common stock.
• On December 17, 2025, an amendment to the Option Agreements added Stilwell Activist Fund, Stilwell Activist Investments, Stilwell Value Partners VII, and Stilwell Associates as sellers to the agreements.
• Stilwell Activist Fund and Stilwell Activist Investments entered into Subscription Agreements with Kingsway Financial Services Inc. for Class C Preferred Stock on February 12, 2025.
• Stilwell Associates entered into a Class D Subscription Agreement with Kingsway Financial Services Inc. for Class D Preferred Stock on May 8, 2025.

Stakeholder Impact

• Shareholders of Kingsway Financial Services Inc. benefited from the appreciation in share price, allowing the Stilwell Group to realize profits.
• Shareholders of companies targeted by Stilwell Group's activism often see increased value through strategic sales, mergers, share repurchases, or special dividends.
• Management and boards of targeted companies are often compelled to re-evaluate strategies and capital allocation, sometimes leading to leadership changes or significant corporate restructuring.
• The SEC's action against Stilwell Value LLC highlights the importance of regulatory compliance for investment firms and their impact on market integrity.

Next Steps

• The Stilwell Group intends to gradually reduce its remaining position in Kingsway Financial Services Inc. over time.
• The Group will continue to work with management and boards of other issuers (CIBH, UNIF, CPBI, CLST) to maximize shareholder value.
• The Group intends to gain board representation and work to maximize shareholder value at Peoples Financial Corporation (PFBX) and Lake Shore Bancorp, Inc. (LSBK), including ongoing legal proceedings for PFBX.
• The Group will continue to work to maximize value for all common shareholders of Silvergate Capital Corporation (SICP) following a settlement pending Bankruptcy Court approval.

Key Dates

Keywords

Activist Investor, Schedule 13D, Kingsway Financial Services, Share Sale, Corporate Governance, Shareholder Rights, Joseph Stilwell, Preferred Stock, SEC Filing, Investment Management