SCHEDULE: Stilwell Group Trims Kingsway Stake, Details Activist History

Stilwell Activist Fund and affiliates reduced their beneficial ownership in Kingsway Financial Services Inc. to 18.8%, while detailing a two-decade history of successful activist campaigns.

Summary

• The Stilwell Group (comprising Stilwell Activist Fund, Stilwell Activist Investments, Stilwell Associates, Stilwell Value Partners VII, Stilwell Value LLC, and Joseph Stilwell) beneficially owns 5,463,502 shares of Kingsway Financial Services Inc. common stock, representing 18.8% 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's stated purpose in acquiring Kingsway shares was to profit from market price appreciation by asserting shareholder rights, which they claim to have successfully achieved.
• The Group intends to gradually reduce its position in Kingsway Financial Services Inc. over time.
• Stilwell Associates sold a total of 156,769 shares of Kingsway common stock between December 8, 2025, and December 15, 2025, for aggregate proceeds of $2,007,360.33.
• Joseph Stilwell has continuously served on Kingsway's board of directors since April 23, 2009.
• The filing provides a detailed history of the Stilwell Group's activist positions in 78 other publicly-traded companies since 2000, categorized by outcomes such as company sales/mergers, successful board appointments leading to sales, exits after value maximization, and ongoing campaigns.

Sentiment

Score: 7

Explanation: The filing reflects a positive outcome for the Stilwell Group regarding Kingsway, as they state they have succeeded in their investment purpose and are now reducing their position. Their extensive activist history also highlights a strong track record of achieving shareholder value maximization, despite some challenges and a recent SEC penalty for a filing violation.

Positives

• The Stilwell Group states they have succeeded in profiting from the appreciation in Kingsway's market price by asserting shareholder rights.
• Joseph Stilwell has maintained a long-standing board presence at Kingsway since April 2009, indicating sustained influence.
• The Group boasts a strong track record of successful activist campaigns, often leading to company sales/mergers or shareholder-friendly capital allocation strategies (e.g., share repurchases, special dividends, second-step conversions) across 65 companies.
• Successfully compelled several companies to undertake second-step conversions or sales after initial resistance (e.g., Seneca-Cayuga Bancorp, Inc./Generations Bancorp NY, Inc., Malvern Bancorp, Inc., FSB Community Bankshares, Inc., Alamogordo Financial Corp., NorthEast Community Bancorp, Inc.).
• Successfully seated directors on the boards of 13 companies that subsequently were sold or merged (e.g., Oregon Trail Financial Corp., HCB Bancshares, Inc., American Physicians Capital, Inc., Provident Bancorp, Inc., IF Bancorp, Inc.).
• Successfully influenced numerous companies to implement share repurchases and other shareholder-friendly capital allocation strategies (e.g., SP Bancorp, Inc., TF Financial Corporation, Eureka Financial Corp., Georgetown Bancorp, Inc., Wolverine Bancorp, Inc., First Federal of Northern Michigan Bancorp, Inc., Jacksonville Bancorp, Inc., Ben Franklin Financial, Inc., Central Federal Bancshares, Inc., First Savings Financial Group, Inc., Roma Financial Corp., Home Federal Bancorp, Inc. of Louisiana, Standard Financial Corp., Alliance Bancorp, Inc. of Pennsylvania, ASB Bancorp, Inc., United Community Bancorp, West End Indiana Bancshares, Inc., William Penn Bancorp, Inc., First Financial Northwest, Inc., Pinnacle Bancshares, Inc., Sugar Creek Financial Corp., Provident Financial Holdings, Inc., West Town Bancorp, Inc., Cincinnati Bancorp, Inc.).
• Won a lawsuit against HopFed Bancorp, Inc. for attorneys' fees and expenses totaling $610,312 due to the board's conduct.
• Successfully compelled Silvergate Capital Corporation (SICP) to hold an annual meeting and seated Joseph Stilwell on the board despite SICP's Chapter 11 bankruptcy filing and attempts to enjoin the meeting.

Negatives

• Stilwell Value LLC was subject to an SEC administrative cease and desist order on September 25, 2024, for failing to timely file certain beneficial ownership reports (Sections 13(d)(1) and 13(d)(2) and rules 13d-1 and 13d-2).
• A $75,000 civil monetary penalty was imposed on Stilwell Value LLC as a result of the SEC order.
• The Group exited one activist position (Garrison Capital, Inc.) without maximizing shareholder value, attributing it to the global pandemic making activism problematic for a business development company.
• Experienced instances where their nominees were not initially elected to boards (e.g., Harvard Illinois Bancorp, Inc., Poage Bankshares, Inc., HopFed Bancorp, Inc., Wayne Savings Bancshares, Inc., Peoples Financial Corporation).
• Faced legal challenges and resistance from target companies, including lawsuits (e.g., Oregon Trail Financial Corp., SCPIE Holdings Inc., HopFed Bancorp, Inc., Malvern Bancorp, Inc., NorthEast Community Bancorp, Inc., Silvergate Capital Corporation, Peoples Financial Corporation).
• Joseph Stilwell resigned from SCPIE Holdings Inc.'s board after it approved a sale he believed was an inferior deal.
• Anchor Bancorp's acquisition was delayed due to regulatory issues at Washington Federal, Inc.

Risks

• Regulatory non-compliance: Stilwell Value LLC faced an SEC cease and desist order and a $75,000 penalty for untimely beneficial ownership filings, indicating a risk of regulatory scrutiny and penalties.
• Activist campaigns can be protracted and costly, involving proxy contests and litigation, which may not always yield desired outcomes or could incur significant legal expenses.
• Activist efforts do not always result in maximized shareholder value or board representation, as evidenced by the exit from Garrison Capital, Inc. without value maximization and initial failures to elect nominees at several companies.
• Potential for management and board resistance, including bylaw amendments to limit nominees (e.g., Montgomery Financial Corporation), which can complicate or delay activist objectives.
• Risk of inferior deals being approved despite activist opposition (e.g., SCPIE Holdings Inc.), leading to suboptimal shareholder returns.
• Regulatory delays can impact acquisition timelines and outcomes (e.g., Anchor Bancorp), introducing uncertainty and potentially altering deal terms.
• Bankruptcy proceedings can complicate activist efforts and outcomes, as seen with Silvergate Capital Corporation, requiring engagement in complex legal frameworks.
• Ongoing litigation and appeals, such as the derivative action against Peoples Financial Corporation's directors, carry inherent uncertainties and costs.

Future Outlook

The Stilwell Group intends to gradually reduce its position in Kingsway Financial Services Inc. over time, having achieved its goal of profiting from share price appreciation through asserting shareholder rights. The Group hopes to work with management and boards of CIB Marine Bancshares, Inc., U & I Financial Corp., Central Plains Bancshares, Inc., and Catalyst Bancorp, Inc. to maximize shareholder value. For Peoples Financial Corporation and Lake Shore Bancorp, Inc., the Group intends to gain board representation and work to maximize shareholder value, including through ongoing litigation for PFBX.

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." (Regarding Kingsway Financial Services Inc.)
• "In each instance, 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." (Regarding general activist history)
• "We hope to work with management and the board of directors to maximize shareholder value at SFBC."
• "We intend to continue to work to maximize value for all common shareholders of SICP."
• "We believe management and the board are acting in good faith to maximize shareholder value." (Regarding CIB Marine Bancshares, Inc.)
• "We are evaluating how best to proceed to maximize shareholder value." (Regarding U & I Financial Corp.)
• "We hope to work with management and the board to maximize shareholder value." (Regarding Central Plains Bancshares, Inc. and Catalyst Bancorp, Inc.)
• "We believe management and the directors have ill served PFBXs shareholders, and PFBX should explore all possibilities to maximize shareholder value." (Regarding Peoples Financial Corporation)
• "Following an unproductive meeting with management, we intend to seek board representation at LSBK's 2026 annual meeting." (Regarding Lake Shore Bancorp, Inc.)

Industry Context

The filing provides a comprehensive overview of activist investing strategies, particularly within the financial services sector (primarily banks and insurance companies). The Stilwell Group consistently targets companies where they believe assets are undervalued and shareholder value can be unlocked through M&A, share repurchases, special dividends, or corporate governance changes (e.g., second-step conversions for mutual holding companies). Their history demonstrates a persistent approach, often involving proxy contests, litigation, and board representation to achieve their objectives, reflecting a common trend in shareholder activism to drive strategic changes and capital allocation decisions.

Comparison to Industry Standards

• The Stilwell Group's strategy of targeting undervalued financial institutions and advocating for sales, mergers, or shareholder-friendly capital allocation (e.g., share repurchases, special dividends, second-step conversions) is a well-established activist playbook, particularly in the community banking sector.
• Their success rate in achieving sales or mergers (27 companies listed in Category I, 13 in Category II) or prompting value-maximizing actions before exiting (25 companies in Category III) suggests a highly effective activist approach compared to general activist investor success rates, which can vary widely.
• The use of proxy contests and litigation to gain board seats or compel action (e.g., Oregon Trail Financial Corp., SCPIE Holdings Inc., HopFed Bancorp, Inc., Malvern Bancorp, Inc., NorthEast Community Bancorp, Inc., Silvergate Capital Corporation, Peoples Financial Corporation) is a standard, albeit aggressive, tactic employed by prominent activist funds like Carl Icahn or Starboard Value, indicating a willingness to engage in prolonged battles for shareholder rights.
• The specific examples of forcing second-step conversions (e.g., Seneca-Cayuga Bancorp, Inc., Malvern Bancorp, Inc., FSB Community Bankshares, Inc., Alamogordo Financial Corp., NorthEast Community Bancorp, Inc.) highlight a specialized expertise in navigating the complex regulatory and governance structures of mutual holding companies, a niche often exploited by activists in the banking industry.
• The $610,312 award for attorneys' fees against HopFed Bancorp, Inc. demonstrates a successful legal challenge against a board, which can serve as a benchmark for other activist investors facing similar resistance.
• The ongoing legal proceedings against Peoples Financial Corporation, seeking over $50 million in restitution from directors, indicates a high-stakes approach to corporate governance and fiduciary duty enforcement, comparable to actions taken by institutional investors or regulatory bodies in cases of alleged mismanagement.

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 certain beneficial ownership reports (Sections 13(d)(1) and 13(d)(2) and rules 13d-1 and 13d-2), 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 resulting in sanctions against OTFC. Two other suits against OTFC directors were dismissed pre-trial.
• Stilwell Group sued SCPIE Holdings Inc. (SKP) in Delaware Chancery Court to obtain a shareholder list.
• Stilwell Group sued Prudential Bancorp, Inc. of Pennsylvania (PBIP), its mutual holding company, and directors in federal court in Philadelphia regarding management stock benefit plans and fiduciary duties; the lawsuit was later discontinued to pursue a derivative action.
• Stilwell Group sued Malvern Bancorp, Inc. (MLVF) directors in Chester County, Pennsylvania, demanding that the court order directors to properly consider pursuing a second-step conversion; the lawsuit was withdrawn after MLVF announced its intention to convert.
• Stilwell Group sued First Financial Northwest, Inc. (FFNW) to enforce their rights after the company attempted to invalidate their votes in a director election, leading to a settlement.
• Stilwell Group filed a motion to compel production of Seneca-Cayuga Bancorp, Inc. (SCAY) books and records in U.S. District Court for the Western District of New York, which was granted, leading to SCAY's announcement of a second-step conversion.
• Stilwell Group filed a complaint in the Delaware Court of Chancery against HopFed Bancorp, Inc. (HFBC) and its directors, resulting in an award of $610,312 in attorneys' fees and expenses against HFBC.
• Stilwell Group formally demanded HFBC's board take action against its attorneys for legal malpractice, seeking damages in excess of $1 million.
• Stilwell Group sued NorthEast Community Bancorp, Inc. (NECB) in federal court in New York to compel compliance with a shareholder list demand, and later in New York state court for breach of fiduciary duty regarding a second-step conversion.
• 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 in Maryland Circuit Court to compel SICP to hold an annual meeting, both of which were granted despite SICP's Chapter 11 bankruptcy filing.
• Stilwell Group filed a complaint in the Chancery Court of Harrison County, Mississippi, on July 22, 2022, to compel Peoples Financial Corporation (PFBX) to produce books and records, which was partially granted.
• Stilwell Group filed a derivative complaint on behalf of PFBX against PFBX's directors on September 29, 2023, for breach of fiduciary duty, seeking damages in excess of $50 million, with the court denying motions to dismiss and allowing discovery.

Related Party Transactions

• Joseph Stilwell is the managing member and owner of Stilwell Value LLC, which serves as the general partner for Stilwell Activist Fund, Stilwell Activist Investments, Stilwell Associates, and Stilwell Value Partners VII.
• Joseph Stilwell and Stilwell Value LLC are entitled to an allocation of a portion of profits from the investment partnerships.
• Joseph Stilwell serves on the board of directors of Kingsway Financial Services Inc.
• Corissa B. Porcelli, Director of Research for the Group, serves on the board of Sound Financial Bancorp, Inc.
• E. J. Borrack, General Counsel for the Group, serves on the board of Wheeler Real Estate Investment Trust, Inc.
• Megan Parisi, Director of Communications for the Group, serves on the board of Wheeler Real Estate Investment Trust, Inc.
• Mark D. Alcott, a nominee of the Group, serves on the board of Ottawa Bancorp, Inc.
• Dennis Pollack, a nominee of the Group, serves on the board of Provident Bancorp, Inc.
• Scott J. Dworschak, a nominee of the Group, serves on the board of IF Bancorp, Inc.

Stakeholder Impact

• Shareholders: The Stilwell Group's actions are explicitly aimed at maximizing shareholder value through various strategies like sales, mergers, share repurchases, and special dividends. Their stated success in Kingsway and other companies suggests a positive impact on shareholders of target companies. However, protracted proxy contests and litigation can create uncertainty and incur costs.
• Management/Boards: Management and boards of target companies often face pressure, scrutiny, and potential removal or changes in compensation policies. The filing details instances of CEOs being fired (Wheeler Real Estate Investment Trust, Inc., Poage Bankshares, Inc.), directors stepping down (Harvard Illinois Bancorp, Inc., Malvern Bancorp, Inc.), and boards being compelled to adopt new policies (HopFed Bancorp, Inc.).
• Employees: Mergers and acquisitions, often a result of activist campaigns, can lead to job reductions or organizational restructuring.
• Creditors/Suppliers: While not explicitly detailed, changes in corporate strategy or ownership could indirectly affect relationships with creditors and suppliers, depending on the new company's policies or financial health.
• Regulatory Authorities: The Stilwell Group's history includes interactions with various regulatory bodies (SEC, FDIC, Federal Reserve, state insurance departments), indicating their activities are subject to regulatory oversight and can sometimes lead to enforcement actions (e.g., SEC cease and desist order).

Next Steps

• The Stilwell Group intends to gradually reduce its position in Kingsway Financial Services Inc. over time.
• Members of the Group may seek to make additional purchases or sales of Kingsway shares.
• The Stilwell Group hopes to work with management and boards of CIB Marine Bancshares, Inc., U & I Financial Corp., Central Plains Bancshares, Inc., and Catalyst Bancorp, Inc. to maximize shareholder value.
• The Stilwell Group intends to gain board representation at Peoples Financial Corporation (PFBX) and Lake Shore Bancorp, Inc. (LSBK).
• Ongoing derivative action against PFBX directors, seeking discovery and over $50 million in restitution.
• For IROQ, if the company fails to substantially implement stockholder-approved matters after March 31, 2026, the Stilwell Group will select an additional board nominee.
• Settlement with Silvergate Capital Corporation (SICP) pending Bankruptcy Court approval, with the Stilwell Group entitled to select directors of the reorganized entity.

Key Dates

Recommendation

The Stilwell Group, a prominent activist investor, has stated that it has succeeded in its investment purpose for Kingsway Financial Services Inc. and now intends to gradually reduce its position. This suggests that the primary catalyst for significant share price appreciation driven by their activism may have largely played out. While their continued board presence and historical success are positive, the stated intent to reduce holdings implies a mature investment for the activist, leading to a 'hold' recommendation for other investors who might have followed the activist's initial entry. The stock is likely fairly valued in the activist's view, prompting their exit strategy.

Keywords

Activist Investing, Shareholder Rights, Schedule 13D, Corporate Governance, M&A, Bank Mergers, Share Repurchases, Special Dividends, Second-Step Conversion, Proxy Contest, SEC Filings, Stilwell Group, Kingsway Financial Services, Financial Institutions, Investment Management, Shareholder Value Maximization