Merrill W. Sherman, Bancorp Rhode Island president and chief executive officer, right, prepares for the start of yesterday’s annual meeting with Malcolm G. Chace III, board chairman.

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The Providence Journal / Bob Thayer

PROVIDENCE — The management at Bancorp Rhode Island yesterday deflected another effort by dissident shareholders to engineer the sale of the Providence-based parent of Bank Rhode Island.

The latest push came during a sometimes testy annual meeting held yesterday in a meeting room at the Hotel Providence, the same venue where the two sides faced off last year.

“We told you we’d be back,” said Richard Lashley, one of the dissident shareholders. “Nothing has changed significantly. . . The decision not to sell cost shareholders.”

Lashley is one of two men who lead PL Capital LLC, an Illinois hedge-fund investment firm with a history of taking on the management at banks it considers underperforming. It seeks to profit from improved earnings, a quick run-up in stock prices or the sale of its targets.

For the second year running Lashley and partner John Palmer sought seats on the Bancorp Rhode Island (BARI: Nasdaq) board of directors.

Lashley and Palmer lost a bid last May to gain seats on BARI’s board as company shareholders sided with the bank’s management in a proxy fight.

This year, the two men were joined by former investment banker Daniel Mullane, of Connecticut, who headed Advest Group Inc. before its sale to the Merrill Lynch brokerage house. He also was nominated for a board seat.

The results remained the same.

BARI’s board said that based on an estimate of the votes cast at the meeting, the company believes shareholders voted to elect all of the board of directors’ five nominees.

“On behalf of the board of directors and management team, we thank all of our shareholders for their support and confidence in BancorpRI,” said Bancorp Rhode Island Inc.’s chairman, Malcolm G. Chace, in a statement released during the meeting. “We look forward to building on the momentum of our first quarter and continuing to deliver long-term value to our shareholders.”

Merrill W. Sherman, BARI’s president and chief executive officer, commented in the statement, “We are pleased that our shareholders and the nation’s leading corporate governance firms have again recognized our board’s track record of value creation. We value the views and insights of our shareholders and appreciate their interest in the future of our company.”

During the meeting, however, equanimity was not always on display.

Speakers turned pink-faced and personal at times.

Board member Anthony F. Andrade lambasted the dissidents because “you weren’t smart enough to get in on the ground floor” when the bank was founded in the 1990s. “Let me buy you out at $25 a share. Tell [friends] Tony Andrade, a nice barber from Rhode Island, gave you a haircut.”

The tenor of the commentary forced Sherman to cut off one disgruntled shareholder’s attack on her charitable work.

“I just want to stop the insult right now,” she intoned. “We will match our charitable giving, on a personal level, with anyone.”

Charity traded yesterday at a higher premium than the bank’s stock, which hasn’t been north of $40 a share since last September. The stock reached its high as $45.40 on Sept. 21, 2006.

The bank’s current share price (it closed yesterday at $31.76, up 1cent on the day) is only one performance measure at issue in the running proxy fight.

Lashley and Palmer pointed to BARI’s low earnings, low return on assets and weak efficiency rating.

They consider the bank’s efficiency rating, essentially a measure of how much money an institution has to spend to make a $1, a “critical” issue, they said.

The partners contend that the bank’s efficiency rating of 73.4 percent, while improved from last year’s rating of 76 percent, remains unfavorable when compared with ratings of similarly sized banks.

Those ratings at other banks often fall below 60 percent, they contend.

“This bank has been stuck over 70 percent for years,” Lashley said. “The high efficiency ratio would be OK if the bank were growing.”

Sherman spent a good portion of yesterday’s meeting reviewing the bank’s performance “which I think paints a good picture” of the bank’s strategy.

The bank relies on a “high-touch” strategy based on cultivating commercial borrowers in its home state, some poached from the multistate competitors who dominate the Rhode Island market.

High-touch relationships, which require bank executives to become intimately familiar with a customer’s business and financial needs, come with high costs, Sherman noted, and that can hurt a bank’s performance in the short run.

She acknowledged that the bank’s returns put it “in the middle of the pack.”

Between 2003 and 2007, the bank built four new branches — in Lincoln, East Greenwich, North Kingstown and Pawtucket — and an operations center in Lincoln as well. Building those was expensive and recouping that investment takes time, she said, adding that the newest branches have yet to break even.

“It will take four to five years of hard, smart work,” she said. “Our profitability will improve.”

The bank has worked to trim expenses, she said, in a nod to PL Capital’s criticism.

“We’re getting increasingly good in our cost containment,” she said.

The loan portfolio has shifted away from residential property since BARI was founded a decade ago as management emphasized commercial lending.

In 2002, the commercial loan portfolio was about $282 million. By 2006, commercial loans reached $520 million. Last year, the bank’s commercial loans were valued at $574 million.

Finishing last year with $1.5 billion in assets, “We think we’re very well positioned,” she said.

The 16-branch bank previously forecast earnings of $1.94 to $1.99 a share for fiscal 2008 and said it expects low double-digit growth in its commercial portfolio.

The performance was good enough for many shareholders to back Sherman and the rest of the bank’s board.

BARI has grown “under Merrill Sherman’s experienced and steady hand,” said Jim Winoker. “I am absolutely satisfied with the board of directors.”

In a statement released during yesterday’s meeting, the company announced that shareholders reelected all five of the management’s board nominees. The nominees included; Sherman, Andrade, company founder and board chairman Malcolm G. Chace III, Ernest J. Chonyei Jr. and Edward J. Mack II.

pgrimald@projo.com