Feud ends: Giles cashes as VNB heads for buying spree
If anyone were expecting fireworks or fisticuffs at the annual meeting of Virginia National Bank Monday night, they were shown less a feud than a roadmap to riches, as bank leaders said they've been eyeing a stream of opportunities to buy struggling banks. As for former chair Mark Giles, who recently waged a battle to climb back on the board, that fizzled in seconds at the May 21 event as the majority of shareholders voted instead to re-install Giles' rival, developer Hunter Craig.
Afterwards, Craig had little comment other than to agree with the words of the bank president that "we have won the decathlon" and that the recently-completed quarter was a strong indicator of profits and continuing growth. As Craig told a reporter, the first three months of 2012 were "strong as horseradish."
As for what Craig thought of the Giles effort to push him off the board, that was left unknown, as he declined other questions.
But questions from shareholders percolated during the meeting, with the first coming from Richard Miksad, who phrased it in the form of an opinion: "I think the name of the bank," said Miksad, "is not as bright as it used to be in the community."
Chair Bill Dittmar, who took the reins in late December after the sudden Giles resignation, explained what happened at that fateful pre-Christmas meeting: that Giles demanded that he and Craig each nominate a slate of directors.
"The board rejected that proposal," said Dittmar. "It was the sense of the board that it was inappropriate to put up a slate."
"Does that answer your question?" Dittmar asked.
"Well, partially," Miksad replied.
"I don't think you answered his question completely, Bill," said longtime Albemarlean Fred Scott. "What was it that triggered the change?"
In the past two years, Craig has become a lightning rod for controversy, ever since an outgoing governor thanked him for his supposed bargain transfer of a flopped housing development called Biscuit Run for a state park. As it turned out, the $10 million purchase price was the tip of a costly iceberg, as Craig's crew reaped another $11 million in secret tax credits and then sued the taxpayers– in a still-pending matter– for nearly $20 million more.
Craig, as a longtime member of VNB's loan committee (though he stepped down last fall), was allowed to peer into the business of some of the biggest business tycoons in Albemarle, and yet his Biscuit Run finances enjoy a legally-mandated shroud of secrecy.
It wasn't until shareholder David Kudravetz stood up Monday that the issue Giles raised in a May 3 federal filing was asked: What does leadership think about the propriety of letting board members "pledge" their stock– something that Craig has reportedly done– to an in-market competitor bank?
"It says something about your bank," said an approving Dittmar, "that another bank will accept your stock as pledge."
Dittmar noted that VNB sought opinions from both an outside attorney and the federal Office of the Comptroller of the Currency. In the wake of that inquiry, the only ensuing policy change was a requirement that VNB directors must immediately notify shareholders when they pledge their shares as collateral.
Dittmar also announced that over 80,000 shares of stock traded on Friday, the last business day prior to the meeting. The buzz was that Giles– who owned eight percent of the company last week– was trimming his position.
This was the same day that a Hook reporter placed an order for 100 shares, what turned out to be a successful effort to gain admission to the meeting. Less successful (for this individual who owns no other listed securities) was the price: over $15 a share which promptly fell to $14 as the 80,000-share block depressed the price and cost us nearly $200 in one day.
"You shoulda waited four more hours," joked president Glenn Rust after the meeting.
It was Rust who presented a vision of VNB's future, and it came in response to a question from shareholder Bob Coleman about "excess capacity" and "excess capital" that might be parlayed into a better return.
"We still want to do some type of merger," replied Rust, who noted the the Federal Deposit Insurance Corporation, or FDIC, has shown VNB seven banks on its list of takeover targets.
"We've turned them all down, but we're continuing to look," said Rust. "I think there's going to be some out there we can pick off for a really good price."
Coleman, however, expressed concern that VNB's stock price, at about 80 percent of book value, could put VNB "into play," i.e. find itself the target of a takeover.
"We have not been approached by any bank, ever," said Rust.
And with that, the meeting came to a close.
"They've done a good job," remarked shareholder Dickie Tayloe. "They've been conservative, and that's good."